Heading into the 2017 holiday shopping season, you couldn’t give retail stocks away. Investors were worried about weak same-store sales, underinvestment in e-commerce operations, and the loss of valuable market share to online retailers, including the 800-pound gorilla Amazon.com (AMZN, Rated “B-”). So they were dumping retail stocks like hotcakes.
But in November, I took a contrarian stance. I produced a table of highly rated retail sector stocks that had fallen from grace, but that looked like solid plays to close out the year. After all, we’ve seen time and time again in the market that panic and fear can impair investor judgment — causing large overshoots to the downside. That’s why I said bottom-feeding ahead of the holiday season could pay off in a big way.
So how did things work out? Well, here’s that same list of stocks, updated to show how much they’ve gained since that piece was published …
You can see the average return of these stocks was 11.5%, with all but one of the 18 names showing gains. The biggest winner was Boot Barn Holdings (BOOT, Rated “C”), with a gain of 28.7%. But Burlington Stores (BURL, Rated “B+”) – a current holding in my Weiss Ratings’ Quantum Trader investing service – was no slouch either. It surged 19% during the period, aided by stronger demand from one of coldest winters ever.
Best of all: There may still be some steam left in the rally’s engine. As I show in the table above, despite the post-November bounce, some of the highlighted names are still down more than 10% from their 52-week highs. That means you may want to consider buying some of these stocks even now, using our proprietary Weiss Ratings (the higher the better) to guide you to stronger, less-risky names.
Bottom line: This kind of bottom-fishing, value-identifying analysis can bear fruit. But it requires patience and balance. Knowing when and what to buy is difficult, which is why tools like our Weiss Ratings are so valuable. In fact, I’m currently using them to evaluate another sector that’s primed for a turn around — and I’ll tell you more about it, as well its potential catalysts, in a future issue. Stay tuned!