Retail Plays For Bad Times

Retail stocks have been getting hammered and consumers remain under heavy pressure. That should delight doctrinaire contrarians. Buying when times are bad can definitely produce great results down the road, so this may, indeed, be a good time to look for retail bargains. But since we don't yet know how close or far we are from a significant bottom, such investing is best approached with careful and discipline. Presented here are 10 stocks, some well known with others flying under the radar, produced by a model that has shown an ability to cherry-pick within this presently-beleaguered group.

Under Pressure

To measure the degree of weakness in retail stocks, I created and backtested a simple screen that includes all non-OTC retail issues with market capitalizations above $100 million. Figure 1 shows how that collection of stocks (equally weighted with rebalancing every four weeks) fared against the Russell 2000 over the past year.