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Wall Street smiles on specialty stores

Steve Halpern regularly reviews more than 400 stock market newsletters and services, choosing what he believes to be the most interesting or informed recommendations. Investors should do their own research before buying or selling a stock. Halpern is editor of the Dick Davis Digest. For subscription information or further details call (800) 654-1514.

"Specialty retailers are out on the catwalk of late, trying to woo an increasingly skeptical financial community that fears recession will hurt the industry," says Kevin Pilot, editor of Money Over Fifty in Carlsbad, Calif. "But many of these retailers have actually seen their businesses and market share grow in the last several years. Indeed, we see this sector rebounding nicely when recession fears subside."

Here are some of Wall Street's favorite specialty retail plays:

Books-A-Million

Headquarters: Birmingham, Ala.

Nasdaq (Symbol: BAMM)

52-week range: $10.87{-$17.75

Friday's close: $15.87{

"Books-A-Million is a bookstore chain with a strong presence in the South and in the small- to medium-size markets ignored by the larger book retailers. The company's stores have traditionally been a bit smaller than the industry average, but Books-A-Million has begun expanding aggressively into the popular superstore format. Second-quarter earnings per share should be up 14 percent _ the smallest earnings gain of the year _ with earnings growing 30 percent-plus in the third and fourth quarters. Books-A-Million is our top pick for 1995 among the specialty retail stocks. Buy."

Maureen McGrath,

Smith Barney

Nordstrom

Headquarters: Seattle

Nasdaq (Symbol: NOBE)

52-week range: $35-$49.75

Friday's close: $41.62{

The Limited

Headquarters: Columbus, Ohio

NYSE (Symbol: LTD)

52-week range: $16.62{-$23.25

Friday's close: $21.87{

"Down but not out, clothing retailers should rebound nicely when fears of a recession subside. Nordstrom owns and operates 55 upscale department stores across the country. The company offers solid growth, excellent management and a good stock price now. If only Nordstrom's shareholders were as loyal as its customers! The Limited, meanwhile, is one of the largest women's clothing retailers in the country, operating more than 4,800 stores under a variety of names. The firm has made some marketing blunders in the last several years, but it's recovering quickly and is now on the right track. Both stocks offer particularly good value now. Buy."

Kevin Pilot,

Money Over Fifty,

Carlsbad, Calif.

Bombay Co.

Headquarters: Fort Worth, Texas

NYSE (Symbol: BBA)

52-week range: $7.12{-$14.87{

Friday's close: $7.75

"We view Bombay Co., a specialty retailer of traditional home furnishings and accessories, as a turnaround situation. The firm has been repositioning itself after several tough years; it has closed its Alex & Ivy unit, which had been a big profit drain, and is expanding many of its core Bombay stores to a larger supercenter format. The firm's balance sheet is rock solid, with no long-term debt. Earnings should advance 13 percent in 1995, with revenues rising 18 percent. We recommend purchase of Bombay shares, which are categorically undervalued, at prices up to 8{."

David Wanetick,

Market Maneuvers,

New York

Circuit City

Headquarters: Richmond, Va.

NYSE (Symbol: CC)

52-week range: $19.75-$32.12{

Friday's close: $32

"With more than 350 stores, Circuit City is one of the nation's premier retailers of video and audio equipment, appliances, computers and other electronic products. The company had a better-than-expected first quarter, with sales jumping 33 percent and comparable-store sales increasing a noteworthy 10 percent. Looking ahead, we see full-year 1995 earnings jumping 18 percent to $2.03 a share. The stock's price indicates a p/e of 14 times current-year earnings, despite its recent sharp run-up. As such, we continue to recommend the shares as a buy at prices up to 32."

Argus Weekly Staff Report,

New York

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