13 Retail Stocks To Watch For The 2013 Holiday Season

13 Retail Stocks To Watch For The 2013 Holiday Season
"We believe there are retailers that still remain on the bargain rack"  - S&P Chief Equity Strategist

Forget the night before Christmas - try nightmare before Christmas.  Retailers have feared a bleak 2013 holiday shopping season since the weak back-to-school spending appetite three months ago; these fears have only been exacerbated by the government shutdown's dampening effect on consumer sentiment and a shorter-than-usual holiday shopping window (25 days between Thanksgiving and Christmas compared to 32 days in 2012).  However, proving that it really can be best to be greedy when others are fearful, two new research notes indicate there are 13 different retail stocks that are a particularly good buy right now.

S&P Capital chief equity strategist Sam Stovall said in a note on Monday that while the best time to buy something is when no one wants it - "straw hats in winter and overcoats in summer" - and that now is typically the time most investors want to buy Retail (XRT) stocks, there are certain equities that have been overlooked.

 "Most things are likely to be considered a steal when no one is looking. And the same goes for retail stocks," Stovall said.  "Based on investment recommendations from S&P Capital IQ's qualitative STARS and quantitative Fair Value investment recommendation systems, we believe there are 12 retailers that still remain on the bargain rack."

Those 12 stocks - all which have a "buy" or "strong buy" rating from S&P Capital - are:

Advance Auto Parts (AAP), 
AutoNation (AN),
Bed Bath and Beyond (BBBY),
Carmax (KMX),
Nordstrom (JWN),
PetSmart (PETM),
Ross Stores (ROSS),
Staples (SPLS),
Target (TGT),
Urban Outfitters (URBN),
CVS (CVS)
and Wal-Mart (WMT).

Rounding out the list of 13 retail stocks to buy right now is Best Buy (BBY), which on Monday was upgraded from neutral to buy by UBS analyst Michael Lasser.

In a research note, Lasser said that the electronics retailer has a forward P/E moving from 5x to 16x in the next twelve months and indicated that there is reason to be optimistic about Best Buy's prospects thanks to cost-savings measures (that will eventually save $1 billion) and vendor relationships with giants like Google (GOOG) and Amazon (AMZN), both of which have recently installed kiosks in select Best Buy stores.

"There is potential for greater asset productivity as the vendor shops could increase sales by improving the shopping experience and creating a cleaner store layout. Over time, we would not be surprised to see additional vendors added to the lineup," Lasser said. "Just recently, BBY rolled out kiosks that feature products from Google in 750 of its stores and vignettes of the Amazon Kindle in select locations. These could be preludes to deeper relationships in the future."

Lasser also said that Best Buy's online presence could be a boon to the company in the future, predicting the $2 billion in sales e-commerce generates could see double-digit growth going forward.
"We think the stock still under-appreciates the company's earnings potential. As further signs of its progress emerge, we think the shares will move higher. The company's upcoming earnings release is likely to be a catalyst for estimates to be revised upward," Lasser said. His price target for Best Buy stock is $49 per share; it currently trades for about $44 per share.

Courtesy of Maggie McGrath,  Forbes.com