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Avoid Amazon -- Buy These Cheaper Stocks Instead

NEW YORK (Stockpickr) -- A couple of more bricks just got chipped off of the bricks-and-mortar foundation.

Old line stores -- derisively called "bricks and mortar" for their legacy way of selling merchandise -- just completed another ignominious milestone. Market share shrank as the online retailers made continued headway, led by mighty Amazon.com (AMZN). According to Web traffic monitoring firm Comscore.com, online sales rose roughly 15% in November and December compared with a year ago. That compares with zero growth through traditional retail channels. Online holiday sales, which hit $32.6 billion in 2010, appear set to approach $37 billion in 2011.

>>5 Stocks Hedge Funds Favor for 2012

This ongoing migration carries two implications. First, traditional retailers may need to think about closing more stores in 2012 as the least-trafficked outlets fail to generate enough sales to cover fixed overhead costs. Second, online retailers can count on still-expanding profit margins as they leverage higher revenue over their fixed costs.

This all should be an endorsement for Amazon.com, the undisputed heavyweight champion of the online sales arena. Amazon is on track to boost sales at least 40% in 2011, another 30% in 2012 to around $65 billion, with more gains likely to come after that. Trouble is, Amazon is an awfully expensive stock based on near-term results. An investment in Amazon now is a bet on a much higher sales and profit base five years down the road.

How's this for an eye-opener? Amazon trades for 147 times projected 2011 profits, and looking ahead to 2012, that multiple falls to a still-lofty 88.

If you want exposure to the ongoing migration away from bricks-and-mortar and towards "e-tailing," it may be wiser to seek out more attractively valued names. Here are three to consider.

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