Industrials Key to U.S. Economic Growth in 2013

NEW YORK (TheStreet) -- The U.S. economy is sputtering along at a slow pace that is too anemic to bring down the unemployment rate. A key to an accelerating U.S. economy comes from companies in the industrial products sector.

Strategists are telling investors that ending the overhang of the fiscal cliff and the continued quantitative easing programs of the Federal Reserve will help this sector lead. I am not that optimistic, but the 10 stocks I am profiling today can still be considered as buy-and-trade candidates.

My benchmark for the industrial products sector is the Industrial Select Sector SPDR Fund ( XLI) ($37.22) which set a 2012 high at $38.53 on Dec. 19. Since then the daily chart has become negative with the ETF above its 50-day and 200-day simple moving averages at $36.98 and $36.31. The weekly chart below ended last week with a positive profile with rising momentum and with Friday's close just above the five-week modified moving average at $37.15. My monthly value level is $35.21 with weekly and annual pivots at $37.20 and $37.74 and quarterly risky level at $39.58.

Chart Courtesy of Thomson/Reuters

At www.ValuEngine.com we show the industrial products sector 11.3% overvalued with the machinery-construction/mining industry 26.6% overvalued and the machinery/general industrial industry 7.6% 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.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

Here are my buy-and-trade strategies for 10 industrial products stocks. I profiled five of these names on Oct. 1 in Industrial Products Stocks May Catch QE Fatigue.

Caterpillar ( CAT) ($86.81 vs. $86.04 on Oct. 1): Still has a buy rating, is 6.8% undervalued with a favorable trailing 12 months price-to-earnings ratio at 9.5. CAT has a negative daily chart profile with the stock well below its Feb. 24 high at $116.95 and trading between its 50-day and 200-day SMAs at $85.71 and $90.21. The weekly chart profile is positive with the five-week MMA at $86.48 and the 200-week SMA at $77.27.

Deere & Co ( DE) ($84.55 vs. $82.47 on Oct. 1): Has been upgraded to buy from hold since Oct. 1, is 7.1% undervalued with a favorable trailing 12 months P/E at 11.0. Deere has a negative daily chart profile falling below its 50-day SMA at $85.26 with the 200-day SMA at $80.20. The weekly chart ended last week with a downgrade to negative with the close below its five-week MMA at $84.77 with the 200-week SMA at $69.01.

Gardner Denver ( GDI) ($68.03 vs. $60.41 on Oct. 1): Still has a hold rating, is 9.8% overvalued with a favorable P/E at 12.1. GDI is well below its Jan. 17 high at $84.46 with its June 4 low at $69.41. The daily chart is negative with the 50-day SMA at $68.15 and the 200-day SMA at $60.99. The weekly chart ended last week with a downgrade to negative with the close below its five-week MMA at $68.12 and with the 200-week SMA at $56.70.

H&E Equipment Services ( HEES) ($14.82): Has a hold rating, is 10.6% overvalued with a favorable P/E at 14.9. The daily chart is negative with the 50-day and 200-day SMAs at $15.09 and $16.13. The weekly chart ended last week neutral with the five-week MMA at $15.05 and the 200-week SMA at $12.30.

Ingersoll-Rand ( IR) ($46.88): Has a hold rating, is 14.5% overvalued with a favorable P/E at 14.4. The daily chart is negative with the 50-day SMA at $47.13 and the 200-day SMA at $43.70. The weekly chart is negative with the five-week MMA at $47.14 and the 200-week SMA at $36.98.

Joy Global ( JOY) ($61.48): Has a buy rating, is 9.2% overvalued with a favorable P/E at 8.8. The daily chart is positive but overbought with the 50-day and 200-day SMAs at $59.56 and $60.36. The weekly chart is positive with the five-week MMA at $59.83 and the 200-week SMA at $64.37.

Manitowoc ( MTW) ($15.22): Has a hold rating, is 13.2% undervalued with an elevated P/E at 21.6. The daily chart is negative with the 50-day and 200-day SMAs at $14.64 and $13.11. The weekly chart is positive with the five-week MMA at $14.84 and the 200-week SMA at $11.87.

Owens Illinois ( OI) ($20.77 vs. $18.76 on Oct. 1): Has a buy rating, is 13.9% undervalued with an excellent P/E at 7.9. Owens set a 2012 high at $25.46 on Jan. 26 with a Sept. 5 low at $16.82. The daily chart is positive but overbought with the 50-day and 200-day SMAs at $19.85 and $20.12. The weekly chart is positive with the five-week MMA at $20.10 and the 200-week SMA at $25.99.

Parker Hannifin ( PH) ($83.86 vs. $83.58 on Oct. 1): Has a hold rating, is 2.6% overvalued with a favorable P/E at 12.2. PH traded to a 2012 high at $91.47 on Feb. 29 and as low as $70.42 on July 12. The daily chart is neutral with the 50-day and 200-day SMAs at $81.41 and $81.81. The weekly is positive with the five-week MMA at $82.77 and the 200-week SMA at $70.64.

Terex ( TEX) ($26.32): Has a hold rating, is 5.4% undervalued with a favorable P/E at 13.0. The daily chart is neutral with the 50-day and 200-day SMAs at $24.13 and $21.53. The weekly chart is positive with the five-week MMA at $24.79 and the 200-week SMA at $21.35.

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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