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14 Energy Stocks Illustrate Difficult Stock Picking


NEW YORK (TheStreet) -- In my first post this morning I showed how tough it is to pick stocks in the basic materials sector. In this article I expand by screening through the oils-energy sector to identify stocks that are suitable investments in 2014. I narrowed my 'buy and trade' choices down to 14 stocks that are tradable, but should be underweighted in any longer-term investment allocation given the overvalued and overbought stock market. Included in my analysis are Dow components Chevron (CVX) and Exxon Mobil (XOM) which have hold ratings according to, are overvalued by 24.1% and 29.2% respectively and have lagged the market with gains of 12.6% and 13.9% over the last 12 months respectively.

These 14 stocks are in a sector that's 15.5% overvalued. I give the oils-energy sector an underweight rating as 29.8% of the 540 stocks in this sector have sell or strong sell ratings and only 1.5% have buy ratings.

Among the 14 stocks in today's table 13 have hold ratings with Peabody Energy (BTU)rated sell. Since the oils-energy sector has a difficult stock picking profile investors should consider using the electronically-traded fund for an underweight allocation to this sector.

SPDR Oils-Energy (XLE) ($87.10) set a new multi-year intra-day high at $88.50 on Dec. 31 vs. the all-time intra-day high at $91.37 set in May 2008. This ETF includes Dow components Chevron and Exxon Mobil. The ETF is up 19.4% over the last 12 months and is above its 200-day simple moving averages at $82.66 vs. the oils-energy sector which is up 13.3%. The daily chart below shows downside risk to the 200-day SMA given daily closes below the 21-day and 50-day SMAs converged at $86.77. The weekly chart shifts to negative on a close this week below with its five-week modified moving average at $86.75. I show a quarterly pivot at $86.54 and quarterly and annual risky levels at $88.66 and $89.37.

Courtesy of MetaStock Xenith

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