By Philip van Doorn, MarketWatch
Zoltan Major / Shutterstock.com
We recently pointed out that the S&P 500 Index is trading at its highest level to trailing earnings in nearly 13 years, and its highest level to trailing sales in almost 16 years.
Those valuations, together with the broad increase in U.S. stocks since Donald Trump’s election, mean you might be better off considering shares that have been left behind by the rally.
Here’s a look at how strong the rally has been:
The S&P Composite 1500 Index has returned 7.1% since Nov. 8 (Election Day). You can see on the chart that the three indices that make up the S&P 1500 have had varied performance, with small-cap stocks faring the best.
There are so many factors at play, with uncertainties still lingering as Trump doesn’t take over for another five weeks.
Investors expect a lowering of the corporate tax rate to boost profits for many U.S. companies. Then there are expectations that deregulation of the banking and energy industries will accelerate U.S. GDP growth and put more people to work when the unemployment rate is already low, at 4.6%. The GDP growth rate (3.2% during the third quarter) will probably increase if Trump gets his way with a massive infrastructure-spending bill.
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Investors already believe upward pressure on wages will lead to inflation, which has pushed the yield on 10-year U.S. Treasury bills /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.51% to about 2.5% from 1.88% on Election Day.
Rising interest rates means a strengthening dollar, considering that many central banks around the world are keeping short-term rates near or below zero, as the Federal Reserve is raising rates. A stronger dollar can hurt sales of larger companies that rely heavily on exports or on sales in foreign markets. This helps explain the great outperformance of small-cap stocks during the Trump rally.
Stocks left behind during the Trump rally
We thought it would be useful to take a broad look at the entire S&P 1500 to identify stocks that have declined as most of the market has risen since Trump was elected. From Nov. 8 through Dec. 13, shares of 187 S&P 1500 companies declined. Among this group, 41 were health-care companies, showing just how much of a political beating companies took as politicians bashed them over pricing, and the Affordable Care Act was thrown into play by Trump.
Among the 187 stocks declining since Nov. 8, 65 were down at least 5% and 34 of those had majority “buy” or equivalent ratings among at least three analysts polled by FactSet.
Among those 34, 20 have implied 12-month upside potential of more than 20%, based on consensus price targets:
|Company||Ticker||Industry||Closing price - Nov. 13||Consensus price target||Implied 12-month upside potential|
|Flotek Industries Inc.||/zigman2/quotes/200116711/composite FTK||Oilfield Services/ Equipment||$10.27||$17.33||69%|
|Nektar Therapeutics||/zigman2/quotes/206715615/composite NKTR||Biotechnology||$12.24||$19.83||62%|
|Alexion Pharmaceuticals Inc.||/zigman2/quotes/206262068/composite ALXN||Biotechnology||$110.01||$170.28||55%|
|Mallinckrodt PLC||/zigman2/quotes/209283217/composite MNK||Pharmaceuticals||$53.04||$81.40||53%|
|Salesforce.com Inc.||/zigman2/quotes/200515854/composite CRM||Software||$71.61||$95.14||33%|
|Centene Corp.||/zigman2/quotes/208900023/composite CNC||Managed Health Care||$57.02||$75.69||33%|
|Activision Blizzard Inc.||/zigman2/quotes/200717283/composite ATVI||Recreational Products||$37.32||$48.90||31%|
|Synchronoss Technologies Inc.||/zigman2/quotes/203882576/composite SNCR||Internet Software/ Services||$41.23||$53.57||30%|
|Royal Gold Inc.||/zigman2/quotes/203440759/composite RGLD||Precious Metals||$69.29||$88.69||28%|
|Cerner Corp.||/zigman2/quotes/209885277/composite CERN||Health Industry Services||$48.21||$60.82||26%|
|Newell Brands Inc.||/zigman2/quotes/209507510/composite NWL||Home Furnishings||$47.30||$58.73||24%|
|Ultimate Software Group Inc.||Misc. Commercial Services||$193.82||$240.00||24%|
|Calavo Growers Inc.||/zigman2/quotes/207207265/composite CVGW||Food: Specialty/ Candy||$57.55||$71.17||24%|
|Providence Service Corp.||/zigman2/quotes/203661569/composite PRSC||Misc. Commercial Services||$37.74||$46.67||24%|
|Hill-Rom Holdings Inc.||/zigman2/quotes/200618216/composite HRC||Medical Specialties||$55.91||$68.75||23%|
|Eli Lilly and Co.||/zigman2/quotes/200106384/composite LLY||Pharmaceuticals||$68.64||$84.29||23%|
|HMS Holdings Corp.||/zigman2/quotes/200443609/composite HMSY||Health Industry Services||$18.55||$22.63||22%|
|Newmont Mining Corp.||/zigman2/quotes/205356474/composite NEM||Precious Metals||$33.87||$41.21||22%|
|American Tower Corp.||/zigman2/quotes/200890312/composite AMT||Real Estate Investment Trusts||$106.13||$128.78||21%|
|Molson Coors Brewing Co. Class B||/zigman2/quotes/205165133/composite TAP||Beverages: Alcoholic||$99.83||$120.73||21%|
Here’s a summary of analysts’ ratings for the group, along with total returns since Trump’s election and for all of 2016:
|Company||Ticker||Share ‘buy’ ratings||Share neutral ratings||Share ‘sell’ ratings||Total return - Nov. 8 through Dec. 13||Total return - 2016, through Dec. 13|
|Flotek Industries Inc.||/zigman2/quotes/200116711/composite FTK||100%||0%||0%||-7%||-5%|
|Nektar Therapeutics||/zigman2/quotes/206715615/composite NKTR||100%||0%||0%||-6%||-21%|
|Alexion Pharmaceuticals Inc.||/zigman2/quotes/206262068/composite ALXN||76%||24%||0%||-8%||-42%|
|Mallinckrodt PLC||/zigman2/quotes/209283217/composite MNK||89%||11%||0%||-8%||-24%|
|Salesforce.com Inc.||/zigman2/quotes/200515854/composite CRM||94%||4%||2%||-6%||-7%|
|Centene Corp.||/zigman2/quotes/208900023/composite CNC||68%||32%||0%||-15%||0%|
|Activision Blizzard Inc.||/zigman2/quotes/200717283/composite ATVI||83%||17%||0%||-9%||1%|
|Synchronoss Technologies Inc.||/zigman2/quotes/203882576/composite SNCR||87%||13%||0%||-8%||10%|
|Royal Gold Inc.||/zigman2/quotes/203440759/composite RGLD||80%||20%||0%||-8%||87%|
|Cerner Corp.||/zigman2/quotes/209885277/composite CERN||56%||37%||7%||-8%||-20%|
|Newell Brands Inc.||/zigman2/quotes/209507510/composite NWL||94%||6%||0%||-6%||6%|
|Ultimate Software Group Inc.||71%||29%||0%||-6%||2%|
|Calavo Growers Inc.||/zigman2/quotes/207207265/composite CVGW||83%||17%||0%||-5%||12%|
|Providence Service Corp.||/zigman2/quotes/203661569/composite PRSC||67%||33%||0%||-8%||-21%|
|Hill-Rom Holdings Inc.||/zigman2/quotes/200618216/composite HRC||71%||29%||0%||-6%||20%|
|Eli Lilly and Co.||/zigman2/quotes/200106384/composite LLY||70%||30%||0%||-7%||-15%|
|HMS Holdings Corp.||/zigman2/quotes/200443609/composite HMSY||80%||20%||0%||-13%||51%|
|Newmont Mining Corp.||/zigman2/quotes/205356474/composite NEM||60%||40%||0%||-6%||78%|
|American Tower Corp.||/zigman2/quotes/200890312/composite AMT||90%||10%||0%||-8%||16%|
|Molson Coors Brewing Co. Class B||/zigman2/quotes/205165133/composite TAP||79%||21%||0%||-5%||10%|
The idea of presenting this list is to bring to your attention stocks you may have never considered. Maybe chasing stocks that have performed well isn’t the only way for you to generate ideas. If you are interested in any of the companies listed here, you need to do your own research and form opinions on the companies’ prospects for long-term success, hopefully with the assistance of your broker or investment adviser.