Dollar Tree, Gap, Big Lots Earnings Lead Buy Rated Retailers

TheStreet.com

NEW YORK (TheStreet) -- Today I preview ten companies in the retail wholesale sector who report quarterly results Thursday and premarket Friday. All 10 have buy ratings according to ValuEngine. The retail wholesale sector is 24.9% overvalued, but with more than 70% of all stocks in the sector rated buy, it's a sector that continues to have an overweight rating.

Most of the retailers previewed today are in the malls around the country, and cater to folks of all ages for their casual apparel needs; from infants to preteens, teenagers and young adults. A few of these stores compete against each other. Once consumers buy the clothing and footwear of their choice, they can turn to a closeout retailer of merchandise and toys, and check out video and entertainment software. With any money left in their pockets they can also visit a discount variety store before ending their shopping spree.

This morning the ValuEngine valuation warning continues with 75.8% of all stocks overvalued 43.2% by 20% or more. 15 of 16 sectors are overvalued, 12 by double-digit percentages, seven by more than 20%.

Technically, the major equity averages straddle their five-week modified moving averages are 15,306 Dow Industrials, 1666.8 S&P 500, 3573 Nasdaq, 6426 Dow transports and 1026.03 Russell 2000 with the 12x3x3 weekly slow stochastic readings mixed versus the overall overbought threshold of an 80.00 reading. It appears that it will take a week or two to either confirm or deny the early-August highs as cycle highs.

The table below shows the upside potential to my semiannual risky levels and the downside risk to my annual value levels. I also show the percent decline off the early-August highs. For the Dow industrial average the upside is 9.9% with a downside of 15.4% after a decline of 4.2% from its Aug. 2 high at 15,658.42.

All 10 stocks previewed today have buy ratings with only one slightly undervalued, and four overvalued by more than 20%. Four stocks are lower over the last 12 months with four up by more than 20%.

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.

Abercrombie & Fitch ($48.50) has been trading just above its 200-day simple moving average at $47.89, which is a key level to hold after reporting earnings premarket on Thursday. My quarterly value level is $37.84 with a monthly risky level at $50.87.

Ann ($33.01) held its 200-day SMA at $31.49 over the last seven sessions, which is a key level to hold after reporting earnings premarket on Friday. My annual value level is $30.07 with a quarterly risky level at $33.62.

Aeropostale ($11.99) broke below its 200-day SMA at $13.79 on Aug. 8 and reports afterhours on Thursday. My quarterly pivot is $12.11 with a monthly risky level at $14.30.

Big Lots ($33.21) has declined to its 200-day SMA at $33.19 and reports quarterly results on Thursday. My quarterly value level is $26.43 with a quarterly risky level at $36.35.

Buckle ($53.84) is well above its 200-day SMA at $49.19 and reports premarket on Thursday. My semiannual value level is $50.74 with a semiannual risky level at $56.19.

Dollar Tree ($52.00) is well above its 200-day SMA at $45.75 and reports premarket on Thursday. My semiannual pivot is $52.56 with a weekly risky level at $55.63.

Foot Locker ($35.10) held its 200-day SMA at $34.36 over the last eight sessions and reports quarterly results premarket on Friday. My monthly value level is $33.38 with a weekly pivot at $36.54 and semiannual risky level at $36.94.

Gamestop ($48.24) set a multi-year high at $51.36 on Aug. 1 and reports premarket on Thursday. My monthly value level is $42.53 with a weekly risky level at $50.77.

Gap ($43.31) set a multi-year high at $46.56 on Aug. 2 and reports afterhours on Thursday. My semiannual value level is $37.17 with a quarterly pivot at $42.78 and weekly risky level at $47.00.

Children's Place ($53.64) is between its 200-day and 50-day SMAs at $50.22 and $54.27 and reports premarket on Thursday. My monthly value level is $51.29 with a weekly risky level at $55.39.

At the time of publication the author held no positions in any of the stocks mentioned.

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

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