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Which is the best share market sector to invest in following the market crash?

This is Part 2, in my two part series, “Which is the best share market sector to invest in following the market crash?”.

I’ve currently analysed all 10 sectors of the S&P/ASX 200 (Index: ^AJXO) (ASX: XJO) following the crash, to find out which are the best performing sectors and which are some of the best performing shares.

Sectors are ranked from the worst performing (#10) to best performing (#1) compared to the S&P/ASX 200.

In Part 1, I covered the bottom five sectors #10 – #6. If you missed Part 1, you can find it here.

Today, we’ll take a look at the Top 5:

5. Number five is the S&P/ASX 200 Cons Disc Index. The consumer discretionary sector is down by a total of 3.9%, 4% better than the the S&P/ASX 200. The sector contains names such as Crown Resorts Ltd (ASX: CWN), REA Group Limited (ASX: REA), and Aristocrat Leisure Limited (ASX: ALL).

The consumer discretionary sector has been helped by some of its well known retailers. JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) are both set to be big winners due to the unfortunate demise of Dick Smith Holdings Ltd (ASX: DSH).

There’s SKYCITY Entertainment Group Limited-Ord (ASX: SKC), which recently announced that it continued its strong financial performance in the first half of FY16 and plans for a major expansion of its Adelaide casino.

And, Aristocrat Leisure Limited. Its been one of the biggest beneficiaries of a weak Australian dollar, given its large exposure to the United States market.

One standout performer for the sector is Domino’s Pizza Enterprises Ltd. (ASX: DMP). The company has a P/E ratio (TTM) of 82*, compared to the sector average of 20*.

4. Number four is the S&P/ASX 200 Health Care Index. The health care sector is down by a total of 1.9%, 6% better than the the S&P/ASX 200. The sector contains some big names such as CSL Limited (ASX: CSL), ResMed Inc. (CHESS) (ASX: RMD), and Ramsay Health Care Limited (ASX: RHC).

The sector has been helped out by the big gains of Australian Pharmaceutical Industries Ltd (ASX: API), which recently reported net profit of $43.1m, the highest on record by the company, and increased earnings before interest and tax to $74m.

Then there’s ResMed Inc, which announced results for its quarter ended 31 December 2015. Revenue for the quarter was $454.5m, a 7% increase compared with the quarter ended 31 December 2014; a 13% increase on a constant currency basis. In the second quarter of fiscal year 2016, revenue in the Americas was $269.5m.

And, Primary Health Care Limited (ASX: PRY). Its shares recovered following November’s announcement that it expects underlying EBITDA and underlying NPAT for financial year 2016 to be approximately five per cent below the prior year’s underlying results. Citing “disappointing operating performance” in their Medical Centres, and subdued market conditions in their Pathology and Diagnostic Imaging businesses.

One stand-out performer for the sector is ResMed. The company has a P/E ratio (TTM) of 25*, compared to the sector average of 26*.

3.Number three is the S&P/ASX 200 Cons Staples Index. The consumer staples sector is up by a total of 1.29%, 6.62% better than the the S&P/ASX 200. The sector contains big names such as Woolworths Limited (ASX: WOW), Wesfarmers Ltd (ASX: WES), and Treasury Wine Estates Ltd (ASX: TWE).

The sector is enjoying a great run from some big names. Treasury Wine Estates recently announced that based on preliminary, unaudited accounts, Earnings Before Interest, Tax and SGARA (EBITS) for the six months ended 31 December 2015 will be in the range of A$140-A$150m, above analyst consensus of circa A$120 million.

And, Metcash Limited (ASX: MTS) which is enjoying strong gains off the back of its half yearly report stating sales revenue up 1.4%, reported profit after tax up 20%, net debt reduced 34.8%, and their balance sheet has been strengthened with gearing reduced to 25.4%

One stand-out performer for the consumer staples sector is Treasury Wine Estates. The company has a P/E ratio (TTM) of 71*, compared to the sector average of 19*.

2. Number two is the S&P/ASX 200 Telecomms Index. The telecomms sector is up by a total of 0.51%, 7.4% better than the S&P/ASX 200. The sector contains heavyweights such as Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPM) and Spark New Zealand Ltd (ASX: SPK).

The sector has been pushed into positive territory thanks to the upcoming merger between M2 Group Ltd (ASX: MTU) and Vocus Communications Limited (ASX: VOC), a deal that will see them become Australia’s fourth-largest telco.

TPG Telecom Ltd is having a great run at the moment. TPG Telecom executive chairman David Teoh is speeding up his fibre rollout and gunning for Telstra’s share of the telecommunications market, launching products and services at prices he claims the incumbent can’t match.

TPG recently announced new broadband plans at its annual general meeting that include the first tranche of business products that use its extensive fibre-optic network that use the iiNet brand, which it bought for $1.56 billion earlier this year.

One stand-out performer for the telecomms sector is M2 Group. The company has a P/E ratio (TTM) of 31*, compared to the sector average of 18*.

1.Finally, at number one I have the S&P/ASX 200 Utilities Index. The utilities sector is up by a total of 0.02%, 7.9% higher than the S&P/ASX 200. Sector heavyweights include AGL Energy Ltd (ASX: AGL), APA Group (ASX: APA) and MERIDIAN FPO NZX (ASX: MEZ).

The sector has outperformed thanks to a number of winners including Spark Infrastructure Group (ASX: SKI).

Its earnings should remain strong in 2015 thanks to favourable regulatory settings locked in during 2010-11, though they will fall from 2016 onwards.

Then there’s AGL, which says it’s focusing on renewable energy as it assesses the viability of its Gloucester coal seam gas project in the New South Wales Hunter Valley.

One stand-out in the utilities sector is Spark Infrastructure. The company has a P/E ratio (TTM) of 22*, compared to the sector average of 24*.

(*Source: Commsec)

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Motley Fool contributor John Hopkins has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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