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Discount Retailers Continue to Lag Despite Recovery

NEW YORK ( TheStreet) -- Eight of the nine discount retailers I have been following peaked in 2012 between March and October. Only one has been a leader trading to a new multi-year high yesterday. Eight of the nine, including the leader are in the iShares DJ US Consumer Services Sector Index Fund (IYC), which traded to an all time high this morning in reaction to a better than expected retail sales release.

The last time I covered these stocks as a group was on Dec. 13, 2012, in Discount Retailers, From Leaders to Laggards. Not much has changed in their ValuEngine characteristics, but the stocks have had choppy stock price performances since then.

All nine discount retailers are buy-rated according to www.ValuEngine.com, five are undervalued by 1.6% to 9.9%, and four are overvalued by 4.4% to 11.4%.

Three have declined by 1.3% to 21.1% over the last twelve months and six have gained between 2.4% and 21.3%. These stocks are projected to gain between 5.9% and 9.7% over the next twelve months. The twelve-month trailing P/E ratios are between 14.5 and 24.3.

Technically, four are below their 200-day simple moving averages (SMA), while five are above their 200-day SMAs.

I covered six of these nine retailers on Dec. 27, in The Retail Bubble Stocks are Deflating, and covered three of their earnings reports on Feb. 25, in Retailers Headline This Week's Earnings.

This morning we learned that Retail Sales rose by 1.1% in February, well above the 0.5% consensus estimate from economists. We remain under a ValuEngine Valuation Warning with 65.0% of all stocks overvalued. The retail-wholesale sector, which contains all nine retailers profiled today is 16.5% overvalued.

Chart Courtesy of Thomson / Reuters

iShares DJ US Consumer Services Sector Index Fund traded to a new all time high this morning at $96.33. The daily chart above shows overbought momentum with the 21-day, 50-day and 200-day SMAs at $93.84, $92.18 and $85.97. My quarterly value level is $88.18 with monthly and semiannual pivots at $94.40 and $95.48 and this week's risky level at $97.60.

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