(Weekly) S&P 500: Which Are the Best Companies in Each Sector? | June 18

The goal of this analysis is to determine which are the top 10 companies in each of the 11 sectors that make up the most important United States stock market index, the S&P 500, assigning each one a score (from 0% to 100%) based on fundamental and technical criteria.

The score is assigned based on 15 metrics divided into 4 areas and is higher based on how much the company has better metrics than the others in the sector. The score of the 4 areas is determined by answering the following questions:

Financials

  • Has the company been able to produce higher revenues and earnings than other companies in the sector?
  • Has the company been able to grow revenue and earnings more than its competitors over the past year and over the past 3 years?

Margins

  • Is the company able to operate with a higher operating and net margin than other companies in the sector?

Valuation

  • Does the company currently have valuation multiples that make it more undervalued than its competitors?

Trend

  • Does the company’s stock price have a stronger medium to long-term positive trend than other companies in the sector?

Within this analysis it is possible to find both the ranking of the top 10 companies in each sector with the score of each area of the company indicated, but also to summarize, within the same table, the company with the highest overall score in each sector.

In addition, each week the companies that enter/exit the top 10 in each sector are indicated.


Table of contents

This article is divided into the following 3 sections:

1. How is the Score Calculated?
It contains an explanation of how the score that is assigned to each company is determined based on the 15 fundamental and technical metrics considered.

2. Summary
It contains a summary of the best companies in each sector based on the overall score.

3. Top 10 Companies in Each Sector
Contains the ranking of the top 10 companies, based on the overall score, for each of the 11 sectors of the S&P 500 index.

The content of this article is for informational purposes only and in no case constitute an investment advice. Past performance is no guarantee of future performance. To read the complete disclaimer click here.


1. How is the Score Calculated?

For each company, a score is assigned (from 0% to 100%) based on how much each of the 15 metrics, divided into the following 4 types, is better than the other companies in the sector:

  • Financials:
    • Revenues for the last 12 months
    • Revenue growth in the last year
    • Revenue growth in the last 3 years
    • Net Income of the last 12 months
    • Net income growth over the last year
    • Net income growth over the last 3 years
  • Margins:
    • Operating margin (ratio between Operating income and Revenue) for the last 12 months. The higher it is, the more the company operates with a better operating margin than its competitors.
    • Net margin (ratio between Net income and Revenue) for the last 12 months. The higher it is, the more the company operates with a margin, net of all costs, better than its competitors.
  • Valuation:
    • P/S (Price to Sales) for the last 12 months. The lower this valuation multiple is compared to other companies in the sector, the more the company is considered undervalued.
    • P/E (Price to Earnings) for the last 12 months. The lower this valuation multiple is compared to other companies in the sector, the more the company is considered undervalued.
  • Trend:
    • Mid term trend. The higher the price is above the 50-day moving average, the stronger the positive medium-term trend is.
    • Long term trend. The higher the price is above the 200-day moving average, the stronger the positive long-term trend is.
    • Performance over the last 3 months, 1 year and 3 years.

Example

In this example we consider two metrics: “Price to Earnings” from the Valuation section and “Net margin” from the Margins section. The data inside the tables are invented and do not correspond to reality.

As you can see from the image below, let’s assume that in an industry there are Apple Inc (AAPL), Amazon Inc (AMZN) and Nvidia Corp (NVDA).

Example: P/E and Net margin

In the image on the left, we see that Apple has a P/E valuation multiple of 10x (the company is worth 10 times the profits produced), while Amazon has a P/E of 20x and Nvidia of 30x.


2. Summary

In this section you will find summary screens that allow you to intuitively know the best companies in each sector. In particular, there are 2 subsections:

  • The Best Company by Sector
  • Companies That Have Entered or Exited the Top 10

The Best Company by Sector

In this first subsection you will find the best company in each sector based on the overall score. Furthermore, the score of the individual areas is indicated.

It is not advisable to compare the score of companies in different industries to determine who is better.

If a company’s score is higher than one in a different sector it does not necessarily mean that the company is better, but rather that it is more “dominant” in its sector than its competitors.

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Companies That Have Entered or Exited the Top 10

In this second subsection you will find the tickers of the companies that entered the top 10 in the last week and those that exited. In the next section you will find the top 10 of each sector where the companies that are new entries in the ranking are highlighted in yellow.


3. Top 10 Companies in Each Sector

This last section contains the rankings of the top 10 companies in each of the 11 sectors of the S&P 500 index, based on the overall score.

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The content of this article is for informational purposes only and in no case constitute an investment advice. To read the complete disclaimer click here.