Retail Stocks are Back from the Dead -- Here's How They'll Pay You Double-Digit Gains

Halloween’s over—but there’s one group of stocks that’s coming back from the dead in a big way.

Gentlemen, get ready to hold your wife’s purse and stare mindlessly at your phone while she tries on 27 different sweaters. Retail stocks are back in action!

But I have a new incentive for you to get off the couch and fight for a space in the mall parking garage: You could quickly bank double-digit gains as these comeback stocks take center stage this month…

It’s been a long, strange trip for retail brands big and small in 2015. These stocks were unstoppable during the first half of the year. Here’s how we described them back in early spring:

Retail stocks have solidified their spot as market leaders. Many key retail companies saw their stocks sprint to new highs despite tough winter conditions that kept people holed up in their homes. We just can’t ignore that kind of strength. Powerful trends like this are like locomotives ripping down the tracks at 90 miles an hour. It takes a ton of force and time to stop them…

But by late June the market was starting to top out. Retailers soon gave clear indication that it was time to roll over. Have a look for yourself:

A Speedy Comeback

After several failed attempts to break out to new highs, the S&P Retail Index fall apart. It cratered more than 13% in a matter of weeks.

But that’s beginning to change. Once again, we’ve located another potentially powerful comeback sector. After milling around its August lows for the better part of the past two months, retail stocks are roaring back to life this week. And even during what has been a murky earnings season for most industries, retailers across the board are posting some pretty impressive numbers…

Just yesterday, American Eagle Outfitters (NYSE:AEO) soared nearly 10% after boosting earnings guidance and announcing a couple of key buyouts in the clothing industry. That’s big time, my friend.

And it doesn’t hurt that we’re dropping into the holiday shopping season. Now, to be clear, I don’t really give a damn about holiday shopping numbers. They’re just straight-up analyst guesses that are always overhyped by the financial press.

But a little hype at the beginning of a potential end-of-year ramp ain’t a bad thing. And it also doesn’t hurt that gas is cheap. That means more money in the pockets of anyone who leaves the house on a regular basis. It could also mean more disposable income going to retailers. At least, that’s what the media hype-train tells us…

Either way, it’s clear that retail stocks are setting up for a big run into 2016. So have fun at the mall!

Sincerely,

Greg Guenthner
for The Daily Reckoning

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