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The Basic Industries Sector Has Not Maintained QE Hype

Stocks in this article: XLB NEM AA DD DOW FCX MON

Newmont Mining (NEM) ($55.47 vs. $45.26 on July 31): This gold mining stock now has a hold rating after being buy rated on both July 31 and Aug. 23. NEM has a reasonable P/E ratio and is above its 200-day SMA at $52.43.

NEM set its 2012 high at $64.62 on Jan. 12 and its 2012 low at $42.95 on July 27. The stock has a positive weekly chart profile with the 200-week SMA at $52.52. Investors and traders should employ a "buy and trade" strategy between the value level and risky level.

Vulcan Materials (VMC) ($47.15 vs. $38.79 on July 31): This building materials stock continues to have a hold rating according to ValuEngine without a calculated P/E ratio with the stock above its 200-day SMA at $41.28.

VMC set its 2012 high at $49.99 on September 14 set after its 2012 low at $32.31 on June 5. The weekly chart profile is positive with the 200-week simple moving average at $43.48. Investors and traders should employ a "buy and trade" strategy between the value level and risky level.

United States Steel (X) ($18.88 vs. $18.92 on July 31): This steel producer stock continues to have a hold rating according to ValuEngine with an extremely elevated P/E ratio with the stock below its 200-day SMA at $24.40.

U.S. Steel set a 2012 high at $32.52 on Feb. 3 and a 2012 low at $17.67 on June 12. The weekly chart is negative with the 200-week SMA at $38.57. Investors and traders should employ a "buy and trade" strategy between the value level and risky level.

The table of basic materials stocks shows that the most undervalued stock is U.S. Steel by 42.0% with Vulcan the only overvalued stock by 1.9%. The worst performer over the past 12 months is Newmont down 10.1% with Vulcan the best performer with a gain of 80.2%. Eight of nine stocks are expected to rally over the next 12 months by just 1.7% for Alcoa to 8.4% DOW. US Steel is expected to slide 1.2%.

Six of the nine stocks set their 2012 high in the first half of the year (AA, DD, DOW, FCX, NEM and X), while the others participated in the QE3 euphoria with 2012 highs set in September (MON, MOS and VMC). This mix of performances could be a symptom of early QE fatigue for the stocks that lagged year to date.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at
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