Book Profits on Sell Rated Industrial Products Stocks

NEW YORK (TheStreet) -- The industrial products sector is 25% overvalued in a market where 83.2% of all stocks are overvalued with 51.4% overvalued by 20% or more. Within this sector there are 342 stocks and 40.9% are rated sell or strong sell according to www.ValuEngine.com. This gives the sector an underweight rating.

In this market environment I have identified seven industrial products companies that are rated sell and overvalued by 30.6% to 65.1% including Manitowoc (MTW) and H&E Equipment (HEES) which are the most overvalued.

The industrial products sector gained 38.4% over the last 12 months and five out of seven in today's post gained 49.5% to 120.8% with Taser (TASR) the best performer.

All seven of these stocks are trading above their 200-day simple moving averages which reflect the risk of reversion to the mean in 2014.

If you own any of the stocks in today's post consider taking profits now! If you want to keep an investment exposure to this sector re-invest a portion of the proceeds into the Industrial Sector SPDR Fund (XLI) ($50.24) in a strategy to underweight this sector. My semiannual value level is $43.08 with semiannual and monthly pivots at $49.14 and $49.96 and quarterly and weekly risky levels at $50.44 and $51.80. The industrial ETF set an all-time intra-day high at $50.77 on Nov. 29 and has been above its 200-day SMA all year which is now $44.96. Beware that the weekly chart of the industrial sector fund is extremely overbought in a parabolic formation I consider a bubble formation with the five-week modified moving average at $49.51.


Courtesy of MetaStock Xenith

Here are my buy-and-trade profiles for seven sell rated industrial products companies:

Cintas (CTAS) ($55.06) is 30.6% overvalued with a gain of 30.6% over the last 12 months. The corporate identity uniforms supplier reports quarterly results on Thursday and analysts expect earnings per share of 68 cents. The stock set an all-time intra-day high at $57.99 on Nov. 29 then traded as low as $53.83 on Dec. 5. Cintas has been above its 200-day SMA all year which is now at $48.38. My quarterly value level is $47.48 with a monthly pivot at $55.27 and quarterly risky level at $57.85. Cintas has a parabolic weekly chart with its five-week MMA at $54.34.

Flowserve (FLS) ($73.66) is 43% overvalued with a gain of 55.7% over the last 12 months. The maker of pumps and valves reported quarterly results on Oct. 24 with a beat of 6 cents earning 90 cents a share. The stock set a new all-time intra-day high at $73.89 on Monday and has been above its 200-day SMA all year which is now $59.17. The 50-day simple moving average is $68.51 with this week's risky level at $77.89. Flowserve has a parabolic weekly chart with its five-week MMA at $70.37.

H&E Equipment ($28.53) is 65.1% overvalued with a gain of 93.6% over the last 12 months. The maker of aerial platforms equipment and cranes reported results on Nov. 1 with a beat of 5 cents earning 40 cents a share. The stock set a multi-year intra-day high at $31.92 on Nov. 4 then traded as low as $26.94 on Nov. 21 and has been above its 200-day SMA since Jan. 3 with this level now at $23.43. My semiannual value level lags at $19.36 with the 50-day SMA at $27.22, a monthly pivot at $28.35 and quarterly and weekly risky levels at $29.34 and $29.91. H&E has a neutral weekly chart profile with declining momentum but above its five-week MMA at $27.91.

Manitowoc ($21.46) is 64% overvalued with a gain of 36.4% over the last 12 months. The maker of ice machines, beverage dispensers and refrigeration products reported quarterly results on Oct. 24 with a beat of 7 cents earning 32 cents a share, and will report fourth quarter results on Jan. 30 and analysts expect EPS of 33 cents a share. The stock traded as high at $21.84 on Monday vs. its 2013 high at $21.87 set on Aug. 26. The 200-day SMA is $19.62 with a monthly value level at $19.08 with a semiannual pivot at $21.73 and quarterly risky level at $24.70. The weekly chart profile is positive with the five-week MMA at $20.50.

Owens-Illinois (OI) ($34.35) is 37.1% overvalued with a gain of 67.6% over the last 12 months. The maker of glass containers reported results on Oct. 30 with a beat of 2 cents earning 52 cents a share, and will report fourth quarter results on Jan. 29 and analysts expect the company to report EPS of 52 cents a share. The stock set a multi-year intra-day high at $34.43 on Monday and has been above its 200-day SMA since the beginning of the year with that average now at $29.09. My quarterly and monthly value levels are $32.97 and $32.79 and this week's risky level at $35.02. The weekly chart profile is positive but overbought with its five-week MMA at $32.92.

Taser ($16.89) is 55.4% overvalued with a gain of 120.8% over the last 12 months. The maker of less-lethal weapons used in law enforcement reported quarterly results on Oct. 30 with a beat of 3 cents earning 10 cents a share. The stock set a multi-year intra-day high at $18.52 on Oct. 31 then traded as low as $15.23 on Dec. 13 and has been above its 200-day SMA all year with that average now at $11.35. My quarterly value level is $12.56 with weekly and monthly risky levels at $17.27 and $17.47. The weekly chart profile is neutral with declining momentum with its five-week MMA at $16.28.

Terex  (TEX) ($39.06) is 52.1% overvalued with a gain of 49.5% over the last 12 months. The construction and mining equipment maker reported results on Oct. 23 with a beat of 77 cents a share. The stock set a multi-year intra-day high at $39.37 on Dec. 10 and has been trading above its 200-day SMA since Sept. 9 which is now at $32.25. My semiannual value level is $34.62 with a weekly pivot at $38.55 and quarterly and annual risky levels at $41.40 and $42.34. The weekly chart profile is positive but overbought with its five-week MMA at $36.66.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier is the chief market strategist at 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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