Is Black Friday The Time To Sell The Retailers?

Barry Ritholz recently wrote to ignore the Black Friday hype, especially NRF survey results:

The track records of these surveys are awful. In 2005, the NRF forecast a 22 percent increase in holiday shopping gains for the Thanksgiving weekend. Full holiday retail sales were up just 1 percent. In 2006, it was 18.9 percent sales increase, versus less than 5 percent actual gains. In 2007, a 4 percent gain was actually a 0.4 percent drop. NRF forecasts for 2008 were even worse, 2.2 percent sales gain versus a drop of 6 percent.

But nothing compares to the NRF's 2009 Holiday Consumer Intentions and Actions Survey for holiday shopping -- it forecast a stunning 43 percent fall versus actual sales, which were up about 3 percent.

He concluded:

Investors who don't enjoy losing money should ignore the media coverage of these misleading, inaccurate surveys with extreme prejudice.

I would tend to agree. I played around with the seasonality chart function at stockcharts.com and came up with the following for the Retailing ETF (XRT).

(click to enlarge)

Retailing stocks tend to underperform the market in December. An analysis of the less liquid RTH, which had a 13 year history compared to XRT's 8 year history, showed that retailing stocks only outperformed SPY 25% of the time in December (though it outperformed 54% of the time in November). I have also seen other studies that indicate that this stock group tends to peak out about US Thanksgiving.

(click to enlarge)

Bottom line: Beware of the Black Friday and Cyber Monday hype. This may be a case of where you should buy the rumor and sell the news.

Disclaimer: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). The opinions and any recommendations expressed in the blog are those of the author and do not reflect the opinions and recommendations of Qwest. Qwest reviews Mr. Hui's blog to ensure it is connected with Mr. Hui's obligation to deal fairly, honestly and in good faith with the blog's readers."

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this blog constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or I may hold or control long or short positions in the securities or instruments mentioned.

Source: Is Black Friday The Time To Sell The Retailers?

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