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NEW YORK ( TheStreet) - Six downgrades to sell in the construction sector and five downgrades to sell in the industrial products sector question the sustainability of construction spending in an economy struggling to stay in growth mode.
The industrial companies downgraded this week provide copper wiring and lumber, and security, safety and climate control products.
The construction companies are involved in cement, home improvements, brass and copper products used in home construction, office buildings, factories, hotels and hospitals.
When so many companies supporting construction are downgraded almost simultaneously, this has to be a warning that
Fed policy is not working. Perhaps these downgrades resulted from the rise in the yield of the 30-year bond, which is an important input to the both the ValuEngine valuation model and the ValuEngine forecasting model.
The bottom line is that these downgrades suggest that construction spending should be weak in the quarters ahead.
ValuEngine shows that the industrial products sector is 18.9% overvalued and that the construction sector is 15.6% overvalued.
Reading the Table
OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.
Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.
Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.
Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.
Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.
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Risky Level: Price at which to enter a GTC limit order to sell on strength.