Shoppers walk past Macy's in the Magnificent Mile shopping district in Chicago © Scott Olson, Getty Images

Compiled from StockScouter ratings by Verus Analytics

If you're shopping for stocks this week, you might consider stopping by Macy's (M) or Home Depot (HD).

The department store and home improvement retailer look to be breaking free of the winter doldrums, with both stocks appearing on StockScouter's latest list of 10 top stocks to watch right now.

The retail sector has struggled this winter, as frigid conditions kept many shoppers at home after a shorter-than-usual holiday season. Meanwhile, office supply store Staples (SPLS) on Thursday announced it would close more than 200 stores in the face of online competition, and even the warehouse success story Costco (COST) has floundered of late.

And this is on top of the longer-term declines at Sears (SHLD), RadioShack (RSH) and J.C. Penney (JCP).

But despite sluggish sales, Macy's and Home Depot both reported better than expected profits in their most recent quarters.  Macy's shares have shot up 8 percent since the company reported earnings Feb. 25, and Home Depot is up 5.8 percent over the same period, compared to a 1.6 percent rise in the S&P 500 ($INX). Both retail giants remained positive in their full-year forecasts.

"Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping," Macy's CEO Terry Lundgren said in the earnings release.

Macy's shares get a '10' from the StockScouter rating system on MSN Money, the highest score possible. Based on StockScouter's analysis, shares of Macy's are expected to significantly outperform the market over the next six months with less than average risk. Home Depot shares get a '9' rating from StockScouter, and are also expected to outperform.

Read the full Scouter report on Macy's here. Read the full report on Home Depot here.

StockScouter Top 10 for March. 7

Company

Sector

Dividend yield

Forward P/E

Scouter score

American International Group (AIG)

Insurance

1.0%

9.4

10

Michael Kors Holdings (KORS)

Luxury goods

NA

NA10

Southwest Airlines (LUV)

Airlines

0.7%13.410

Macy's (M) 

Department stores1.7%11.310

Annaly Capital Management (NLY)

Real estate investment trust (REIT10.7%6.510

Oracle (ORCL)

Software

1.2%

11.8

10

Taiwan Semiconductor Manufacturing (TSM)

Semiconductors

2.2%

28.0

10

Xilinx (XLNX)

Semiconductors

2.2%

24.8

10

Huntington Bancshares (HBAN)

Regional US banks

2.1%

12.6

9

Home Depot (HD)

Home improvement stores

2.3%

16.2

9

StockScouter beats the market

We think the StockScouter rating system developed by Verus Analytics for MSN Money is one of the best tools you can use when you're trying to decide where to invest.

StockScouter looks for stocks whose business fundamentals, price behavior, valuation and stock-ownership characteristics appear to predict a rising price in the future, based on how those factors have influenced stock prices in the past.

The system assigns each stock an expected six-month return and balances that return against the stock's expected volatility.

Scouter rates stocks on a scale of 1 to 10, and ratings can change daily. Ratings and data in the chart above were current as of this article's publication date.

In addition to the daily top 10 list described above, StockScouter is used by investment research firm Verus Analytics (previously known as the quantitative business unit of Gradient Analytics) to generate a monthly benchmark portfolio of stocks that, refreshed monthly, has outperformed the market since its inception in August 2001.

An investor who began in 2001 by investing in each of the benchmark portfolio's top 10 stocks at the start of the month, selling them at the end of the month and then starting fresh with a new group of 10 stocks, would have generated returns, before trading costs and taxes, of 1,044 percent through Feb. 28, 2014.

Click here to become a fan of MSN Money on Facebook

Writer Jon Markman, at the time a columnist for MSN Money, collaborated with company researchers on the tool.

Markman suggested rolling over the top 10 stocks every six months to hold down trading costs, a strategy that might be a better fit for most investors; that would yield different results, which would vary based on your starting point.

Performance through Feb. 28, 2014

Full 50 position portfolio    

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual
return

Portfolio

4.4%

3.7%

15.9%

20.9%

586.7%

17.0%

Nasdaq

5.0%

6.1%

20.0%

36.3%

112.5%

8.1%

S&P 500

4.3%

3.0%

13.9%

22.7%

53.5%

4.6%

DJIA

4.0%

1.5%

10.2%

16.1%

55.1%

4.6%

Top 10 portfolio

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual return

Portfolio

6.6%

5.8%

12.6%

13.4%

1,043.8%

21.1%

Nasdaq

5.0%

6.1%

20.0%

36.3%

112.5%

8.1%

S&P 500

4.3%

3.0%

13.9%

22.7%

53.5%

4.6%

DJIA

4.0%

1.5%

10.2%

16.1%

55.1%

4.6%

Inception: August 2001