AFTER SELLING OFF FOR WEEKS AMID CONCERNS about the health of the U.S. consumer, retail shares finally look like a bargain. Companies such as Macy's (ticker: M), Kohl's (KSS) and Home Depot (HD) have seen their stocks fall more than 30% from highs reached earlier this year, and now trade at levels last seen in 2005.
"Retailers are one of the few sectors that appear to be pricing in the fear of a recession," says Bill Nygren, manager of the Oakmark Fund (OAKMX). As a result, he believes that the shares are more attractive than other stocks, including many in the materials and technology sectors, whose still-lofty prices reflect little risk that the economy will stop growing. Retail stocks would outperform in a recession, he maintains, and could rally strongly if the economy keeps growing.