WEEKLY SECTOR ROTATION
Brian T. Hannon, CFA
Cheap Stocks Can Get Cheaper
Volatility in our attractiveness rankings has been relatively subdued this week; whereby, in the most
significant move, the business services sector has broken out of the bottom 5 group on the strength
of improved catalytic properties (see Table 1). What we find most notable, as indicated in Table 2, is
that the sectors with the most favorable valuations scores dominate the bottom-end of our multi-factor
rankings due to low catalytic scores (consumer staples, retail, technology, consumer discretionary
and healthcare). Thus, our sector attractiveness rankings suggest that these cheap stocks are at risk
of getting cheaper in the absence of catalytic support. See Tables 5 and 6 for top-ranked names from
the most attractive sectors and bottom-ranked names from the least attractive sectors.
Brian T. Hannon, CFA
Founder, Director of Quantitative Equity Research
Qubit Research, LLC
Brian Hannon began his career in the chemicals industry at the Dupont Company where he held various positions in research & development, project management, and corporate finance. While in R&D, he was awarded a patent for his role in the development of a reverse osmosis application for the production of semiconductor devices (Patent# 4,879,043: Manufacture of High Purity Hydrogen
Peroxide by Using Reverse Osmosis”). Brian made the transition to the investment management profession as a research analyst covering chemicals industry stocks in 1992 at the DuPont Pension Fund. In 1995 he joined ASB Capital Management where he developed the first version of the multi-factor model that Polaris is based on. From 1997 to 2006, Brian produced an exceptional track record while serving as a senior portfolio manager at Macquarie Investments (formerly Delaware Investment Management) on their institutional large-cap value team. In 2006, Brian founded Qubit Investments, LLC to launch an equity market neutral fund. He later became the Director of Equity Research at Sturdivant & Co. and then Quoin Capital, LLC in 2013 and 2020, respectively, which was prior to assuming his current role at Qubit Research, LLC. Brian holds a BS degree in chemical engineering and a BS in economics from Carnegie-Mellon University and has been a CFA charter holder since 1991.
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