According to the sector and industry overview pages, the five U.S. market sectors with the largest gains during January were consumer cyclical, communication services, technology, basic materials and health care. Stocks that fueled these gains included Tesla Inc. (TSLA, Financial), Warner Bros. Discovery Inc. (WBD, Financial), Nvidia Corp. (NVDA, Financial), Albermarle Corp. (ALB, Financial) and Align Technology Inc. (ALGN, Financial).
US market begins February with a bang, continuing strong January gains
On Wednesday, the Dow Jones Industrial Average closed at 34,094.34, essentially unchanged from Tuesday’s close of 34,086.04 despite tumbling more than 500 points at the intraday low. On the other hand, the Standard & Poor’s 500 Index closed at 4,119.37, up 42.77 points or approximately 1% from the previous close of 4,076.60.
Stocks surged as the Federal Reserve increased the federal funds target rate by 0.25%, down from the 0.5% rate hike in December 2022. Fed Chairman Jerome Powell said that while the rate hikes may continue further to combat inflation, the central bank saw “for the first time” that the disinflationary process has begun.
Wednesday’s gain boosted the markets’ strong returns during January. The S&P 500 gained 6.2% in January while the Nasdaq Composite Index gained 10.7%, its highest gain since July 2022. Likewise, the S&P 500’s gain was the highest January gain since 2019.
According to the Aggregated Statistics Chart, a Premium feature of GuruFocus, the mean one-month total return of the S&P 500 stocks is 7.38% with a median of 6.36%.
Based on the discrete layers chart, sectors with the highest ratio of stocks that gained during the past month to the stocks that had negative returns during the past month include basic materials, consumer cyclical and technology.
Consumer cyclical: Tesla
The consumer cyclical sector returned approximately 17.64% in January, led by gains in vehicles and parts, homebuilding and construction and travel and leisure. The mean one-month return of the S&P 500 consumer cyclical stocks is 12.18% with a median of 12.23%. According to the All-in-one Screener, a Premium feature, the top-performing S&P 500 consumer cyclical stock during January was Tesla (TSLA, Financial).
Shares of Tesla traded around $171.83, showing that the stock is significantly undervalued based on Wednesday’s price-to-GF-Value ratio of 0.43. The stock gained approximately 38.89% during January.
The Austin, Texas-based electric vehicle giant has a GF Score of 79 out of 100 based on a rank of 8 out of 10 for financial strength and growth, a GF Value rank of 4 out of 10, and a rank of 5 out of 10 for profitability and momentum.
Gurus with holdings in Tesla include Catherine Wood (Trades, Portfolio)’s ARK Investment, Ron Baron (Trades, Portfolio)’s Baron Funds, and Baillie Gifford (Trades, Portfolio).
Communication services: Warner Bros. Discovery
The communication services sector returned approximately 16.77% during the past month, led by Warner Bros. Discovery Inc. (WBD, Financial). Shares traded around $14.88 on Wednesday; the stock gained approximately 56.33% during January.
The New York-based cable company has a GF Score of 80 out of 100 driven on a rank of 9 out of 10 for growth and a rank of 8 out of 10 for profitability and GF Value.
Despite the strong gain and profitability, Warner Bros. Discovery is a possible value trap according to GuruFocus’ GF Value Line. Although the stock’s price-to-GF-Value ratio is just 0.60, Warner Bros. Discovery has a low financial strength rank of 3 out of 10 and a low momentum rank of 2 out of 10.
Technology: Nvidia
The technology sector returned approximately 13.87% during the past month, led by semiconductor company Nvidia (NVDA, Financial). Shares traded around $201.10, showing that the stock is modestly undervalued based on its price-to-GF-Value ratio of 0.85. The stock gained approximately 36.96% in January.
The Santa Clara, California-based graphics processing chip company has a GF Score of 96 out of 100 based on a rank of 10 out of 10 for profitability and growth, a financial strength rank of 8 out of 10, a GF Value rank of 7 out of 10 and a momentum rank of 5 out of 10.
Gurus with holdings in Nvidia include Baillie Gifford (Trades, Portfolio) and Ken Fisher (Trades, Portfolio)’s Fisher Investments.
Basic materials: Albermarle
The basic materials sector gained approximately 12.04% during the past month, led by lithium company Albermarle Corp. (ALB, Financial). Shares traded around $281.50, showing that the stock is modestly undervalued based on its price-to-GF-Value ratio of 0.78. The stock gained approximately 29.91% in January.
The Charlotte, North Carolina-based company has a GF Score of 83 out of 100 based on a momentum rank of 10 out of 10, a GF Value rank of 9 out of 10, a profitability rank of 8 out of 10, a financial strength rank of 7 out of 10 and a growth rank of 4 out of 10.
Health care: Align Technology
The health care sector returned 11.20% during the past month, led by medical instrument company Align Technology (ALGN, Financial). Shares traded around $274.11, showing that the stock is significantly undervalued based on its price-to-GF-Value ratio of 0.55 as of Wednesday. The stock gained approximately 29.92% during January.
The Tempe, Arizona-based company designs clear aligners including its main product Invisalign. Align Technology has a GF Score of 92 out of 100 driven on a financial strength rank of 8 out of 10 and a rank of 10 out of 10 for profitability and growth despite momentum and GF Value ranking just 4 out of 10.
