Use Stock Ratings to Set Sector Allocations

NEW YORK ( TheStreet) -- A good way to evaluate whether or not to underweight or overweight the 16 sectors tracked by www.ValuEngine.com is to look at the percentage of buy rated stocks vs. the percentage of sell rated stocks in each sector. This table gives you this data for 8,389 stocks tracked by ValuEngine.

Any sector with 40% or more of the stocks in that sector rated buy or strong buy, that sector deserves an overweight rating. Any sector with 40% or more of the stocks in that sector rated sell or strong sell that sector deserves an underweight rating. A sector with 70% or more stocks rated buy or strong buy should have a 'double-weighting'. A sector with 70% or more stocks rated sell of strong sell should have an 'avoid-source of funds' rating. Any sector with a balance of ratings between 40% on the buy side or 40% on the sell side deserves an equal-weight rating.

Even in the underweight or 'avoid-source of funds' sectors traders can still use my buy-and-trade strategy when I profile these stocks in an article I write on TheStreet.com.

Aerospace: This sector is rated underweight, and there are no stocks worthy of your investment dollars at this time. Use a buy-and-trade strategy only.

Auto-Tires-Trucks: This sector is rated equal-weight. I do not have a stock in this sector worthy of your investment dollars. Use a buy-and-trade strategy only.

Basic Materials: This sector is rated underweight with no stocks worthy of your investment dollars. Use a buy-and-trade strategy only.

Business Services: This sector is rated equal-weight. One stock to consider is buy rated Hertz Global ( HTZ) ($22.05).

Computer & Technology: This sector is rated overweight. Companies to consider include buy rated Jabil Circuit ( JBL) ($21.71), Cisco Systems ( CSCO) ($23.00), America On-Line ( AOL) ($34.95), and IBM ( IBM) ($183.86).

Construction: This sector is rated underweight. Note that the homebuilders I tracked on Sept. 26 in Homebuilder Volatility Provides Trading Opportunities remain sell or strong sell rated. Even so, homebuilders have been good candidates for a buy-and-trade strategy.

Consumer Discretionary: This sector has an equal-weight rating. Take-Two Interactive ( TTWO) ($17.73) has a buy rating.

Consumer Staples: This sector is rated overweight. Dean Foods ( DF) ($18.31), Coca Cola ( KO) ($37.16), Campbell Soup ( CPB) ($40.87) and McCormick ( MKC) ($64.07) have buy ratings.

Finance: This sector is rated equal-weight. There are no buy rated stocks in the regional bank index. I do not have a stock in this sector worthy of your investment dollars. Use a buy-and-trade strategy only.

Industrial Products: This sector is rated underweight, and there are no stocks worthy of your investment dollars at this time. Use a buy-and-trade strategy only.

Medical: This sector is rated equal-weight. I do not have a stock in this sector worthy of your investment dollars. Use a buy-and-trade strategy only.

Multi-Sector Conglomerates: This sector has an overweight rating. General Electric ( GE) ($24.10), 3 M Co ( MMM) ($118.55), and United Technologies ( UTX) ($103.69) have buy ratings.

Oils-Energy: This sector is rated underweight, and there are no stocks worthy of your investment dollars at this time. Use a buy-and-trade strategy only.

Retail-Wholesale: This sector has an overweight rating. On Oct. 1 I wrote Discount Retailers Should Hold Up in a Risky Market, which includes key levels for nine buy rated stocks.

Transportation: This sector has an 'avoid-source of funds' rating. Use a buy-and-trade strategy only.

Utilities: The sector has an overweight rating. 63 of the 108 strong buy rated stocks are in this sector.

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 is the chief market strategist at AlphaPlus Analytics in addition to ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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