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The month of February provided much optimism for the retail segment, as U.S. retailers posted their best monthly sales performance since just before the recession started in 2007. Three-quarters of the 28 retailers in the Thomson Reuters index beat expectations, with the index’s same store sales up 4% in February, compared with expectations for a 2.9% rise. It seems that people are not too busy tending to their budget to go out to splash $200 on a pair of jeans at Nordstrom (JWN), or a set of jewelry at Tiffany (TIF) to please the loved ones. After all, Valentine’s Day falls in the month of February. It seems, too, that teenagers did not want to be left behind with the spending spree, helping boost sales at Abercrombie & Fitch, American Eagle Outfitters and Aeropostale. While some were quick to point out a recovery in consumer spending, others were more cautious in assessing how much of a recovery has been priced in retail stocks. First, while the positive comps growth of most retailers is pleasing, it came as a result of easy comparisons, with the base period comps down 4.7%. Second, tax refund checks are either making its way to tax-payers’ mailboxes, or have already made its way to cash registers at the shopping malls. With refund checks being sent out as early as the end of January, it is safe to assume that some of these checks contribute to the comps growth. Therefore, the question that remains is, when comparison normalizes and tax refund fades, what is the sustainable growth for the country’s retailers?

A list of the 25 top performing stocks of 2010 (ex. Financials) from within the S&P 500 index. We have taken the top 25 companies from 2010 and provided our readers 3 attractive and 5 unattractive stocks from this list based on their valuation attractiveness relative to sector peers and overall investment opportunity using key criteria that The Applied Finance Group (AFG) uses in its stock selection process including corporate performance, management quality and earnings quality to see which of the top performers still look to have upside and which look like they have run out of room to run.

Below is a chart and table outlining the 2009 year to date performance of the sectors within the S&P 500. The Technology sector has lead the way thus-far and the Financial and Utility sectors have been dragging down the overall index performance coming up on the halfway point of 2009. Along with sector performance we have also provided a table with the best and worst 10 performing stocks within the S&P 500 index so far this year.

It is nice to see that 2 of the top 10 performers in the S&P 500 index (S, FCX) are stocks that we have recommended on multiple occasions on ValueExpectations.com. VE.com recommended Sprint on 11/26/08 AFG Buys, 12/29/08 High Value Score, 3/13/09 10 Most Undervalued and Freeport Mc-Moran on 1/17/09 4 Stocks To Consider, 1/30/09 5 Cheap Stocks, 2/17/09 Digging Deep.

Average Sector Returns (S&P 500 YTD)

 

Average Sector Returns (S&P 500 YTD)

 

Best and Worst 10 Performing Companies YTD 2009 (S&P 500)

The Applied Finance Group

Nearly all of the biggest return earning companies in the S&P 500 are firms that have been beaten up over the past few months but have bounced back to provide the biggest return in the entire index for the month of December. These firms have ended 2008 on a high note and move into 2009 with what they hope to be sustainable momentum.

The list of companies in the S&P 500 with the worst returns in December had also been trending downward for the past few months but were unable to muster a year-end turnaround as those on the other list had been able accomplish. Many of the firms on this list have something to do with oil, as their stock prices have been highly correlated with the falling price of oil.

Compare the sales growth priced-in to justify the current stock price (VE Sales Growth), to what the company has been able to deliver the past 5 years in revenue growth (5 Year Median Sales Growth), to see which companies have reasonable expectations of achieving the Sales Growth priced-in. Companies with low expectations relative to what they have been able to achieve are more likely to out-perform.

 

Sales Growth Expectations for the Highest Return Companies (S&P 500) - December

**denotes only 2 years historical sales growth available (2 year median used)

 

Sales Growth Expectations for the Lowest Return Companies (S&P 500) - December

 

VE Sales Growth Calculated for these firms on 12/26/08.

The timing and performance of the stock market had an important impact on the outcome of the election just as the outcome of the election has had an impact on these 20 stocks since the election-day.
Listed are 10 of the best and worst performing stocks in the S&P 500 (excluding financials) since the November 4th election and their 5 year implied sales growth that the company needs to earn to be fairly valued at the closing price on 12/1/08.

*LIZ has since been removed from the S&P 500

 

                                           Biggest Winners Since The Election

 

 

 

                                       Biggest Losers Since The Election 

 

 

 Recently we also screened the S&P 500 to identify investment opportunities and identified over 150 companies (industrials) that have negative sales growth expectations embedded into their current market valuations. These companies include high quality companies such as: COH, DOW, CAH, TGT, JNJ, UTX, SBUX, and WAG, among others. If you would like to Read our study Click Here