4 Stocks Taken to the Woodshed

NEW YORK (TheStreet) -- Last week four stocks gapped lower on negative stock specific news. A regional department store blamed slowing same store sales on Superstorm Sandy. A luxury jewelry store missed earnings estimates on lower-than-expected sales of lower-priced silver-based products.

A fast food chain reported weaker-than-expected fried chicken sales in China. And an Internet software company said raising prices for their products would be limited due to a new deal with the U.S. government.

The three retailers taken to the woodshed are in the retail-wholesale sector, which is 7.6% overvalued according to www.ValuEngine.com. The Internet software stock is in the computer-technology sector, which is 3.3% overvalued. The Internet software industry is 16.9% undervalued.

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 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 are projected to move higher by that percentage over the next 12 months.

Value Level: The 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 timeframe noted.

Risky Level: The price at which to enter a GTC Limit Order to sell on strength.

Kohl's Corp ( KSS) ($44.65) gapped below its 200-day simple moving average at $49.82 last Thursday after they reported weaker-than-expected same store sales blaming Superstorm Sandy. Shares were taken to the woodshed and chopped by 9.0%.

The stock traded as low as $44.18 on Friday testing my annual value level at $44.22. Investors considering KSS as a "buy and trade" stock with a buy at the value level should consider booking profits on strength to my semiannual pivot at $47.45.

Kohl's has a buy rating according to ValuEngine, is 17.0% undervalued and has a favorable trailing 12-month price-to-earnings ratio of 10.4.

Tiffany & Co ( TIF) ($58.98) gapped below its 200-day SMA at $61.68 last Thursday after reporting earnings that missed analysts' estimates. The luxury retailer reported solid sales of high-end jewelry, but weaker-than-expected lower-end sales of silver-based goods.

Investors considering TIF as a "buy and trade" stock should try to catch this falling knife with a buy on weakness to my semiannual value level at $57.66. The upside is a return to the 200-day SMA with my weekly risky level at $62.99.

Tiffany has a buy rating according to ValuEngine, is 21.9% undervalued and has a reasonable trailing 12-month P/E of 17.5.

Yum! Brands ( YUM) ($67.08) gapped below its 200-day SMA at $68.08 last Friday after reporting weaker-than-expected sales of fried chicken by KFC in China, YUM is a proxy for economic growth in China and weak numbers from this segment slashed the stock's share price by 10%. Investors considering YUM as a "buy and trade" stock should consider adding to positions on weakness to my semiannual value level at $60.69 and reducing positions on strength to my quarterly risky level at $72.24.

YUM has a buy rating according to ValuEngine, is just 2.5% undervalued and has a slightly elevated trailing 12-month P/E of 20.9.

Verisign ( VRSN) ($34.15) was already below its 200-day SMA at $42.55 when they reported that raising software prices would be difficult given a new deal with the U.S. government. Shares were taken to the woodshed with a 13% chop to $34.15.

Investors considering VRSN as a "buy and trade" stock should consider adding to positions on weakness to my semiannual value level at $23.84 and reducing positions on strength to my weekly risky level at $37.49.

VRSN has a hold rating according to ValuEngine, is 21.0% undervalued and has a slightly elevated trailing 12-month P/E of 20.2.

At the time of publication, the author had no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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