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 Technology SPDR
Looking at the overvalued and undervalued data, six of the 10 stocks are undervalued with Cisco Systems ( CSCO) the cheapest at 26.2% undervalued. The telecom stocks in the group, AT&T and Verizon, are the most overvalued, by 19.6% and 11.8%, respectively, with both coming off respective multi-year highs of $38.28 and $46.41 set on August 1. Since AT&T and Verizon are also utilities, investors should consider liquidating them on strength to the pivots and risky levels. Another reason to rotate from AT&T and Verizon into one of the others in the table is that they are rated 3-Engine, or hold, while all others are rated 4-Engine, or buy, according to ValuEngine. Qualcomm ( QCOM), which can be considered either a tech or telecom stock, has been downgraded to hold from buy, according to ValuEngine this morning. All 10 stocks traded higher over the past 12 months, led by Apple ( AAPL) with a gain of 75.5% over the past 12 months. This strength has increased Apple's weighting in the XLK to nearly 20%. Note that AT&T and Verizon have been the second and third best performers in the group, with 12-month gains of 43.0% and 40.4%, respectively. All 10 are projected to be higher 12 months from now by 3.5% to 6.9%, with reasonable-to-high price-to-earnings ratios between 10.5 and 19.4 times forward 12-month EPS estimates. Intel ( INTC) and Cisco are members of my ValuTrader Model Portfolio. I advocate 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 long positions or to add to a short position on strength to Risky Levels. At the time of publication, the author did not own any of the stocks mentioned and had no other conflicts. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.