Comparing the industries performance during the crisis time of 2008 and 2009.

2008.

S&P: -38,5%

Dow Jones: -33,8%

Nasdaq: -40,5%

No one industry was in positive territory by performance in 2008.It looks like biotechnology industry not much depends on general market movements. This industry is popular among investors in 21st century. The index BTK declined 17,72% in 2008 which is the lowest negative performance among the economy.

Despite the price of gold which is represented GLD index almost didn’t change in 2008 (91.40-91.31), CBOE Gold Index which represent the companies in gold industry declined 20,6%.

Pharmaceutical and Medical Equipment industry (DRG, RXP) declined 19,4% and 20,1%, accordingly. Those are defensive industries. Index RXP includes not only drugs manufacturers, but biotechnology and medical technology companies. Note that Health Care Index (HMO) which represents health care organizations is declined 54,8% in 2008. This index has the best average performance of 28,78% among industries annually from 2000 to 2011.

The next best performed industries are Transportation, Defense, Airline, Utility, Global Telecommunication, and Retail. All of those industries are defensive. It’s interesting that DJT outperformed SPX for 1 decade and 5 last years. I can say the same about Utility and Retail industry. The Airline industry declined less than S&P in 2008 because the oil prices moved down sharply. Defense industry depends much on government orders, so we don’t invest in it. Telecommunication industry today is not industry from technology sector yet. The penetration of mobile services is high, and the companies pay good dividends. So, this is defensive industry, and it basically goes in line with the broad market.

The worst industries in 2008 were Investment banking (-62,6%), Hard disk drive (-60,9%), Oil services (-59,7%), Insurance (-59%), Home Construction ITB (-57,9%), Steel and Iron (-55,6%), Health Care services (-54,81%), Banks (-50%), Semiconductors (-48%), Computer Hardware (-46%), Networks (-45%), Chemicals (-44%), Real Estate (-41%). Most of those industries are cyclical or technological. The only unusual ones in the list are Insurance and Health Care Services. I think the insurance segment sharply declined because the S&P Insurance Index includes such mortgage insurers like AIG and MetLife. I don’t see any clear reason for such moving down Health Care Services in 2008.

 

Well, what about 2009 performance? Have cyclical industries been leaders with the gain? Let’s look at numbers.

2009

S&P: +23,45%

Dow Jones: +18,82%

Nasdaq: +43,89%

The leaders by performance in 2009 were not just cyclical companies, but technological ones. Computer Hardware (+132,4%), Hard Disk Drive (+124,82%), Internet services (+74,82%), Semiconductors (+69,63%), Networks (+60,48%) are the best performance industries in the year following the recession. The appetite for the risk gained as investors started to sell government bonds and buy stocks. In 2008 Treasury Yield Index declined 44,4%, but in 2009 the same indicator raised by 71%!

Among outsiders in 2009 were Banks (-3,63%) as they were continuing to carry losses from foreclosures and bad mortgages; Utilities (+4,9%), Telecommunications (+11,37%), Drugs (+13,33%), Defense (+14,73%), Transportation (+15,90%) as those are defensive industries, Insurance (+11,28%) as the companies were hurt by mortgage loses.

What’s important to note that Retail, Biotechnology, Gold, and Airline outperformed S&P500 despite the fact that in 2008 those industries declined less the broad market. Retail is the brilliant industry because it was continuing to do better than the market in 2010 and 2011.

Cyclical industries such as Oil Service, Chemicals, Investment Banking, Steel and Iron outperform the broad market in 2009 but not as much as technological sector we discussed above.

The only industries which difficult to predict in 2009 were Oil & Gas, Airline, Real Estate, Home Construction, Health Care Services.

 

 

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