Our monthly sentiment run is a behavioral, market-based gauge of investor sentiment in the Basic Materials Sector. Any relative performance measure is tied to an S&P 500 Materials Sector INDEX (GICS or XLB). Further screening methodologies are included in the link to the tracker below.
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Key Call-Outs:
Positive Sentiment (or more positive)
Negative Sentiment (or more negative)
- Short-Interest: Gold Miners remain among the least shorted. Month-over-month, short-interest has shifted back toward the chemical companies (basic, diversified, fertilizer). 8 of 12 of the highest short interest names are in the chemicals space if Ag. Chem is included (Mosaic (MOS) and CF Industries (CF) are among the top 12).
- Buy Ratings: After a shifting and re-shifting of miner short-positioning, metals & miners have consistently had the lowest buy ratings in the sector in 2016 (VALE, FCX, FMG). Mosaic (MOS) and Yara (YARIY) are also in the top 12.
- Combining consensus “buy” ratings and short-interest, Construction Materials (VMC, MLM) have the most positive relative sentiment when combining both metrics. Sentiment in the chemicals space is mixed. Looking at the sub-sectors in aggregate, sentiment among specialty and diversified chemicals is relatively positive when combining short-interest and "buy" ratings despite 8 of 12 with the highest short-interest being chemical companies.
- Earnings Season: Sales and earnings growth has come in -8.8% and -6.7% respectively for the 21 out of 27 Materials names in the S&P 500 that have reported. The one sub-sector that has comped higher Y/Y for Q2 (sales +7.3% and earnings +41.3%) is construction materials (VMC, MLM). Q2 will likely mark the 4th consecutive quarter for negative earnings growth for S&P 500 materials constituents.
- LOOKING FOR A TURNAROUND: However, past Q2 2016, consensus currently expects a sharp turnaround in sector earnings (+6.1% in Q3, +19.1% in Q4, 20.9% in Q1 2017, and 12.0% in Q2 2017), so today's current forward multiple, near a cycle peak, has in it a sharp expected earnings turnaround on the whole.
