One of the things I like most about Stockopedia is the way it allows us to slice and dice market data in so many different ways, making it easier to spot potential opportunities.
My normal strategy is to follow a bottom-up approach, screening for individual stocks which satisfy my criteria. But to shake things up a little, I recently decided to try looking at the market from a top-down perspective, focusing on sector-level data instead.
To get started, I sorted all of the UK stock market industry groups by StockRank, starting with the highest. As a result, I’ve found what I believe could be an attractive medium-term investment opportunity.
The sub-sector in question is Containers & Packaging, which has the highest average StockRank of any industry grouping in the UK market. Quality, value and momentum all score well.
With Black Friday just gone and Christmas shopping in full swing, there’s also a pleasing seasonality to this selection:
The seven companies in this group range from FTSE 100 members to micro-caps. However, I think that the majority of them are similar enough to be reasonably compared. This should hopefully make it easier for me to assess their relative attraction as potential investments:
Why I’m interested
The Containers & Packaging industry group is home to companies that make cardboard boxes, plastic packaging, and all the other miscellany needed to safely transport industrial and consumer goods from source to destination.
I see this sector as a pick-and-shovel play that’s somewhat in the tradition of the companies who supplied tools to gold prospectors in the Gold Rush.
Ecommerce, consumer and industrial firms all need to pay for packaging, regardless of whether they succeed or fail. Recent results suggest that supplying this packaging can be more profitable than selling the products within it:
For example, the recent operating margins of the packaging companies I’ve highlighted above are all higher than those of ASOS, AO World, and Halfords – or indeed Ocado, Tesco, Sainsbury and Marks & Spencer.
(The only exception to this pattern is gifting and stationery group IG Design. In my view, this business is something of a misfit here, as all the other firms in this industry group supply types of product packaging to trade customers.
…
