Discount Retailers, From Leaders to Laggards

Tickers in this article: COST FDO TGT TJX WMT
NEW YORK ( TheStreet) -- Discount retailers have not participated in the Santa Claus rally. One of the nine stocks I am profiling today set its 2012 high on March 27, six topped out between June 14 and Sept. 21, another peaked on Oct. 16, and the ninth set its high recently on Dec. 5.

All nine discount retailers are rated a buy according to www.ValuEngine.com, with four undervalued by double-digit percentages. Six are higher by double-digit percentages over the last 12 months and only one is lower by more than 20%. Market volatility is projected to decline over the next 12 months with projected gains between 6.5% and 11.1%, all within the 5% to 12% range of stocks rated "four-engine" or buy according to ValuEngine. The trailing 12 month price-to-earnings ratios are reasonable for eight of nine P/E between 10.5 and 17.9 with the ninth having an elevated P/E of 23.8.

Six of the nine stocks I am profiling today were covered in my Oct. 17 post, Analyzing the Retail Stock Bubble. These six were also profiled on Nov. 29 in my post, Retail Bubble Stocks Play On Earnings Momentum.

The retail-wholesale sector is 10.8% overvalued with the discount & variety industry 11.8% overvalued.

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 in the table 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 time frame noted.

Risky Level: is the price at which to enter a GTC limit order to sell on strength.

Big Lots Inc (BIG) ($27.65): Set a multi-year high at $47.22 on March 27. BIG has an oversold weekly chart profile needing a weekly close above its five-week modified moving average at $28.75 to gain upward momentum. The stock is close to its 52-week low with my monthly value level at $23.68 with a weekly pivot at $27.13 and semiannual risky level at $30.88.