Naughty Or Nice? Some Stocks To Put On Santa's Shopping List

by: Benzinga

By Jonathan Chen

Santa Claus is coming to town soon, and some of these names may help your portfolio be naughty or nice.

Brian Sozzi of Wall Street Strategies had a research report earlier with a list of retail names, and how they have reacted since the August 9th intraday low. He also has some thoughts on how the names will react during the 2011 holiday shopping season.

Sozzi notes that that the S&P Retail Index has recovered 15.3% since then, handily outpacing the 9.7% rise for the S&P 500 (NYSEARCA:SPY). He notes, "While a sigh of relief that the world is not ending may be 30% of the pie, the remaining 70% is the market's pricing mechanism turning furiously to decipher holiday season winners from losers. Here are the early winners and losers for the holidays, if the efficient market hypothesis is to be believed."

He goes on to talk about some of the companies that have performed exceptionally well since then, as well as some that have not, and what they have in common. The companies that have performed well since August 9, have traded above all or most of their the key technical moving averages, while the losers have not yet reached their major moving averages, or closed above one for a session, only to fall back below.

Sozzi, a retail analyst, and contributor to CNBC, notes that Abercrombie & Fitch (NYSE:ANF) has the ability to overcome pricing wars, while names like Aeropostale (NYSE:ARO) and American Eagle Outfitters (NYSE:AEO) do not. Sozzi believes that Aeropostale and American Eagle are competing aggressively with their promotions, and thus, have not been able to beat Wall Street earnings estimates.

When Santa is making his list this year and checking it twice, he is going to note that price is secondary to overall value, according to Sozzi. Names like Bebe (NASDAQ:BEBE), Hot Topic (NASDAQ:HOTT), Wet Seal (WTSLA), and Under Armour (NYSE:UA) will benefit. Names like Chico's (NYSE:CHS), Talbot's (NYSE:TLB), New York & Company (NYSE:NWY), and Perry Ellis (NASDAQ:PERY) are losing out on this. Goods that are purchased often, such as underwear, are winning the replenishment good wars. Limited Brands (LTD) is winning, while Maidenform (NYSE:MFB) is losing out here.

Santa and his reindeer's are going to be traveling all over the world, and will need something comfortable on the bottom of their feet. Sozzi notes that the shoe companies are benefiting, particularly the boot names after a harsh 2010 winter. Steve Madden (NASDAQ:SHOO), Foot Locker (NYSE:FL), Genesco (NYSE:GCO), Finish Line (NASDAQ:FINL), Crocs (NASDAQ:CROX), Decker's Outdoor (NASDAQ:DECK), Wolverine Worldwide (NYSE:WWW), and Nike (NYSE:NKE) are benefiting in this space.

Consumers are increasingly moving toward one-stop shops, and that looks like where Santa may be headed during the holiday shopping season as well. Target (NYSE:TGT) and Costco (NASDAQ:COST) are in the lead in the big box space, as higher income households are increasingly spending more of their paychecks at these places at the expense of Sears Holdings (NASDAQ:SHLD), Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT).

With Wall Street going after spare change, it makes sense that Santa Claus would do. Names like Dollar Tree (NASDAQ:DLTR), Dollar General (NYSE:DG) and Family Dollar (NYSE:FDO) will do well. Sozzi notes the dollar stores as having "improved seasonal selection plus economic conditions" being a "win win scenario for the dollar store sector."

While there may be no miracle on 34th street this year in terms of the economy, Macy's (NYSE:M) with its flagship store on 34th street in Manhattan continues to benefit from the increasingly shrinking middle class, and to a lesser extent, the upper class. It is taking away market share from Kohl's (NYSE:KSS) and J.C. Penney (NYSE:JCP). Bill Ackman has been very vocal on why he thinks J.C. Penney is a great bet for the long term, but so far the market is not seeing it that way.

As Santa moves toward the Northeast, according to Sozzi, Saks' (NYSE:SKS) "outsized exposure to NYC and stock volatility will weigh on holiday season potential." Sozzi believes that Nordstrom (NYSE:JWN) is in a position to take advantage of the high end luxury consumer.

When Santa Claus finally does come to town, he will note that TJX Comapnies (NYSE:TJX) and Ross Stores (NASDAQ:ROST) are still socially acceptable, according to Sozzi. Consumers still want to have exposure to the high-end market without paying for the labels, and these two off-priced retailers stand to benefit.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.