Book Profits on Aerospace Stocks

Tickers in this article: BA BEAV COL CW FLIR GD LLL LMT NOC RTN
NEW YORK (TheStreet) -- The Department of Defense sent out furlough notices on May 28. Another wave of spending cuts will affect military bases next week.

I live and work in Tampa, Fla., and starting on Monday, about 3,500 civilian employees at MacDill Air Force Base in Tampa will begin to take unpaid days off. Each employee will lose about 11 days of wages through the end of September. While that may not seem as a big deal on Wall Street, these furloughs will cost Main Street in Tampa about $8 million.

It appears to me that in addition to furloughs across the country at military bases, there will be spending cuts that could hit aerospace stocks. Eight of the 10 stocks I profile today set new multiyear or 2013 highs on Tuesday.

ValuEngine still shows that stocks are trading under a valuation warning with 74% of all stocks overvalued with 38.6% overvalued by 20% or more. The aerospace sector is 18.2% overvalued. My asset-allocation rating for the aerospace sector is underweight with 32.6% of the 95 stocks in this sector rated sell.

Today I profile 10 stocks in the aerospace sector that will report quarterly earnings between July 19 and August 8.

All 10 of these stocks are overvalued with five overvalued by more than 20%. Five of these stocks have recently been downgraded to sell from hold and the other five continue to have hold ratings. All have had big gains over the last 12 months of between 19.7% and 53.1%.

These stocks are projected to slide by 2.1% to 11.9% over the next 12 months. All stocks are above their 200-day simple moving averages, indicating the risk of a reversion to the mean.

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 twelve 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 twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve 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.