The Japan Analytics App scores all listed companies by (Relative) Price and Volume as well as Quarterly Results. Scores can then be aggregated by Sectors and Peer Groups to derive cap-weighted averages which can highlight trends and outliers.
For October 2017, the best performing sectors in terms of change in Market Cap were Tech Hardware, Metals and IT and the worst were REITs, Internet and Media.
The Japan Analytics Price Score is a measure of the deviation of the stock price relative to the market index compared to its mean absolute deviation over its trading history. Sectors outliers (the top and bottom percentile of observations) are above 2.5 and below -1.35. These can be considered ‘overbought’ and ‘oversold’ levels, respectively. Currently, no sectors are overbought but three (Utilities, REITs and Multi-Industry) are oversold.
Outliers can remain so for several months. Utilities, for example, have been ‘oversold’ for almost every month this year. Apart from Utilities, over the 17 years since the 2000 tech ‘bubble’, no sector has remained an outlier for more than two months. Note that being ‘oversold’ should not in itself be considered a ‘buy’ signal without further fundamental and valuation confirmation.
Four sectors (Commercial Services, Electrical Equipment, Chemicals and Machinery) are nearly ‘overbought’ and have the highest current price momentum. Valuation aside, these are the sectors to own right now.
The Japan Analytics Volume Score is a measure of the deviation of volume divided by shares outstanding compared to its mean absolute deviation over a stock’s trading history. Outliers are amounts over 2.5 and less than 0.7 with the former being considered ‘overbought’. Sector volume scores are influenced by new listings and secondary offerings (e.g. Japan Post in Multi-Industry) and market ‘events’ (Kobe Steel in Metals), but are helpful when combined with the Price Score in identifying turning points. Of note for this month is the decline and lack of recent volume in the Internet sector.
The Japan Analytics Results Score is a measure of earnings results and momentum which covers the last eight quarters of Revenue and Operating Income for every company. The score has a maximum of 30 and minimum of -30. The aggregate sector Results Scores presented here are cap-weighted. Sector Results Score outliers are amounts above 12.5 and below -12.5. Currently there are now outliers but, for the first time since January 2014, there are no sectors with a negative score, a fact that is now being rightly celebrated in the market.
The best sector Results Scores are in Metals, Tech Hardware and Transportation, the worst are in Banks, Healthcare and Media. The sectors with best three-month change in Results Score (which adds momentum to momentum) are Utilities, Machinery and Electrical Equipment, the worst are Consumer Services, Real Estate and Telecommunications. The best medium-term Results Score momentum is in Machinery, Other Consumer Products and Metals, the worst momentum is in Banks, Media and Telecommunications.
Finally, we add aggregate sector valuation measures using the traditional PER and PBR metrics. The top and bottom 20% for each are highlighted and a sector which is is highlighted for both is designated in our ‘QUADrant’ analysis as one of FP (Fully Priced), MT (Mature), SP (Speculative) or DV (Deep Value).
In theory the following characteristics can be expected for residual income in each quadrant: –
Fully Priced = Positive + Growing
Mature = Positive + Declining
Speculative = Negative + Growing
Deep Value = Negative + Declining
Our next post will look at the Monthly Peer Group Scores.
Leave a Reply