Editor's note: Our Pre-Memorial Day special examines military-related stocks and how to buy, sell or trade them. This feature includes a video by Gregg Greenberg, Defense-Stock Domination; and articles by Marc Courtenay One Priced to Buy; Robert Weinstein Bigger Guns, Bigger Profits; Richard Saintvilus Boeing's Offense Is Defense; Richard Suttmeier Sequester Survivors; and Richard Cox Bullish Earnings Support Defense.
NEW YORK ( TheStreet) -- Sequestration spending cuts were expected to adversely effect the performances of companies that provide products and services to the U.S. military. As we prepare to honor those who served our country on Memorial Day, I profile nine stocks that have performed extremely well so far this year. I can only assume that the risk of defense spending cuts has been priced into these aerospace sector stocks.
The stock market continues to trade under a ValuEngine Valuation Warning, with 72.7% of all stocks overvalued. My sector focus today is aerospace, which is 17.6% overvalued. With 35.4% of all stocks in this sector rated sell or strong sell, I give the sector an underweight rating. View the setting of new multi-year highs this week as an opportunity to book profits.
Five of the nine defense related stocks profiled today are overvalued by more than 20%, and only one has a buy rating according to ValuEngine, and one has a sell rating. All nine stocks have given investors a gain of more than 12% over the last 12 months, but only one is expected to have 10% gain over the next 12 months. All are above their 200-day simple moving averages (SMA) reflecting the risk of a reversion to the mean.