By KATHLEEN GALLAGHER

Sensing that the recession may be history, some investors are sizing up the stocks of higher-end retailers.

Jeff Strong, who is pursuing an MBA in the Applied Security Analysis Program at the Wisconsin School of Business, isn't one of them.

Despite some heartening economic signals and a robust stock market rebound, Strong said he believes consumers will avoid returning to their devil-may-care ways.

It is more difficult to get credit card loans, house values have declined, personal income has shrunk, and a lot of consumers are focused on paying down debt.

"Many of them won't go back to throwing everything on their credit cards and not worrying about it," Strong said. "I don't expect consumer spending to return to the levels we saw a few years ago, especially with regard to premium vs. value brands."

During the recession, a lot of consumers traded down, shopping at Wal-Mart and T.J. Maxx rather than Macy's and Bloomingdale's. Some believe consumers will abandon the lower-priced retailers and return to their more robust spending habits as the economy recovers, but Strong says that's "wishful thinking."

If he's right, off-price retailers should be well positioned to continue their growth. Off-price retailers make purchases later in the buying cycle, even storing some inventory for the next season, so they can pay less and offer customers better deals.

"The off-price industry has been outperforming department store peers and is still attractively valued," Strong said.

TJX Cos. (TJX, $38.31), Framingham, Mass., is the biggest U.S. off-price retailer, operating in all 50 states with well-known store names like T.J. Maxx, Marshall's and HomeGoods. Its shares are trading at the high end of a 52-week range of $17.80 to $38.84.

While TJX is expected to continue doing well, Strong likes the other big off-price chain even better.

Ross Stores Inc. (ROST, $45.72), Pleasanton, Calif., is about half the size of TJX and operates more than 900 Ross Dress for Less and dd's Discounts stores in 27 states. Most of its stores are in California and the West, in some of the areas that have been hit the hardest by the housing bust.

"Weak consumer balance sheets are going to force a more long- term change in spending habits out there," Strong said.

Ross has sought-after brands, low prices, lean inventories and fewer markdowns than traditional retailers, he said. Its sales, earnings and profit margins have all been increasing, he said.

As discretionary income rises again and consumer confidence returns, shoppers may just spend more at Ross rather than moving back upstream, Strong said.

The biggest risk Strong associates with Ross shares is the possibility that traditional retailers might hold aggressive price promotions that would lure customers away from off-price stores, Strong said.

He and his classmates hold Ross shares in the Applied Security Analysis Program's $4 million stock portfolio. They have traded as high as $50.50 and as low as $21.70 in the last 52 weeks. Strong says they could trade as high as $58 in the next 12 months.

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