Construction Stocks, an Alternative to Home Builders

NEW YORK (TheStreet) -- The construction sector is the most overvalued of the 16 sectors covered by www.ValuEngine.com. The construction sector is 14.9% overvalued with the building -- residential/commercial industry 29.11% overvalued. Compare this to the building production-wood industry at 18.7% overvalued, the building -- heavy construction industry at 12.3% overvalued, and the engineering -- R&D services industry 13.2% undervalued.

On Monday, we learned that construction spending rose by a better than expected 1.4% in October, as the construction sector is becoming a bright spot for the U.S. economy. Compare this to manufacturing. Also on Monday we learned that the national reading of the ISM Manufacturing Index unexpectedly contracted to 49.5 in November.

Today I profile 14 construction stocks and five of them being upgraded this morning, four to buy from hold and one from sell to hold.

On Nov. 28 I wrote Homebuilders Are Risky Bets Despite Positive Data and six of the eight home builder stocks profiled had triple-digit gains of 120.7% to 325.6% over the last 12 months. For the 14 construction stocks only two had triple-digit gains of 119.1% and 148.9%.

Investors who want exposure to the construction sector should consider the stocks in today's table. Upgrades and underperformance are two reasons to consider buy-and-trade strategies in construction stocks after booking profits on the home builders.

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 twelve 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 twelve months. Stocks with a black number in the table are projected to move higher by that percentage over the next twelve months.

Value Level: The 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.

Risky Level: The price at which to enter a GTC limit order to sell on strength.Here are comments on the five construction stocks that were upgraded this morning:

AECOM Technology ( ACM) ($22.85): Upgraded to buy from hold this morning according to ValuEngine. The stock is 16.4% undervalue with a favorable trailing 12 month price-to-earnings ratio of 9.9.

Forster Wheeler ( FWLT) ($22.35): Upgraded to buy from hold this morning according to ValuEngine. The stock is 16.1% undervalue with a reasonable trailing 12 month P/E of 13.0.

Great Lakes Dredge & Dock ( GLDD) ($8.86): Upgraded to hold from sell this morning according to ValuEngine. The stock is 35.8% overvalued with an elevated trailing 12 month P/E of 41.9.

Masco ( MAS) ($16.66): Upgraded to buy from hold this morning according to ValuEngine. The stock is 23.4% overvalued with an elevated trailing 12 month P/E of 66.6.

MasTec ( MTZ) ($22.87): Upgraded to buy from hold this morning according to ValuEngine. The stock is 0.7% undervalued with a reasonable trailing 12 month P/E of 16.2.

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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