What are we looking for?
U.S. stocks in sectors that outperformed after the 2016 U.S. presidential election.
Following Donald Trump’s 2016 election victory, financial markets saw a notable rally led by several key sectors through December of that year. Financials surged on expectations of deregulation, with the Financial Select Sector SPDR Fund (XLF) gaining over 17 per cent. Industrials and materials also posted strong performances, reflecting optimism around increased infrastructure spending and manufacturing activity, while energy stocks rose in anticipation of fossil fuel-friendly policies. Consumer discretionary stocks climbed as well, bolstered by improved consumer confidence. These gains were primarily driven by investor expectations of pro-business policies, including tax cuts and deregulation, under the incoming administration.
The screen
Although past performance is no guarantee of future results, the U.S. equity market seems to be reacting similar to the 2016 postelection period. We used Trading Central Strategy Builder to search for U.S. stocks in sectors that trended higher into December after the 2016 Trump presidential election win.
We begin by setting a minimum market capitalization threshold of $1-billion. This threshold helps filter out smaller, potentially more volatile stocks, allowing for a more reliable assessment of trends and performance within a broader investment landscape.
Trading Central’s Quantamental rating system evaluates stocks on a scale from 0 to 100, with 100 indicating the most bullish outlook and 0 the most bearish. This unique rating leverages key metrics such as valuation, growth, quality, price momentum and income to comprehensively assess a company’s potential. For our screening process, we established a minimum rating threshold of 60 out of 100 to identify top-rated companies from both fundamental and quantitative perspectives, ensuring we spotlight the strongest opportunities in the market.
Finally, we filtered for companies with a price-to-earnings ratio below the current S&P 500 average of 27.81. This approach enables us to identify stocks that are trending upward in price while remaining valued below the broader market index average, striking a balance between growth potential and relative value.
We have also included year-to-date, one-year price performance, and TC Value and Growth Factor ratings for your reference.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
Topping our list is Nomura Holdings NMR-N, a leading Japanese financial services group with a global presence spanning over 30 countries. The stock has a TC Valuation factor rating of 80 and a growth factor rating of 78. With a price-to-earnings ratio of 10.34, Nomura’s one-year performance increase stands at 40.5 per cent, while year-to-date gains amount to 31.4 per cent. Nomura has the largest market cap on our list at $17.29-billion dollars.
Embraer SA ERJ-N, an aerospace and defence company, holds the second spot. With a market cap of $7.03-billion dollars, it boasts a growth factor rating of 82 and a TC Valuation rating of 69. The stock trades at a P/E of 14.01 and achieved a one-year gain of 134.2 per cent, along with a year-to-date performance increase of 112.7 per cent. The stock has the highest overall TC Quantamental rating on our list at 78 out of 100.
The stock with the lowest price-to-earnings (P/E) ratio on our list is Unum Group UNM-N, which trades at a P/E of 7.95. Unum Group offers a broad range of financial protection benefits and services in the insurance industry. With a market capitalization of 13.37-billion dollars, the company has demonstrated solid growth, reflected in its one-year performance gain of 71.8 per cent and a year-to-date increase of 60.2 per cent. Its TC valuation and growth factor ratings are 72 and 63, respectively, indicating a balance between solid fundamentals and market performance.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of investing in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.