Nike Boosts Apparel Sector and Semi Stocks Continue to Rise

Stocks rallied on Wednesday, reversing course during the session and breaking a three-day losing streak. Stock initially fell after downbeat manufacturing data, but merger news and earnings reports cheered investors and led stocks higher.

Among the industry leaders on Wednesday were Apparel and Footwear, led by an 8.3% gain in shares of Nike (NKE@NKE | Quote | Chart | News | PowerRating). Nike reported a 32% gain in profits in the latest quarter, and the sportswear giant also reported a 12% rise in orders. This boosted the Apparel and Footwear group by 2.8%, making it one of the top-performing groups on Wednesday. Apparel, Footwear and Accessories has a PowerRating (for Industries) of 8. Our quantitative research from 1995 through 2006 has done a good job of identifying industries that have generated superior annualized returns for a time horizon of three months. So investors who seek growth and safety would benefit from considering our list of Top Rated Industries.

Settlement Sparks Netflix Shares

The Music & Video Store industry has two firms that specialize in mail-order rentals of DVDs: Netflix and Blockbuster. On Wednesday they announced a settlement to a patent lawsuit, leading the industry to a gain of 2.1%. This group has a PowerRating of 9, and the biggest members are:

• Netflix (NFLX@NFLX | Quote | Chart | News | PowerRating) rose 6.5% to $20.78.
• Blockbuster (BBI@BBI | Quote | Chart | News | PowerRating) fell 0.5% to $4.20.

Semi Stocks Continue to Rise

Finally, two semiconductor industries were market leaders on Wednesday: Semiconductor Equipment rose 1.8% while Semiconductor Specialized rose 1.7%. Semiconductor stocks have been rising after bullish news last week about chip inventories. There has been a glut of inventories, which has weighed on semiconductor pricing. But relief appears to be on the way since the largest maker of DRAM chips, Samsung, is holding some inventory off the market. This is helping to boost prices throughout the semiconductor industry.

Tobacco Products and Cigarettes are both leading groups on Tuesday. Tobacco seems to be getting a boost from a shift to defensive stocks as investors fear higher inflation. Granted, the stocks are benefiting from a ruling expected later today that could settle a dispute between two major players. But the gains in tobacco stocks today are spread among all of the industry players, which suggests that investors are at the macro environment for tobacco stocks, and not at a ruling that affects a few players.

The Cigarette industry and the Tobacco Products industry both have low PowerRatings (for Industries). The results of our simulated trading show that low-rated industries have underperformed over the next three months, while industries rated 1 have lost money on an annualized basis. Investors should think twice before investing in any group on our list of Industries to Avoid.

Another leader on Tuesday is Semiconductor Memory Chips. The group has been rebounding since news last week that Samsung is holding back inventory from the market. This led to a big rise in chip prices, which have been under pressure in 2007 due to a capacity glut (especially in DRAM used in personal computers). Unfortunately, not one of the five semiconductor industries has an attractive PowerRating (for Industries).

Finally, Research Services was a leading group on Thursday. This is driven by a 1.1% rise in shares of Arbitron (ARB@ARB | Quote | Chart | News | PowerRating) This follows a 4% rise on Monday when Arbitron won a large contract for its portable devices to be used by a major radio station group. This was followed by a similar announcement on Tuesday when the radio industry in Denmark also agreed to use this system. Arbitron has a market cap of $1.5 billion and it measures the audiences of cable, TV, and radio shows via its joint venture with the Nielsen Co. Arbitron has a PowerRating (for Investors) of 9.

Rob Martorana is Director of Content for PowerRatings.net.

Rob was most recently at TheStreet.com as the Director of Content for Professional Products. Robert has spent 22 years on Wall Street, and was a portfolio manager and head of U.S. equity research at Barclays Private Bank. Robert also managed small-cap stocks at Schroder Capital Management International, was an equity analyst at Vontobel USA, and was an editor and senior industry analyst for The Value Line Investment Survey.