Consumer facing stocks are leading the lunch time charge on the back of better-than-expected retail sales figures.
The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) jumped 0.7% to 5720.9 but that pales in comparison to the 1.2% gain by the S&P/ASX 200 Consumer Discretionary Index (Index: ^AXDJ) (ASX: XDJ).
Data from the Australian Bureau of Statistics (ABS) showed that retail turnover increased by 0.7% in seasonally adjusted terms in June following a 0.4% rise in May. The June figure is nearly double the 0.4% increase that economists polled on Bloomberg were expecting.
Electrical and furniture retailer Harvey Norman Holdings Limited (ASX: HVN) surged 8.8% to a more than one-month high of $4.84 – making it the best performer on the ASX 200 index in early afternoon trade.
Household goods retailing was the brightest star in the ABS data as the category grew by 2.2% as New South Wales led the states with 1% growth. No doubt the booming housing market there is adding to consumer confidence.
But Harvey Norman is also helped by a broker upgrade to "outperform" from "neutral", and I suspect the stock will head for $5 in the coming months even though Harvey Norman is looking fully valued to me.
Embattled department store Myer Holdings Ltd (ASX: MYR) is also enjoying a rare moment of sunshine with the stock jumping 3.2% to $1.30 even though the ABS data showed that department store sales slipped 0.1% for the month.
Perhaps the fall wasn't as bad as some had anticipated but that is hardly a catalyst for a re-rating in the stock as management is undertaking a rejuvenation program. As my colleague Sean O'Neill suggested, it's probably too early to bet on Myer even though the stock has nearly halved in value over the past year.
The fact is, it's not easy to find attractive stocks in the sector, when a number of my favorites like footwear retailer RCG Corporation Limited (ASX: RCG) have nearly doubled in price to $1.26, and electronic and music chain JB Hi-Fi Limited (ASX: JBH) has raced over 20% higher to $19.46 since January this year.
If anything, this could be a time to consider taking some profit off the table even though another expected cut in interest rates later this calendar year would be supportive of the sector.
This is because there are only two types of stocks left in the sector: strong performers trading at a pretty large premium to their historical average, and dogs that are facing a long and challenging turnaround.
I am not sure I want to be in either.
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