You have to admire the market's simplicity. You get a strong employment number on a summer Friday, money managers assess it for about a day and then they come out with guns blazing buying the stocks that they think correlates with the robust hiring picture.
I say "admire the simplicity" because you would think there should be more to it. You would think that there should be more mystery, more science, more brainpower involved but there isn't.
Why is that?
Because we have a cluster of retailers that are so powerful that you truly can say "if the number is good then buy these stocks."
So let's go over them so you can play this game at home.
First and foremost the number one retailer remains Walmart (WMT) . This stock, which is up 21% for the year, hit its all-time high again. Why is it so strong? First the comparable store sales are the best in ages. More important, the family is letting CEO Doug McMillon lose as much money as necessary to rival Amazon. On-line sales at Walmart are off the charts, growing at 40% on top of 44% the year before. That's staggering and a sign that the acquisition of Jet.com a few years ago for $3.3 billion was a bargain because Walmart got to keep Mark Lore, the smartest guy in on-line other than Jeff Bezos. Walmart still isn't a factor against Amazon even as it is doing more than $20 billion on-line and a Recode report says it could lose $1 billion. If you ask me that's the ante that's needed to be in the game.
Costco (COST) is second. The numbers here are so extraordinarily consistent that it's worth paying up.The company was late to on-line but is now making up for it. The food business is making money. But most important, the darned thing is a club, with 90 million members. It's like Amazon Prime long before there was an Amazon Prime.
Then there's Lululemon (LULU) . This one's become the aggressive growth stock to buy on a strong employment number because it has the strongest comparable sales. Fund managers never hesitate to buy the retailers with the best comp store numbers. It's like there is a mythical envelope that the most growth-crazed managers have. It says, "In the event of a fabulous employment number please open." In it is the simple instruction: "Buy LULU."
Home Depot (HD) has become the default home investment retailer when jobs are created. It doesn't even matter how good the last earnings were - in this case most managers didn't care for them. But memories are short on Wall Street: Upside surprise hiring: buy Home Depot.
Finally, best for last, there is Amazon (AMZN) . We are a week away from Amazon Prime Day, which, of course, is two days, July 15th and 16th, and you historically like to be in ahead of those days so you can sell into those who are shocked that Amazon's having big numbers. Amazingly, the employment number trumps the tech ETFs that have Amazon in them almost all of which were down big today.
Too much work for you? Some managers just like to buy the (RTH) , the ETF for retail. I think that's a mistake because 20% of it is Amazon, and if there is some sort of negative story on Amazon, which seems to be every other day, you may not catch the move. Home Depot's 10%, Walmart is 9.4% and Costco is 5%, so you do get a lot of exposure to the good ones.
Or, as many cynics now think, the RTH is taking up these stocks, and not the other way around. You know me: I hate sector ETFs. I would rather own the best. In this case, the best are a big part of the RTH. That said, Amazon at 20% is probably the most stupid weighting among all the mindless ETFs. So stick with the ones I have outlined and take Amazon with a grain of salt; the cross currents for all but a super employment number aren't worth the risk of a pure play on retail.
(Home Depot and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells HD or AMZN? Learn more now.)