Well… despite all on the domestic horizon mixed in with a global political crisis (the Syria confrontation/non-confrontation), September sure worked out well for equities.
After an up-and-down summer, the Dow, S&P 500, and the small-cap Russell 2000 once again powered upward to fresh all-time record levels in mid-September, while the Nasdaq had the quarter’s strongest performance. The S&P 500 finished the month on a price-only basis up almost 3%; the NASDAQ was up over 5%; and the Russell 2000 was up over 6%. Even the 10-year Treasury had a good month, down 14 basis points, bucking the trend of the last quarter.
The month was particularly good to the largest capitalization names. In our monthly effort in evaluating industry-specific performance, we reveal our sector portfolio returns for the month of September. Like the indexes, they are both quite positive, and wide in their positivity.
The broadest contribution (by a skinny margin) was the Consumer Cyclical space. Although the 50-stock portfolio modestly underperformed the Technology portfolio of similar size, 46 of the top 50 capitalization names generated a positive return. Nike (+14%) and Comcast (+8%) delivered solid results over the last 30 days among the top 10 largest, but the returns had breadth.
Among the top 20 largest Cyclicals, Las Vegas Sands (+18.2%) and Walgreen’s (+17.6%) contributed significantly. Widening to the top 50, Fastenal (+17%) also made a large contribution. Soft good retailers had the weakest relative performance among the group. Macy’s and Ralph Loren were two of the four negative returners in the last 30 days. Carnival Cruise (CCL) was the notable exception in the group. Down 10%, Carnival peaked mind-month before they announced a poor bookings curve during their third quarter conference call.
As mentioned, the Technology sector experienced broadly positive returns. 45 of the top 50 capitalizations have seen positive results in the past 30 days. Internet companies, Amazon (+14%) and eBay (+11.3%) led the way among the largest caps. However, Priceline (+13.7), Yahoo (+26%) and Akamai (+13.6%) continued the solid performance for the group at the wider cut-offs. The hardware companies had the greatest underperformance, with the exception of Micron Technologies (+30%) which hit a new 52-week high leading all of the tech companies in performance.
A lot has gone right for Micron this year (up 160%) including spectacular growth in the DRAM and NAND industry, strog revenue growth, recent acquisitions of Elpida and Rexchip, supply constraints for competitors for Apple products, and potential new product developments.
The 10 largest Energy names took the month’s gold medal for performance, and did it despite a loss for the second largest cap name in the country. Exxon has lost 1.2% in the last 30 days. Exxon (XOM) peaked mid-month before Credit Suisse listed it among the top short candidates. They noted that short sellers see little growth in its overall business, poor execution on recent initiatives, and the need of a portfolio upgrade after totally missing out on huge new plays in east and west Africa.
The rest of the industry continued to perform with Petrobras and Schlumberger leading the way among the largest caps. 43 of the top 50 capitalizations gained over the last 30 days. The seven decliners were as follows:
Net/net, it was a good month for equities. A quick look at the first few days of October is showing some giveback. Each sector and capitalization group is currently showing declines of between 0.4% and 1.0%. The first few days of the government shutdown haven’t helped; however, data has shown that historical shutdowns have not been too damaging to equities.