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Analyzing the Retail Stock Bubble

NEW YORK ( TheStreet) -- Well-known retail and consumer-related stocks have become bubbles. Some of them have already popped. Others have yet to do so.

Nine of the twelve stocks I am profiling today are in the retail-wholesale sector, which is 13.3% overvalued, according to Two are in the consumer-staples sector, which is 13.1% overvalued. The twelfth stock is in the consumer-discretionary sector, which is 3.3% overvalued.

Eight of the 12 stocks are overvalued and remain risky investments. They went from being value stocks at their 2011 lows to MOJO plays as they rose toward their 2012 highs, where they became bubble stocks.

All 12 stocks have had tremendous price gains going into 2012. Four saw their bubble burst from April through July, while three peaked in reaction to the Federal Reserve policy announcement of QE3 on Sept. 12. Five set highs between Oct. 5 and Oct. 16.

Having bubble stocks in retail is not justified by consumer confidence readings. Although the latest reading of 70.3 marks an improvement, it is well below the 90 to 110 range that is considered neutral. A positive trend in confidence requires readings of more than 110. Confidence has not been greater than 110 since 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.

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 One-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.

Price-to-earnings ratios appear elevated.
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