by Peter Degen-Portnoy

Created on: February 16, 2009   Last Updated: February 27, 2009

Retail, or the sale of goods or commodities directly to the consumer, has been a cornerstone of humanity. Even in uncertain times and these are uncertain times consumers still need basic items such as food, clothing and shelter. With all types of companies shedding workers and shutting down, investing in anything at this time can be nerve wracking, but for the strong willed and steely nerved, this is bargain hunting time!

Looking back to the strong performers of the Great Depressions, vice and commodity goods that grew between 1.6% and 7.5% in the four year period from 1930 to 1933, we can identify that there are opportunities in retail sales.

For example, Amazon.com (AMZN), which operates various online retail web sites in multiple countries, has held strong and steady over the last two years and is one of the few companies whose stock price rose over the three month window of November 2008 to January 2009. Amazon has created growth by leveraging its infrastructure and technology for affiliates. This makes it very easy for companies to get an online presence, which drives healthy competition. Amazon wins regardless of who makes the sale. With online sales projected to grow at a healthy clip, Amazon.com is strongly positioned.

Large brick and mortar retailers such as Costco and click and mortar retailers Target are also worth looking at. Costco (COST) operates a series of no-frills, self-service membership only warehouses with a large range of products from food staples to specialty items to clothing, electronics and furniture. Costco offers branded products at discount plus their own private label for many staple items. Costco is running at the same stock price it had in 2005, which is not a bad thing in todays economy, and is still showing a strong P/E and healthy capitalization.

Target (TGT) is a general merchandise and discount-food retail chain that offer clothing, electronics, furniture and home goods, sporting equipment, jewelry as well as a line of food items. Targets stock is running even with older 2003 price levels but Target has a strong P/E and even better profit and operating margins that Costco.

Finally, bottom dollar merchandiser Big Lots Inc (BIG) has a strong story. Big Lots runs a line of close out retailers. In a bottom-dollar economy, lots of consumers are looking at these stores to meet their needs while stretching dollars. Big Lots subsidiaries offer a wide range of goods such as food, cosmetics, clothing, furniture, hardware, seasonal items, toys, jewelry, and infant supplies in over 1,500 stores. Big Lots is back to only 2006 stock price levels, has a strong P/E and healthy profitability margins.

The savvy investor will see the opportunity in the hard times. Everyone still needs basic items so retail sales will not be going away entirely, but they will be moving to the providers who give the best value. Look to see those providers grow even when most other companies are shrinking.

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