Markets Hit a Year High as Rally Continues
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U.S. stocks kept climbing this week to 1-yr highs midweek on continued optimism about the economy. Thursday brought new reports showing that a recovery is underway, but the response from investors was more muted with worries that the market is already overbought and a pull back is on its way. There were 545,000 initial jobless claims filed in the week ending Sept. 12, down 12,000 from the previous week, according to the Labor Department. Americans are still feeling the continued affects of the recession as shown by a CNN poll released this week, 86% still believe we are in a recession while only 13% say the economic downturn has ended.
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This week we are looking at the retail sector. The current rally has been lifting all ships, but retail has not enjoyed the same surge and we see a good opportunity with some companies that will enjoy a continuous lift if we are truly coming out of this recession but also have less risk if we aren’t. Our Bearish pick is also a retail pick but unlike this week’s Bullish pick, their main product is not a necessity, their outlook is flat at best and seems to be an overbought stock currently. |
 Wal-Mart Stores (WMT) - Retailers have not shown the recovery that the some of the other sectors are experiencing, even as the economy shows signs of recovery and Fed Chairman Ben Bernanke stating the recession is likely over. Wal-Mart is not just a retailer, it’s not high end retailer relying on expendable income to survive. Wal-Mart still represents savings and value to most Americans and with their mail-delivery drug service going nationwide, it’s easier to see this company as a safer investment than most retailers, when considering a sector that has yet to catch up to the recovery.
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 Bebe Stores (BEBE) - Unlike our Bullish pick this week, Bebe does require some expendable income. Their clothes are pricier than most of its competitors like, New York and Company and French Connection. Not only is this company’s stock price overbought against it’s sector, its up 62% in the last six months, trading at 95 times forward earnings. Two weeks ago Bebe reported that it will post a first quarter loss and their YTD numbers are horrible.
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