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The Power Rating community is concentrating on stocks across the board this week. Stocks from the struggling mortgage/finance sector with the lowest possible Long Term Power Rating of 1; to the smoking hot pipeline and insurance sector with the sought after 10 rating have all been regularly showing up on our community screen.
Long Term Power Ratings of 1, the lowest ranking, our studies indicate are volatile and unsafe for Long Term Investors. In fact, statistically, 65% of stocks with a 1 rating have closed lower over the following one year period. Aggressive traders can use these low ratings as short signals, but this is for highly experienced market players only. On the other end of the spectrum, stocks with a 10 rating have an 81% chance of closing higher after a year than the average stock. Long term investors should concentrate on building a portfolio of 10 rated stocks for the best odds of success over a one year period.
Let's take a closer look at several of the most closely watched stocks by our community this week. Ones to consider buying and others to avoid.
1. Freddie Mac (FRE | Quote | Chart | News | PowerRating) - This beat down, US government chartered, private mortgage corporation has been climbing over the last several days. Rumors and announcements are swirling about concerning direct Fed bailouts, billion dollar note issuing and revamping of the entire company. Freddie Mac's future is extremely uncertain right now, so despite the recent potentially bullish overtures, our Long Term Power Rating studies are ranking the stock at the lowest level possible of 1, in an industry with the same bottom of the barrel ranking. Based on the uncertainty surrounding Freddie Mac, investors should tread cautiously if they're considering buying in.
2. Buckeye Partners (BPL | Quote | Chart | News | PowerRating) - On the other end of the Long Term Power Rating Spectrum falls the oil and gas pipeline sector. This sector is full of top-rated companies in this presently high performing space. Our community of Power Ratings users are focusing on Buckeye Partners, in particular.
This stock has a Long Term PowerRating of 9 in an industry with a solid 10 rating. BPL owns and controls one of the largest independent pipeline system in the United States for refined petroleum products. We all know about the high prices at the gas pump, here's a company that appears to be benefiting from the sharply increasing petroleum prices. A candlestick pattern known as a Doji was formed earlier in the month around the 38 price level, and the stock has bounced up from this point.
A Doji Candlestick formation is thought to indicate indecision and potential change of direction in the stock. The fundamental factors in this industry, the technical picture and the strong Long Term Power Rating combine to make this stock a promising addition to your watch list/portfolio.
3. Pfizer (PFE | Quote | Chart | News | PowerRating) - Here is a popular community stock that is solidly outperforming its sector. It's been in a slow, grinding uptrend since the start of July. PFE rates 9, however it is in the major drug manufacturing sector that only ranks 6 in the Long Term Power Ratings. The cause of this outperformance when compared to the sector appears to be solid earnings and a nice increase in revenue recently reported by the company. If you're interested in the Drug sector, this popular community name deserves a close look.
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David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.
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