February 20th, 2007

Industry Group Tracking Spreadsheet

Here is IBD’s ranking of the top 10 industry groups as of Friday, February 16, 2007 (the first column is alpha rank and the second is current rank):

In addition to their current ranking, IBD provides for comparison purposes each Groups ranking the previous Friday and 6 months earlier. Interesting but, I believe, insufficient alone for zeroing in on opportunities over the intermediate (3-6 months) term.

For example, the top Group, Auto/Truck-Tires & Misc, includes 6 stocks. The index for this group has increased from 255 to 420, 64% since August! Clearly, the primary companies in the group, Cooper Tire and Goodyear Tire have both increased significantly but, would they still be a good buy today?

Now, I don’t actually know how IBD determines the ranking of their Industry Groups; whenever I’ve asked they say it’s proprietary (the same answer I got when I asked about how they calculate their Industry Group charts or the graph of their IBD 100 list). But wouldn’t it be better selecting stocks from Industry Groups that appear to be moving up than stocks that were in the top Industry Groups and may have already increased significantly. The risk/reward balance would certainly have better back then than it is today.

My solution: create a spreadsheet to which I transfer each Friday’s Industry Group rankings and measure the change in their ranking over 4, 8 and 12 weeks. Those that move up more than 50 points in the ranking (an arbitrary ranking change that I can change for more or less “precision”). The results look like this:

Clearly, the primary companies in the group, Cooper Tire and Goodyear Tire have both increased significantly but, would they still be a good buy today? Wouldn’t it have been better if it were possible to be able to identify the group last fall before the moves began. The risk/reward balance would certainly have better back then than it is today.

My solution: create a spreadsheet to which I transfer each Friday’s Industry Group rankings and measure the change in their ranking over 4, 8 and 12 weeks. Those that move up more than 50 points in the ranking (an arbitrary ranking change that I can change for more or less “precision”). The results look like this:

In this particular example, the spreadsheet is sorted according to those Industry Groups have increased by more than 50 positions over the previous 3 weeks (the green in the third column from right end).

The analysis can easily be changed by changing the key variables in this spreadsheet (span of weeks for the range, actual change in ranking, the specific week being evaluated and the period to sort). I’ve been collecting the Industry Group ranks for nearly three years. This allows me to see how money rotates within the groups by seeing how those groups move up and down in their ranking.

In order to use this spreadsheet, one has to be fairly experienced with MS Excel to copy the data, paste it into the spreadsheet and perform the sorting. Let me know if you’re interested in obtaining a copy of the spreadsheet.

to be continued:

Subscribe below or click here to learn more about help for navigating turbulent markets.
  • Pete

    I think I’m with you on this.
    Correct me if I’m wrong, but if I follow your train of thinking, according to this breakdown, the three indusrty groups that have moved up the most in rankings in the past three weeks are “Comml Svcs-Schools,” “Food-Meat Products” and “Retail-Miscellaneous.” So it seems that within each of those groups might be individual stocks that are at the beginning stages of upward momentum? I haven’t looked closely enough, but maybe I could apply rankings to each of the time frames to check for pacing and consistency of upward movement.
    Interesting…

  • Guru

    You got it. That’s the way I focused in on Steel, Telecom Svce-Foreign, Agriculture, Chemicals and Defense (I focused on it in December but hadn’t yet resumed my postings to this blog). Take a look at those titles in the Archive at the right.

  • Pingback: IBD’s “Stocks on the Move”; ANAD, AVT, FFN, BRCD | Stock Chartist()