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Retail Bounces Back and the Legends Buy More

By Stansberry Research Interview Series
Wednesday, April 4, 2007

Having posted weak sales for January and February, the retail sector is finally bottoming out...
 
Retailers will be closing the books on March sales on April 7, but so far, the month's results have been excellent...
 
 
 
For the first week in March, the Thomson Financial Same Store Sales (TF SSS) Index posted a 4% gain, more than twice its 1.8% return for the same period in 2006. Excluding Wal-Mart, the TF SSS posted gains of 6.7%: more than three times last year's ex-Wal-Mart results.
 
Retailers are divided in several sectors: discount, department, teen apparel, apparel, and specialty. Looking over who owns the various market leaders for these sectors, you'll notice one name pop up time and time again:
 
 
If you don't recognize the name, you've been living in a cave. In addition to his heavily publicized political activism, Soros is widely considered one of the greatest investors of the 20th century. He is best known for managing the Quantum Fund – the single best fund in history. If you'd invested $100,000 with Soros at Quantum's inception in 1969, your position would have grown to $150 million by 1994.
 
Recently, Soros has been investing heavily in the retail sector, buying the leaders in four of the five retail sectors...
 
Discounter Wal-Mart (WMT), for example, is currently owned by a who's who of investing legends. In addition to Soros, Warren Buffett, Joel Greenblatt, and investment firm Tweedy Browne have all established positions in the world's largest retailer.
 
Soros also owns $11 million of department-store standout Nordstrom (JWN), $22 million of teen-retailer American Eagle Outfitters (AEO), and $12 million of apparel conglomerate Limited Brands (LTD).
 
Soros has been gobbling up shares of retailers since last fall. But there is one holding he's dumped: Recently, he closed his entire position in specialty retailer Pier One Imports (PIR). Even Warren Buffett has lowered his holdings by 51%. In fact, Specialty retail is the only retail sector that the legends are selling.
 
The retail industry hardly receives any mention in the financial press. I'm thankful for that. It gives us a chance to buy some fantastic franchises alongside the legends, all before the rest of the world finds out. And we get the benefit of George Soros' investing advice without the fees or expenses.
 
Good trading,
 
Graham




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Market Notes
Oil drops 2% on easing global tensions.
 
Whole world hits new highs: Australia, Sweden, Germany, Italy, Belgium, Netherlands, Spain, France, Mexico, Brazil, and U.K. ETFs all at record highs.
 
Luxury retailers Ralph Lauren, Tiffany, and Ducati at new highs.
 
Construction & infrastructure companies Lafarge, Martin Marietta, Foster Wheeler, and Chicago Bridge & Iron hit new highs.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%