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Don't Look in Dustbin for Retail Stocks

The conventional wisdom is that brick-and-mortar retailers are dying, and online retailers are killing them. Pick your stocks accordingly.

Investors have been doing just that. The S&P Retail Select Industry Index is down 10.9 percent this year through Wednesday, including dividends.

But the headline number doesn’t tell the whole story. By my count, the index has 80 traditional and 16 online retailers. Those online sellers have returned 30.8 percent this year on average, while the traditional ones are down 14.6 percent.

Investors will soon be able to do more than dump their shares of traditional retailers. ProShares Advisors LLC plans to issue three brick-and-mortar doomsday ETFs. One fund will buy stocks of online retailers and sell short -- or bet against -- the stocks of traditional ones. A second will offer a double-leveraged short against traditional retailers, and the third will offer a triple-leveraged short.

Not so fast, says Target Corp. It predicted on Thursday that its same-store sales would grow in the second quarter after declining for four consecutive quarters. The announcement gave traditional retailers a jolt. As my Gadfly colleagues Brooke Sutherland and Sarah Halzack pointed out on Thursday morning, “Target jumped about 4 percent in early trading...