We have evolved a sector-ranking model, which takes our view of where our 12-month economic outlook stands vis-à-vis consensus. When the macro-economic inputs are placed in the model and it is calculated it arrays the sectors (currently 104 industry groups) and gives us an indication of the business outlook for these groups over the coming twelve months.
We primarily focus on those sectors that end up at the extremes of the model (the top and bottom 20 industry groups) as this gives us a clearer indication of the prospects for out or under-performance. We then look into the major players in that sector and focusing upon those companies with market capitalisations of $1bn or more we then look for long and short ideas in the sectors.
This model has worked well in guiding our analysis (and our recommendations to clients) through the dangerous shoals of the market over the last several years.