When the U.S. Goes Shopping Investors Have One Clear Choice

Americans love to shop. Our willingness to plunk down cash and credit for goods and services accounts for 56 percent of U.S. gross domestic product, according to Tobias Levovich, a strategist at Citigroup.

Astute investors are well aware of the trend, especially ahead of the holiday shopping season. Chris Verrone, a strategist at www.strategasrp.com, sent us the following chart illustrating retailers' performance compared with the S&P 500 since 1989 -- nearly 14 percentage points from October through March.


In pursuit of retailers most likely to outperform over the next 2-3 months, we screened the 130 retailers in the S&P 1500 Index based on two simple criteria:


The ten companies that made the cut have all provided earnings guidance since Oct. 1 which exceeds the current analyst estimates. Setting expectations this high is notable, and I'm inclined to give these companies the benefit of the doubt. Bottom line, we like betting with the insiders.


Note the even split between retailers and restaurants, and especially the mix of high and low end (Blue Nile for diamonds vs. Family Dollar for bargains). We think this broad-based data bodes well for the economy. It also reinforces the stronger-than-expected GDP print last week of 2.8 percent (better than both the survey estimate of 2 percent and the previous reading of 2.5 percent).

Also note the significant returns generated this year by these top ten retailers. With seasonal trends now in effect, and an under-enthused analyst community who could be surprised to the upside, these may be the names to own.