January 8, 2009

 *****Retail Sales
*****Oil Stocks
*****Growth Report
Retail sales numbers are out for December. Obviously, they weren’t good. Sears stores reported a 12.8% drop in sales. The Limited saw sales fall 10%. One of the few retailers to actually grow sales, Wal-Mart, still missed analyst expectations. Wal-Mart grew sales at a 1.7%, when analysts were expecting growth of 2.8%

Now, I’m not sure what analysts were basing their expectations on, but it’s clear they were too optimistic. I wonder if investors were as optimistic. Personally, I’m impressed that Wal-Mart posted any growth at all. It will be interesting to see how the stock trades over the next few days.Overall, retail sales fell 1% for December. That’s as bad as the worst forecasts for retail sales.

 *****As we’ve discussed recently in Daily Profit, there’s a wave of small retailer bankruptcies coming. It could be as many as 200,000 stores across the country. While this news has been widely reported, I suspect that stock prices haven’t been adjusted to account for the weak retail numbers and rising unemployment after small companies go belly up.  Some put options on the Retail SPDR (XRT) might be a good idea here. I like the XRT because it doesn’t weight Wal-Mart higher than other stocks. The XRT currently trades around $21, with a 52-week low at $14.81. Or if you prefer to avoid the risk of options, the ProShares Ultrashort Consumer Goods (SZK) ETF might be a better alternative. This leveraged ETF is esigned to rise twice as much the Dow Jones U.S. Consumer Goods index falls. It closed Wednesday at $72.66 and has a 52-week high at $125.49.

*****Unemployment numbers fell below expectations for the second week in a row. The Labor Department reported that new claims for unemployment fell by 24,000 last week. That might be a bit of a surprise, but it’s temporary. Unemployment rates are going higher, no question. 

*****Oil prices fell yesterday and oil stocks got slaughtered, down +10% virtually across the board. Yes, that means Graham Corp. (AMEX:GHM) got whacked, too.  Given the sharp rise we saw from the stock over the first days of 2009, it may be time to take profits on this stock. My small-cap advisory service Growth Report is taking profits. Yesterday, we recommended selling ViroPharma (Nasdaq:VPHM). The stock was recommended December 1, 2008 and was sold yesterday at $13.78 for a 25% gain in just about a month. Not too shabby. If you’d like to read more about Growth Report, click HERE.

Published by Wyatt Investment Research at