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Stock Ratings Define Sector Ratings

The retail-wholesale sector is the most overvalued sector by 22.5%, but the sector has 267 buy rated stocks out of 358. With 74.6% of all stocks in this sector rated buy the sector gets an overweight rating.

Among the buy rated names are many of the discount retailers including two I mentioned when recording a segment on Yahoo Finance Breakout.

Dollar Tree (DLTR - Get Report) peaked this year at $51.20 on May 23. The stock closed Friday at $49.12 with a semiannual value level at $47.35, and a semiannual pivot at $50.27.

Ross Stores (ROST - Get Report) peaked this year at $66.60 on May 9. The stock closed Friday at $64.86 with a monthly value level at $56.55, and a semiannual risky level at $69.32.

The transportation sector is overvalued by 20.8% but only 7 stocks out of 183 in the sector have buy ratings. There are 94 sell rated stocks and 44 strong sell rated stocks and thus 74.5% of all stocks in this sector are rated sell. This gives the sector an avoid-source of funds rating. I spoke to an industry insider last week who told me that commercial shipping is weakening and that margins slipped to 15% due to fierce competition. Before the recession margins were around 30%. I will cover this sector on Wednesday.

The utilities sector is overvalued by 9.6% but 73 stocks are rated strong buy and 121 are rated buy. With 215 stocks in the sector 90.2% have buy ratings. This sector is thus rated overweight. This anomaly suggests that investors should be rotating into this dividend friendly sector.

Rather than pick names I suggest investing in the Utilities Select Sector SPDR (XLU) which peaked this year at $41.44 on April 30 then dropped like a popped bubble to its 200-day simple moving average at $37.21 last week. The EFT closed Friday at $38.00 with a semiannual value level at $36.48, a monthly pivot at $38.51, and a quarterly pivot at $40.27.

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 www.ValuEngine.com 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 RSuttmeier@Gmail.com.
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SYM TRADE IT LAST %CHG
CX $8.19 -2.38%
DD $54.64 -1.18%
DLTR $77.80 0.18%
FSLR $49.95 14.00%
ROST $53.19 0.30%

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Chart of I:DJI
DOW 17,550.69 -47.51 -0.27%
S&P 500 2,093.32 -4.72 -0.22%
NASDAQ 5,105.5460 -9.8360 -0.19%

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