Nothing really seems to change on Wall Street. Today, I read with interest a few of the latest doom and gloom headlines about retailers -- accompanied, as usual, by sell recommendations. "Gas prices are finally going to convince consumers to stop spending," meaning fewer bucks for Target (NYSE:TGT) and Wal-Mart (NYSE:WMT). "Back-to-school isn't going well," meaning dark times for Abercrombie & Fitch (NYSE:ANF) and Aeropostale (NYSE:ARO).
Stock watchers with memories longer than that of a goldfish (or typical analyst) may remember that this was the same refrain we heard last year: "Stay away from retail." Advice made on the basis of these and other similar guesses about consumer sentiment and the macroeconomic picture put the hurt on many retail stocks, including Chico's FAS (NYSE:CHS).
At the time, I made the modest suggestion that Fools look past the broad generalizations and concentrate on the companies that were getting the job done, including the ones already listed and American Eagle Outfitters (NASDAQ:AEOS). This was based on a couple of simple, Pollyanna notions. First, Wall Street navel-gazing isn't likely to predict the macroeconomic future with any accuracy. Next, good companies would continue to find ways to succeed despite tough times.
How did that work out? Does this chart answer your question? Only two of the six companies underperformed the market, and with most of the winners posting gains between 60% and 100%, a portfolio of the bunch would have creamed the averages. While Wal-Mart and Aeropostale lagged, most of these firms posted big sales and earnings gains over the time period, and their stock prices have appreciated accordingly. And most of them seem to have plenty of room left to grow.
Of course, just because the common Wisdom was wrong then doesn't mean it's wrong now, but on the other hand, what evidence is there that things have changed? There are always tough times or boom times around the corner, depending on whom you ask. As a stock picker, you'll have your best luck when you concentrate on what you can know, and that means sticking with companies that are growing profitably, especially when they're discounted.
For related Foolishness:
- Would you like to catch some falling stars?
- American Eagle looks like it's still flying.
- ... While Aeropostale is carrying excess baggage.
- Take a look at our back-to-school duel.
Seth Jayson is happy to invest where moms and teenagers empty their wallets. At the time of publication, he had shares of American Eagle and Aeropostale. View his stock holdings and Fool profile here. Fool rules are here.
