BY Momei Qu:

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies.  The reports are linked to the stock symbols in the article below.

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(La Jolla, CA)  To many retailers’ dismay, Thanksgiving weekend is the latest victim in the current economic downfall. Although foot traffic was robust, this year’s consumers are stingy and have their eyes fixated on bargains, and are less likely to be distracted by undiscounted items in the surroundings. The National Retail Federation estimates that 195 million people went to stores or online this weekend looking for Black Friday bargains, up 13% from last year’s turnout of 172 million. But average spending dropped 8% to $343.31 per person, compared to $372.57 the previous year.

The results sent retail stocks lower during midday trading on Monday, as companies fear that this mentality will continue into Christmas shopping. The S&P Retail Index (RLX) dropped almost 2% midday Monday before recovering a closing down 0.5% at 402.17. Major retailers such as Walmart (NYSE: WMT) and Target (NYSE: TGT) were all in the red.

What do these trends indicate about consumer spending in the upcoming holiday season? And which companies should you look out for as an investor? One reasonable conclusion to draw is that people will be more likely to purchase “everyday” items such as clothes or DVDs as gifts as oppose to designer watches or other luxury goods. According to a survey by the NPD Group, a leading market research company, apparel tops the list of items that consumers plan to buy as presents. Toys, DVDs, Books, and Electronics round out the top 5 list.  

As a result, companies that sell casual apparel such as American Eagle Outfitters (NYSE: AEO) and GAP (NYSE: GAP) should experience solid sales relative to other retailers. Both stocks are headed toward their 52-week high and should continue upwards throughout Christmas season. Amazon (Nasdaq: AMZN), which sells products in all of the top 5 categories online, was one of the few companies that saw its stock close 3.2% higher Monday at $135.91. Aided by the recent surge in online shopping, Amazon is hit a new 52 week high today at $136.08, and trades well above its 52 week low of $38.82. Another stock to watch is Best Buy (NYSE: BBY), whose shares rallied in the recent months and should see additional boost in sales of consumer electronics during the holiday season.

Profit margins will likely be low across the retail industries as companies try to beat the deals of their competitors with better bargains. While it is unlikely that one player will dominate the holiday shopping, the economy is favorable to companies that sell frugal yet “gift-friendly” items such as clothes or books. As always, each individual company has its own advantages and risks that investors need to adjust to. Our free trading reports can provide you with in-depth information on the retail market as well as insight on a specific company’s risks and growth potential. You can find investment advice on the companies mentioned in today’s report here: WMT, TGT, AEO, GAP, AMZN, BBY.