small-cap strategy · 7/11/2012 · jjsf j&j snack foods corp. cybx cyberonics inc. hls...

Small-Cap Strategy

Wednesday July 11, 2012

Sector Technical Rankings

Jeffrey deGraaf, CMT, CFA Rob Ginsberg Alex Meintel, CMT [email protected] Important disclosure on last page

Strongest WeakestHealth Care

Financial Services

Consumer Staples

Materials & Processing

Technology

Energy

Producer Durables

Utilities

Although our trend model back has moved back to positive, there has been few signs of bullish momentum that would signal to us that the rally out of last month’s deep oversold condition is sustainable, as the weakness exhibited on down days continues to outweigh the strength we see on up days. Last week’s surge in 20 – day highs to 46% likely signals a near‐term blow‐off as we enter the most difficult part of the calendar.

As we look to position portfolios for the months ahead, highly capital efficient names have historically been a good place to hide, with solid returns not only into the fall, but into year‐end as well. While the most highly volatile names tend to lead to the downside through September and we would use the recent lift in small‐caps to lighten up on those names that have this attribute. In this week’s piece, we highlight 22 names that are not only highly capital efficient, but also possess a top ranking in our technical model. Names that should provide strong relative performance in the months ahead. Conversely, we have included those that fall into the top quintile of volatility, as well as the bottom ranking of our model.

The performance out of the building materials space has been nothing short of impressive and while it remains at the top of our sub‐sector rankings, it is likely due for a pause. The recent acceleration has seen an expansion in 65 – day highs to levels that have historically marked a near‐term consolidation. A handful of names continue to look good in our work and we highlight those that would be our candidates to add to any pullbacks.

Rob Ginsberg

Sub‐Sector Technical RankingsStrongest Weakest

Building Materials

Pharma & Biotech

Medical Equip & Svcs

Leisure

Real Estate

Alternative Energy

Auto & Auto Parts

Energy Equipment & Svcs

Electronics

Metals & Minerals

Trend Model Back to Positive

2

Rolling Over at Resistance

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

600

650

700

750

800

850

Russell 2000 (RUT-RUX)Price 50 - Day Moving Average 200 - Day Moving Average

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

90

92

94

96

98

100

102Relative Strength to Russell 1000

Given seasonality and macro headwinds, we question whether recent outperformance is sustainable

3

Surge in 20‐Day Highs Suggests Further Pullback

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

Russell 2000 (R.2000)Price - Close or Current Intraday

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-120%

20%

40%

60%

80%

100%

Renaissance Macro Research - Technical Analysis

7/11/2012 = 14.84%20 DAY NEW HIGHS AS A % OF ISSUES

Momentum present during this acceleration

4

Internal Trends Continue to Deteriorate…

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Russell 2000 (R.2000)Price - Close or Current Intraday

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

20%

40%

60%

80%

100%


7/11/2012 = 52.18%% OF ISSUES WITH 50 DAY M.A. > 200 DAY M.A.

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…As Does the Average RenMac Rank

S O N D 2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S O N D 2011 M A M J J A S O N D 2012 M A M J J A S

3.8

3.7

3.6

3.5

3.4

3.3

3.2

3.1

3.0

2.9

2.8

2.7

2.6

2.5

2.4

2.3Russell 2000 Mean Rank (2.98308, 2.98308, 2.98308, 2.98308, -0.09299)

350

400

450

500

550

600

650

700

750

800

850

900Russell 2000 Weekly (807.140, 807.140, 807.140, 807.140, +8.65002)

Slight improvement during oversold bounce

6

Leadership Attributes

7

Highly Volatile Names Leading to the Downside

8

Long Capital Efficiency/Short Volatility Works Well into the Fall

9

Top Quintile of Capital Efficiency & Top Ranked in our Technical Model

10


11


12


13


14


15

Top Quintile of Volatility & Bottom Ranked in our Technical Model

16

Healthcare Biggest OverweightTech, Energy Biggest Underweight

Bar Width:Higher Ranks – ThickerLower Ranks ‐ Thinner

Color Coding:Overweight‐ GREENUnderweight – RED

17

Health Care, Financials & Staples Remain Leadership

New high

New high

New high

Rolling over at resistance

18

Utilities Continues to Improve

Continues to improve

Weak

Relative deteriorating

19

Tech is our Biggest Underweight

20

Sub‐Sector Ranking

21

Top Sub‐Sectors

22

Bottom Sub‐Sectors

23

Leadership Group Due for a Consolidation?

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

700

800

900

1,000

1,100

1,200

Russell 2000 / Building Materials & Services -SUBSEC (R2K037RG)Price - Close or Current Intraday

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-120%

20%

40%

60%

80%

100%


7/11/2012 = 21.74%65 DAY NEW HIGHS AS A % OF ISSUES

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Leadership Names to Add to on Pullback

25


26


27


28

Optimal Exit in Metals & Minerals

1

1.5

2

2.5

3

3.5

4

4.5

5

Paramount Gold & Silver Corp. (PZG-US) Market Cap: 343.41RenMac Rank: 5 Precious Metals & Minerals

Price 50 Day Moving Average 200 Day Moving Average

10/09 1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12 7/1260

80

100

120

140

160

180

200Relative Strength to Russell 2000

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Consumer Discretionary Financial Services Materials & ProcessingPSMT PriceSmart Inc. PCBC Pacific Capital Bancorp GEVA Synageva BioPharma Corp. BECN Beacon Roofing Supply Inc.BC Brunswick Corp. KW Kennedy‐Wilson Holdings Inc. CPHD Cepheid MYE Myers Industries Inc.IILG Interval Leisure Group Inc. NEWS NewStar Financial Inc. NPSP NPS Pharmaceuticals Inc. AYI Acuity Brands Inc.CHDN Churchill Downs Inc. CYS CYS Investments Inc NKTR Nektar Therapeutics IPHS Innophos Holdings Inc.MTN Vail Resorts Inc. HR Healthcare Realty Trust Inc. MDCO Medicines Co. GPK Graphic Packaging Holding Co.HSNI HSN Inc. OHI Omega Healthcare Investors Inc. LXRX Lexicon Pharmaceuticals Inc. WSO Watsco Inc.SIX Six Flags Entertainment Corp. OCN Ocwen Financial Corp. WST West Pharmaceutical Services Inc. EXP Eagle Materials Inc.SKS Saks Inc. SEM Select Medical Holdings Corporation USG USG Corp.MDC M.D.C. Holdings Inc. Health Care AUXL Auxilium Pharmaceuticals Inc. LPX Louisiana‐Pacific Corp.SPF Standard Pacific Corp. AFFY Affymax Inc. PDLI PDL BioPharma Inc. TREX Trex Co. Inc.MHO M/I Homes Inc. IPXL Impax Laboratories Inc. OPTR Optimer Pharmaceuticals Inc. NX Quanex Building Products Corp.POOL Pool Corp. MRX Medicis Pharmaceutical Corp. HAE Haemonetics Corp. BLDR Builders FirstSource Inc.MTH Meritage Homes Corp. PRX Par Pharmaceutical Cos. Inc. SGEN Seattle Genetics Inc. IBI Interline Brands Inc.RYL Ryland Group Inc. JAZZ Jazz Pharmaceuticals Plc INFI Infinity Pharmaceuticals Inc. TXI Texas Industries Inc.DTG Dollar Thrifty Automotive Group Inc. CBST Cubist Pharmaceuticals Inc. IMGN Immunogen Inc. HW Headwaters Inc.TRK Speedway Motorsports Inc. IRWD Ironwood Pharmaceuticals Inc. Cl A MWIV MWI Veterinary Supply Inc.CBRL Cracker Barrel Old Country Store Inc. ATHN athenahealth Inc. PBH Prestige Brands Holdings Inc. Producer Durables

QCOR Questcor Pharmaceuticals Inc. BRLI Bio‐Reference Laboratories Inc. LCC US Airways Group Inc.Consumer Staples TMH Team Health Holdings Inc. THRX Theravance Inc. SAVE Spirit Airlines Inc.LNCE Snyders‐Lance Inc. ARNA Arena Pharmaceuticals Inc. ISIS Isis Pharmaceuticals Inc. ALGT Allegiant Travel Co.BGS B&G Foods Inc. SCLN SciClone Pharmaceuticals Inc. PCYC Pharmacyclics Inc. TGH Textainer Group Holdings Ltd.UVV Universal Corp. ALGN Align Technology Inc. EXAS EXACT Sciences Corp. RA RailAmerica Inc.UNFI United Natural Foods Inc. AMSG Amsurg Corp. OMER Omeros Corp. JBLU JetBlue Airways Corp.HAIN Hain Celestial Group Inc. PRXL PAREXEL International Corp. DVAX Dynavax Technologies Corp.CIGX Star Scientific Inc. IDIX Idenix Pharmaceuticals Inc. SNTA Synta Pharmaceuticals Corp. TechnologyCORE Core‐Mark Holding Co. Inc. VVUS VIVUS Inc. SLTM Solta Medical Inc. ARRS Arris Group Inc.JJSF J&J Snack Foods Corp. CYBX Cyberonics Inc. HLS HealthSouth Corp.LANC Lancaster Colony Corp. AIRM Air Methods Corp. CRIS Curis Inc.SMBL Smart Balance Inc. AKRX Akorn Inc. OMPI Obagi Medical Products Inc.SHF Schiff Nutrition International Inc. Cl A HTWR HeartWare International Inc CBM Cambrex Corp.

SNTS Santarus Inc. ZIOP ZIOPHARM Oncology Inc.Energy ACCL Accelrys Inc. THLD Threshold Pharmaceuticals Inc.CVI CVR Energy Inc. MDSO Medidata Solutions Inc. ALNY Alnylam Pharmaceuticals Inc.DK Delek US Holdings Inc. PCRX Pacira Pharmaceuticals Inc.WNR Western Refining Inc. GHDX Genomic Health Inc.

*New entrant to top ranking

Top Ranked (1) in RenMac Small Cap Technical Model

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Consumer Discretionary Producer DurablesTOWR Tower International Inc. SYRG Synergy Resources Corp. ES EnergySolutions Inc. NANO Nanometrics Inc.SRI Stoneridge Inc. PQ PetroQuest Energy Inc. JBT John Bean Technologies Corp. PCTI PC‐Tel Inc.MTOR Meritor Inc. WRES Warren Resources Inc. MXWL Maxwell Technologies Inc. AXTI AXT Inc.THRM Gentherm Incorporated STRI STR Holdings Inc. PMFG PMFG Inc. SHOR ShoreTel Inc.CWST Casella Waste Systems Inc. Cl A WLB Westmoreland Coal Co. VLCCF Knightsbridge Tankers Ltd. IXYS IXYS Corp.FSYS Fuel Systems Solutions Inc. AMRS Amyris Inc. FRO Frontline Ltd. ELON Echelon Corp.SMP Standard Motor Products Inc. ENOC EnerNOC Inc. GHM Graham Corp. FN FabrinetCVO Cenveo Inc. HNR Harvest Natural Resources Inc. MEA Metalico Inc. WFR MEMC Electronic Materials Inc.DLA Delta Apparel Co. NR Newpark Resources Inc. HCCI Heritage‐Crystal Clean Inc. IPHI Inphi Corp.PERF Perfumania Holdings Inc. PHX Panhandle Oil & Gas Inc. VPG Vishay Precision Group Inc. CEVA CEVA Inc.MDCA MDC Partners Inc PDC Pioneer Drilling Co. FLOW Flow International Corp. ASEI American Science & Engineering Inc.KSWS K‐Swiss Inc. Cl A NGS Natural Gas Services Group Inc. AIN Albany International Corp. Cl A TNAV TeleNav Inc.MHGC Morgans Hotel Group Co. HURC Hurco Cos. DAKT Daktronics Inc.PRTS U.S. Auto Parts Network Inc. Financial Services GNK Genco Shipping & Trading Ltd. IRBT iRobot Corp.NPK National Presto Industries Inc. GSVC GSV Capital Corp. ECOL US Ecology Inc. NPTN NeoPhotonics Corp.MCHX Marchex Inc. Cl B ITG Investment Technology Group Inc. ABFS Arkansas Best Corp. COHU Cohu Inc.XIDE Exide Technologies INTL INTL FCStone Inc. UACL Universal Truckload Services Inc. MOSY MoSys Inc.

GCAP GAIN Capital Holdings Inc. HIL Hill International Inc. DGII Digi International Inc.Consumer Staples FXCM FXCM Inc. ERII Energy Recovery Inc. UCTT Ultra Clean Holdings Inc.CEDC Central European Distribution Corp. SWS SWS Group Inc. LMIA LMI Aerospace Inc. MXL MaxLinear Inc.CDZI Cadiz Inc. GFIG GFI Group Inc. ISH International Shipholding Corp. AGYS Agilysys Inc.FARM Farmer Bros. Co. LTS Ladenburg Thalmann Financial Services MPR Met‐Pro Corp. RELL Richardson Electronics Ltd.LMNR Limoneira Co. ATNY API Technologies Corp. KOPN Kopin Corp.

Health Care FRM Furmanite Corp. OCLR Oclaro Inc.Energy GTS Triple‐S Management Corp. Cl B PATR Patriot Transportation Holding Inc. VOCS Vocus Inc.GEVO Gevo Inc. UAM Universal American Corp. KTOS Kratos Defense & Security Solutions Inc WSTL Westell Technologies Inc. Cl AGPRE Green Plains Renewable Energy Inc. TWIN Twin Disc Inc. SIGM Sigma Designs Inc.BPZ BPZ Resources Inc. Materials & Processing PLAB Photronics Inc.MIND Mitcham Industries Inc. RVM Revett Minerals Inc. Technology ENTR Entropic Communications Inc.ATPG ATP Oil & Gas Corp. ZEUS Olympic Steel Inc. MEET MeetMe Inc RBCN Rubicon Technology Inc.MHR Magnum Hunter Resources Corp. UEC Uranium Energy Corp. ARX Aeroflex Holding Corp GSIT GSI Technology Inc.GGS Global Geophysical Services Inc. NOR Noranda Aluminum Holding Corp. MSPD Mindspeed Technologies Inc.CPE Callon Petroleum Co. CENX Century Aluminum Co. GCOM Globecomm Systems Inc.BAS Basic Energy Services Inc. SWC Stillwater Mining Co. MTSN Mattson Technology Inc.REX Rex American Resources Corp. GSS Golden Star Resources Ltd. ESIO Electro Scientific Industries Inc.DWSN Dawson Geophysical Co. VGZ Vista Gold Corp. OPLK Oplink Communications Inc.VOG Voyager Oil & Gas Inc. ZINC Horsehead Holding Corp. RSTI Rofin‐Sinar Technologies Inc.UDRL Union Drilling Inc. AUMN Golden Minerals Co. NEWP Newport Corp.TESO Tesco Corp. MDW Midway Gold Corp. GEOY GeoEye Inc.TTI Tetra Technologies Inc. PZG Paramount Gold & Silver Corp. ANAD ANADIGICS Inc.GST Gastar Exploration Ltd. URZ Uranerz Energy Corp. SIMG Silicon Image Inc.HEK Heckmann Corp. ODC Oil‐Dri Corp. of America ACLS Axcelis Technologies Inc.

*New entrant to bottom ranking

Bottom Ranked (5) in RenMac Small Cap Technical Model

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Analyst: The analyst does not serve as an officer, director, or advisory board member of the subject company.The analyst or a member of the analyst's household does not have a long position in shares or derivatives of the subject company.The analyst or a member of the analyst's household does not have a short position in shares or derivatives of the subject company.

Rafferty Capital Markets, LLC has not acted as an investment banker for the company(s) mentioned in this report in the past or will solicit in the future.The person(s) responsible for preparing this report regularly trade the constituents of the CRB index, currencies, fixed income securities and stock indices.

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Additional Significant Risk Factors and Investment Considerations: The securities or trading strategies discussed in this report may not be suitable for some investors. Investors must independently evaluate each issuer, security, or instrument discussed in this report and consult independent advisors where necessary.

1. Past Performance is not indicative of future results.2. Market Risk: Securities may decline in value due to factors affecting securities markets generally or particular industries. The value of a security may be worth less than the original investment.3. Concentration risk: Investing a substantial portion of assets in securities within a single industry or sector of the economy may be subject to greater price volatility or adversely affected by the

performance of securities in that particular sector or industry.4. Leverage Risk: Fluctuations in interest rates on borrowings or the dividend rates on preferred shares as a result of changes in short‐term interest rates may reduce the return to common shareholders or

result in fluctuations in the dividends paid on the common shares. There is no assurance that a leverage strategy will be successful.5. Foreign Investment Risk: Investment in foreign securities (both governmental and corporate) may involve a high degree of risk. In regards to debt securities, such risks may impair the timely payment of

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Copyright © Renaissance Macro Research, LLC. 2011. All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Renaissance Macro Research, LLC. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Renaissance Marco Research, LLC.

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small-cap strategy · 7/11/2012 · jjsf j&j snack foods corp. cybx cyberonics inc. hls...

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