Novice Traders' Notebook  |  FEB 1997

The Fundamentals of Sector Rotation by Paul and Carole Huebott

The Fundamentals of Sector Rotation by Paul and Carole Huebott Maintaining an optimized portfolio of strong blue-chip stocks is one way to invest. Here are the basics of how stock groups move through a typical business cycle. Our new Dow strategy, described in the August 1996 STOCKS & COMMODITIES, is a formula system operating on the sector rotation principle. But sector rotation can also be practiced on fundamentals. Here’s how. Each issue of Barron’s provides market performance data on 96 industries in nine industrial groups. These groups are sometimes called sectors, and we use the two terms interchangeably. One of Barron’s nine groups contains only the conglomerates — companies involved in many industries and probably more than one industrial group. For our purposes, however, let’s forget about the conglomerates. Some of them may be great investments from time to time, but they don’t lend themselves to the sector rotation strategy of investment.

by Paul and Carole Huebotter