The best performing sector in the S&P 500 this year is Consumer Discretionary (XLY), up in price by 6.69% through June 1st compared to the index itself up just 1.63%. While the average stock is doing well, there is substantial diversity, with 15 of the 81 stocks down by more than 20% and 18 of the 81 stocks up more than 20%. Looking at the winners points to a strong underlying theme: Value Retailers.
I define the value retailers as the dollar stores and off-price stores, though I suppose that the universe could be defined even more broadly. There are four companies from these two sub-sectors in the S&P 500, and they are up 17-30% in 2012. The group includes Ross Stores (ROST), TJX (TJX), Dollar Tree (DLTR) and Family Dollar (FDO). I added a fifth company to the group that is the largest dollar store but not in the S&P 500, Dollar General (DG).
These stocks are benefiting from the confluence of many factors, including a slow economy, a high or exclusive focus on the domestic consumer (note that TJX has 11% exposure to Canada and 11% to Europe), and high gasoline prices that hit consumers in the wallet.
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