NEW YORK (TheStreet) -- The retail-wholesale sector may be 24.9% overvalued according to www.ValuEngine.com, but this sector of 360 companies has 80% of the stocks rated buy. With an overweight sector rating I decided to profile nine buy-rated stocks in the retail-wholesale sector that are trading below $10 a share.
All nine stocks profiled today are overvalued, six by more than 40%. Only one is lower in price over the last 12 months, while the others are up between 22.4% and 227.7%. Seven of nine are above their 200-day simple moving average, which reflects the risk of reversion to the mean. As you will observe one of the stocks in today's table ended above $10 on Tuesday and was downgraded to hold from buy.
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. Casual apparel retailer Aeropostale (ARO) ($10.17) had been above $10 a share until Aug. 22 when they missed EPS estimates by 10 cents reporting a loss of 34 cents a share. The stock traded as low as $7.78 on Sep. 4. On Tuesday private equity firm Sycamore Partners purchased an 8% stake in the retailer and the stock quickly moved back above $10 to a day's high at $10.47. This puts the stock within the price gap between the Aug. 22 low of $10.88 and the Aug. 23 high at $9.55. This morning the stock has been downgraded to hold from buy. My weekly value level is $7.61 with a quarterly risky level at $12.11.
Family-style restaurant chain Denny's (DENN) ($6.22) set a new multi-year high at $6.25 on Monday. Each time this stock dropped to its 200-day SMA, now at $5.57 this key support held; on June 24 at $5.30, on July 30 at $5.40 and on Aug. 28 at $5.50. My quarterly value level is $5.52 with a semiannual pivot at $5.97 and monthly risky level at $6.40.
Fitness machines maker Nautilus (NLS) ($7.21) approached $10 a share on July 15 then traded as low as $6.15 on Aug. 12 holding its 200-day SMA, then at $6.22. Today the stock is between its 200-day SMA at $6.67 and its 50-day SMA at $7.63. My semiannual value level is $6.27 with a quarterly pivot at $6.93 and monthly risky level at $10.58.
Women's fashion retailer New York & Co (NWY) ($5.46) fell from $6.87 on July 11 to $4.64 into Sept. 10 but ended that day above its 200-day SMA at $4.76. Today the stock is between its 200-day SMA at $4.80 and its 50-day SMA at $5.81. My weekly value level is $4.41 with a semiannual pivot at $5.49 and semiannual risky level at $5.53.
Office supply retailer Office Depot (ODP) ($4.31) held its 200-day SMA at $3.94 on Aug. 21. The stock is on the cusp of its 50-day SMA at $4.29. My weekly value level is $4.22 with a monthly risky level at $4.97. Drugstore chain Rite Aid (RAD) ($3.70) traded to a multi-year high at $3.75 on Sept. 11 with the 50-day SMA at $3.25. Weakness so far this yea has held the 50-day going all the way back to April 5 when the 50-day SMA was $1.71. My semiannual value level is $2.60 with a weekly pivot at $3.76 and monthly risky level at $3.86. Wholesale food and grocery distributor Supervalu (SVU) ($7.70) traded to a 2013 high at $8.26 on July 18 and has been trading back and forth around its 50-day SMA at $7.50 since Aug. 20. My semiannual value level is $2.78 with a weekly pivot at $7.78 and monthly risky level at $9.48.
The operator of travel service centers catering to truckers along the interstate TravelCenters of America (TA) ($8.00) has been a focus company of mine since I frequently travel on I75 and I95 between Tampa Bay, Fla., and the New York area. This stock was above $10 until Aug. 6 following disappointing earnings. After trading as low as $7.35 on Aug. 27 the stock failed at its 200-day SMA at $8.55 on Sep. 10. My semiannual value level is $7.18 with a quarterly pivot at $8.04 and semiannual risky level at $9.32.
Fast food chain Wendy's (WEN) ($8.54) set a multi-year high at $8.75 on Sept. 16 and is well above its 50-day SMA at $7.48 after holding that support on July 5 at $5.89. My monthly value level is $7.79 with a weekly risky level at $9.01.
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.
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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