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Here is the latest on the Retail sector:

In the near term retailers could attract a bid, as investors buy into the belief that the worst is priced in. Those investors looking for something longer than a trade should stay defensive and focus on retailers with stable revenue and earnings. These include discounters, retailers with rock solid balance sheets, and supermarkets.

Two stocks we like in this environment are Kroger (NYSE: KR) and PetMed Express (Nasdaq: PETS). Kroger's sales should remain relatively intact. Consumers will still need to shop for groceries even with in a weak economic environment. Kroger is doing a good job of gaining market share by competing on price and selection.

We also like GameStop (url=http://www.zacks.com/research/report.php?t=gme) (NYSE: GME). GameStop's results have remained strong throughout this downturn, and its stock has been unfairly punished along with the rest of retailers. The company even pre-announced strong holiday results on Feb 19.

We would avoid most names in retail. The stocks that are least attractive in this environment are those companies with levered balance sheets, marginal businesses, or those retailers that do not generate enough cash flow to internally finance operations. Among our current Sell ratings are specialty retailer Cost Plus (Nasdaq: CPWM) and e-commerce firm Overstock.com (Nasdaq: OSTK).

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