Sector Ratings Set Asset Allocations

TheStreet.com

NEW YORK (TheStreet) -- ValuEngine covers more than 8,000 stocks among 16 sectors. My asset allocation recommendations are based on the distribution of the number of stocks with buy ratings compared to the number of stocks with sell ratings for each sector. Sectors with a high distribution of buy rated stocks are rated overweight, while sectors with a high distribution of sell rated stocks are rated underweight.

Aerospace has 48 stocks or 64.0% of the 75 stocks in this sector rated strong sell or sell, the sector gets an underweight rating.

Auto-Tires-Trucks has 67 stocks or 69.8% of the 96 stocks in this sector rated strong sell or sell, the sector gets an 'avoid source of funds' rating. On June 24 I wrote Toyota, Volvo Headline Downgrades to Sell which is when I explained this rating for this sector.

Basic Materials has 199 stocks or 48.4% of the 411 stocks in this sector rated strong sell or sell, the sector gets an underweight rating. On June 25 I wrote Gold Stocks Are Extremely Undervalued where I provided buy-and-trade levels for several gold mining stocks with hold ratings.

Business Services has 99 stocks or 41.4% of the 239 stocks in this sector rated strong buy or buy, the sector gets an overweight rating. Last Friday Accenture ($72.10) offered a disappointing sales forecast pre-market and the stock was taken to the woodshed with an open below its 200-day simple moving average at $73.23, closing down 8.24% on the day. The price weakness was enough to upgrade the stock to buy from hold. My annual value level is $64.30 with quarterly and semiannual pivots at $70.01 and $72.61 and weekly risky level at $78.68.

Computer & Technology has 381 stocks or 31.3% of the 1180 stocks in this sector rated strong buy or buy, the sector gets an overweight rating. On June 26 Apple ($409.22) was upgraded to buy from hold. The prior ratings change was on May 6 when the stock was downgraded to hold from buy at $458.80. My new monthly value level is $325.25 with weekly and annual pivots at $407.70 and $421.05 and my annual risky level at $510.64. On June 20 I wrote Apple Can Grow to $500 in the Second Half of 2013 when the stock was still rated hold.

Construction has 58 stocks or 36.5% of the 159 stocks in this sector rated strong sell or sell, the sector gets an underweight rating.

One of my themes for 2013 was that The Housing Recovery will remain sluggish in 2013. The National Association of Home Builders Housing Market Index may be above the neutral 50 reading with a current reading at 52 in June, but since this report was released on June 17, the 30-year mortgage rate rose 53 basis points to 4.46%. This could put the brakes on the housing recovery.

Most on Wall Street say that the housing market has turned the corner. My concern is that this corner is on a dead end street.

On June 21 I wrote, Homebuilders Hurt by Fed Policy and the PHLX Housing Sector Index (179/07) traded below its 200-day simple moving average for the first time since Dec. 20, 2011. The housing index is up by only 4.5% year to date and is 14.7% below its May 20 high at 210.01. At the low on April 24, the housing index was briefly in the red for 2013.

Two home builder stocks were upgraded to buy from hold as the housing index bottomed; Beazer Homes and PulteGroup . For Beazer ($17.71) my semiannual value is $14.82 with a monthly pivot at $17.72 and weekly risky level at $20.04. For Pulte ($19.11) my semiannual value level is $14.85 with a quarterly pivot at $19.37 and monthly risky level at $21.69.

Consumer Discretionary has only seven stocks rated buy and only 17 rated sell, this sector of 430 stocks gets an equal-weight rating.

Consumer Staples has 98 stocks or 36.8% of the 266 stocks in this sector rated strong buy or buy, the sector gets an overweight rating.

Finance has 176 stocks rated strong buy or buy and 143 rated strong sell or sell, this sector of 2943 stocks gets an equal-weight rating. In my second post today I will profile the buy rated community banks as the America's Community Bankers Index as this index sets a new multi-year high at 204.48 on Monday.

Industrial Products has 59 stocks rated strong buy or buy and 85 rated strong sell or sell, this sector of 361 stocks gets an equal-weight rating.

Medical has 107 stocks rated strong buy or buy and 149 rated strong sell or sell, this sector of 802 stocks gets an equal-weight rating.

Multi-Sector Conglomerates has 18 stocks rated strong buy or buy and 2 rated strong sell or sell, this sector of50 stocks gets an equal-weight rating.

Oils-Energy has 189 stocks or 33.9% rated strong sell or sell, this sector of 558 stocks gets an underweight rating.

Retail-Wholesale has 265 stocks or 74.0% rated strong buy or buy, this sector of 358 stocks gets an overweight rating. On June 27 I wrote, Buy-Rated Pit Stops Along I-95, where I profiled companies that featured coffee, fast food and casual dinning on a trip between Florida and New York.

Transportation has 136 stocks or 74.7% rated strong sell or sell, this sector of 182 stocks continues to have an 'avoid source of funds' rating. On June 19 I wrote Continue to Avoid Transportation Stocks and today the story remains the same.

Utilities has 194 stocks or 90.7% rated strong buy or buy, this sector of 214 stocks continues to have an overweight. In this sector I suggest a core position in the Utilities Select Sector SPDR ($37.16) which bottomed at $35.80 on June 21. This ETF is on the cusp of its 200-day SMA at $37.20. My weekly value level is $35.65 with monthly and semiannual pivots at $38.15 and $39.25, and semiannual and annual risky levels at $40.39, $40.51 and $43.47.

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.

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