2011's 20% pullback from May through the first week of October hit nearly every sector in the market. However, a few retail stocks were able to hold up well despite the consumer pinching pennies. In fact, that penny pinching may have been the reason a handful of retailers posted gains as the overall market swooned.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

The SPDR Retail ETF (ARCA:XRT) lost 16% of its value during last summer's sell-off as some of the higher-end retailers saw traffic dry up around the country. At the same time, some of the discount retailers continued to attract cost conscious customers.

SEE: An Inside Look At ETF Construction

Warehouse Deals
One of the best performing retailers during the market pullback was Pricesmart (Nasdaq:PSMT), the owner of warehouse shopping clubs in the U.S., Caribbean and Latin America. The 39% increase as stocks fell was more than impressive. The big rally continued into the end of 2011, but in 2012, the stock has been consolidating near the October 2011 high of $78.71.


A breakout above the old high would be a very bullish technical signal. Fundamentally, the stock is not a value play with a PEG ratio of 2.1. That said, during market uncertainty and pullbacks, PSMT should continue to be a stock that investors view as a safe haven.

Dollar Stores
Two deal-offering dollar stores that always seem to do well during market sell-offs continued that trend last year. Dollar Tree (Nasdaq:DLTR) and Dollar General (NYSE:DG) gained 28 and 13% during the sell-off, respectively. DLTR has over 4,200 stores in the U.S. and another 99 in Canada that sell merchandise prices at $1. They sell everything from food to health products to toys. Even though the stock has been on a tear for a few years and is near an all-time high, the PEG ratio is still attractive at 1.06. Pullbacks in DLTR can be bought, based on the strong chart and acceptable fundamentals.


DG has a very similar business model to DLTR, is also trading near an all-time high and has a PEG ratio of 1.03. These are almost identical stocks and both look attractive based on my research. The major difference is that DG operates nearly 10,000 stores, about double of that of DLTR.

Shoes and Accessories
Genesco (NYSE:GCO) operates retail stores that concentrate on footwear, apparel and accessories. Its stores include Journeys, Underground Station, Lids and Johnston & Murphy. The stock was up 24% during the 2011 sell-off, and is sitting near an all-time high. Even with the recent rally, the PEG ratio remains at 94 cents, signaling an undervalued stock. GCO needs to pull back from the recent high of $75, and it should find some support at the $70 area. It appears that investors are willing to buy into a company that offers lower-priced footwear and accessories during tough economic times, and GCO has been a beneficiary.


The Bottom Line
The stocks mentioned above will likely continue to outperform their peers if the risk-off trade is taking place. If the opposite occurs, the focus will turn to riskier assets and retailers that are not as focused on cost-cutting consumers. Consider the stocks as ways to stay in the market and at the same time, hedge against further market weakness.


SEE: 5 Must-Have Metrics For Value Investors

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Matthew McCall did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  5. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  6. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  9. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Fast Fashion

    Definition of "fast fashion."
  4. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!