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The troubled economy is steering shoppers away from high-end retailers, toward discount stores. What does that mean for the shares of companies that run the discount stores?
"The stocks have done phenomenally well," Patrick McKeever of MKM Partners told CNBC.
And he thinks they still have room to grow another 10 to 20 percent.
The three publicly-traded "dollar stores" are 99 Cents Only Stores, Family Dollar Stores, and Dollar Tree.
"This 'trade-down' dynamic, which is one of the macro drivers for the fundamental outperformance for these names, I think it's actually accelerating right now, and I see it continuing well into next year," McKeever said.
He does have one caveat:
"I'm not saying that these are recession-proof stocks, but they're definitely recession-resistant," he said.
*(well... that is, if your universe is the S&P 500!)
No matter... shares of Office Depot are not only No. 1 today (up 20 percent) but No. 1 this week... with an astounding 118 percent gain in 5 days.
What's noteable is that ODP actually posted weak results on Wednesday, but they were pushed aside after rival Staples gave strong guidance... which was enough to rally Office Depot and Office Max too.
Also worth noting:
- ODP's short interest has fallen from 10 percent to about 8 percent in October...
- It's one of the 10 smallest members of the S&P 500, with market cap of $990 million...
- And one of 20 S&P 500 index members with a share price less than $5.
Greg Estes, portfolio manager at Intrepid Capital Funds, and Alan Vales, vice president at Hillard Lyons, named stocks to help investors build and strengthen their portfolios ahead of next week’s trading.
“Anheuser-Busch is being acquired by InBev for $70 a share at the end of the year,” said Estes. “But if you look at the share price even recently, it’s been down $58—that’s more than 15 percent return on a stock that’s going to be bought very shortly…I think it’s a worthwhile risk to take for a short period of time.”
“The energy category where Hansen Natural does its business is still growing, so it’s a rather nascent industry,” he said.
Rafael Resendes thinks investors should spend less time looking for a market bottom, and more time trying to find stocks likely to improve in the intermediate future.
The co-founder of the Applied Finance Group has even created an index to help find them.
How does he define "intermediate?"
"We'd be looking at over the next three years, where we can let these companies play their cycle a little bit more, and start to resume business as normal," he told CNBC.
His index is geared to calculate the expectations built into a stock's price.
"There's two conflicting tensions at work here," he explained. "There's the emotional cost of investing, and there's the financial cost, and sometimes they tend to conflict pretty heavily."
So what stocks does his index rank high?
"Coach...is obviously a huge consumer play, but you look at their ability to grow," he said. "They have 300 units here in the U.S.; management feels they can grow to 500; they have great opportunities overseas; if you don't believe Coach will be half its size by five years from now, this is a great opportunity."
He also likes Valero.
"With oil prices having fallen, gasoline prices holding strong, this is a stock that's poised to have an interesting turnaround," he said.
Technology stocks have not been immune to the market skid, and Richard Prati of AmTech Research thinks it's time to take a look at some of the ensuing bargains. He urges caution, though — and he's got a few pans to go with the picks.
"Even if you look at the numbers that are forecast for next year, if you can take a pretty good-sized discount to those numbers and even assuming a worst-case scenario, they still appear to be pretty cheap, there's a good chance that's actually going to turn out to be the case," he told CNBC.
He likes Research In Motion.
"While the consumer is definitely questionable, iffy, into the next year, with discretionary spending taking a hit, they've got a lot of new products," he said. "We think they're going to see some pretty good numbers."
Google and Yahoo are also on his list.
"These stocks have gotten extraordinarily cheap," he said. "These guys have been able to monetize search, and on top of that, you've got 3G that's a major trend that Google benefits from."
Pans—Stay Away From:
So who doesn't he like?
"Some of the hardware names," he said. "I still don't like Dell a whole lot; Ericsson is one that we think is still going to have problems."
Telecom companies such as KPN and Telefonica are well positioned going into the economic slowdown, Michael Kovacocy, European telecoms analyst and sector strategist from Daiwa Institute of Research Europe, told CNBC.
It's not a good time for the options market, according to one observer.
"Option premiums are very high," said Rebecca Darst, an options analyst with TheStreet.com, on CNBC Friday. "It's a frustrating time to be trading in the options, because it's...I would say the premiums are prohibiltively high for anyone who enters an options position on the long side. Which is why you see, even for people who are entering directional positions, you're going to see them using spreads and maybe limiting the amount of risk that they take on, limiting the amount of profit that they could hope to realize as well. However even when you see a substantial move in the stock to the up or the down side, the premiums are so pumped up that you may not be able to close out the option position at a significant profit.
Insurers are in for especially rocky times, Darst suggested.
"The implied volatility will tell you it is toil and trouble for the insurers across the board," said Rebecca Darst, an options columnist with TheStreet.com. "There's a lot of concern as to whether insurance companies might seek some sort of federal assistance, under TARP funds, for example; we're in the midst of a very rocky earnings season for a lot of insurers. What's interesting from an implied volatility standpoint is that in many of these names you're seeing spikes in implied volatility, even after the numbers are already out. After Hartford Insurance lost half its value yesterday, we saw a dramatic spike in its implied volatility. It closed the day 75 percent higher; we saw action in the front-month puts at strikes as low as the $7.50 strike."
The nation may be facing a long, deep recession, but Kiplinger's Personal Finance says some companies are positioned to survive and thrive. The publication has singled out the stocks of five such companies.
"These are all 11-digit cash stashes," executive editor Manuel Schiffres explained to CNBC. "At least $10 billion in cash; that's after debt."
Topping the list is Exxon Mobil.
"Exxon's shares are off only 22 percent from their 52-week high," Schiffres pointed out. "Exxon is a stable company, $37 billion in cash...it's very well managed."
Then there's CiscoSystems, with $19 billion in cash reserves.
"Clearly, there are concerns that sales of routers and switchers will suffer in a weaker economy," he said, but added, "This is about as cheap as you can get for Cisco; one fund manager described this as 'a no-brainer.'"
Apple is another standout.
"Obviously, you know the story: iPod, iPhone, Macs, a great innovator, tremendous earnings growth in recent years," he said. "Apple could announce a major buyback program sometime in the next year or so."
The most controversial stock on the list could be drugmaker Pfizer.
The new paradigm in stock-market investing: It's going to take some time.
Sales of physical gold reached record heights as investors sought the traditional safety of precious metals.
"Since Sept. 15, I'd say business is up 300 percent," said Mark Albarian, CEO of Goldline, a dealer in bullion and coins.
"A lot of the buying is fear — but a lot is diversification," he told CNBC.
Watch the video for insights from Albarian — and from his customers.
(UPDATE: How has the Fed rate cut affected gold? Click for commodities data .)
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Disclosure information was not available for Albarian or for his company.