Why is XLB a BUY?
S&P Materials Select Sector Index: The companies included in each Select Sector Index are selected on the basis of general industry classification from a universe of companies defined by the Standard & Poor’s 500 Composite Stock® Index (“S&P 500®”). The nine Select Sector Indexes (each a “Select Sector Index”) upon which the Select Sector SPDR Funds are based together comprise all of the companies in the S&P 500. The Materials Select Sector Index includes companies from the following industries: chemicals; metals & mining; paper & forest products; containers & packaging; and construction materials.
Apart from the broader metals and mining positive outlook, we have a few objective reasons for an XLB BUY.
1) The SPDR has made it to the ORMI ETF Global Sector Index.
Indexing: The Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.
The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.
The ORMI Index is based on the extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.
2) The sector is an underperformer in the Jiseki quarterly performance rankings.
3) The price momentum is positive and the prices have made above key review levels.
To download the latest report please visit our Reuters Store
For knowing more about ORMI Indices mail us for details or contact a sales representative.
Presentations and Primers: ORMI Indices and Analytics
North American Sales Office (Toronto)
Phone: 001.905.847.1400
Toll Free: 001.877.289.5673
Fax: 001.416.352.0190
northamerica@orpheus.asia
India Sales Office (New Delhi)
Phone: 0091.11.65181118
Phone: 0091.9873155513
india@orpheus.asia
European Sales Office (Cluj Napoca)
Romania, EU
Phone/Fax: 0040.364.401.172
Phone: 0040.746919497
Phone: 0036.704195211
europe@orpheus.asia