Retailers with a Lasting Glow
By Michael Kaye, CFA
Ah, the holidays. A time for peace on earth, goodwill to all, and Wall Street's obsession with the seasonal health of the retail sector. Will sales be strong this year? What's the mood of the consumer? Which categories and products are hot this time around? Etc., etc.
Well, instead of fixating on the shorter term, we decided to focus this week's screen on retailers that have displayed good trends over the long haul. This longer-term perspective may help investors identify retailing stocks that will do well year in and year out -- and not worry so much about how trends change annually.
We kept our search fairly simple this time. To ensure that the companies we sought were able to prosper under a variety of economic conditions, we looked for retailers that have posted year-over-year increases in both sales and net profit for each of the past five years.
Finally, to ensure that these are liquid, stable stocks, each has to have a market cap above $500 million. Our search turned up these seven names:
|Bed Bath & Beyond||BBBY|
|Big 5 Sporting Goods||BGFV|
|Jos. A. Bank Clothiers||JOSB|
|United Auto Group||UAG|
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|A-||Above Average||D||In Reorganization|
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In the U.S.
As of September 30, 2005, research analysts at Standard & Poor's Equity Research Services U.S. have recommended 28.7% of issuers with buy recommendations, 60.3% with hold recommendations, and 11.0% with sell recommendations.
As of September 30, 2005, research analysts at Standard & Poor's Equity Research Services Europe have recommended 34.8% of issuers with buy recommendations, 44.8% with hold recommendations, and 20.4% with sell recommendations.
As of September 30, 2005, research analysts at Standard & Poor's Equity Research Services Asia have recommended 28.1% of issuers with buy recommendations, 51.1% with hold recommendations, and 20.8% with sell recommendations.
As of September 30, 2005, research analysts at Standard & Poor's Equity Research Services globally have recommended 29.3% of issuers with buy recommendations, 57.7% with hold recommendations, and 13.0% with sell recommendations.
5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis.
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2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.
1-STARS (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis.
Relevant benchmarks: in the U.S. the relevant benchmark is the S&P 500 Index, in Europe the S&P Europe 350 Index and in Asia the S&P Asia 50 Index.
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Kaye, an analyst for Standard & Poor's Portfolio Services, is the author of the newly published book The Standard & Poor's Guide to Selecting Stocks