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One Sector Certain to Outperform in an Uncertain Market

By Frank Curzio, editor, Small Stock Specialist
Friday, December 16, 2011

Picking stocks is no easy task these days.
 
European debt problems are certain to escalate in the months ahead. China's growth continues to slow. Higher energy prices and tax hikes will likely hurt consumer spending next year. And judging by the latest comments this week from bellwethers Intel and Best Buy, margins in the U.S. are beginning to contract.
 
Even with the difficult year behind us and all the uncertainty ahead, one sector is sure to outperform over the next 12 months.
 
I'm talking about discount retailers.
 
I've talked about discount retailers like Dollar General and Costco over the past few months. These companies have easily outperformed the S&P 500 index since I last wrote about them.
 
In fact, both stocks are trading near their 52-week highs.
 
 
Dollar General is opening stores at a rapid pace. The company just announced a huge buyback of its shares and record quarterly results. Billionaire investor Warren Buffett also opened a new position in the company last quarter.
 
Costco just reported its fourth-straight quarter of rising profits. More than 80% of its earnings are based on membership sales – which were super-strong last quarter.  
 
If you believe we've got a rough economic patch ahead, discount retailers should have another banner year. These are the places consumer-strapped consumers shop during tough times.
 
Based on the current landscape of the economy here and abroad, these stocks should continue to outperform the markets at least over the next 12 months.
 
Good investing,
 
Frank Curzio




Further Reading:

Frank's top discount retailers have had an incredible year... Year-to-date, Costco has outperformed the market by nearly 20 percentage points, and Dollar General has outperformed by around 35 percentage points... earning Growth Stock Wire readers 6% and nearly 30%, respectively, since Frank's recent recommendations.
 
Frank also recommends keeping your eye on a certain beaten-down group of retailers… These stocks could be looking at 30%-plus gains from here. Get the full story here: How to Make a Fast 30%-60% Buying These Beaten-Up Stocks.

In The Daily Crux
Market Notes
Crude oil drops to a five-week low... still up more than 20% off its October lows.
 
Big Oil Service fund OIH touches its lowest level in two months.
 
China internet collapse continues... Sina and Sohu fall to fresh 52-week lows.
 
Chinese oil giants Cnooc and Sinopec are competing to buy a portion of private, Texas-based fracking company Frac Tech.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1215.75 +0.3% -1.6%
Oil (USO) 36.13 -1.5% -4.9%
Gold (GLD) 152.33 -0.4% +13.1%
Silver (SLV) 28.22 +0.5% +0.5%
U.S. Dollar 80.29 -0.3% +1.2%
Euro 1.30 +0.3% -1.5%
Volatility (^VIX) 25.11 -3.6% +40.0%
Gold Stocks (^HUI) 501.40 -1.5% -11.6%
10-Year Yield 1.91 +0.5% -45.7%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 122.18 +0.4% +0.4%
S. Korea (EWY) 51.39 +0.2% -10.0%
Japan (EWJ) 9.08 -0.2% -13.7%
S. Africa (EZA) 59.22 +0.6% -14.6%
Canada (EWC) 25.44 +0.0% -15.3%
Singapore (EWS) 10.92 -0.3% -15.7%
Lat.America (ILF) 42.08 +0.2% -17.3%
China (FXI) 34.09 -0.8% -18.6%
Taiwan (EWT) 11.70 -0.5% -20.5%
Israel (ISL) 13.39 +2.1% -20.7%
Russia (TRF) 14.05 +0.3% -36.5%
India (IFN) 19.99 +1.0% -37.2%

Sector ETFs
Symbol Price
Change
52-Wk
Utilities (XLU) 35.03 +1.2% +17.5%
Big Pharma (PPH) 70.76 +1.4% +12.8%
Retail (PMR) 21.10 +0.9% +9.4%
Health Care (IYH) 69.16 +1.0% +7.2%
Real Estate (IYR) 54.99 +1.4% +6.6%
Consumer Svcs (IYC) 69.50 +0.3% +5.0%
Big Tech (QQQQ) 54.74 -0.3% +1.8%
Defense (PPA) 17.66 +0.9% -3.1%
Industrials (IYJ) 61.43 +0.6% -3.3%
Transportation (IYT) 86.48 +1.4% -3.4%
Internet (HHH) 68.85 -0.3% -4.5%
Media (PBS) 12.74 +0.1% -7.2%
Software (PSJ) 23.19 +0.5% -7.5%
Insurance (PIC) 14.75 +0.5% -8.4%
Telecom (IYZ) 20.52 +0.5% -8.6%
Construction (PKB) 11.40 +1.0% -10.9%
Biotech (PBE) 19.01 +0.2% -11.5%
Financials (IYF) 47.43 +0.3% -13.9%
Basic Mat (IYM) 62.57 +0.4% -14.5%
Water (PHO) 16.24 +0.7% -14.8%
Semis (PSI) 13.30 +0.8% -17.5%
Oil Service (OIH) 108.86 -1.8% -18.5%
Nanotech (PXN) 6.05 +0.5% -39.0%
Alt. Energy (PBW) 4.98 +0.0% -50.5%

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