As an investor, it doesn't pay to follow the crowd.

In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.

Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.

If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.

In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.

That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (i.e., a "buy") or underperform rating (i.e., a "sell") in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.

The top 7 retail buys
So, with that methodology as prelude, I present to you the top 7 retail stocks based on the number of CAPS members who have rated the stock an outperform. Remember that only stocks rated 4- or 5-stars are consensus buys.


Market Capitalization (in millions)

Outperform Picks

CAPS Rating (out of 5)

Wal-Mart (NYSE: WMT)




Costco (Nasdaq: COST)



**** (Nasdaq: AMZN)




Whole Foods (Nasdaq: WFMI)




eBay (Nasdaq: EBAY)




Home Depot (NYSE: HD)




Gamestop (NYSE: GME)




Source: Motley Fool CAPS.

More CAPS members think Wal-Mart is a buy than any other retailer, but the consensus is that it's a middling three-star stock. Perhaps the real winner is Costco, which ranks second and has a four-star rating.

Do you think Wal-Mart deserves more than three stars? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these popular stocks.

As for me, I'm taking the plunge and rating Wal-Mart an outperform in CAPS today. You can see my profile here.

Anand Chokkavelu owns shares of Whole Foods. Costco, Home Depot, and Wal-Mart are Motley Fool Inside Value recommendations., Costco, eBay, and Whole Foods are Stock Advisor choices. Motley Fool Options has recommended a bull call spread position on eBay. Motley Fool Options has recommended writing covered calls on GameStop. The Fool owns shares of Costco. The Fool has a disclosure policy.