People walk by a sale sign in the window with Christmas decorations at a shopping mall in Toronto.MARK BLINCH/Reuters
Globe editors have posted this research report with permission of S&P Capital IQ. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
Someone from the media recently asked if investors should begin loading up on retail stocks as we approach the all-important holiday gift-giving season. My initial thought was that investors should have looked into buying retail stocks six months ago if they were expected to benefit from a strong holiday selling season. The old Wall Street adage is "Buy straw hats in winter and overcoats in summer," indicating that the best time to buy something is when no one wants it (and to unload it when you have anxious buyers).
This advice is sound whether buying or selling anything, be it stocks, collectables or a home. But does it also pertain to specific retailers within the consumer discretionary and staples sectors of the S&P 500? Is there a pattern of seasonal strength and weakness as indicated by the frequency with which these stocks out- or underperform the overall market?
History indicates, but does not guarantee, that the greatest period of market outperformance for the typical retailer occurs in March, whereas December shows the time that most retailers underperform. Of course, not all retailers were found to shine the brightest in a particular quarter of the year. ....
Based on investment recommendations from S&P Capital IQ's qualitative STARS and quantitative Fair Value investment recommendation systems, we believe there are 12 retailers that still remain on the bargain rack.
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