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The Consumer Staples Bubble Is Popping

NEW YORK ( TheStreet) -- When watching financial TV Wednesday afternoon my jaw dropped when I heard a strategist suggest that investors would be better off investing in consumer staples stocks than in U.S. Treasuries. While it may be true that the dividend yield on many consumer staples stocks is higher than the yield on the U.S. Treasury 30-year bond, at least you know that you will get your money back at maturity. A stock does not have a maturity. Today, many consumer staples stocks are in a parabolic bubble, whereas U.S. Treasuries are not!

The consumer staples sector remains one of the most overvalued sector at 16.1% overvalued. On March 25 I wrote, 9 Consumer Staples Stocks at Risk of Reversion and this sector was 25.9% overvalued. Being less overvalued was primarily due to the decline in U.S. Treasury bond yield from 3.19% to 2.90%. All nine of these stocks were rated buy on March 25 and today four have been downgraded to hold as six of these stocks set multi-year highs between April 19 and April 23 in parabolic patterns. A parabolic always ends with the pop of a bubble.

Reading the Table

OV/UN Valued: 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 1-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.

Value Level: 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.
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