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US Sector analysis

After the 2Q results for US companies in the S&P500, where 80% of companies have reported #eps positive surprises on a watered down expectations, a simple sector analysis reveals some curious statistics: #tech has had the most positive surprises, and it’s the sector that weighs the most on the index (26%); #energy however has the 3rd worst scorecards in terms of surprises, and weighs only 4% on the index. However, the energy sector currently has the biggest #fcf yield in historical terms, and as you can see below, it’s earnings weight as a percentage of the total earnings on the S&P500 is 12.4%, almost 3X its market cap weigh on the index. Despite being the top performer during 2022, with 66% return, it continues to be ignored by investors, hasn’t received meaningful flows, and consequently, the valuation gap continues to widen. No meaningful sector rotation is seen in the horizon to improve market breadth.

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