NEW YORK ( TheStreet) -- It is very unusual for retail stocks to be a play on momentum, but that's what has happened this year to a dozen retailers that I describe as bubble stocks.
Nine are in the retail-wholesale sector which is 7.2% overvalued according to www.ValuEngine.com. Two are in the consumer staples sector which is the most overvalued sector by 13.9%. These 12 stocks are in consumer discretionary which is 2.8% undervalued.
On Oct. 17 I wrote Analyzing the Retail Stock Bubble and since then there have been two downgrades. One set a new all-time high on Wednesday and another, the archrival of the other, is set for a new multi-year high today. This second one is the only retailer in the dozen that is still shy of its all-time high.
Four stocks are overvalued, six have trailing 12 month price-to-earnings ratios above 20.0, nine have gains of more than 25% over the last twelve months, but none are projected to match these past gains over the next 12 months.Ten of the twelve retailers are above their 200-day simple moving averages. The Conference Board's reading on consumer confidence rose to 73.7 in November was the highest reading since February 2008, but keep in mind that this is well below the neutral zone of 90 to 110 for this measure. Chart Courtesy of