PRN: Industrials Dashboard For July

seekingalpha07-23

The monthly article reports aggregate sub-sector metrics in industrials.This is the second most overvalued sector after information technology. Aerospace/defense looks the least attractive subsector, ...

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Aerospace/defense looks the least attractive subsector, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4705513-prn-industrials-dashboard-for-july\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>PRN: Industrials Dashboard For July</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPRN: Industrials Dashboard For July\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-23 00:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4705513-prn-industrials-dashboard-for-july><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The monthly article reports aggregate sub-sector metrics in industrials.This is the second most overvalued sector after information technology. Aerospace/defense looks the least attractive subsector, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4705513-prn-industrials-dashboard-for-july\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4550","symbol_name":"红杉资本持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4705513-prn-industrials-dashboard-for-july","article_id":"2453797739","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/544452105/image_544452105.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2453797739","pubTimestamp":1721664064,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The monthly article reports aggregate sub-sector metrics in industrials.This is the second most overvalued sector after information technology. Aerospace/defense looks the least attractive subsector, ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4550":"红杉资本持仓","BK4588":"碎股","BK4585":"ETF&股票定投概念","BK4581":"高盛持仓","PRN":"Invesco Dorsey Wright Industrials Momentum ETF","FIDU":"Fidelity MSCI Industrials Index","FDN":"First Trust Dow Jones Internet I","XLI":"工业指数ETF-SPDR"},"translate_title":"PRN：7月份工业仪表板","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FIDU":1,"PRN":1,"XLI":1,"FDN":0.74},"content_text":"The monthly article reports aggregate sub-sector metrics in industrials.This is the second most overvalued sector after information technology. Aerospace/defense looks the least attractive subsector, based on value and quality scores.PRN is an alternative to XLI with better fundamentals and historical return.Nine stocks are cheaper than their peers in July.Monty Rakusen This monthly article series reports aggregate sub-sector metrics in industrials. It is also a review of sector ETFs like The Industrial Select Sector SPDR® Fund ETF (XLI), Fidelity MSCI Industrials Index ETF (FIDU), and Invesco Dorsey Wright Industrials Momentum ETF (NASDAQ:PRN), whose holdings are used to calculate these metrics. Shortcut The next two paragraphs in italics describe the dashboard methodology. They are necessary for new readers to understand the metrics. If you are used to this series or if you are short of time, you can skip them and go to the charts. Base Metrics I calculate the median value of five fundamental ratios for each subsector: Earnings Yield (\"EY\"), Sales Yield (\"SY\"), Free Cash Flow Yield (\"FY\"), Return on Equity (\"ROE\"), Gross MaPRNn (\"GM\"). The reference universe includes large companies in the U.S. stock market. The five base metrics are calculated on the trailing 12 months. For all of them, higher is better. EY, SY, and FY are medians of the inverse of Price/Earnings, Price/Sales, and Price/Free Cash Flow. They are better for statistical studies than price-to-something ratios, which are unusable or non-available when the \"something\" is close to zero or negative (for example, companies with negative earnings). I also look at two momentum metrics for each group: the median monthly return (RetM) and the median annual return (RetY). I prefer medians to averages because a median splits a set into a good half and a bad half. A capital-weighted average is skewed by extreme values and the largest companies. My metrics are designed for stock-picking rather than index investing. Value and Quality Scores I calculate historical baselines for all metrics. They are noted respectively as EYh, SYh, FYh, ROEh, and GMh, and they are calculated as the averages on a look-back period of 11 years. For example, the value of EYh for transportation in the table below is the 11-year average of the median Earnings Yield in transportation companies. The Value Score (\"VS\") is defined as the average difference in % between the three valuation ratios (EY, SY, FY) and their baselines (EYh, SYh, FYh). In the same way, the Quality Score (\"QS\") is the average difference between the two quality ratios (ROE, GM) and their baselines (ROEh, GMh). The scores are in percentage points. VS may be interpreted as the percentage of undervaluation or overvaluation relative to the baseline (positive is good, negative is bad). This interpretation must be taken with caution: the baseline is an arbitrary reference, not a supposed fair value. The formula assumes that the three valuation metrics are of equal importance. Current data The next table shows the metrics and scores as of writing. Columns stand for all the data defined above.     VS QS EY SY FY ROE GM EYh SYh FYh ROEh GMh RetM RetY   Aerospace+Defense -35.86 -17.46 0.0263 0.5401 0.0191 14.70 20.03 0.0479 0.6640 0.0340 19.96 21.92 2.84% 33.28%   Building+Equipment -32.80 35.24 0.0311 0.2498 0.0208 14.49 37.14 0.0405 0.6743 0.0237 10.31 28.58 -4.52% 19.28%   Machinery+Conglomerates -17.72 7.97 0.0375 0.2898 0.0300 20.46 42.33 0.0447 0.4786 0.0293 19.38 38.35 1.31% 16.14%   Services+Distribution -38.12 17.10 0.0277 0.2102 0.0147 35.83 48.31 0.0370 0.3957 0.0255 26.32 49.27 2.99% 22.02%   Transportation -25.31 -2.64 0.0412 0.7242 0.0097 26.06 24.17 0.0528 0.7389 0.0202 25.19 26.49 3.22% -4.03%   Click to enlarge  Value and Quality chart  The next chart plots the Value and Quality Scores by subsector (higher is better). Value and quality in industrials (Chart: author; data: Portfolio123) Evolution since last month The transportation industry shows an improvement in valuation and a deterioration in quality. Variations in value and quality (Chart: author; data: Portfolio123) Momentum The next chart plots momentum based on median returns by subsector. Momentum in industrials (Chart: author; data: Portfolio123) Interpretation Industrials are the second most overvalued sector after information technology based on my monthly S&P 500 dashboard. Machinery/conglomerates and transportation are respectively overvalued by about 18% and 25% relative to 11-year averages. Other subsectors are overvalued by 32% to 38%. Overvaluation may be partly offset by a good quality score for building/construction/electric equipment and to a lesser extent for services/distribution. Aerospace/defense is the least attractive subsector, with both value and quality scores significantly below the baseline. Focus on PRN Invesco Dorsey Wright Industrials Momentum ETF (PRN) started investing operations on 10/12/2006 and tracks the Dorsey Wright® Industrials Technical Leaders Index. It has a net expense ratio of 0.60%, whereas capital-weighted ETFs XLI and FIDU charge only 0.09% and 0.08%, respectively. The fund holds a portfolio of 43 stocks. The next table lists the top 10 holdings, representing 36.8% of asset value. Although the portfolio is quite concentrated, risks related to individual companies are moderate: the heaviest position is below 4%.   Ticker Name Weight% EPS growth %TTM P/E TTM P/E fwd Yield%   HEI HEICO Corporation 3.94 16.27 69.87 61.54 0.10   AME AMETEK, Inc. 3.89 10.23 29.73 24.74 0.66   WSO Watsco, Inc. 3.80 -14.68 38.39 35.29 2.18   PH Parker-Hannifin Corporation 3.76 83.75 25.65 21.92 1.20   CTAS Cintas Corporation 3.74 16.63 50.09 45.51 0.71   GWW W.W. Grainger, Inc. 3.68 11.30 25.94 24.19 0.87   TT Trane Technologies plc 3.63 21.22 35.29 31.29 1.02   FIX Comfort Systems USA, Inc. 3.52 67.95 30.11 24.55 0.39   HUBB Hubbell Incorporated 3.48 32.47 27.61 22.70 1.32   CPRT Copart, Inc. 3.42 19.32 36.26 35.77 0   Click to enlarge The heaviest industries in the portfolio are construction and engineering (17.3%) and electrical equipment (13.5%). PRN and XLI have similar price-to-earnings and price/book ratios. However, PRN is significantly cheaper in price/sales and price/cash flow, as reported in the next table. Moreover, it shows superior aggregate growth rates.     PRN XLI   Price/earnings 25.09 24.67   Price/book 5.11 5.36   Price/sales 1.99 2.31   Price/cash flow 15.57 17.46   Earnings growth 34.93% 20.74%   Sales growth 9.16% 7.97%   Cash flow growth 30.41% 19.42%   Click to enlarge PRN has outperformed XLI by 87 bps in annualized return since its inception in October 2006. Risk metrics are similar (drawdown and volatility measured as standard deviation of monthly returns).     Total Return Annual Return Drawdown Sharpe Volatility   PRN 493.88% 10.55% -59.88% 0.53 20.53%   XLI 416.11% 9.68% -62.26% 0.5 19.47%   Click to enlarge In summary, PRN provides exposure to industrials with better fundamentals and historical returns than the sector benchmark XLI. Dashboard List I use the first table to calculate value and quality scores. It may also be used in a stock-picking process to check how companies stand among their peers. For example, the EY column tells us that a transportation company with an earnings yield above 0.0412 (or price/earnings below 24.27) is in the better half of the subsector regarding this metric. A Dashboard List is sent every month to subscribers with the most profitable companies standing in the better half among their peers regarding the three valuation metrics at the same time. The list below was sent to subscribers several weeks ago based on data available at this time.   SAIC Science Applications International Corporation   DNOW DNOW Inc.   VNT Vontier Corporation   DCI Donaldson Company, Inc.   LECO Lincoln Electric Holdings, Inc.   CAT Caterpillar, Inc.   TEX Terex Corporation   AGCO AGCO Corporation   WNC Wabash National Corporation   Click to enlarge  It is a rotational model with a statistical bias toward excess returns in the long-term, not the result of an analysis of each stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2453797739"}