How to Pick Winning Retail Stocks, Pt. 2

This column was originally published on RealMoney on June 7, 2007 at 1:17 a.m. ET. It's being republished as a bonus for TheStreet.com University readers. For more information about subscribing to RealMoney, please click here.

I really enjoy the process of picking retail stocks, and I wanted to give you a behind-the-scenes look at how I look for winners in the sector. In part 1, I led you through the first steps of retail-stock selection:

• Select retailers you know something about.
• Make sure the retailer's stock is public.
• Check for sufficient market capitalization, share size and liquidity.
• Look for an attractive technical uptrend.
• Focus on stocks with attractive valuations.

Now I'll drill even deeper into the key fundamentals that I consider before I take the plunge on a promising retail stock.

Peer Standing

At the end of the first part of this stock-picking journey, the universe of retail stocks had come down to a handful that looked attractive. But there's more work to do. ...