Among the many features found in each week’s edition of Value Line’s Selection & Opinion service is a list of the seven best and worst performing industries over the past six weeks. These rankings can be found on the inside back cover of Selection & Opinion. The roughly 1,700 stocks in the Value Line universe are currently divided among about 100 industries. Notably, for the purposes of calculating these results, the performance of each stock is equally weighted to the others in its industry (i.e., irrespective of market capitalization).  

This week’s rankings of best and worst performing industries (over the past six weeks) provides ample evidence of how quickly market sentiment toward a particular group can shift. Indeed, we find that four of the names on this week’s worst performing list were among the top performers as recently as late July.



Six Weeks Ending 7/30/2013

Six Weeks Ending 9/24/13

7 Best Performing Industries

7 Best Performing Industries

Healthcare Info., +13.7%

Maritime, +30.9%

Newspaper, +13.1%

Biotechnology, +9.0%

Thrift, +12.3%

Hotel & Gaming, 7.4%

Biotechnology, +12.2%

Aerospace / Defense, 6.4%

Telecom. Services, +10.8%

Foreign Elec. / Enter., +5.8%

Bank (Midwest), +10.7%

Automotive, +5.7%

Publishing, +10.5%

Heavy Truck & Equip., +5.4%


7 Worst Performing Industries

7 Worst Performing Industries

Homebuilding, -13.7%

Precious Metals, -8.2%

Chemical (Basic), -5.5%

Publishing, -6.4%

Building Materials, -5.2%

Thrift, -4.5%

Coal, -5.0%

Bank (Midwest), -4.4%

Furn/Home Furnish., -4.6%

Metals & Mining (Divers.), -4.1%

Engineering & Const, -3.3%

Healthcare Info., 3.9%

Wireless Networking, -3.1%

Electric Util. – Central, -3.8%

This week, we are focusing our attention on one of the recent laggards, the Healthcare Information Services group, as a potential source for investment ideas. Being a relatively small industry—only seven companies are included in our coverage—a big move in even one stock can land the group a spot on either our best or worst-performing list. This seems to be the case this week. The recent price action across most of this space has been fairly modest, but WebMD (WBMD) stock has dipped nearly 15% over the past six weeks. The recent slide kicked off in mid-September after the completion of a tender offer in which the company purchased five million of its shares for $34 each. The stock is now trading at about $29. 

Overall, Healthcare Information stocks have delivered healthy returns for investors so far in 2013. In particular, WBMD shares, even with the recent setback, are up about 100% year to date. Generally, these equities, including WebMD, are trading at fairly lofty P/E multiples. Based on historical data, the valuations are not necessarily out of character, but do appear to leave most of these issues with fairly unexciting long-term appreciation potential. 

One stock that looks to be worth a closer look for those with an eye on 3- to 5-year total returns is Computer Programs & Systems (CPSI). CP&S, which is based in Mobile, Alabama, designs, installs, and supports information-technology solutions for small and mid-sized hospitals in the U.S. Its client list includes 650 hospitals in 45 states.  

The company went public just over a decade ago, and it has compiled a more-than-respectable track record since then. Its top line has advanced fairly steadily, with growth averaging nearly 10% per year between 2002 and 2012. These gains have been good for profits, which climbed at a faster clip (13%) over this stretch. The positive momentum has continued into 2013, with the full-year tallies, likely to show annual increases of 12% and 5% for sales and earnings, respectively. 

Looking ahead to 2014 and beyond, the ongoing implementation of recent healthcare legislation should offer opportunities for CP&S to expand its business, including the potential for market-share increases from weaker competitors. On the basis of the company’s promising long-term outlook, CPSI stock stands a good chance of providing investors with above-average price-appreciation to 2016-2018. The company also pays a sizable dividend, which provides a yield of 3.5%, well above the current Value Line median of 2.1%. The payout represents a sizable chunk of earnings (about 70% of our 2013 estimate), but is supported by a solid balance sheet and healthy free cash flow and should enhance this equity’s appeal with income-oriented accounts.    

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.