The Retail Bubble Stocks are Deflating

NEW YORK (TheStreet) -- One of my major themes this fall for retail stocks is that it is highly unusual for consumer staples, consumer discretionary and retail-wholesale companies to be plays on technical momentum, but that was a story in 2012. I have been profiling a dozen retail bubble stocks, and after setting new all time highs or multi-year highs this year, these stocks have been deflating into year end.

On Wednesday, I wrote Consumer Staples Stocks Are Holiday Laggards with that sector 14.5% overvalued according to www.ValuEngine.com. Of the dozen retail bubble stocks I have been covering, two are additional consumer staples stocks included in today's post.

On Nov. 29 I wrote Retail Bubble Stocks Play On Earnings Momentum . This story was an update to my original post on Oct. 17, Analyzing the Retail Stock Bubble. One retail bubble stock is in the consumer discretionary sector which is 2.9% overvalued. Nine of the dozen are in the retail-wholesale sector which is 12.5% overvalued. Five of these are in the retail-discount and variety industry which is 10.9% overvalued.

Among the dozen bubble stocks, six are undervalued and six are overvalued. One has a strong buy rating, nine have buy ratings, and two have hold ratings. Only one has declined slightly over the last 12 months and eight had double-digit gains between 16.1% and 67.7% over the last 12 months. All are projected to be higher over the next 12 months by 2.9% to 14.0% thus lagging the performance of the past 12 months. Six have reasonable trailing 12 months price-to-earnings ratios, and six have elevated P/E.

Chart Courtesy of Thomson/Reuters

Nine of the 12 retail bubble stocks are components of the iShares Dow Jones US Consumer Services sector index fund ( IYC). IYC ($85.88) set an all-time high at $89.08 on Dec. 18, and closed Wednesday below its 50-day simple moving average at $86.11, which indicates risk to the 200-day SMA at $82.94. The weekly chart (not shown) shifts to neutral from positive on a close this week below the five-week modified moving average at $86.25. My annual value level is $78.65 with monthly and weekly pivots at $86.72 and $86 93 and quarterly risky level at $90.39.

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.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

Amazon.com ( AMZN) ($248.63 vs. $247.11 on Nov. 29 and $243.94 on Oct. 17): Set an all-time high at $264.11 on Sept. 14 and came close to a re-test on Dec. 18. Amazon is 33.6% overvalued, still has a hold rating and an extremely elevated trailing 12 months P/E at 648.6. The daily chart is negative with the 50-day and 200-day SMAs at $241.77 and $228.46. The weekly chart profile is positive with the five-week MMA at $247.38. My semiannual value level is $236.23 with a weekly pivot at $248.91, and quarterly risky level at $263.71.

Costco Wholesale ( COST) ($98.68 vs. $102.58 on Nov. 29 and $97.00 on Oct. 17): Set a new all-time high at $105.97 on Dec. 5 then the bubble popped. Costco is 1.1% overvalued, still has a buy rating and an elevated trailing 12 months P/E at 24.1. The daily chart is neutral with the 50-day and 200-day SMAs at $97.94 and $93.93. The weekly chart shifts to negative on a close this week below the five-week MMA at $98.46. My annual value level is $89.71 with a weekly pivot at $99.40 and quarterly risky level at $108.47.

Dollar General ( DG) ($42.95 vs. $49.58 on Nov. 29 and $50.29 on Oct. 17): Set an all-time high at $56.04 on July 7. DG is 16.5% undervalued, still has a buy rating and a reasonable trailing 12 months P/E at 15.4. The daily chart is negative with the 50-day and 200-day SMAs at $47.10 and $49.04. The weekly chart stays negative on a close this week below the five-week MMA at $46.11. My semiannual value level is $39.16 with a weekly pivot at $45.87 and semiannual risky level at $53.23.

Dollar Tree ( DLTR) ($39.72 vs. $41.42 on Nov. 29 and $40.52 on Oct. 17): Set an all-time high at $56.81 on June 20. DLTR is 20.6% undervalued, still has a buy rating and a reasonable trailing 12 months P/E at 16.7. The daily chart is neutral with the 50-day and 200-day SMAs at $39.88 and $47.38. The weekly chart stays negative on a close this week below the five-week MMA at $40.41. My weekly pivot is $39.80 with semiannual risky level at $43.02.

Family Dollar ( FDO) ($62.60 vs. $69.01 on Nov. 29 and $68.52 on Oct. 17): Set an all-time high at $74.73 on June 14. FDO is 6.6% undervalued, still has a buy rating and a reasonable trailing 12 months P/E at 16.9. The daily chart is oversold with the 50-day and 200-day SMAs at $66.88 and $65.91. The weekly chart stays negative on a close this week below the five-week MMA at $66.01. My semiannual value level is $62.16 with a weekly risky level at $68.45.

Home Depot ( HD) ($61.14 vs. $64.83 on Nov. 29 and $60.86 on Oct. 17): Set a new multi-year high at $65.92 on Dec. 3 versus its all-time high of $70.00 set in April 2000. HD is 9.6% overvalued, still has a buy rating and a slightly elevated trailing 12 months P/E at 20.7. The daily chart is oversold with the 50-day and 200-day SMAs at $62.48 and $55.37. The weekly chart stays negative on a close this week below the five-week MMA at $62.05. My quarterly value level is $58.83 with a weekly risky level as $64.12.

Lowes ( LOW) ($35.20 vs. $35.77 on Nov. 29 and $32.35 on Oct. 17): Set an all-time high at $36.47 on Dec. 3. LOW is 21.3% overvalued, still has a buy rating and a slightly elevated trailing 12 months P/E at 20.1. The daily chart is neutral with the 50-day and 200-day SMAs at $33.78 and $30.01. The weekly chart is overbought with the five-week MMA at $34.13. My quarterly value level is $31.01 with an annual pivot at $34.45 and weekly risky level and $36.97.

Monster Beverage ( MNST) ($52.02 vs. $51.36 on Nov. 29 and $58.42 on Oct. 17): Set an all-time high at $83.96 on April 30. MNST is 10.2% undervalued, still has a strong buy rating and an elevated trailing 12 months P/E at 27.3. The daily chart is negative with the 50-day and 200-day SMAs at $49.76 and $60.91. The weekly chart stays positive with a close this week above the five-week MMA at $51.36. My semiannual value level is $37.68 with a weekly pivot at $52.60 and monthly risky level at $57.24.

Constellation Brands ( STZ) ($34.79 vs. $35.36 on Nov. 29 and $35.78 on Oct. 17): Set an all-time high at $36.98 on Oct. 17. STZ is 23.3% overvalued, still has a buy rating and a reasonable trailing 12 months P/E at 14.8. The daily chart is negative with the 50-day and 200-day SMAs at $35.36 and $28.34. The weekly chart shifts to negative with a close this week below the five-week MMA at $35.06. My annual value level is $31.07 with a weekly pivot at $35.13 and monthly risky level at $36.09.

TJX ( TJX) ($41.23 vs. $44.04 on Nov. 29 and $43.10 on Oct. 17): Set an all-time high at $46.67 on Aug 29. TJX is 2.5% undervalued, still has a buy rating and a reasonable trailing 12 months P/E at 17.2. The daily chart is negative with the 50-day and 200-day SMAs at $42.62 and $42.79. The weekly chart stays negative with a close this week below the five-week MMA at $42.56. My semiannual value level is $35.85 with a weekly risky level at $44.36.

Under Armour ( UA) ($47.65 vs. $54.74 on Nov. 29 and $58.08 on Oct. 17): Set an all-time high at $60.96 on Sept. 14. UA is 18.6% undervalued, still has a hold rating and an elevated trailing 12 months P/E at 41.5. The daily chart is neutral with the 50-day and 200-day SMAs at $52.37 and $51.74. The weekly chart stays negative with a close this week below the five-week MMA at $50.63. My semiannual value level is $42.68 with a weekly pivot at $49.27 and monthly risky level at $57.66.

Wal-Mart ( WMT) ($67.99 vs. $70.56 on Nov. 29 and $76.91 on Oct. 17): Set an all-time high at $77.60 on Oct. 16. WMT is 4.5% overvalued, still has a buy rating and a reasonable trailing 12 months P/E at 14.1. The daily chart is oversold with the 50-day and 200-day SMAs at $71.86 and $68.80. The weekly chart stays negative with a close this week below the five-week MMA at $70.28. My weekly value level is $65.71 with a quarterly pivot at $68.55 and monthly risky level at $79.76.

At the time of publication the author held 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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