The laggard rally that began at the March 9th bottom is still alive and well. The table below shows the performance of a universe of mid and large cap domestic equities in September, broken down by relative strength decile and quartile and then compared to the universe return. Those at the top of the ranks are those stocks which have the best intermediate-term relative strength. Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.
Time frame (8/31/09 - 9/22/09):
In fact, the top 5 performing stocks in this investment universe so far this month have been stocks that (with the exception of AMD) have dramatically underperformed the S&P 500 over the last 12 months.
Even though the best performance is still coming from those stocks with the worst longer-term relative strength, it is encouraging to see the performance of the top decile pull slightly ahead of the universe for the month.
How long this laggard rally will persist is anyone’s guess, but I suspect that the further we get from the bear market low the better relative strength strategies will perform.
