|Written by Rob Goldman|
All this talk about energy prices ad global economic issues are not just exhausting but have taken attention away from other sectors, such as tech, health care and industrials. Still, these segments offer upside via ETFs and especially small caps. Which ones appear to be the most attractive? Click the link below. (Hint: We profile a previous pick that is up 1000% but still offers upside through midyear.)
TOP SECTORS AND STOCKS
In one of last week's Market Monitor blogs we discussed the forgotten sector, healthcare. While this was somewhat tongue in cheek, the point is made that cheap oil and another impending Greek crisis are dominating global capital market discussions. The biotech segment of healthcare along with the semiconductor segment of technology, are the 'go to sectors in our small cap space. The question is: how have each of these sectors started out 2015 and what does the rest of the year hold, particularly for biotech and healthcare.
The chart below illustrates 4 ETFs which can be used as proxies for the small cap space in healthcare, biotech, technology, and the important industrials space. We reviewed the following ETFs: Healthcare SPDR ETF (XLV), Powershares S&P Small Cap Industrials Portfolio (PSCI), SPDR S&P Semiconductor (XSD) and Powershares S&P Small Cap Healthcare Portfolio (PSCH) and compared each to the Russell 2000 Index (RUT).
Clearly large cap healthcare has been a big winner thus far this year as compared to small cap healthcare as the price of XLV is up 8% while PSCH just broke even recently. Technology and industrials have also outpaced the broader Russell 2000 so far according to our proxies.
Tech and Industrials Picks
YTD Price Changes for Select ETFs, Russell 2000
Some prior Market Monitor picks that maybe be in play include inTest Corporation (NYSE – INTT - $4.16) for technology and CPI Aerostructures, Inc. (NYSE – CVU $11.87) for industrials. Both are very bullish in all durations for the EMA technical indicator, and trade at attractive forward P/Es. INTT is a supplier and tester to companies that make semiconductor products, so it has a diverse customer base. CVU is a solid defense and industrials play and both stocks are coming out of a relative bottom and accumulation runs.
This HC Play Keeps on Going...
M&A activity in small cap biotech has been slow for a while but is picking up in the bigger space which could drive it out of its lagging state. Excuse us while we toot our own horn for a moment, but one of our big biotech Market Monitor winners from two years ago, Lannett Company, Inc. (NYSE – LCI - $63.23), is up over 1000% and appears to be headed higher. Even with the great run the all important M&A metric EV/EBITDA is just 9. The Company continues to expand its product line for various medical indications including glaucoma, migraine, antibiotic, pain management, anesthetic, endometriosis, anxiety, irritable bowel syndrome, obesity, congestive heart failure, antipsychotic, tuberculosis, thyroid deficiency, dryness of the mouth, epilepsy, gout, low sodium, bronchospasms, hypertension, and gallstone, as well as HIV. A $70 is not out of the question by mid-year.
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