Yesterday, I showed you how Alphabet’s (GOOGL) incredible post-antitrust pop helped the communications sector (XLC) beat the rest of the market by a solid margin last week.
GOOGL’s 11% gain was great for its investors. I know my Infinite Momentum Alert subscribers are enjoying it, as we’re now sitting on a 21% gain since slotting the stock into our “Tech Titans” portfolio in January, double the S&P 500’s performance. (Click here if you want to know more about that strategy, where we’re rotating into the top momentum plays based on my system each month.)
However, one-time moves are tough to pinpoint, which is why I designed my Green Zone Power Rating system with the long view in mind. It gives us a chance to find those stocks that are best suited for continued outperformance over months and years.
In a funny way, Alphabet’s rally unveiled a trend that you might’ve picked up on in yesterday’s edition.
Let me show you what I mean with today’s sector x-ray…
XLC’s “Bullish” X-Ray
Most of the time, I’m running my Green Zone Power Rating x-ray on the sector that led the pack in the previous week’s trading sessions.
It gives us a good gauge of how the sector rates overall, and if the one-week outperformance points to more positive price action ahead.
This week’s scan of the communications sector tells me this is a corner of the market with a lot of promise:
Of the 21 stocks currently tracked by the Communication Services Select Sector SPDR Fund (XLC), 10 rate “Bullish” or “Strong Bullish” in my system. So just under 50% of these stocks are set to outperform the broader S&P 500 by 2X or 3X over the next year.
With only six stocks (28%) rated “Bearish” or “High-Risk,” the sector overall looks strong.
Let’s see how things shake out on my individual Green Zone Power Rating factors…
Strong Growth in the “Boring” Comms Sector
Listed in order, from the factor with the most “Bullish” stocks down to the factor with the least number of bullish stocks, here’s how the communications sector looks today:
Here we see that the Communications Services sector is chock-full of quality, growing businesses … and that over half of its stocks are generating solid price momentum.
Though you might pay a bit of a premium for that growth, with only 11 stocks rated “Bullish” on my Value factor.
That’s not a huge surprise, considering XLC holds two “Magnificent Seven” tech stocks: Meta Platforms Inc. (META) and Alphabet (GOOGL). It also contains Netflix Inc. (NFLX), a stock that has enjoyed an 85% price rally over the last year.
Since growth is a theme here, I went ahead and pulled nine stocks that posted double-digit EPS growth or better in the second quarter:
Again, six of the nine stocks above rate “Bullish” overall in my system, and only one rates “Bearish.” That means these are high-growth companies supported by strong scores on my other factors. These are well-rounded stocks that should continue to outperform in the coming months and years.
The bottom line is that the communications sector is definitely worth a closer look right now.
To look up any of these tickers and to gain access to my weekly “Top 10” list, click here for information on how to join Green Zone Fortunes now. You’ll gain unlimited access to my system, as well as my model portfolio, which holds many other top-rated stocks built for this market.
To good profits,
Editor, What My System Says Today