Comments on: Avoiding Doomed Sectors, Redux

By: David Merkel

David Merkel — Fri, 12 Sep 2008 18:43:56 +0000

Ruth, for those that want to do momentum trading, use the red zone. I use it primarily for value investing, so I use the green zone, and, as a result, I have to eliminate industries that are value traps (doomed, or crippled). I fish mainly in the green. I will hold stocks a little longer if they are in the red zone. More of my sales come in the yellow and orange.

Steve, the momentum in the Value Line industries is not short-term, it is more like 6-12 months, so consider price and earnings performance over a year.

By: ruth

ruth — Fri, 12 Sep 2008 18:00:18 +0000

Your colors are reversed. The top 20 are in RED. Your text says you would choose the GREEN ones, ie all your loser sectors.

By: Steven Milos

Steven Milos — Fri, 12 Sep 2008 16:29:24 +0000

Hi David,

I’m curious about how the industry rankings are derived. If I remember correctly, they are from Value Line; still, there seem to be a few rankings that make little sense. Life Insurance is rated as having little momentum, although recently stocks such as PRU, HIG, TMK have had decent moves; perhaps AIG is influencing that. But Heavy Construction as having strong momentum? Stocks such as FLR, FWLT, JEC etc. have been crushed lately. I bought FWLT into the panic liquidation maelstrom of the last week, and am already up nicely. These are cheap stocks, with strong balance sheets and well financed customers, but I don’t think one could accuse them of having strong momentum, unless it’s over the last two days.

Thanks for the explanation in advance,

Steve