At the moment, the Consumer Staples Sector may be the worst place to shop for a top Zacks Rank industry.
Why?
Overvaluation! Because the S&P500 Consumer Staples sector has a forward 12-month P/E ratio of 19.76, while the high profit margin, cash flow rich Info Tech sector has a 19.10. No sector is more richly priced.
In comparison, the overall S&P500 large cap index has a forward 12-month P/E of 16.9. In simple terms, the slow growing, defensive Staples sector is likely to be +17% overvalued to the broad S&P500. A sector or industry rotation away from Staples looks to be in the cards. The Finance sector –with more Fed rates hike and Trump stimulus on the way to pad profits down the road– has a forward 12-month P/E of 14.28.
Buy Finance stocks and sell Staple stocks, right?
However, I have found a sleeper industry in there — Agricultural Operations .
This 6-company Zacks Industry is currently ranked #39 out of 265 (top 15%). It was #44 out of 265 just before Christmas. Check out the new Zacks Heat Map on all of our industries to see. The path of rising industry estimates goes back a few months. Agricultural commodity price fundamentals put in a bottom early in 2016, along with the WTI oil price. Now, Materials and Energy sector companies are getting a bid, driving up shares nicely.
Zacks’ Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn’t? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Fresh Del Monte Produce, Inc. (FDP): Free Stock Analysis Report
Calavo Growers, Inc. (CVGW): Free Stock Analysis Report
Archer-Daniels-Midland Company (ADM): Free Stock Analysis Report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Plantations International