Pathetic Equity Selection Advice from The Wall Street Journal

I opened this morning's Wall Street Journal to see one of the most horrific examples of stock buying advice it's been my misfortune to probably ever read.

With the tenor of a cutesy sales circular, John Christy wrote,

"But with gloom already priced into retailing stocks, contrarian investors may still be able to find some bargains to add to their shopping lists.

Department stores and specialty retailers are among the worst-performing industry groups in the S&P 500, down roughly 30% each since the start of the year. To put things in perspective, that's an even bigger plunge than some of the worst-hit financial sectors. Investment banks and brokers, for example, are off less than 20% over the same period.

Clothing group Gap, by comparison, appears more reasonably priced at 17 times estimated earnings for its 2008 year. But this assumes that Gap's efforts to reinvigorate sales can produce 12% earnings growth this year and 13% next year against stiff economic headwinds. Talbot's, Pier One and RadioShack are other turnaround stories that are facing an uphill battle.

One bright spot is consumer electronics. Sales growth for TVs, camcorders and other gizmos is expected to be about twice as strong as overall retail sales this winter. That bodes well for Best Buy, which looks like a bit of a bargain at just 13 times 2008 earnings. True, it is under competitive pressure as Wal-Mart encroaches on its turf, but electronics junkies still make a beeline for Best Buy's stores. It's also one of the better-managed companies in the sector.

For those looking for a shot aimed directly at outdoor types, Cabela's may be a good stocking-stuffer.

Then there's the top end of the market. Of course, richer folks may tighten their belts as well, but they generally don't shift downstream. Stocks like Tiffany and Polo Ralph Lauren are a little pricier in earnings-multiple terms than, say, Gap, but sales growth could hold up reasonably well. A little luxury this holiday season might be good for investors."

"Add to their shopping lists?"

"Appears more reasonably priced?"

"Looks like a bit of a bargain?"

"May be a good stocking stuffer?"

"Sales growth could hold up....might be good for investors?"

What's going on here? Did I mistake the transcript of a Jim Cramer show for the Wall Street Journal?

What happened to portfolio construction? Managing risk? Analyzing a new purchase for its effect on a portfolio, and determining what should be sold to finance the new stock?

Moreover, the entire piece presumes that investors should look for possible inflection points. There's no rigorous analysis. Just cleverly worded phrasing to imply that maybe some of these stocks won't be so bad after all.

Where's the time-series analysis? The provision of information to help an investor understand under what conditions such price retracing might occur? With what probability? What expected value?

You can just imagine the instructions Christy received from an editor,

'Listen, John, it's the day after Thanksgiving. Everyone's out buying holiday gifts.

Why don't you do a piece on retailers? Make it punchy. Use a lot of language to make it seem like the retail stocks are sale items themselves?

Make it light and catchy, ok? Nothing heavy- no analysis. Just pretend you're writing a sales circular for Wal-Mart.'

Don't you expect better than this sort of nonsense from the nation's best business daily?