Retailers Headline This Week's Earnings
The seven retailers I cover today report fourth quarter results on Tuesday and pre-market on Wednesday.. Tomorrow I will cover seven more retailers that report earnings after the close on Wednesday and on Thursday.
We begin the week with 62.0% of all stocks overvalued versus the 65.0% reading that defines a ValuEngine Valuation Warning. We show 15 of 16 sectors overvalued with the retail-wholesale sector among the 10 sectors overvalued by more than 10.0%.
When the fundamentals are overvalued as they continue to be and with the weekly charts for the major equity averages technically overbought, my recommended investment strategy is to reduce allocations to stocks on strength to risky levels. Investors should have reduced their allocations to stocks by 50% once the fourth quarter earnings season comes to an end.
On Tuesday the Conference Board releases its Consumer Confidence Index for February and this measure surprisingly slipped to 58.6 in January and economists expect a rebound to 68.0 in February. Even with this rise, measures of consumer confidence will remain well below the neutral 90 to 110 range. In my opinion retail stocks should not be trading near all time or multi-year highs with continued below neutral readings for consumer confidence.
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.
My Buy-and-Trade Strategies for These Retail-Wholesale Stocks
Reporting before the open Tuesday:
Home Depot (HD) ($65.58) is expected to earn 64 cents per share. The stock has a buy rating and set a multi-year high at $68.15 on Jan. 28. Home Depot is 15.4% overvalued and has gained 43.9% over the past 12 months and has an elevated trailing 12 months price-to-earnings ratio at 21.6. The weekly chart profile shifts to negative given a close this week below the five-week modified moving average at $65.62. My quarterly value level is $61.73 with a weekly risky level at $71.16.