Daily Gains Letter

wealth creation


My Favorite Pick in the Retail Sector Is Not What You’d Think

By for Daily Gains Letter | Apr 14, 2014

Variables Aligning for Retail to Outperform 2013The retail sector can return some amazing gains as we have witnessed since the recession ended—but it can also provide periods of anxiety.

How the retail sector performs is dependent on many variables, including the economy, jobs, housing, consumer confidence, interest rates, and even the weather, as we witnessed this winter.

There is no tried-and-tested rule on what areas of the retail sector do well. For instance, if you think discount and big-box stores always fare the best, while high-end luxury-brand stocks underperform during times of economic uncertainty, then you are likely off the mark.

The reality is that the past years of massive wealth creation in the stock market and a rebounding housing market have helped to create wealth, and with this comes the desire to spend. There have been some 300,000 new millionaires created in the country in 2013, and that means a propensity to want to spend specifically on higher-end goods and services.

The rationale supports why luxury stocks, such as Michael Kors Holdings Limited (NYSE/KORS) and Tiffany & Co. (NYSE/TIF), have done so well over the past few years. In the luxury retail sector space, Michael Kors continues to be one of my favorite retail sector stocks.

KORS Michael Kors Holding Ltd Chart Chart courtesy of www.StockCharts.com

Meanwhile, the bottom end of the retail sector, which includes the discount and big-box stores, has provided mixed results; albeit, these stocks have made investors a lot of money.

One of my favorite discount stocks in the retail sector is Family Dollar Stores, Inc. (NYSE/FDO). But the company recently reported a soft fiscal second quarter, in which same-store sales fell 3.8% in the quarter; year-over-year, … Read More