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Whole-Foods1-300x200I love this kind of stock market. Beating the indexes is a piece of cake.

Why?

Because it’s a stock-pickers market, and if you know what you are doing you can make money by owning stocks going up and selling stocks going down.

On Thursday, shares of Wal-Mart (NYSE: WMT) fell nearly 2% thanks to the company reducing its outlook due to falling sales.

Blame it on the weather or blame it on the weak economy that is supposed to be strong. Whatever the reason for the poor performance, it is not a good situation, considering Wal-Mart’s excessive valuation.

There’s your opportunity on the short side. Find a stock that is trading for a premium valuation that is likely to miss expectations. The results to the downside can be spectacular.

For Wal-Mart, a 2% loss on a day when the rest of the market traded higher is more like losing 5%. More losses are likely to follow.

If Wal-Mart is vulnerable, other retailers are likely to disappoint and fall as well.

I think the retail sector is quite vulnerable at the moment. At a minimum, poor weather will like blanket the industry like a cold, wet snow.

Here are three retail stocks I would dump now:

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