However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are 56 stocks listed under "specialty retail" in the CAPS' screener, of which more than a handful carry well-respected four- and five-star ratings. Those accolades mean our 180,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:
CAPS Rating (out of 5) Today
52-Wk. Price Change
Est. 5-Yr. Growth Rate
EZCORP (NAS: EZPW)
PetSmart (NAS: PETM)
Source: Motley Fool CAPS.
International and financial worries still grip the market, but with the S&P 500 rising less than 3% over the last 12 months, it may be surprising to learn that with a weak economy the CAPS retail stocks fared better, rising over 8% in that same time span. So let's take a closer look at why investors think these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.
The new reality
The pawn business is so hot these days that the History Channel created a spinoff of its hit TV show Pawn Stars that has a decidedly Louisiana flair: Cajun Pawn Stars. Being a pawn broker is a lucrative business and, apparently, a heckuva lot of fun, too. And given their recent performance, EZCORP, First Cash Financial (NAS: FCFS) , and Cash America would all likely agree.
Soaring gold prices last year were also a boon to pawn shop operators, who saw their businesses soar as people rushed to trade in their gold for cash. When gold subsequently fell from its lofty heights, the pawn operators went down too. Now they're marching higher again and EZCORP, as the leading pawn-shop payday lender, has seen its shares rise 17% so far this year, though with a 24% increase, First Cash has recovered even more ground.
And despite a government crackdown on payday loans, even lender Advance America (NYS: AEA) has watched its stock rise 30% year over year -- then get another big boost when Mexican specialty finance firm Grupo Elektra offered to buy the lender the other day.
I picked EZCORP on CAPS to outperform the market indexes more than four years ago, seeing the poor economy and the rising price of gold as trends that would benefit the leading specialty finance operator. Since then, the stock is up more than 150% compared to a near 4% decline in the S&P 500. I believe it still has more room to run and will maintain my outperform rating on it.
Add the pawn star to the Fool's free portfolio tracker and let us know on the EZCORP CAPS page or in the comments section below if you agree that rising gold prices will once again spark a gold rush in its shares.
Raining cats and dogs
Pampering pets is an even more lucrative business than pawn shops, and PetSmart is top dog in the business. With "pet parents" spending upward of $50 billion annually on their charges, it has proven to be a resilient industry, even in a recession. Indeed, the amount spent on pets in the U.S. is up 23% since 2007, according to the American Pet Products Association.
Motley Fool blogger Tom Gibbs points out the propensity of owners to spend big bucks as a reason to expect PetSmart and other pet-care businesses to continue their meteoric rise: "The industry's most important consumers -- the high willingness to pay group who spend a large amount on their pet's health and well being -- undoubtedly desire the benefits that come from a specialty retail store concept. These consumers want, and will pay extra for, a relationship with their local pet goods retailer and their in depth product knowledge."
Yet as much as the circumstances continue to point toward good growth, the rewards are not evenly distributed. While PetMed Express (NAS: PETS) added 150,000 new customers in the last quarter, with new orders jumping 29%, its stock is off 17% over the last 12 months.
CAPS member balcobulls says the proliferating population of pets means PetSmart will continue to be the cat's meow.
90ish million cats, 70ish million dogs, PetSmart is the number one stop for pets. As Whole Foods is booming because of people wanting to eat healthier, those same people want their pets to eat healthy as well. PetSmart has a huge selection of healthy food products that are priced fairly.
Add PetSmart to your watchlist and keep apprised of the latest developments in the pet-care space.
The ball's in your court
You don't have to be an international giant to make it big, but the Motley Fool has found three companies set to conquer the world. Read the new report "3 American Companies Set to Dominate the World," which gives a rundown of U.S. superstars ready to exploit emerging markets.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of PetMed Express.Motley Fool newsletter serviceshave recommended buying shares of PetSmart. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.