The above table shows data from ValuEngine.com covering the top 10 of the 52 components of the XLV listed by weighting from top to bottom.
Reading the Table
OV/UN Valued -- The stocks with a red number are undervalued by the percentage shown. 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: The price at which to enter a GTC Limit Order to buy on weakness (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. Risky Level: The price at which to enter a GTC Limit Order to sell on strength.
Analysis of the Top 10 Components of Health Care SPDR
Looking at the overvalued and undervalued data, only three of the 10 stocks are undervalued: Johnson & Johnson by just 1%, United Healthcare ( UNH) by 17% and Express Scripts by 12%, though these numbers do not take into account the after-hours pop in its share price on Tuesday. All 10 of the medical sector stocks in the table are rated buy or better, according to ValuEngine, with UNH a strong buy. All 10 have traded higher over the past 12 months by 13% to 58.1%, led by Amgen ( AMGN), up 58.1%, and Gilead Sciences ( GILD), up 52.4%, because the biotech companies are likely to have the more robust new drug pipelines. And they are all projected to be higher 12 months from now by 6.2% to 13.4%, with reasonable price-to-earnings ratios between 10.6 and 17.5 times forward 12-month EPS estimates. The author advocates the use of GTC Limit Orders to add to long positions or become less short on share price weakness to the Value Levels. Traders should enter GTC Limit Orders to reduce the long positions or to add to a short position on strength to Risky Levels. At the time of publication, the author had no positions in the stocks mentioned and no other conflicts.This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.