Cyclical Retail: Will This Segment Keep The Recovery
Going?
The Dynamic Wealth Report
March 23, 2011
by Brian T Mikes, Editor
I love America.
In the midst of utter world chaos, one American retailer reports blowout
earnings. And amazingly, during one of the worst five day stretches in
the Dow, their stock skyrockets! We’ll chat about them in a minute. But
first, I want to address the chaotic trading going on.
Right now we are seeing the markets driven by headlines. If there’s good
news out, the markets go up. If bad news hits the wires, we see a big
sell off.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
So with the markets being headline driven these days, it’s tough
to decide where to invest. Will the natural disaster in Japan continue
to lead us lower? Will QE2 continue to buoy equities? Will Middle East
unrest drive oil higher? Will inflation force interest rates higher?
The markets can’t seem to keep a steady path lately.
But in one industry, a clear trend seems to be emerging (despite the
crazy headlines).
Retail sales continue to forge higher. February 2011 retail sales
figures came in at a solid $387.1 billion. That makes for the 8th
straight month of retail sales improvement. It’s the largest increase in
the past four months. And it’s only getting better!
One by one, retailers’ earnings are catching the rebound. So what
retailer recently announced record numbers? None other than
Williams Sonoma Group (WSM)…
They posted record Q4 profits for 2010 and the stock shot up over 13% in
one day! Net income climbed to $113.4 million from $88.4 million in the
same period a year earlier. That’s a 28% jump!
In addition, the company raised their quarterly dividend by 15% to $0.17
per share. And WSM just announced a $125 million stock buyback program.
This company is clearly headed in the right direction…
While that’s great news for current shareholders, potential investors
also have something to be excited about. You see, management estimates
double digit growth for the next five years in their “direct to
consumer” sales model. That’s a fancy way of saying online sales.
For an established brand name like Williams Sonoma, growth like that is
both amazing and refreshing to hear.
So what does it tell us about the rest of the retail sector? We’re only
in the first few innings… We have a long way to go!
There’s no doubt American retailers will continue to surge higher… WSM’s
results confirm the recovery in the retail sector. And I don’t think the
run is over for this group. The United States always recovers on the
back of the consumer.
And it’s happening again…
If the trend continues, Williams Sonoma will prove to be a great
investment… But they won’t be the only ones to benefit from this
recovery.
You see, companies with cyclical economic cycles are wound up and ready
to spring. We want to be invested in companies leveraged to the
consumer. Companies just like Williams Sonoma…
And I couldn’t think of a better way to hop on the retail recovery train
than through an ETF.
Now, you’ll find a handful of retail ETFs out there to choose from. But
my favorite ETF for cyclical retail is the Spiders S&P Retail Holdings
(XRT). I’ll tell you why…
XRT is extremely overweight in cyclical stocks. And as you know,
cyclical stocks take advantage of an economic recovery better than
defensive companies. They perform at the whim of the economy and
discretionary spending…
XRT holds 78% cyclical stocks with just 20% defensive companies. For
those of you doing the math, the other 2% is in industrials.
Just take a look at XRT’s top ten holdings and you’ll quickly see
they’re mostly cyclical. Some of these names include Chico's FAS, Jos A.
Bank Clothiers, and Ascena Retail Group…
In addition, XRT holds only US companies. It’s an easy way to capture
part of the US recovery, while avoiding those big global headlines I was
talking about earlier!
In headline driven markets, I like to look for strong performers. And the
best industry is retail right now. Especially cyclical stocks that will
outperform in an economic recovery… just like WSM.
Now’s the time to jump on board and ride the retail train higher. A year
from now you’ll be glad you did! Consider adding XRT in your portfolio.
• Silver (Over $36.75 an ounce)
After some modest consolidation, silver continues to remain hyperbolic
as global unrest and tragedy rule the headlines. Investors now choose
silver as the go-to “flight to safety” trade. Silver is up 112% over the
last year and up 17% year to date.
Share This Story:
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map