17 Transportation Stocks Illustrate Difficult Stock Picking

NEW YORK (TheStreet) -- The Dow Jones Transportation Average (OTC: ^DJT) outperformed the other four major averages in 2013 with a gain of 39.4%. Dow transports set a new all-time multi-year high on Monday at 7485.34 before falling to 7,361.84 at the close, between my monthly and semiannual pivots at 7327 and 7376. Transports stayed above my second semiannual pivot at 7245 on Jan. 6.

Today I provide a table of my buy-and-trade parameters for 17 brand-named companies from the transportation sector: three airlines, two air freighters, one in leasing, three railroads and eight truckers.

One airline set a new all time intra-day high on Monday and another flew to a new multi-year intra-day high. Railroad CSX (CSX) set a new all-time intra-day high and reports quarterly earnings after the close tomorrow. Two truckers reached new all-time intra-day highs and another a new multi-year high helping transports drive to its new high.

The airlines are flying at altitudes that should be difficult to sustain, but with no risky levels. The leader is Delta Airlines (DAL) up 130.1% over the last 12 months and in the flight to new heights has become 89.7% overvalued with a sell rating according to www.ValuEngine.com.

Air freighter FedEx (FDX) outperformed United Parcel Services (UPS) with a gain of 42.8% over the last 12 months compared to 26.5% for its rival. Both are overvalued by 34.1% and 26.6% respectively.

On the rails Norfolk Southern (NSC) was the fractional outperformer with a gain of 39% over the last 12 months but is the most overvalued by 24.5%.

Along the interstate highways Saia (SAIA) and Swift Transport (SWFT) moved into the fast lanes with gains of 115.8% and 116% respectively over the last 12 months.

The 17 transportation stocks are in a sector that's 29.9% overvalued with an underweight rating as 76.5% of the 170 stocks in this sector have sell or strong sell ratings.

iShares Dow Transports (IYT) ($131.92) set a all-time intra-day high at $134.10 on Monday and closed below Friday's low at $132.37, which is a key reversal given lower closes today and tomorrow. The weekly chart shown below is positive but overbought with its five-week modified moving average at $129.99 and the 200-week simple moving average at $95.92. My semiannual and quarterly value levels are $129.17 and $126.32 with monthly and semiannual pivots at $131.56 and $131.89. My annual value level is $111.27.

Courtesy of MetaStock Xenith

The column labeled 'OV / UN Valued' shows that United Continental (UAL) is the most overvalued by 95.4%.

The 'VE Rating' column shows that six stocks have '3-Engine' hold ratings and that 11 have '2-Engine' sell ratings, which makes it difficult to pick stocks from the transportation sector.

The next column 'Last 12-month Return%' shows that the biggest gainers over the last 12 months are: Delta Airlines up 130.1%, Swift Transport up 116% and SAIA Inc up 115.8%.

The 'Forecast 1-Year Return%' column shows that all 17 stocks are projected to decline by 2.5% to 10.1% over the next 12 months.

The column that is headed 'P/E Ratios' represents the trailing 12 month price-to-earnings ratios and these stocks have P/Es they are between 9.8 for Delta Airlines and 27.0 for trucker JB Hunt (JBHT).

The '200-day SMA' column represents the 200-day simple moving averages and all 17 stocks are above this moving average reflecting the risk of a reversion to the mean.

How to use Value Levels: If you are looking to buy or add to long positions, my buy-and-trade methodology recommends that you employ good-until-cancelled GTC limit orders to buy weakness to a value level shown in the table. The value levels followed by an 'M' apply for January only. Those followed by a 'Q' apply until the end of March. Those followed by an 'S' apply until the end of June. Those followed by an 'A' apply for all of 2014.

How to use Pivots: A pivot will likely be a magnet during the time frame shown by the letter. Pivots followed by an 'M' apply for January only. Those followed by a 'Q' apply until the end of March. Those followed by an 'S' apply until the end of June. Those followed by an 'A' apply for all of 2014. If a value level or risky level is violated during its time horizon that level becomes a pivot and has an 85% chance of being re-tested during its time horizon.

How to use Risky Level: If you are looking to book profits or reduce positions, my buy-and-trade methodology recommends that you employ GTC limit orders to sell strength to a risky level shown in the table. The risky levels followed by an 'M' apply for January only. Those followed by a 'Q' apply until the end of March. Those followed by an 'S' apply until the end of June. Those followed by an 'A' apply for all of 2014.

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

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

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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