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Recent retail sales data shows the American consumer is broke — and getting broker. The way to make money is obvious: Short retail stocks through
the purchase of put options.High-end retail stocks are a dead end for investors. So focus on high-end retailers and providers of consumer goods and services that are most liable
to have a bad holiday season and will no longer be able to cut costs to generate profits.Read on to get five retail stocks to short.
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Retail Stock to Short #1: Macy’s (M)
Macy’s (M) has a terrible balance sheet compared to its peers, too much high-end merchandise
that is not selling, and locations in the wrong malls — all of which combine to make it a very weak retailer. Not to mention the company and its
stock have a ridiculous valuation if you believe the holiday shopping season and most of 2010 will be a bust.Buy put options on M.
Learn why put options are the best way to short a stock.
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Retail Stock to Short #2: Tiffany & Co. (TIF)
My wife loves that robin’s egg blue box, but there are going to be fewer of those under our Christmas tree this year — and I suspect that will
be the case in many homes. Tiffany & Co. (TIF) is well managed and is not going under,
but sales will continue to fall, especially in Asia and the flagship New York store (Wall Street is broke and tourists are staying home).Buy put options on TIF.
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Retail Stock to Short #3: Nordstrom (JWN)
Nordstrom (JWN) is a great retailer with empty stores, at least where I live. The company
has been too slow to adjust merchandise and pricing, and is far too dependent on clothing for sales and profits.Buy put options on JWN.
Learn how to Play it Safer With Put Options.
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Retail Stock to Short #4: Saks (SKS)
Saks (SKS) is a retailer that would be past its prime even without a recession –empty
stores, merchandise that is too expensive, and too narrow a focus on the baby boomer and older crowd. Talk of a takeover buoyed the stock, which tripled
since the March bottom, but SKS is on its way back down.Buy puts options on SKS.
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Retail Stock to Short #5: Harley-Davidson (HOG)
Technically, Harley-Davidson (HOG) isn’t a retailer, but who needs a motorcycle? This terribly
managed company has a broken balance sheet thanks to loaning money to customers to buy its bikes, falling sales and rising interest payments on heavy
debt. The stock has more than doubled since March, in part due to short covering, but is headed back down.Buy put options on HOG. A word of caution: HOG is one of the five most shorted stocks on the Street, and short
squeezes can make your life very uncomfortable when you are holding puts.Learn more about why the ride is over for HOG.
Let Michael Shulman help you make money on the short side of the stock market. Download a free copy
of his new investing guide, Double Your Money — and Double it Again here.
