Betting On Microsoft and Against Retail Stocks (MSFT, ANF, BBY, CC, FD, GPS, JWN, LTD, RSH, SKS)

Tony Sagami (Harvest Advisors) submits: Retail stocks have enjoyed a mini-rally since bouncing off their October lows, but I believe it won’t be long until they give up their gains, fall back to their October lows, and fall even lower. You’ll have to decide what’s right for you, but I wouldn’t touch a retail stock with a 10-foot pole.

I especially think the mall-based retailers (The Gap, Abercrombie & Fitch, Limited Brands), department stores (Nordstrom’s, Federated, J.C. Penney, Saks), and consumer electronics (Best Buy, Circuit City, Radio Shack) are the most vulnerable.

About the only company that I am confident will have a good Christmas is a company that may surprise you --- Microsoft.

In six more days, Microsoft is going to launch its next generation game console, the Xbox 360. Microsoft already has 18 new video games lined up for release at the same time. Three of those 18 games --- Kameo: Elements of Power, Perfect Dark Zero and Project Gotham Racing 3 --- are produced by Microsoft itself, which means even more profits.

I believe the Xbox360 will be one of the big gangbuster sellers this holiday season and give Microsoft’s stock a big boost. Additionally, Microsoft has a “B