Home Depot, Amazon And Six Other Retail Stocks To Buy ...

My recent suggested investment strategy has been to sell strength, book long- term profits and raise cash. This week we?ll take a look at the retail sector for some practical advice on my strategy. Fundamentally, ValuEngine.com shows consumer discretionary stocks 2.3% overvalued and consumer staples stocks 6.3% overvalued. These two sectors are where you find the big retail players.

Whenever you evaluate retail stocks, one metric that is often mentioned is the Consumer Confidence Index. But make sure you really understand how to use this indicator. Always keep in mind that even when the Conference Board reading of Consumer Confidence is on the rise, the overall figure may indicate a poor retail environment.

A ?neutral? reading for Consumer Confidence is 90 to 120, and we are nowhere near that range. Right now it is often said that confidence is ?rising,? but a reading in the sixties for this measure is in reality pretty weak.

A popular and low-cost way for investors to track the major retailers is via the Retail HOLDRS Trust (RTH) Electronically Traded Index Fund?which declined on Friday to $111.48. This ETF has been around for ten years and traded to an all time high of $114.48 on May 14. The weekly chart for RTH shows an overbought condition. A close this week below the five-week modified moving average at $109.97 shifts the weekly chart profile to negative. My annual value level lags at $86.10 with this week?s risky level at $115.03.

Here are my profiles for the nine components of RTH:

Amazon.com (AMZN) ($198.65) is rated a BUY according to ValuEngine.com with fair value at $183.51 making the stock 8.3% overvalued. Amazon reached an all time high of $206.39 on May 13 versus the ValuEngine.com one-year price target at $212.95. My semiannual value level is $176.78 with a quarterly risky level at $205.20 where investors could have booked profits as the stock was nearing that all time high.

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Best Buy (BBY) ($31.33) is rated a HOLD according to ValuEngine.com with fair value at $38.45 making the stock 18.5% undervalued. Best Buy has been a weak component of the RTH testing a 52-week low of $28.09 on April 5. On an upgrade to BUY this stock would become a candidate for the ValuTrader model portfolio with a one-year price target at $32.62. Weakness to my semiannual value level at $26.90 should be considered as a buying opportunity. My quarterly pivot is $33.02 with my annual risky level at $35.45.

Costco (COST) ($83.40) is rated a BUY according to ValuEngine.com with fair value at $72.45 making the stock 15.1% overvalued. Costco reached an all time high of $83.95 on May 20 versus the ValuEngine one-year price target at $88.52. My quarterly value level is $77.95 with my annual risky level at $86.11.

CVS Care (CVS) ($38.40) is rated a BUY according to ValuEngine.com with fair value at $34.11 making the stock 12.6% overvalued. CVS reached a 52-week high at $38.71 on May 17 shy of its one-year price target at $40.57. My semiannual value level is $36.76 with a semiannual pivot at $37.41 and annual risky level at $40.39, an ideal price at which to book long term profits.

Home Depot (HD) ($37.05) is rated a BUY according to ValuEngine.com with fair value at $33.45 making the stock 10.8% overvalued. Home Depot has been moving sideways to down since testing a 52-week high at $39.38 back on February 22 versus the ValuEngine one-year price target at $39.17. My semiannual value level lags at $23.89 with my quarterly pivot at $38.77, where investors could have booked profits as the stock was nearing that all time high.

Lowe?s (LOW) ($24.46) is rated a BUY according to ValuEngine.com with fair value at $25.66 making the stock 4.7% undervalued. Lowe?s traded to a 52-week high at $27.45 on March 25 above the ValuEngine one-year price target at $25.87. My semiannual value level lags at $17.45 with a quarterly risky level at $28.11.

Target (TGT) ($49.69) is rated a BUY according to ValuEngine.com with fair value at $56.38 making the stock 11.9% undervalued. Target has been a weak stock in the RTH testing a 52-week low of $48.51 on May 3. The ValuEngine one-year price target is $52.56. My semiannual value level is $43.37 with a semiannual pivot at $50.87 and annual risky level at $53.48.

Walgreens (WAG) ($44.37) is rated a BUY according to ValuEngine.com with fair value at $37.12 making the stock 19.5% overvalued. Walgreen?s reached a 52-week high at $45.24 on May 16 versus the ValuEngine one year price target at $46.73. My annual value level is $40.24 with a quarterly pivot at $45.18 and annual risky level at $46.88.

Wal-Mart (WMT) ($55.29) is rated a BUY according to ValuEngine.com with fair value at $53.79 making the stock 2.8% overvalued. Wal-Mart traded as high as $56.47 on May 16 shy of its ValuEngine one year price target at $59.30. My annual value level is $52.54 with a semiannual pivot at $53.60 and semiannual risky level at $57.31

Buy and Trade Strategies for Long Positions

• Value Level ? The price at which you establish an additional long position on share price weakness.This is done on a GTC Limit Order to buy weakness to the Value Level.

• Risky Level ? The price at which you remove a single long position or reduce a multiple long position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.

Buy and Trade Strategies for Short Positions

• Value Level ? The price at which you remove a single short position or reduce a multiple short position on share price weakness. This is done on a GTC Limit Order to buy weakness to the Value Level.

• Risky Level ? The price at which you establish an addition short position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.

Source: http://blogs.forbes.com/investor/2011/05/23/home-depot-amazon-and-six-other-retail-stocks-to-buy/

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