Girls Just Wanna Shop

In lieu of my recent blogs which have been technical and rather dreary, I thought I'd take a break and go shopping. Instead of hitting the mall, I thought we'd stay at home and do some online shopping. Not for clothes and shoes (a girl's second best friend), but for retail stocks.

Picking up a copy of Stocks, Futures, & Options magazine that Dimitri left lying around, I found an interesting interview of a woman named Dana Telsey who heads up her own firm specializing in retail analysis (you go girl!). Because of her work in the retail sector, she's invited to all of the runway shows and gets personalized tours of stores. If you're a girl who loves stocks and loves to shop, how great is that job?

Anyway, she offered some interesting insights into the retail sector. Did you know that consumers represent about two-thirds of the U.S. gross domestic product? I sure didn't. As for her opinions on what is hot in the retail sector, she said that J. Crew (JCG), Abercrombie & Fitch (ANF), and Tiffany (TIF) are the leaders because of tourism. Since these retailers have a very small presence overseas, tourists are coming to our shores with empty suitcases and raiding the American stores. In addition, she likes the Canadian yoga apparel company Lululemon (LULU) which was also touted by Jim Cramer a few months ago. (The stock is making a comeback but it's not a compelling buy right now, at least in my opinion.)

The retail sector has been hit particularly hard in recent months. Are we nearing a bottom? Ms. Telsey isn't sure, but thinks a rebound in the first half of this year is quite possible. Her prediction is based on past performance. According to her analysis, there have been 11 cycles going back to 1980. On average, retail stocks hit bottom when they trade about 26% off their 52 week highs. At the end of 2007, they were even lower than that with many stocks trading southward of 40%. (Tiffany was one of them). Her prediction may be correct. The charts of three retail ETFs (RTH, PMR, XRT) appear to have put in significant bottoms on January 22nd.

Assuming Ms. Telsey's crystal ball is accurate, what stocks are looking good today? Well, pretty much all of them are showing real signs of life--yippee! But after perusing the charts of hundreds of retail stocks, there is one that stands out in particular--Urban Outfitters (URBN). This stock put in a new 52 high yesterday and it's nearing its all-time high. In fact, this stock has been in a consistent uptrend since August, although it too succumbed briefly to the January blues. Ms. Telsey has a reason for liking it. She says that women today all want to look 30 years old. “If you're 20, you want to be 30, and if you are 40 or 50, you think you are 30.” (Hey, I've been 29 for years.) In short, today's active woman has a lifestyle very different from her mother's; in other words, Talbot's is out and Urban Outfitters is in. (She says that J. Crew is another retailer trying to capture this transgenerational market.)

Selected on a purely technical basis, here are some of my picks in the retail sector.

Stocks nearing their all-time or 52 week highs:
Urban Outfitters(URBN)
Buckle (BKE)
Aeropostale (ARO)
Wal-Mart (WMT)
Gymboree (GYMB)

Stocks breaking out from a base:
Charlotte Russe (CHIC) - also just broke its 200dma (200 day moving average)
Carter (CRI) - also just broke its 200dma
Hot Topic (HOTT) - recently broke its 50dma

Stocks on the verge of breaking out (put these on a watchlist):
Bebe (BEBE)
Jones Apparel (JNY)
The Gap (GPS) - *See note below
Retail Ventures (RVI) - (they own Filene's basement)
Tween Brands (TWB)
J.C. Penney (JCP)

Channeling Stocks (see Recipe #3):
Abercrombie & Fitch (ANF)
Dillard's (DDS)
Wal-Mart (WMT) - in an upwards channel
Alloy (ALOY)

* Ms. Telsy said that the prospects at the Gap are improving, citing targeted marketing, cleaner inventories, and better quality.

Well, I hope I've whetted your appetite in regards to retail. So dust off your credit cards, put on your walking shoes, do your due diligence, and let's go shopping!

Posted by Dr. Kris at 12:26pm PST