My Retail Sector Investing Mantra: Try It Before You Buy It

   Dear Friends,

   Most retailers took it on the chin during the economic downturn. But the beleaguered sector is finally starting to show some signs of life. October's same-store sales rose +2.1% -- the strongest showing for U.S. chain stores in more than a year.

   But if you're looking for some low-hanging fruit in the retail sector, don't end your search with statistics on sales and quarterly reports. Investing in the sector requires more than financial analysis. It requires a little aerobic exercise.

   Lessons From a Retail Shopper:

   In early 2008, I discovered I was the only customer in a relatively new Linens 'n Things near my house. Three sales people had already asked me if I needed help. The last salesperson apologized for the over-eager sales staff, noting, "It gets a little boring in here. We get excited when we have a customer."

   When the bed and bath retail chain had to liquidate its store locations in October 2008, was I surprised?  Hardly.

   In January 2008, some shareholders were disappointed when Starbucks (Nasdaq: SBUX) announced its first ever decline in same store sales. I wondered if any of them had eacer taken a stroll down a city street. Back then, they could have passed three different Starbucks locations before they even broke a sweat. Luckily, the coffee chain has since taken steps to correct its once-oversaturated presence.

   Stalking Your Retail Investment:

   For many investments, you can learn most of what you need to know by pouring through financial data and researching the industry. But when it comes to retail stores and restaurant chains, you need to try them before you buy them.

   For instance, I chose a specialty retail chain with a strong financial record for the most recent issue of my premium business model. But I wouldn't have risked a dime on it until I was sure it had a strong and loyal customer base, wasn't overbuilt, and had locations that were conducive to attracting new customers.

   But owning a retail stock isn't easy. Once you buy it, your traveling days have just begun. As long as I own that retail stock in my newsletter's real money brokerage account, I'll continue to visit store locations, ask questions and eavesdrop on customers -- as well as track the company's financial progress.

   So if a strange woman in a black hat starts talking to you in a store, don't worry.  It's just me, watching over my investment.
 

P.S. When I first started my Stock of the Month newsletter, my company put up $50,000 for my "Real Money Portfolio." Not only did they want to profit from my picks, but they wanted to be sure I had the same skin in the game as my readers did. With real money on the line, you can bet I track all my investments like a hawk.

Well now they've upped the ante. This week, they increased my real money brokerage account to $100,000!
 
My retail stock is already up +8.9% in less than a week. And 70% of my holdings are up over +10% -- three of those have gained more than +40%. So I'll be putting my new money to work as soon as possible, starting with the very next issue of my newsletter. If you'd like to learn more about my investment philosophy and Stock of the Month newsletter, click here.