With holiday sales for 2007 being the lowest in some times, consumer stocks seem to be feeling the effects of the current economic slowdown. However, analyst Samantha Panella feels it isn’t all gloom and doom: Urban Outfitters’ (URBN) Anthropologie division, which targets women in their 30s and 40s, did quite well during the second half of 2007.

Anthropologie’s same-store sales over the holidays were up 16% during November/December. In addition, Ms. Panella told us that she feels there’s still strong momentum behind Urban Outfitters’: they are a high quality company, with a strong square footage growth story- she predicts a 15% growth in 2008, the highest in the group she covers. Additionally, Ms. Panella feels Urban Outfitters’ has operating margin expansion opportunities.

For the full interview with Ms. Panella, including a complete overview of the Woman’s apparel retailers space and tips on what stocks to avoid in 2008, click here.

In this troubling economic time, investors will be most definitely be looking for stocks that will be able to resist whatever may come- whether it’s a simply an economic slowdown or a full-blown recession. Luckily, we spoke an analyst this week who covers the business services space, and had some thoughts about some stocks that’ll stay strong under pressure:

“I believe this space is relatively recession resistant. What I mean by that is the base of revenue is relatively protected; just the growth rate can get hurt in a downturn. Over a two-year time frame, both Watson Wyatt (WW) and Hewitt (HEW) have done pretty well. What do they have going for them? What part of human resources do they do? Both of them are HR consultants, to begin with. Hewitt in addition to doing HR consulting, also does benefits administration and then they do something known as HR outsourcing — big large BPO contracts that they go in and take over the entire HR infrastructure of a corporation. Now when it comes to HR consulting, these companies benefit because of new pension legislation. The Pension Protection Act passed in August 2006 is a large, 900-page piece of legislation that was really good for consultants. Consultants benefit because plan sponsors have to call them in for advice on how to respond to this new and complex legislation. Besides the US, there’s also been pension legislation that has been passed in the UK, in the Netherlands, and there are proposals for changes in Germany. These are global companies so they benefit from their non-US exposure as well — that is a bigger factor for Watson Wyatt than Hewitt. Overall, it’s a nice position to be in — aging societies; corporations and governments worried about retirement. These companies are in the right place, they can provide solutions and they can advise on those kinds of situations.”

For the complete business services issue, including an overview of various sectors in the wide business services space, and more stock picks, click here.

In speaking to analyst David Fick about REIT’s this week, he brought up an interesting point about many of the company’s facing the REIT’s crisis: the outlook is so bleak for many of these company’s that the CEOs are turning away from the company’s well being and doing everything they can to come out of this situation in the best shape in terms of their own personal finance:

Mr. Fick: We are seeing, I think, and this is not something that most CEOs want to hear, that most management strategies right now are to simply get paid as much as they possibly can for as long as they can. We have seen a doubling in executive comp over the last two years in this space. A typical comp for a CEO, even for some that have negative dividend coverage, is approaching $3 million. There are many that are over $5 million. There are a few that are over $15 million in total comp and $10 million in cash comp. They want to see that run rate go, so they are building strategies that are in some cases unfriendly from a takeover perspective and are essentially trying to lock in their personal annuities. That is something that I think deserves very close scrutiny this year, as we have gone through a tough year and whether or not that increase in compensation will continue. I don’t mean to be sarcastic about it, by any means. I really think a lot of managements’ focus right now is on how they can come through this in the best personal condition.

For the full roundtable, including more information on REITs, stock picks, and stocks to avoid, click here.

Portfolio Manager Patrick Becker Jr., of Becker Capital Management, spoke to us a little this week about how 2007 was for value investors.

TWST: What was 2007 like for value investors?

Mr. Becker: If you look at value and the Value Index, the beginning of 2007 saw significant weightings favoring finance, especially in the mid- and large cap space. We were underweight in finance for the year and are starting to be rewarded with outperformance versus the Russell 1000 Value Index.

For the full interview with Mr. Becker, including a full overview of Becker Capital Management’s investment strategy and stock picks, click here.

Our other special focus this week is on Business Services. Analyst Bruce Simpson of William Blair & Company covers “companies that provide an outsourced service across a broad range of industrial verticals.” That’s everything from uniform and mat rentals, to auctioneers to car parts recyclers. He talked with us a little about one his stock picks, LKQ Corporation.

Mr. Simpson: This is a Chicago-based company and they are the leading provider of alternative auto parts. Prior to last October, LKQ was essentially a provider of recycled parts…. in October they closed on the acquisition of Keystone Automotive. Keystone was the number one provider of aftermarket parts. You had a leader in one of the alternative parts categories buying the leader in the other alternative parts, so you really created a giant in alternative parts.

For the full interview with Mr. Simpson, including a complete overview of his coverage of the business services sector and more stock picks, click here.

Our special focus this week is on the volatile subject of REITs. With REITs in the worst shape they’ve been in in the last five years, we asked analysts the question on everyone’s mind: when is this going to be over?

Mr. Fick: As REIT prices have dropped and as the 10-year has dropped, we have gotten back to better than a 150 basis point positive spread. I think once that hits 200 bps, which shouldn’t be too far out; it will be a nice entry point. Not that you couldn’t drop further, but when the average yield is approaching 6% for REITs and you can buy some with relatively safe dividends at the 9% or even better level, that will attract that type of investor, but that is not the investor that went away here. They pretty much have stuck through this. The problem that we have is that institutional investors have come in who aren’t dedicated to the space. They tend to be very cyclical in the way they look at things and they like to rotate in and out. They are now rotating out or have rotated out of REITs. Since they have been put into the indices — there are 11 REITs in the S&P 500, for example — they had to consider them for the past few years. They now see them as an unfavorable sector. I don’t think that is going to change any time soon. I think they are looking elsewhere. So you have to have funds flow, and you have to have a positive overall view.

Mr. Mitchell: I think that probably the largest factor, again, is going to be the message from the fixed income markets. I think that right now, it may only last a week or so, but we are seeing an unraveling of the carry trade. The yen is up very strongly now, over the past week, and may continue to be. Basically, there is a process of risk aversion going on in the markets that continues to drive up credit spreads and also is reducing the number of transactions that are
being done. We have actually had some fairly well publicized difficulties of aggressive real estate investors trying to hold on to their financing or having difficulty rolling over their financing, which raises the potential specter of there being a seizing up or at least a lowering of liquidity in the commercial real estate markets tied to the secondary markets in commercial mortgage-backed securities. The secondary markets are not as liquid as they were earlier. We think that you need a combination of at least a cessation of the widening in credit spreads on various risk assets and at the same time you need to see some kind of indication that normal or at least better liquidity is available for transactions before you can see the group look attractive relative to all sorts of other equity investment classes.

For the full roundtable, with a complete overview of the current REIT situation and stock picks, click here.