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My Post-Thanksgiving Retail Report Card Shows Big Gains There for the Taking!

Wednesday, November 29, 2017

Mandeep Rai

Two weeks ago, I wrote an issue whose thesis was simple: Big profit opportunities were there for the taking in retail stocks given better earnings reports and easy-to-beat, lowered expectations.

I noted that the retail sector was DOWN 10% in performance compared to a market that was UP double digits – and that a strong rebound was likely in the offing.

So how do things look today, now that Black Friday and Cyber Monday numbers are coming in? Well, I went back and looked at the list of liquid BUY and HOLD rated stocks in the Apparel Retail and Retail REIT sub-sectors from that column. Here are their returns since mid-November:

Yes, Retail REITs were a hit-or-miss situation, with some showing modest gains and others roughly flat. But apparel stocks soared, with the average name jumping 10.6%! Foot Locker (FL, Rated “D+”) led the charge with a 31.2% gain. Citi Trends (CTRN, Rated “C”) and Urban Outfitters (URBN, Rated “C”) also clocked in with 22% gains each, while only one stock in the sector, Guess Inc. (GES, Rated “C”), lost value.

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Some of the lower-rated stocks performed the best, largely because they were the ones that had previously been hit the hardest. And the outperformance of retailers over retail REITs tells me investors favor retailers that are succeeding in gaining market share online versus companies that are more pure plays on the brick and mortar retail industry.

But the single biggest driving force behind the gains also tells me there’s still time to get on board: The American consumer is flourishing! Consumers are the driving force of our economy, making up over two-thirds of our total gross national product. Right now, they’re going into the holiday season gainfully employed, sitting on more equity (thanks to higher equity portfolio and home values), and ready for spending sprees.

That’s just what the doctor ordered for the retail industry. So, I strongly suggest you do some stock shopping in the sector this holiday season.

Happy investing.

Best wishes,

Mandeep


Mandeep Rai, Senior Analyst

Small Cap Edition, By Mandeep Rai, Senior Analyst

Mandeep Rai has more than 15 years of investing experience, working as both a stock and credit analyst. At Weiss Ratings, he researches and evaluates financial and economic themes, and makes decisions on when to buy or sell specific shares for the Top Stocks Under $10 portfolio.

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