In honor of Black Friday, let's take a quick, quantitative look at the most attractive retailers. As regular readers will know, my first pass at finding the names to research is looking at the strength of earnings-estimate revisions. The names with strong upward revisions generally have some earnings momentum worth investigating. Equally important to me is finding names that have this earnings momentum, but which are still trading at reasonable valuations.
The table below breaks out the best-looking large-cap retail names. All have strong estimate revisions and mostly good valuations. The earnings momentum is gauged by ranking the strength of change against the rest of the market, with a smaller "rank" number meaning stronger upward pressure.
It comes as no surprise that some of the housing-related names look great, both due to the recovery in housing and as a result of Hurricane Sandy. Home Depot (HD) is booming -- although, given the share rise, it is looking a bit expensive now.
Interestingly, the auto-parts retailers look great, too. These are normally "inferior goods" names, meaning they do better in a weaker economy, with people electing to repair cars themselves rather than go to the repair shop.
In general, many of the recessionary names are strong now, as well, be it Gap (GPS) and Costco (COST), Target (TGT) or Dollar General (DG). The weak representation from high-end retailers is telling vis-à-vis the state of the economy at the moment.