Seeking Alpha
Profile| Send Message| ()  

On May 28, 2010, we published a report for our clients that highlighted the companies that we suspected had the greatest EPS upside/downside in 2H 2010 (click here for report (.pdf)). This report also included some earnings analytics commentary for a number of additional retailers.

We picked 5 companies that we believed had the greatest EPS upside in 2H 2010 and 9 companies that we believed had the greatest EPS downside in 2H 2010 (see table below).

click to enlarge

EPS

So, almost 7 weeks later, how have our trade ideas performed (click here (.pdf))? We’ve calculated the return 2 different ways. First, we’ve weighted each selection by market cap. Second, we took a simple average.

Through July 15th, 5 of 5 long ideas outperformed the RLX index. Through July 15th, 6 of 9 short ideas underperformed the RLX index.

Our 5 long ideas generated a simple average return of -2.3% versus a -9.6% drop in the RLX index.

Our 9 short ideas generated a simple average return of -16.2% versus a -9.6% drop in the RLX index.

While today is a different day, we still like the majority of these selections from May 28th relative to the current EPS expectations in 2H 2010. We do believe that EPS expectations, in general, are much too high for the sector as the group laps improved sales trends and record merchandise margins. Therefore, we suspect that Q2 2010 earnings releases and conference calls for the retail sector will result in lowered earnings expectations for 2H 2010 and FY 2011.

Disclosure: No positions

Source: Looking Back: Have Our Trade Ideas Fared Well?