It’s no secret that I make heavy use of stock screening tools and algorithms to identify promising companies. In some cases, these screens are available to anyone with a brokerage account, although you have to select your own criteria.

On December 15, 2020 I discussed the results of one such screen: These Two Sectors Are Set To Outperform In 2021. Just to recap, at the time the screen showed an abundance of companies from the Financials and Real Estate sectors at the top of the screen. Of the Top 15 companies in the screen, 13 were from those sectors. My conclusion was that these sectors looked poised to outperform.

Now that the first quarter is in the books, let’s see how they did. The S&P 500 returned 5.8% for the first quarter, and every sector notched a positive return. But Financials and Real Estate did significantly outperform the S&P 500 with respective returns of 16% and 9.1%.

Let’s take a look at the same screen today to see if anything has changed.

A Changing Outlook

There has been a shift, but not right at the top. Of the 209 companies my screen identified as “Very Bullish” in their outlook, 55 were Financials. That was still the largest representation of any group. The top two companies in that screen were The Bank of Nova Scotia (NYSE: BNS) and Royal Bank of Canada (NYSE: RY). In fact, Canadian banks were heavily represented at the top of the screen.

But coming in second this time was the Consumer Discretionary sector, with 43 stocks in the Very Bullish category. This category slightly underperformed the S&P 500 in the first quarter. The company scoring highest in this category was Academy Sports & Outdoors (NSDQ: ASO).

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Next was the Industrials category, which had 37 companies in the Very Bullish category. The two top companies in this screen, with identical scores, were Primoris Services (NSDQ: PRIM) and Atkore (NYSE: ATKR).

Finally, the Information Technology sector had 31 companies in the Very Bullish category. Unisys (NYSE: UIS) was the highest-scoring company in this category.

Real Estate only had two companies score in the Very Bullish category this time, indicating that the outlook here has softened after the strong first quarter.

High Yields at the Bottom

At the bottom of this screen was the Utilities category, which had zero companies score in the Very Bullish category. But one thing this sector does have going for it is yield. The Utilities sector currently yields 3.1%, which is more than double the S&P 500’s 1.4% yield.

In fact, none of the sectors yielding above 3% ranked very highly on outlook. In addition to Utilities, Energy (4.4% yield) and Real Estate (3.3%) had only a handful of companies in Very Bullish category. Cumulatively, these three categories only represented 4% of all the companies in the Very Bullish category.

To be clear, this shouldn’t be considered an endorsement of any of these companies. I use screens like this to identify companies that warrant additional research. There are many other factors that I consider that could substantially change the rankings at the top of the screen. However, I do think they provide good general guidance on the direction various sectors are expected to take in the months ahead.

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