Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Why I Still Like the Retail Stocks

Thursday, December 9th, 2010
By for Profit Confidential

retail stocksA few months back, I turned bullish on U.S. retail stocks.

Specifically, on these pages, back on February 22, 2010, I said, “The chart of the Dow Jones U.S. Retail Stock Index looks well positioned to break above its 2007 high.” The DJ Retail Stock Index was then sitting at 325. Today, the DJ Retail Stock Index sits at 380, a gain of 17% in nine months.

To break through its all-time 2007 high, the DJ Retail Stock Index would have to rise another 6.5%. I think it’s going to happen, and here’s why:

Sales this Holiday Season are well above previous analysts forecasts. I count 21 major American retailers that have posted what I call “solid” Black Friday sales. And positive results keep coming from retailers. Just this morning, Canadian-based Lululemon Athletica Inc. (TSX/LLL), which has stores in the U.S., announced that its net profit for its third quarter jumped 103%.

This will likely be the best season for retailers since the Holiday Season of 2007. While most retail investors feel that consumers are holding back on spending, especially in light of millions of unemployed Americans, the fact is that the malls are full. I routinely visit retail stores in various major American cities, speaking to retail people about store traffic and sales. I can tell you that the stronger and more higher-end the brand, the stronger the sales this year Holiday Season. Even the stores in Vegas are busy!

Finally, we must remember that the stock market is a leading indicator. When the DJ Retail Stock Index topped out in May of 2007, it foresaw the recession we would experience in late 2007 and in 2008.

  • 100% Profit in Your Pocket Every 14 Days or Less with This Never-Ending Winning Streak

    Any stocks in your portfolio make you 100% or more this year? Let me tell you about 25 of them! In 2013, 25 of our positions reached gains in excess of 100% each. Average profit per pick at their high was 215.6%!

    Our 100% Letter could make you more money in 2014 than ever before! Learn about it here.

With the DJ Retail Index rallying for the major part of 2009 and for 2010, the index sees stronger retail sales ahead. Similarly, the DJ Home Construction Index is still down 69% from its 2007 high and staying down—it obviously does not foresee an improvement in the housing market anytime soon.

Historically, the Dow Jones sub indices have been leading sector indicators for me. And, right now, I like what the DJ Retail Index is telling me about the future of retail stocks.

Michael’s Personal Notes:

Poor President Obama, the man just can’t get a break. He walked right into the worse economic upheaval since the Great Depression, actually saved us from another depression, and all he gets is criticism. A poll released this morning by Bloomberg National Polls says that most Americans feel they are worse off under President Obama.

Sure, as a taxpayer I wasn’t too happy about my tax dollars going to save General Motors Company. But GM (NYSE/GM) later went public and paid back a chunk of money to the government. Washington will likely see all its money invested in GM returned. Yesterday, AIG announced that it will use the proceeds from the sales of two insurance companies to repay a line of credit to the Federal Reserve. The government is also selling its stake in Citigroup.

So it was a very difficult ride. The government made some difficult decisions. For one, I still feel Washington should have helped Lehman Brothers. I’m also terrified about our record deficits. We are not out of the woods yet, especially at the state level; but, in the end, we are pulling out of the worse recession of our generation. Obama needs at least some credit for that.

Where the Market Stands; Where it is Headed:

Will today be the big day? The day the Dow Jones Industrial Average breaks to a new 52-week high? Could be. Stock market futures are strong this morning. A report just released says the number of U.S. workers filing for unemployment benefits (jobless claims) fell 17,000 last week to 421,000 (U.S. Labor Department statistic).

Nothing has changed much about my opinion on the stock market. I believe that a bear market rally in stocks started on March 9, 2009, and that rally continues.

What He Said:

“Prepare for the worst economic period ahead that we have seen in years, my dear reader, as that is what I see coming. I’ve written over the past three years how, in the late 1920s, real estate prices fell first before the stock market and how I felt the same would happen this time. Home prices in the U.S. peaked in 2005 and started falling in 2006. The stock market is following suit here in 2008. Is a depression coming? No. How about a severe deflationary recession? Yes!” Michael Lombardi in PROFIT CONFIDENTIAL, January 21, 2008. Michael started talking about and predicting the economic catastrophe we started experiencing in 2008 long before anyone else.

 

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.