TradingMarkets.com
Three Top Industries, Three Top Stocks
Thursday November 29, 1:16 pm ET
By TradingMarkets Research


Today, I want to look at three top industries and the stocks in those industries that represent the best opportunities for investors. Some industry groups feature a plethora of high, PowerRatings stocks. However it is more often the case that even the most attractive industries, those industries with PowerRatings of 9 or 10, have only one or two stocks with similarly high, 9 or 10 PowerRatings.

When we find a top rated industry, we have two main options when looking to take advantage of that industry's prospects. One option is to keep a watch list of stocks that have good, but not great PowerRatings, such as a 7. The idea here is to keep an eye out to see if these 7-rated stocks will make it to the Recent Upgrades list that we publish daily at PowerRatings.net. Often, investors can catch a great opportunity by waiting for a 7-rated stock in an attractive industry to get upgraded to an 8, a 9 or even a 10.

The second option is, of course, to simply look to skim off the top of a given high-rated industry. Look at the "View All Stocks" option and see what stocks in that industry are "in the green" with PowerRatings (for Investors) ratings of 8, 9, or 10. Those are the "best of breed" stocks in that industry, and where your focus as an investor should go and remain until the stock's PowerRating slips from the "green end" back into the blue (or, worse, the red).

Let's take a look, then, at three industries and the single stock that represents the best opportunity for investors in each.

First up is the Business Equipment industry. This industry has a PowerRating of 10, making it one of the best industries for investors looking for stocks that will benefit from a positive sector environment. Remember that industries with PowerRatings (for Industries) ratings of 10 have brought in average annualized returns in excess of 35% from 1995-2006, according to our research. This is more than double the returns of the average industry group.

Within the Business Equipment group, Diebold (NYSE:DBD - News) is clearly the top stock, with its PowerRatings (for Investors) rating of 9. Diebold's main business is in the manufacturing, sale, installation and servicing of automated transaction and election systems, as well as software and security systems. With a PowerRating of 9, Diebold is in that class of stocks that has historically provided returns of more than 18% in a year's time.

The next industry worth highlighting here is the Generic Drugs industry. Also with a PowerRatings (for Industries) rating of 10, the Generic Drugs industry is home to companies like Mylan Laboratories and Watson Pharmaceuticals (NYSE:WPI - News). But the stock in this group that investors should pay attention to is Barr Laboratories (NYSE:BRL - News). Barr Laboratories is in the business of developing, manufacturing and marketing both generic and proprietary pharmaceuticals. The company's stock has earned a PowerRating of 8.

Stocks with a PowerRating of 8 have been higher one year later more than 74% of the time, compared to less than 68% of the time for the average stock. 8-rated stocks also have returned, on average, more than 17% in a year's time.

The last industry I want to highlight is another 10-rated industry: Regional Northeast Banks. Interestingly, there are a number of banks in this industry group that investors are no doubt well-aware of. These include Citigroup (NYSE:C - News), Commerce Bancorp BH, and State Street (NYSE:STT - News). However, the top-rated stock in this group is actually the somewhat lesser known Chittenden Corporation HZ. Chittenden has a PowerRating (for Investors) rating of 9 and primarily provides financial services through banking subsidiaries in the New England area. Chittenden was most recently in the news due to its mergers with Community Bank & Trust and People's United Financial.

Three Top Industries, Three Top Stocks Recap:

Business Equipment. PowerRatings (for Industries) rating: 10. Diebold. PowerRatings (for Investors) rating: 9

Generic Drugs. PowerRatings (for Industries) rating: 10. Barr Laboratories PowerRatings (for Investors) rating: 8

Regional Banks -- Northeast. PowerRatings (for Industries) rating: 10. Chittenden Corporation HZ. PowerRatings (for Investors) rating: 9