"Growth stocks are losing
leadership to value," says Ralph Acampora,
director of technical research at Prudential Securities. Here, Acampora discusses the technical state of
the current market, and highlights a dozen stocks that could become potential new market leaders.
"When looking at the daily bar charts of the leading market indexes (e.g. DJIA, the S&P 500, the Nasdaq Composite, etc.), one is in awe because they are still all trading above their respective 50-day moving averages (MAs). These strong, near-term momentum lines have served as excellent support since March when the indexes successfully retested their MAs, seven times . So far these trends are still firm to the upside. That’s the good news. But for the not-so-good news, we are seeing an increase in negative individual stock performance. Many of this year’s huge winners are coming under increased selling pressure.
"But what makes this whole affair so interesting is that there are other stocks that are doing very well—they appear to be the beneficiaries of the profit taking in the former leaders—money is rotating into the laggards. In fact, the 1 ½ year uptrend in the comparative relative performance of growth versus value, was just broken. This is noteworthy because it is happening in the large- , small- , and mid-cap arenas; this suggests to us that investors are preparing for some sort of market pause or correction in the not-too-distant future. A flight into value is not uncommon. We don’t think that this is a long-term shift, but it could manifest itself well into the first quarter of 2004.
"Rotation is best seen in the price action of individual stocks; listed below are some issues that appear to be under accumulation:
Stocks That Appear To Be Under Accumulation—They Should Be Purchased:
Close As Of |
Fundamental | ||
Company |
Symbol |
12/5/03 |
Rating |
3Com Corp. |
7.82 |
— | |
Bank One |
44.41 |
Underweight | |
Boise Cascade |
30.20 |
Neutral Weight | |
Cisco |
23.75 |
Overweight | |
General Motors |
46.05 |
Overweight | |
Hewlett Packard |
22.11 |
Neutral Weight | |
Honeywell |
29.92 |
Overweight | |
Orbital Sciences |
11.00 |
— | |
Renal Care Group |
41.01 |
— | |
Service Corp International |
5.55 |
— | |
Smurfitt-Stone Container |
17.02 |
Neutral Weight | |
Waste Management |
28.80 |
— |