Nine (and then some) retail stocks to watch this holiday season

So, how do you choose? Below are some thoughts from Dart and other industry experts on who will celebrate most when the book is closed on 2009.

Value and Differentiation

Consumers are willing to part with their cash this year, but they're looking for something more. They want to feel like they are getting more than they're spending. So, expect discounters to do well. Also, companies that clearly add some value beyond the apparent transaction are most likely to come out ahead.

1. Walmart (WMT): Since this company dominates the retail market, expect to see it among the top retail stocks. Also, discounters will play well this season, since stability doesn't translate to spending when unemployment is still over 10%.

2. Dollar Tree (DLTR): Barclays (BCS) just predicted same-store sales growth of 4% for the company this year. Again, discounters tend to resonate with cash-strapped consumers during a recession -- even if the public doesn't know if the recession is technically finished.

Other companies "value" companies to watch: TJX (TJX), Big Lots (BIG) and Costco (COST).

3. J. Crew (JCG): Dart likes retailers that offer "great products, have a keen price point and provide consumers with a great experience," according to Reuters. If consumers see an upside, they'll spend a little more.

4. Deckers (DECK): The company that makes UGG boots was among the hottest on feet last year and could be positioned for a solid 2009, for the same reasons as J. Crew. Also, I heard that the line for UGGs at discount nirvana Woodbury Commons (about 45 minutes outside Manhattan), was absurdly long on Black Friday -- always a good sign.

Other "differentiated" companies to watch: Aeropostale (ARO) and Apple (AAPL).

Online Darlings

Convenience and price are driving more shoppers to the web, which is forecast to sustain 3% year-over-year holiday shopping growth, while the rest of the sector could range from -3% to 2%.

5. Amazon.com (AMZN): The most prominent online retailer in the market made a strong showing during the 2008 holiday season, unlike the rest of the sector -- both brick-and-mortar and online. With Sony (SNE) and Barnes & Noble (BKS) sold out of e-readers until early next year, Amazon has a clear advantage with its Kindle when it comes to one of the hot products of the season.

6. eBay (EBAY): With consumers looking to save some extra cash, expect them to turn to the "secondary market." If they can find it cheaper on eBay, that's where they'll probably buy it. And, the auction and retail site has focused on cleaning up the user experience, increasing the listings offered and bolstering the population of sellers with high reputations. According to Dart, "What eBay is currently accomplishing ... really fits the paradigm of increase in intense value."

Declining Monopoly

Only small pockets of demand are insulated from online competition, which favors the likes of Best Buy. It might work out for investors in the near term, but I'm still skeptical.

7. Best Buy (BBY): Dart likes Best Buy because it's lost most of its direct competition (brick and mortar), and most industry analysts seem to be on board with him. But, it still does have to compete with Walmart and all the online players. Even the company's CEO has said the season is likely to be a tough one.

Don't Hold Your Breath

According to Lawrence Creatura, equity market strategist and portfolio manager at Federated Clover in Rochester, New York, "You don't need to wear your wealth with your brand on your chest." Seemingly upscale brands could take a hit this holiday season, as a result.

8. Abercrombie & Fitch (ANF): High prices, teens and Christmas may not mix well in 2009. If you're looking for fashion for one day a week, companies like Abercrombie & Fitch work. But, if you're looking for style all week long, bargains have to enter your thinking.

9. Ann Taylor (ANN): Creatura says "undifferentiated, generic, weaker 'me-too' type concepts with a mid-price point are at risk," according to Reuters. And, like Abercrombie & Fitch, shoppers will have to choose between one killer outfit and a full week's wardrobe.

What to watch in the rest of the mall: American Apparel (APP) and Bebe (BEBE).