The average return for all stocks in this 2022 analysis was about -14%
The first half of 2023 was a blessing for Wall Street. The S&P 500 Index (SPX) is up about 15% on the year. After a tough 2022, the index still sits about 7% away from its 2021 close. This week, I'll be taking a closer look at how different sectors have performed, as well as what analysts and option buyers are saying.
Capturing 2023 Stock Performance So Far
For the analysis below, I have about 2,600 optionable stocks separated into 32 different sectors. The table below lists the 10 best sectors using the median stock return of the sector. It’s been a good year so far for construction as construction materials and home builders are the top two sectors. Most of the sectors in this table were coming off bad years in 2022. The average return for all stocks in this analysis for 2022 was about a 14% loss, and very sector below averaged worse than this last year.
This next table shows the 10 worst performing sectors so far this year. Banks have easily been the worst sector averaging a loss of nearly 20% year-to-date. Oil stocks are interesting, as the sector has struggled this year, but is the only sector that had a great 2022.
Sector Contrarian Analysis
The tables above show the best and worst performing sectors by looking at the stocks in said sector. In this section, I’m going to layer in some sentiment by considering how analysts and option buyers view the stocks in each sector. The tables below tells us the percentage of stocks trading above their 80-day moving average, the percentage of analysts that rate the stocks in the sector a buy and the buy-to-open (BTO) call/put ratio for the stocks in the sector. The BTO volume aggregates data from three different exchanges and only considers option volume initiated by buyers. It disregards closing volume and volume initiated by sellers.
The table below shows the stocks with the lowest BTO call/put ratio. There have been only two sectors in which puts have been more prevalent than calls. It’s amazing to see the home construction sector is one of those sectors. Furthermore, for that sector, only 44% of analyst ratings are a buy (it averages about 55% for all stocks). Analysts and option buyers do not like this sector. Yet, it’s one of the best performing sectors. Our contrarian philosophy would suggest bullish implications for the stocks in this sector going forward.
Finally, here’s a table showing sectors option buyers have been giddy about. For all stocks, about 65% are above their 80-day moving average and 87% of stocks in the electrical equipment sector are above this moving average. Those stocks have performed well, so it’s no surprise that option buyers have been buying up calls at a faster pace than puts.
The drug and grocery stores sector is interesting. Only 45% of these stocks are above their 80-day moving average suggesting struggle. There’s some disagreement, however, between option buyers and analysts. Option buyers have been buying calls but less than half of the analysts rating stocks in this sector have a buy rating.
