2 First-Quarter Sector Standouts

Healthcare and restaurant stocks have turned in strong 1Q performances in recent years

Dec 18, 2014 at 2:30 PM
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It's been a stellar year for the SPDR S&P 500 ETF Trust (SPY), which is on pace to notch an impressive 11% gain. Looking ahead to the first quarter, the broad-market barometer is in a solid position to extend this momentum. In fact, according to Schaeffer's Senior Quantitative Analyst Rocky White, since 2009 -- the start of the bull run -- the SPY has averaged a return of 3.7% in the first three months of the year, and has been positive 83% of the time. Meanwhile, among the specific sectors we track, both healthcare and restaurants tend to start the year off on the right foot.

SPY Quarterly Returns Since 2009

Equities in the healthcare sector have averaged a median first-quarter return of 8.2%. What's more, 74.7% of the securities we track have been positive in the first three months of the year, going back to 2009. For the sake of comparison, the median second-quarter return is just 1.3%, with roughly half of the stocks we follow finishing in positive territory.

Within the sector, pharmaceutical firm Bristol-Myers Squibb Co (NYSE:BMY) has drawn a lot of interest of late. The stock rallied to a record high of $61.20 on Dec. 8, after the company unveiled promising results for its lymphoma drug, and more recently, the shares have been consolidating in the $58-to-$60 range, home to BMY's March 2014 peak.

Should the stock extend this momentum into the new year, a round of upgrades and/or price-target hikes could help propel the shares to higher highs. Among the brokerage bunch, eight out of 17 analysts following the shares maintain a "hold" or "strong sell" suggestion, while the consensus 12-month price target of $56.58 sits at a discount to current trading levels. Today, in fact, Credit Suisse raised its price target on the equity to $66 from $65 -- and reiterated its "outperform" rating -- and BMY is up 1.8% at $60.26 as a result.

Posting an even stronger median return in the first quarter have been restaurant stocks. In fact, the securities we track boast an impressive 11% advance. Additionally, since 2009, nearly 78% of equities have been positive in the first three months of the year. As a point of comparison, the names in this sector have a median second-quarter return of just 1.3%, with only 57.8% of equities in positive territory.

One name to watch is Chipotle Mexican Grill, Inc. (NYSE:CMG). Year-over-year, shares of CMG have rallied nearly 23% -- including a 6.6% pop in the first quarter of 2014. The shares topped out at a record high of $697.93 in mid-August, and were last seen lingering near $653.46 -- just north of their 120-day moving average.

CMG could stand to gain from an unwinding of skepticism, also. Nearly 48% of covering analysts maintain a tepid "hold" rating toward the outperformer, leaving the door wide open for a round of upgrades to help buoy the equity. Elsewhere, it would take more than four sessions to cover all of CMG's shorted shares, at average daily trading volumes. Simply stated, there is an ample amount of sideline cash to help fuel the stock's fire.


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