Retail (model) therapy

31 Aug 2017

Research Signals - August 2017

The retail industry has grappled with many innovations, including the impact of internet shopping on malls and brick and mortar stores and the encroachment of Amazon on established retailers. The latest smart home technology that may change shopping behavior yet again is voice ordering, as home personal assistant devices become more prevalent. We revisit the Research Signals Retail model to evaluate recent performance, as fast-changing developments impact the industry.

  • The model has continued its proven track record, with top ranked names outperforming bottom ranked names by an average of 0.89% per month over the past three years and a positive spread in 65% of months
  • Retail stocks particularly struggled relative to the market since December 2016; however, the model posted a monthly spread of 2.04% over this period, with Short Sentiment the top performing sub-composite (3.23%)
  • Recent trends in the retail industry point to higher financial distress and debt burden, along with more negative sentiment from analysts, short sellers, options traders and credit markets, based on our research library factor exposures

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