Four Regional Retail Plays

I offered my list of top retail picks for the 2011 holiday season in October, predicting that big box super stores would be prime beneficiaries, at the expense of specialty shops. Today, I'll add a selection of small- and mid-cap regional players, with these lesser known companies also set to outperform -- regardless of worldwide political machinations or economic anxiety. The majority of national retail chains are struggling to make their numbers these days, with a fickle customer base that is searching for bargains, steep markdowns and red-light sales. The recent and terrible fate of Abercrombie & Fitch (ANF) shows what can happen when these trendy companies push too hard against an unfriendly sales environment. Abercrombie & Fitch (ANF) -- Daily Source: eSignal View Chart » The company had an excellent run to a three-year high earlier this year, with more optimistic shoppers opening their wallets to buy brands, instead of necessities. However, management marked down too many items during that fruitful period and then expanded international operations at the same time the euro crisis was rearing its ugly head. Then limp foreign sales data hit the newswires, and the stock sold off from a triple-top pattern, dropping 40% in just three weeks. The vicious decline shows what's at stake for retailers that miss their numbers in the next six weeks. From this perspective, it's easy to see why small regional retailers are better positioned to fire on all cylinders than their larger competitors. Conn's (CONN) -- Daily Source: eSignal View Chart » Let's start with Conn's (CONN), an appliance and electronics retailer with 71 locations in Texas, Louisiana and Oklahoma. With a market cap of just $317 million, the company has woken up from the dead in the last two years, lifting out of a five-year downtrend. This renaissance predicts continued sector leadership in the next 12 months, even if the U.S. economy stumbles. The stock returned to its 2010 high, just over $10, in July of this year and sold off with the broad market. It found support near $5 and returned to the high in October, completing a cup-and-handle breakout pattern. The stock surged through resistance, hit a two-year high at $11.72 and pulled back. It's acting well at new support and the price could now head into the teens. PriceSmart (PSMT) -- Daily Source: eSignal View Chart » PriceSmart (PSMT) is a Costco-style warehouse chain headquartered in San Diego but the majority of its 29 facilities are located in Central America. This interesting sales niche has paid off well, with the stock pushing above its March 2000 high in June of this year and entering a strong uptrend that's added 50% its value and posted a series of all-time highs. The rally stalled in the mid-$70s in September with the price pulling back for a few weeks and then testing that resistance level earlier this month. Sellers returned, knocking the price down to a rising lows trendline where it's trying to turn higher. If successful, the uptrend will stay fully intact, supporting a year-end rally burst. Hibbett Sports (HIBB) -- Daily Source: eSignal View Chart » Hibbett Sports (HIBB) owns and operates nearly 800 sporting goods, shoe and apparel facilities in the eastern U.S. That's a better location for retailers than the overbuilt western states, which are still trying to recover from the 2008 housing bust. The price chart confirms this regional advantage, with the stock breaking out to an all-time high earlier this year. The price action since that time has been constructive compared to the broad market, with the stock testing support in a bowl-shaped pattern that yielded a secondary breakout (see the blue line on the chart) about two weeks ago. The stock's rally has made little progress since that time, but it is holding above support at $43, and building a decent base for a continued uptrend into the $50s.

Four Regional Retail Plays

These lesser-known small- and mid-cap companies are set to outperform.

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