The highest scoring names in large cap from 1 year ago (1/2/2013) returned 682 bps more than the S&P 500.  The best performers have been YHOO up 100%, GILD up 98%, BA up 81%, ITT up 78%, CREE up 76%, LEA up 73%, and TMO up 72%.

The average large cap score is 72.22 this week, above the four week moving average score of 71.04.  The average large cap is trading 7% above its 200 day moving average, has 4.14 days to cover short and is expected to see EPS growth of 12.7% next year.

The best scoring sector remains industrial goods.  Services, healthcare, and consumer goods also score above average.  Financials score in line.  Technology, basics, and utilities score below average.
 

Commentary:
 

The best scoring large cap industry heading into 2014 is aerospace/defense (BA, RTN, NOC, LMT, HON, GD, COL).   Aerospace continues to benefit from global passenger growth driving backlogs to records.   Suppliers will benefit as production rates head even higher over the next two years.  The Gov't is helping defense companies offset some of the impact from slowing U.S. sales by assisting with generating orders overseas.  Budget resolution offsets sequestration, easing its impact on the industry.  Lodging  (MAR, HOT, H) revenue per available room continues to climb as business travel supports occupancy and room rates.  Additional capacity will slow that growth; however will add to the top and bottom line this coming year.  The expansion of drug stores (CVS, WAG) into patient care and rewards programs are driving front end foot traffic.  A re-acceleration in patent expiration following 2013's 'breather' will weigh down pharmacy revenue but boost earnings -- supported in part by reform driven enrollment growth/Medicaid expansion.   Railroad (CSX, UNP, NSC) volume was weighed down this past year by coal and grains -- headwinds that ease in 2013 as operators leverage restocking against easier comparisons for coal and grain export activity returns.  Diversified machinery (ITT, FLS, IR, DOV) offers upside opportunity as U.S. industrial production continues higher and nascent European recovery becomes more meaningful.
 

In large cap basics, buy ag chemicals (MON, CF, DD) and refiners (VLO).  Ag chemical demand will remain strong as acreage planted will once again be near highs and farmers -- who were able to reduce fertilizer use this past season thanks to plowing under 2012 crops -- are forced back into the market.  Refiners will benefit as U.S. production growth weighs on crude.  In consumer, buy major food (MDLZ, ADM) and cigarettes (LO, MO).  The top financials groups are asset managers (AMP, BEN, TROW), life insurance (LNC, MFC, SLF, PRU), and credit services (MCO, DFS, AXP, COF).  Money centers (JPM, RY, WFC, BNS, BK) also score highly.  Watch for employment growth to support life insurance premiums and consumer credit demand in 2014. Life insurance equity portfolios also support the group on 2013's heels.  At banks, loan growth will be driven increasingly by consumer activity and commercial construction this coming year.  In healthcare, focus on healthcare plans (CI, AET, WLP, UNH), medical instruments (BDX, BCR, BSX), and biotechnology (CELG, BIIB, GILD, LIFE).  Reform provides insurers with cover for rationalizing provider costs.  Private Medicaid insurers benefit from Medicaid enrollment growth post-reform.  Look for more international expansion.   Utilization continues to support biotech investment as maturing oncology and autoimmune pipelines provide revenue/profit catalysts in 2014.  Collaborations will continue to fuel pipeline expansion as big biotech increasingly acts more like Venture Capitalists.   Every industrials group is above average, buy aerospace/defense and diversified machinery.  In services, focus on lodging, drug stores, rails, and wholesale drugs (CAH, MCK, ABC).  Across technology, the best scoring industries are business software (CTSH, DOX, FISV, ADP), communications equipment (GLW, QCOM, HRS, DTV), specialized semiconductor (MCHP, NVDA), and technical & system software (INFY, ADSK).