Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Three Retailers to Short

By

Another disappointing holiday season approaches. Can these stocks survive it?

PrintPRINT
How is the consumer feeling?

Not so great, it turns out.

We learned this week that the Consumer Confidence Index (CCI) slipped to 47.7 this month from 53.4 last month. Consumers' perceptions of current conditions and their expectations for the future also fell.

Other reports on consumer mood appeared similarly disheartening: The ABC News/Washington Post Consumer Comfort Index (WCCI) dropped another point during the week ending October 24, bringing its total drop the past three weeks to six points.

This cements the index's decline into the lower end of its range for the year, economists note. (The index is based on three core questions, asking respondents to rate the condition of the national economy, the state of their personal finances, and whether or not now is a good time to buy things.)

Joe Consumer is feeling uncertain, and it's hard to blame him as he struggles with a lousy labor market, elevated debt levels, and depressed home prices, to name but a few of the challenges.

Just in case they weren't worried enough, here are a few more concerns consumers can now fret about: the cost of what they're eating keeps shooting up with tea, cocoa, sugar, and coffee prices hitting multi-year highs.

Prices at the pump are also jumping, with gas prices moving closer back to $3 per gallon.

What does this all add up to and what are the investment implications?

David Rosenberg of Gluskin Sheff puts it this way: "All of this leaves less cash left for discretionary holiday spending, which we think again will be a disappointment this year and leave the retailing stocks ripe for the picking for the 'shorting' investor population."

It's certainly true that the retailers have enjoyed a nice run. Indeed, the SPDR S&P Retail ETF (XRT), with holdings including Expedia (EXPE), Guess (GES), Nordstrom (JWN), Tiffany (TIF), and Whole Foods (WFMI), is up 30% in the past six months.

As for which retailers to short, we asked one of our professors with expertise in this space for some ideas.

In general, this pro argues that retailers have been really overbought, and she thinks valuations across the board are too high.

"I personally probably wouldn't even buy the most operationally and financially robust retailers right now given the price," she says, adding, "I think sales for the holidays have been overestimated, and I think we'll see a lot of retail stocks sink."
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE