NEW YORK ( TheStreet) -- The consumer staples sector has been the most overvalued sector among the 16 that I track. On Dec. 26 I wrote, Consumer Staples Stocks Are Holiday Laggards, and since then these nine stocks performed nicely. Today all nine are rated buy according to ValuEngine, but two were downgraded to buy from strong buy during the first quarter.Today www.ValuEngine.com shows that 64% of all stocks are overvalued, just 1% below a ValuEngine Valuation Warning. The consumer staples sector is 25.9% overvalued in a tie with the transportation sector. Last week I wrote, 12 Sell Downgrades Threaten Dow Transports and today I am concerned that this contagion can spread to consumer staples. The nine consumer stocks are more overvalued today than at the end of 2012, less so than the sector.
All nine are trading above their 200-day simple moving averages which reflects the risk of a reversion to this mean. Wall Street continues to tell investors that stocks are cheap given a 15 price-to-earnings ratio for the S&P 500. ValuEngine incorporates this data in its valuation model, as both the 12-month trailing and 12-month forward P/E are two of the three most heavily weighed factors in determining the fair value price of every stock. The 12-month trailing P/E for the nine stocks profiled today are elevated at 17.5 to 24.7. Given my analysis a buy-and-trade strategy remains in play for these stocks, but its time to clean up positions by reducing exposures on strength to risky levels.
Reading the TableOV/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.
General Mills ( GIS) ($48.15 vs. $41.00 on Dec. 26): Set a multi-year high at $48.31 on March 21. My monthly value level is $44.53 with a weekly risky level at $49.42. The weekly chart profile is positive but overbought with the five-week MMA at $45.26. Kellogg ( K) ($63.39 vs. $56.14 on Dec. 26): Set a multi-year high at $63.50 Friday. My annual value level is $60.79 with a weekly pivot at $63.03 with no risky level. The weekly chart profile is positive but overbought with the five-week MMA at $60.61.
Pepsico ( PEP) ($78.64 vs. $69.43 on Dec. 26): Rallied to $79.27 Friday to challenge its January 2008 high at $79.79. My semiannual value level is $75.53 with an annual pivot at $77.05 and annual risky level at $79.02. The weekly chart profile is positive but overbought with the five-week MMA at $75.46. Procter & Gamble ( PG) ($77.27 vs. $68.52 on Dec. 26): Set a multi-year high at $77.82 on March 20. My annual value level is $75.13 with an annual risky level at $78.73. The weekly chart profile is positive but overbought with the five-week MMA at $75.59. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.