Picking Winners in Retail Is a Loser's Game

Retail stock investing, after the big run in the stocks -- up 17% for the year -- remains totally treacherous; yesterday's move of Gap (GPS - commentary - Cramer's Take) to "conviction buy" status at Goldman is part of the difficulties I have making sense of the group.

The Gap selection, which you can now move into if you want at a cheap price because of yesterday's selloff, is in part because its stock is down 2% vs. the others. It's also in part because of the possibility of a turn at key division Old Navy.

But in the end, I regard this conviction selection based on the notion of easy compares. Put simply, Gap did poorly last year, so the modest improvement in business will make things look terrific this year.

I want to contrast this with one of my favorite retailers, Urban Outfitters (URBN - commentary - Cramer's Take), the parent of Urban Outfitters, Anthropologie and FreePeople. Here's a company that has received multiple downgrades, most recently from Cowen, Sterne Agee and Friedman Billings. Clearly there is a slowing of business at URBN. But more important, the company did great last year. So when the numbers come out, the company's comparisons are going to be miserable. That means the stock of a well-run, smart company like Urban could get hammered while at the same time the poorly run company -- at least in terms of previous execution -- could benefit.

That's the difficulty of the group -- it requires you to buy the ones that performed poorly last year in order to get the biggest pop.

To me, that's too hard. I would rather own consistent retail, of which there are only a handful, leading with Wal-Mart (WMT - commentary - Cramer's Take). To me, it is better just to stay with WMT than venture down the food chain, except for Home Depot (HD - commentary - Cramer's Take) with that terrific yield.

Random musings: I cannot believe how stupid this Manitowoc (MTW - commentary - Cramer's Take) was when it got into that bidding war with Illinois Tool Works (ITW - commentary - Cramer's Take) for Enodis just when its core crane business was collapsing. I do not know how it can pull itself out of this hole it has dug for itself. ... Same with Terex (TEX - commentary - Cramer's Take). Maybe ultimately Caterpillar (CAT - commentary - Cramer's Take) will become ascendant in all machinery. ... Taiwan Semi (TSM - commentary - Cramer's Take) isn't done going up. I still like tech as the quick turn here. ... The Hartford (HIG - commentary - Cramer's Take) is today's Lincoln National (LNC - commentary - Cramer's Take). I wish they would just take his group down to zombie status and get it off our screens like they did with MBIA (MBI - commentary - Cramer's Take) and PMI (PMI - commentary - Cramer's Take) and Ambac (ABK - commentary - Cramer's Take). The comparisons are very apt. The FBR note downgrading Principal Financial (PFG - commentary - Cramer's Take) is along these exact same lines: The group remains in the perma sellblock!

At the time of publication, Cramer was long Wal-Mart, Home Depot and Goldman Sachs.

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