Hot & Cold Sectors

10/02/2013 7:00 am EST


Laszlo Birinyi

President, Birinyi Associates, Inc.

Veteran market sage, Laszlo Birinyi, shares his thoughts on the current hot and cold sectors and how he's investing in the current environment.

SPEAKER:  We’re talking about sectors hot and cold with Laszlo Birinyi.  Hi Laszlo, how are you?  Laszlo, now we’ve seen a big run on the market and especially in sectors like the retailers, the homebuilders.  We’ve seen some of those stocks up 700%, 800%, 900% since March of 2009; however, the homebuilders especially had a huge selloff and as we’re recording this interview, a lot of retailers are beginning to sell off as well as they look towards week sales into the fall and Christmas holiday.  Can you tell me a little bit about those sectors and tell me what sectors you’re looking at now that seem to have some really good potential?

LASZLO BIRINYI:  One thing here in the middle of August is I’m not placing a whole lot of emphasis on a lot of us going on.  It’s sort of a quiet year, a quiet month.  We’re surprised at how little information is coming out.  A few research reports are coming out, they’re not the kind of intelligence that you’d like to have, and then a little trouble by the homebuilders stock that most people never think about, MDR, which is a very significant stock.  It’s still pretty big from its peak, a little bit more than product taking.  This could be classic case of you sell when you get the good news but Home Depot is another stock that we used to trade and it’s started weak.  Is it a correction or is it the beginning of something worse?  At this point, I really don’t want to say, I really don’t know.

SPEAKER:  Could they have fallen, I mean some of those homebuilder stocks were up 30% or so.  Could they fall that much and still be in a bull market?

LASZLO BIRINYI:  They could and a lot of them I think is just the lack of buyers and I really haven’t seen selling them would really concern me and I think like Tobra (SP?) is going from 35 to 30.  That doesn’t especially bother me. 

SPEAKER:  That’s not a lot, so a lot of people have said that the baton is being passed from the early cyclical stocks, the homebuilders, the retailers, the consumer to the industrials, to more mid-cycle type stocks.  Do you see evidence of that?

LASZLO BIRINYI:  No, for one thing there are no, these classifications are sort of, they’re not solid.  We did a very significant piece on group rotation years ago.  It was three volumes and basically found that the group rotation is a very iffy thing and what you really want to do is get the big picture right.  For example, we suggested early on financials and since then, we’re just saying financials are in the early cycle.  In a global market, financials are an early cycle group.  In shortable market, financials do better toward the end but in this kind of a market, I think you have to look at the type of market and so to us, financials are not of great interest and I think the industrials, I think you’ve seen of their names, pop on earnings but I’m still not excited about them.  I’m still looking more for individual stocks and stories rather than trying to pick segments because everyone, the real inefficiency I think is through the bottoms up, not top down.

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