Can you think of a sector that has been beaten up more by the media than the retailers? Seriously, every time I hear the retail sector mentioned, it's in a very poor light.
Truth be told, the sector's poor reputation is earned. Year to date, the retail ETF has earned around 4% compared to the broader market S&P 500 Index, which has grown by almost 20%.
It gets worse. Since July 11, 2014, the SPDR S&P Retail ETF (NYSEArca: XRT) has lost 1% while the S&P 500 has given you returns of 52%!
So, I've been talking about how this is a stock picker's market. Want proof?
Year to date, the 20 worst-performing stocks in the XRT have lost an average of almost 40%. The top 20 performers? They've earned an average of almost 50%. Polar opposites! Bottom line, if you pick the wrong stocks in the group, you get slaughtered. And if you get the right ones, you look like Gordon Gecko (minus the cheating).
I talk about my proprietary Best in Breed ranking system often. This system has scored the retail ETF as a sell for more than a year, which has been the right move, as the shares have lost 14%. While the XRT has been a great short, it's also a great example of how it's possible to make money as long as you've got the right tools to pick the stocks correctly every time.
Looking at the retail sector with the Best in Breed system right now reveals a number of companies that are among the top-ranked as we head into the middle of July.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.