9 Stocks to Play in the Sandy Recovery

TheStreet.com

NEW YORK (TheStreet) -- The recovery from the damages caused by super storm Sandy continues in the tristate area of New York and in the Northeast in general. Some homes and businesses are gone, but others will survive thanks to the products and services provided by the nine companies I am profiling today.

Six months after the wrath of Sandy, many families remain homeless. In some devastated areas, recovery grants are just stating to become available. Many victims spent their life savings to begin their own recoveries and now find it difficult to qualify for some aid programs due to resulting lower credit scores.

Some areas along the coast need to be completely rebuilt, under much stricter building codes. In many cases, it will cost thousands of dollars to meet new standards, with the source of funds to do so still to be determined.

In sum, scars clearly remain, but the human spirit to survive is strong.

We are in the midst of first-quarter 2013 earnings season, and six of the nine stocks I am profiling today have already reported their results. Only one missed earnings-per-share estimates. One reports premarket on Tuesday, when this column will be published. The other two report in two weeks.

When you talk about recovering from a super storm, you focus on companies in the construction sector, which is overvalued by 17.9%. These companies provide building materials such as lumber and paint. Other companies are in the retail-wholesale sector, which is 17.4% overvalued, and the industrial products sector, which is 7.3% overvalued. Such companies provide miscellaneous building, machine tools and other repair items. The consumer discretionary sector, which is 8.9% overvalued comes into play in choosing the replacement household appliances.

Reading the Table

OV / UN Valued: The 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 is the 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: is the price at which to enter a GTC Limit Order to sell on strength.

Home Depot ($75.26) set an all-time high at $75.37 on May 6 and reports its quarterly results on May 21, with EPS expected to be 77 cents. In my judgment, any improved earnings resulting from the Sandy recovery is priced into additional strength to my monthly risky level at $76.71. This week's value level is $72.48. The weekly chart profile is positive but overbought, with the five-week modified moving average (MMA) at $71.68. There is risk of a reversion to the mean with the 200-day simple moving average (SMA) at $63.32.

Lowe's ($40.81) set an all-time high at $40.88 on May 6, and reports its quarterly results on May 22 with EPS expected to be at 51 cents. Like Home Depot, any improved earnings resulting from the Sandy recovery is priced into additional strength to my monthly risky level at $43.82. This week's value level is $37.77. The weekly chart profile stays positive, with a close this week above the five-week MMA at $38.42. There is risk of a reversion to the mean with the 200-day SMA at $33.88.

Louisiana-Pacific ($18.77) set a multiyear high at $22.55 on March 21 and reports its quarterly results premarket this morning, with EPS expected to be 41 cents. The provider of building materials and engineered wood products has a negative weekly chart profile with the five-week MMA at $19.42. My quarterly value level is $15.40 with a semiannual pivot at $18.95 and monthly risky level at $22.86. Owens Corning ($43.01) set a multiyear high at $43.88 on Feb.13 and reported an earnings beat of 8 cents a share on April 24 earnings of 29 cents a share. The stock has the risk of a reversion to the mean with the 200-day SMA at $35.93. The provider of home-construction products such as insulation, roofing, siding and stone has a positive weekly chart profile with the five-week MMA at $40.59. My weekly value level is $40.82 with a monthly pivot at $42.78 and monthly risky level at $47.35.

Sherwin Williams ($187.77) set an all-time high at $188.29 last Friday and reported an earnings beat of 3 cents a share on April 18, earning $1.11. The stock has risk of a reversion to the mean with the 200-day SMA at $155.12. The distributor and retailer of paint has a positive but extremely overbought weekly chart profile with the five-week MMA at $175.02, which I will describe as a paint bubble. My monthly value level is $180.62 with a weekly pivot at $185.35 and no risky levels.

Stanley Black & Decker ($77.01) set a multiyear high at $82.43 on March 25 and reported an earnings beat of 7 cents a share on April 25, earning $1.03. The stock has the risk of a reversion to the mean with the 200-day SMA at $73.52. The supplier of tools and related accessories has a negative weekly chart profile with the five-week MMA at $77.37. My annual value level is $70.98 with a weekly pivot at $77.62 and monthly risky level at $84.79.

USG ($26.52) set a multiyear high at $30.97 on Feb. 13, and reported an earnings miss of 8 cents a share on April 24, earning $0.01. The stock recently tested its 200-day SMA at $25.06. The provider of building materials for home construction has a negative weekly chart profile with the five-week MMA at $26.79. My semiannual value level is $25.90, with a weekly risky level at $32.68.

Whirlpool ($119.00) set an all-time high at $122.38 on April 23, and reported an earnings beat of 2 cents a share on April 24, earning $1.97. The stock has the risk of reversion to the mean with the 200-day SMA at $97.41. The maker of major home appliances has a neutral weekly chart profile with the five-week MMA at $115.85. My semiannual value level is $112.72 with a weekly pivot at $115.72 and monthly risky level at $137.77.

Weyerhaeuser ($31.04) set a multiyear high at $32 on April 26 and reported an earnings beat of 4 cents a share on April 26, earning 26 cents. The stock has the risk of reversion to the mean with the 200-day SMA at $27.92. The harvester of timber and forest products has a negative weekly chart profile, given a close this week below the five-week MMA at $30.61. My annual value level is $28.69, with a weekly pivot at $31.44 and monthly risky level at $33.12.

At the time of publication, the author had no positions in the stocks mentioned.

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

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