Citing the General Motors (GM) announced sales more than 30% below their estimates and the continued drop in plans to buy cars in the Consumer Confidence report on Tuesday, it is safe to assume the auto sales numbers will come in below consensus Wednesday and send auto retailers down. Car Max (KMX) is trading more than 25% above its 200 day SMA with a p/e in the 60's. Taking a short position in KMX ahead of the data tomorrow will capitalize on the negative attitude towards car buying and broad economic headwinds to come.
Retailers have outperformed the stock market throughout 2009 jettisoned by retail sales beating expectations in January. The ETF representing the sector is the SPDR Retail ETF (XRT), which is characterized by a 10.68 P/E and trading 10% higher than its 100 day SMA. The sector has traded higher as certain retailers have cut costs to move products in a tough consumer demand environment and looks to be a comfortable sector to short. The sector is diversified and somewhat stable, but a company like Expedia (EXPE) that is included in the XRT is in terrible shape. It is caught in a void between travel agent and discount on-line travel retailer. They have 8,000 employees for a $2.61 billion market cap compared to Priceline (PCLN) with 1,780 employees and a $3.23 billion market cap, providing for a crippling level of overhead and consequently negative profits. The company is operating at -86% net profit and -6.7% revenue growth (year over year) yet the stock is trading above its 50 and 100 day SMA. Consumer confidence tells us people don't want to buy cars, homes or appliances and unemployment data continues to be worse, worsening the chances of consumers to vacation. Shorting this stock is a good vehicle to take advantage of worsening consumer confidence.
