Masco and USG Have Led 11 Construction Stocks Since September

NEW YORK (TheStreet) -- The PHLX Housing Sector Index (HGX) has been my barometer for homebuilders and for stocks in the construction and industrial products sectors that provide products, services and materials for the housing market.

The housing index hit its 2013 low in mid-August. On Sept. 4, I wrote "Better Than Expected Construction Spending Helps Related Stocks."

Since then, the housing index has rebounded. Masco (MAS), a manufacturer of home improvement and building products, has gained 21% since Sept. 3. That number is just shy of the 22% gain for USG (USG), which provides building materials primarily for remodeling. Of the 11 construction-related stocks I have been tracking, only two are lower than their Sept. 3 closes.

The December reading of the National Association of Home Builders Housing Market Index showed a rise to 58 in a confidence trend above the neutral 50 reading. We also recently learned that single-family housing starts rose to an annual rate of 727,000 units in November.

Although these are positive trends, the normal run rate for single-family starts is 1.1 to 1.2 million units, and with higher home prices, mortgage rates on the rise, higher home insurance rates and increasing property taxes, homes have become less affordable on Main Street where family incomes are sliding.

Last week's release of the S&P/Case-Shiller Home Price Indices showed that the 20-City Composite gained 13.6% year-over-year in October with a 0.2% rise from September. From the June/July 2006 peak this index is down 20%, and it is up 23.7% from its March 2012 low in what I consider a reinflating of the housing bubble.

Since Sept. 3, five of the 11 stocks in today's buy-and-trade coverage were downgraded to sell or strong sell, while the remainder maintained hold ratings, according to www.ValuEngine.com.

General Cable Corp (BGC) ($28.89) declined by 4.5% since Sept. 3, has a hold rating and is 8.2% overvalued with a loss of nearly 9% over the last 12 months.

The provider of copper, aluminum, and fiber-optic wire and cable products missed earnings-per-share estimates on Nov. 4. The following day, the stock was taken to the woodshed and plunged to a 2013 low of $27.27, well below its 200-day simple moving average at $31.81.

The weekly chart profile is negative with its five-week modified moving average at $29.43 and its 200-week simple moving average at $31.39. My monthly and semiannual value levels are $27.92 and $23.59, respectively with semiannual and quarterly risky levels at $31.75 and $35.60, respectively.

Cemex (CX) ($11.53) gained 2.4% since Sept. 3, has a hold rating is 37.6% overvalued with a gain of 16% over the last 12 months.

The cement and concrete company traded down to $9.82 in early November then as high as $11.85 on Dec. 31 and is above its 200-day SMA at $11.25. The weekly chart profile is positive with the five-week MMA at $11.36. My semiannual value level is $9.59 with a monthly pivot at $11.23 and a quarterly risky level at $14.68.

Dover Corp (DOV) ($95.22) gained 11.2% since Sept. 3, has a hold rating is 31.6% overvalued with a gain of 42% over the last 12 months.

The diversified manufacturer of industrial products set an all-time intra-day high at $97.00 on Dec. 31 well above its 200-day SMA at $83.75.

The weekly chart profile is positive but overbought in a parabolic formation with its five-week MMA at $93.13. My annual value level is $80.60 with semiannual pivots at $91.63 and $95.31 with a monthly risky level at $107.03.

Ingersoll Rand (IR) ($61.32) gained just 1.3% since Sept. 3, has a hold rating and is 40.7% overvalued with a gain of 25% over the last 12 months.

The provider of security and safety and climate control products set an all-time intraday high at $61.96 on Dec. 30 and is well above its 200-day SMA at $49.43.

The weekly chart profile is positive but overbought in a parabolic formation. The five-week MMA is at $57.96. My semiannual value level is $59.00 with a semiannual risky level at $68.09.

Masco ($23.16) gained a solid 21% since Sept. 3, has a hold rating and is 5% overvalued with a gain of 34% over the last 12 months.

The manufacturer of home improvement and building products set a multiyear intraday high at $23.20 on Jan. 3 with the 200-day MMA at $20.65. The weekly chart profile is positive with its five-week MMA at $21.91 and its 200-week SMA at $14.61.

My semiannual value levels are $19.87 and $17.63, respectively, with a monthly pivot at $22.85 and a quarterly risky level at $26.30.

Mueller Industries (MLI) ($62.34) gained 16% since Sept. 3, has recently been downgraded to sell from hold and has gained 23% over the last 12 months.

The maker of copper tube and fittings and other metallic products set an all-time intraday high at $63.37 on Dec. 31, well above its 200-day SMA at $55.46.

The weekly chart profile is positive but overbought with a parabolic formation. The five-week MMA is at $60.99. My semiannual value level is $60.21 with a monthly pivot at $62.97 and semiannual and quarterly risky levels at $64.65 and $65.79, respectively.

MeadWestvaco (MWV) ($36.11) slipped 0.7% since Sept. 3, has a hold rating and is 17% overvalued with a gain of 10% over the last 12 months. The maker of paperboard, paper and lumber set an all-time intraday high at $39.38 on Sept. 16 and was trading at $39.33 on Oct. 25.

The company missed EPS estimates on Oct. 29 and the stock plunged to $33.38 into Nov. 7. It is now poised just above its 200-day SMA at $36.03 after a high of $37.04 on Dec. 31.

The weekly chart profile is positive with its five-week MMA at $35.98 and its 200-week SMA at $28.49. My semiannual and annual value levels are $33.64 and $30.42, respectively, with monthly and quarterly risky levels at $37.54 and $37.93, respectively.

Potlatch (PCH) ($41.61) gained 9.5% since Sept. 3, has recently been downgraded to sell from hold and is 14.6% overvalued with a gain of 3.9% over the last 12 months.

The forest and timber company set its all time intraday high at $51.44 on May 22, and then its parabolic bubble popped. The stock set its 2013 low at $37.56 on Sept 3 and currently is trading between its 50-day SMA at $40.44 and its 200-day SMA at $42.56.

The weekly chart profile is positive with its five-week MMA at $41.56 and its 200-week SMA at $36.68. My monthly value level is $35.38 with a semiannual pivot at $41.38 and quarterly and semiannual risky levels at $46.78 and $46.78, respectively.

Plum Creek Timber (PCL) ($46.34) gained 6% since Sept. 3, has recently been downgraded to sell from hold and is 12.7% overvalued with a gain of just 1.8% over the last 12 months.

The lumber company set a multiyear intraday high at $54.62 on May 22 then traded as low as $42.95 on Nov. 26 and is now below its 200-day SMA at $47.72.

The weekly chart profile is positive with its five-week MMA at $45.69 and its 200-week SMA at $41.30. My annual and monthly value levels are $41.41 and $41.00, respectively, with semiannual and annual pivots at $45.09 and $46.12, respectively, and semiannual and quarterly risky levels at $51.13 and $54.15, respectively.

Texas Industries (TXI) ($66.95) gained 13.6% since Sept. 3 and will report quarterly results after the bell on Jan. 8. Analysts expect the company to report a loss of 23 cents a share.

The company has recently been downgraded to strong sell from hold and is 4.5% overvalued with a gain of 22% over the last 12 months. The stock traded to a multiyear intraday high at $75.30 on May 22 then traded as low as $53.23 on Nov. 1 and is now above its 200-day SMA at $62.44.

The weekly chart profile is positive with its five-week MMA at $63.37 and its 200-week SMA at $43.61. Monthly and semiannual value levels are $63.67 and $62.89, respectively, with a quarterly risky level at $70.44.

USG Corp ($29.10) gained a solid 22% since Sept. 3, has recently been downgraded to sell from hold and is 7.1% overvalued with a loss of 0.7% over the last 12 months.

The manufacturer and distributor of building materials moved above its 200-day SMA at $26.23 on Dec. 23 to a recent high at $29.23 on Jan. 3.

The weekly chart profile is positive with its five-week MMA at $27.25 and its 200-week SMA at $18.63. This stock traded to a parabolic bubble that popped with the housing market in the second quarter of 2006 when it traded above $110. Monthly and semiannual value levels are $27.10, $26.82 and $26.03, with a quarterly risky level at $38.97.

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 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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