Page 455 - How to Make Money in Stocks Trilogy

Picking the Best Market Themes, Sectors, and Industry Groups 325

determine whether the stock you’re thinking about owning is in a top-flight
industry group. The Industry Group Relative Strength Rating assigns a let-
ter grade from A+ to E to each publicly traded company we follow, with A+
being best. A rating of A+, A, or A– means the stock’s industry group is in
the top 24% of all industry groups in terms of price performance.
Every day I also quickly check the “New Price Highs” list in IBD. It is
uniquely organized in order of the broad industry sectors with the most indi-
vidual stocks that made new price highs the previous day. You can’t find this
list in other business publications. Just note the top six or so sectors, particu-
larly in bull markets. They usually pick up the majority of the real leaders.
Another way you can find out what industry groups are in or out of favor
is to analyze the performance of a mutual fund family’s industry funds.
Fidelity Investments, one of the nation’s successful mutual fund managers,
has more than 35 industry mutual funds. A glance at their performance pro-
vides yet another excellent perspective on which industry sectors are doing
better. I’ve found it worthwhile to note the two or three Fidelity industry
funds that show the greatest year-to-date performance. This is shown in a
small special table in IBD every business day.
For William O’Neil + Co.’s institutional clients, a weekly Datagraph ser-
vice is provided that arranges the 197 industry groups in order of their
group relative price strength for the past six months. Stocks in the strongest
categories are shown in Volume 1 of the O’Neil Database books, and stocks
in the weaker groups are in Volume 2.
During a time period in which virtually all daily newspapers, including
the Wall Street Journal, significantly cut the number of companies they cov-
ered in their main stock tables every business day and/or drastically cut the
number of key data items shown daily for each stock, here’s what Investor’s
Business Daily did.
IBD’s stock tables are now organized in order of performance, from the
strongest down to the weakest of 33 major economic sectors, such as med-
ical, retail, computer software, consumer, telecom, building, energy, Inter-
net, banks, and so on. Each sector combines NYSE and Nasdaq stocks so
you can compare every stock available in each sector to find the best stocks
in the best sectors based on a substantial number of key variables.
IBD now gives you 21 vital time-tested facts on up to 2,500 leading stocks
in its stock tables each business day . . . more than virtually all other daily
newspapers in America. These 21 facts are

1. An overall composite ranking from 1 to 99, with 99 best.
2. An earnings per share growth rating comparing each company’s last
two quarters and last three years’ growth with those of all other