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5 Investment Bubbles That Are About to Pop

Big market gains have led to froth everywhere you turn

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‘Turnaround’ Retail Stocks

retailshopping185While some investors take sadistic pleasure in the failure of a company, most Americans try to share in a company’s success — particularly if they have a personal connection to the brand.

So it’s not a surprise to see some cheerfulness and relief involving once-battered retail players that have snapped back after some dark days in the last few years. Among these are:

  • Department store Sears (SHLD), up over 50% YTD
  • Grocer Safeway (SWY), up almost 90% YTD
  • Video game retailer GameStop (GME), up almost 130% YTD
  • Big-box electronics store Best Buy (BBY), up almost 260% YTD

Unfortunately, the tailwind of a broad S&P rally coupled with a bunch of short squeezes does not make for a sustainable investment.

Furthermore, the underlying issues that brutalized these stocks — slumping sales, weak margins, increased online competition — have not gone away. At best, these retailers were oversold and gained efficiencies that allow them to “right size” for the current economic environment. At worst, they are now grossly overbought after bouncing off the bottom.

Some traders made a pretty penny buying these picks at their lows… but a strategic swing trade in a bad stock is vastly different than going long in a struggling business.

Even if you were to go long, the time for that was a year ago before these big rallies — not now before the bubble bursts.

Article printed from InvestorPlace Media,

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