8 'buy'-rated retail-wholesale stocks under $10
A closer look at Aeropostale, Denny's, Wendy's, Office Depot, Rite Aid and TravelCenters of America.
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 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 Wednesday'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. Wednesday morning the stock was 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. Wednesday 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 year 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.
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