Top Performing Sectors Of The Year
By Padraig O'Hannelly |
14 May 2008
|
One year ago, all the talk was of private equity funds and their raids on the market. Credit Suisse estimated their collective buying power at $1.3 trillion -- a trade union estimate put the figure at $2 trillion.
And the targets for this money? Pretty much any company that could take on more debt, and size was no object. Even giants like Unilever
(LSE: ULVR)
were in the frame, and it was rumoured that Barclays
(LSE: BARC)
could be a target for an American bank.
Northern Rock
(LSE: NRK)
could be snapped up, too. Broker Cazenove assured investors that a material fall in Northern Rock's earnings was unlikely, and said it could be trading at £12.80 within a year. Well, I guess it could have been, but it wasn't.
British Airways
(LSE: BAY)
and Sainsbury
(LSE: SBRY)
were also potential targets.
Sainsbury did enter into discussions, but in the end, none of these deals came to fruition.
And now that all that excitement has died down, where is the market? The FTSE 350 is down by about 6.4%, with the FTSE 100 and FTSE All-Share off by similar amounts. Hard to believe that in such a different investment world, shares are within striking distance of where they were during the height of the private equity boom.
So investors got off lightly then? No, not exactly; performance has varied hugely from sector to sector. There are 39 sectors, and of the 35 for which we have reliable data, only twelve are beating the market, and only ten are in profit.
Resource-related sectors dominate the winners: Oil Equipment and Services (up 48.7%), Mining (up 45.5%), and Oil and Gas Producers (up 22.5%). Also doing well were Chemicals (up 28.3%) and Tobacco (up 22.1%).
Meanwhile, the long list of losers is topped by General Retailers (down 38.9%), Real Estate (down 37.6%), and Travel and Leisure (down 30.8%).
Sector
|
12-month performance
|
|---|
Oil Equipment & Services
|
48.7%
|
Mining
|
45.5%
|
Chemicals
|
28.3%
|
Oil & Gas Producers
|
22.5%
|
Tobacco
|
22.1%
|
Mobile Telecommunications
|
13.8%
|
Aerospace & Defence
|
3.4%
|
Beverages
|
1.8%
|
Industrial Engineering
|
1.4%
|
Equity Investment Instruments
|
0.5%
|
Electricity
|
-1.1%
|
Electronic & Electrical Equipment
|
-6.1%
|
Food Producers
|
-6.7%
|
Gas, Water & Multiutilities
|
-10.1%
|
Food & Drug Retailers
|
-11.8%
|
Health Care Equipment & Services
|
-13.1%
|
Software & Computer Services
|
-13.7%
|
Personal Goods
|
-14.2%
|
Nonlife Insurance
|
-15.1%
|
General Financial
|
-16.8%
|
Construction & Materials
|
-17.1%
|
Life Insurance
|
-19.6%
|
General Industrials
|
-20.2%
|
Automobiles & Parts
|
-20.5%
|
Media
|
-20.5%
|
Support Services
|
-21.0%
|
Pharmaceuticals & Biotechnology
|
-22.0%
|
Industrial Transportation
|
-22.6%
|
Household Goods
|
-25.8%
|
Fixed Line Telecommunications
|
-27.3%
|
Banks
|
-28.1%
|
Technology Hardware & Equipment
|
-29.1%
|
Travel & Leisure
|
-30.8%
|
Real Estate
|
-37.6%
|
General Retailers
|
-38.9%
|
Nonequity Investment Instruments
|
n/a
|
Forestry & Paper
|
n/a
|
Leisure Goods
|
n/a
|
Industrial Metals
|
n/a
|
Data Source: Digital Look
So sector rotation -- adjusting your investments to the changing economic cycles -- can be a very lucrative strategy if you can do it successfully. That's a big 'if', though; it's not necessarily any easier than stock-picking, as you are still competing against the rest of the market.
Alternatively, buying trackers gives you an average of the good with the bad, so you are going with the market rather than competing against it.
What strategy suits you?
More: What The Investment Gurus Are Buying
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