Stocks Under $10: Have Homebuilders Become Overvalued During the Current Housing Recovery?

Richard Suttmeier |

At www.ValuEngine.com we show that the Construction sector 23.6% overvalued with the Building Products Wood industry 21.3% overvalued, the Heavy Construction industry 42.7% overvalue, and the Residential/Construction industry 37.1% overvalued. All 12 stocks in today’s table have complete ValuEngine data and have enough price data to have most value levels, risky levels and pivots.

BXC – has been below $10 since the week of May 5, 2007.
GFA– has been below $10 since the week of September 10, 2011.
GLDD – this stock tried to get above $10 in mid-2007 but failed to a low of $1.78 four years ago. Its latest attempt to get above $10 failed last month.
HOV – has been below $10 since the week of May 24, 2008.
LYTS – has been below $10 since the week of October 4, 2008.
NTSC– has been below $9 for at least five years.
OESX– has been below $10 since the week of July 12, 2008.
ORN – was below $10 trading as low as $5.18 in November 2011 and is trying to stay above $10 this month.
PGTI – has been below $10 since the week of September 29, 2007.
SPF – has been below $10 since the week of September 29, 2007.
TINY – has been below $10 since the week of November 24, 2011.
WLDN – has been below $10 since the week of November 3, 2007.

 

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. The most undervalued stock is BXC by 53.6%. The most overvalued stock is SPF by 73.1%.

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. Best rated stocks are BXC & GLDD with Hold ratings. We have seven Sell-rated stocks and three Strong Sell-rated stocks.

Last 12-Month Return (%) – Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage over the past twelve months! The biggest gainer over the last twelve months is PGTI up 320.1%. The biggest loser was WLDN down by 42.9%.

Forecast 1-Year Return – Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months. Only GLDD has a projected gain over the next twelve months, but only by 1.4%. All others are projected to lose between 1.0% and 21.4%.

P/E Ratios – The twelve month trailing P/E ratios – These P/E ratios are elevated with five showing P/E’s between 37.2 and 67.6.

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 acts as a magnet during the time frame noted.

Risky Level: is the price at which to enter a GTC Limit Order to sell on strength.

Where to Buy and Where to Sell

A “Value Level” is a price at which buyers should add to positions on market price weakness. A “Risky Level” is a price at which sellers should reduce holdings on market price gains. A "Pivot" is a support or resistance (Value Level or Risky Level) that was violated in its time horizon, acting as a magnet during the remainder of that time horizon.  These levels are calculated in weekly (W), monthly (M), quarterly (Q), semiannual (S) and annual (A) time horizons, based on the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock. These levels are the most important element of my Buy and Trade Strategy.

Buy and Trade Guidelines

Investors should consider entering good until cancelled (GTC) orders to buy weakness to a value level, or to sell strength to a risky level.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BXC Bluelinx Holdings Inc. 8.97 -0.01 -0.11 10,482
GFA Gafisa SA S.A. American Depositary Shares 1.57 -0.02 -1.26 196,474
GLDD Great Lakes Dredge & Dock Corporation 3.58 -0.01 -0.28 131,064
HOV Hovnanian Enterprises Inc. Class A 1.69 0.03 1.81 1,148,751
IPAS iPass Inc. 1.62 -0.07 -4.14 63,956
LYTS LSI Industries Inc. 11.08 0.23 2.12 209,785
OESX Orion Energy Systems Inc. 1.35 -0.01 -0.74 77,060
ORN Orion Group Holdings Inc. Common 6.66 0.11 1.68 180,596
PGTI PGT Inc. 11.03 -0.03 -0.27 360,969
WLDN Willdan Group Inc. 18.27 -0.23 -1.24 42,801

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