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.

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 twelve 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 twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve 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 time frame noted.

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

Big Lots ( BIG) ($35.76 vs. $27.65 on Dec. 13) set a multi-year high at $47.22 on March 27, 2012. BIG has gone from being oversold to being overbought on its weekly chart profile since Dec. 13 with its five-week modified moving average (MMA) at $33.39. My semiannual value level is $28.14 with weekly and quarterly risky levels at $38.48 and $40.54.

Costco Wholesale ( COST) ($103.75 vs. $97.72 on Dec. 13) set an all-time high at $105.97 on Dec. 5, 2012. The weekly is positive with the five-week MMA at $102.07. My annual value level is $93.09 with a semiannual pivot at $100.61, and weekly, monthly and quarterly risky levels at $104.46, $105.05 and $106.33.

Dollar General ( DG) ($47.76 vs. $44.39 on Dec. 13) set an all-time high at $56.04 on July 10, 2012, and recent strength tested the 200-day SMA at $48.77. The weekly chart profile is positive with the five-week MMA at $46.58. My monthly value level is $42.33 with an annual pivot at $45.67 and semiannual and quarterly risky levels at $50.94 and $54.76.

Dollar Tree ( DLTR) ($44.64 vs. $38.65 on Dec. 13) set an all-time high at $56.81 on June 20, 2012 and recent strength tested the 200-day SMA at $45.41. The weekly chart is positive with the five-week MMA at $42.88. My monthly value level is $34.94 with weekly and semiannual risky levels at $46.31, $47.35 and $50.27.

Family Dollar ( FDO) ($58.58 vs. $66.48 on Dec. 13) set an all-time high at $74.73 on June 14, 2012. The weekly chart shifts to positive on a close this week above the five-week MMA at $58.49. My annual value level is $49.09 with a weekly pivot at $48.94 and monthly risky level at $59.83.

Ross Stores ( ROST) ($55.90 vs. $54.41 on Dec. 13) set an all-time high at $70.82 on Aug. 20, 2012 and strength to $62.07 Feb. 7 was just below the 200-day SMA. The weekly chart is negative with the five-week MMA at $57.63. My annual value level is $51.51 with an annual pivot at $54.55 and monthly, weekly and quarterly risky levels at $59.32, $60.85 and $63.59.

Target ( TGT) ($67.11 vs. $60.54 on Dec. 13) set a multi-year high at $67.56 on March 12, 2013. The weekly chart is positive with the five-week MMA at $63.87. My annual value level is $65.45 with a monthly pivot at $66.39 and semiannual risky level at $70.31.

TJX Companies ( TJX) ($44.59 vs. on Dec. 13) set an all-time high at $46.67 on Aug. 29, 2012. The weekly chart is overbought but shifts to negative with a close this week below the five-week MMA at $44.67. My semiannual value level is $35.77 with an annual pivot at $45.75 and weekly, semiannual and quarterly risky levels at $46.01, $48.10 and $49.78.

Wal-Mart Stores ( WMT) ($73.60 vs. $68.94 on Dec. 13) set an all time high at $77.60 on Oct. 16, 2012. The weekly chart profile is positive with the five-week MMA at $71.44. My quarterly value level is $70.08 with a weekly pivot at $73.07 and monthly risky level at $74.19.

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

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

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