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4 Stock Strategies From Wall Street: Feb. 3

NEW YORK ( TheStreet) -- In today's daily series of investing strategies from Wall Street, analysts focus on the defensive traits of dollar-store stocks in this period of rising gasoline prices.

1. Dollar Stores Make Good Defensive Stocks Amid High Gasoline Prices

As gasoline prices continue to rise, the first assumption that many investors might make about dollar stores is that they will take a hit, with their core, lower income customers tightening purse strings to cope with the elevated fuel costs. However, Guggenheim analysts say that this assumption is flawed.

Using detailed "regression analysis," the researchers are deducing that dollar store same-store sales will actually receive a boost in this environment, as they incrementally pick up higher-income customers looking to spend more economically. From this perspective, stocks such as Family Dollar (FDO), Dollar Tree (DLTR - Get Report) and 99 Cents Only Store (NDN) could actually serve as defensive names in a stressful spending environment. The average retail price of gasoline is now up 9.4% from a year ago at $3.39 a gallon, according to the latest MasterCard SpendingPulse report, which also factors in cash and check usages.

As for drug retailers such as Walgreen (WAG), investors might assume that these stocks could benefit from the physical convenience of their stores at a time when the average consumer may want to cut down on travel. However, Guggenheim analysts caution that the convenience edge of drug retailers in general could be offset by their higher prices -- roughly 25% above Wal-Mart's (WMT - Get Report), for instance.

Guggenheim researchers say that it's not unreasonable to assume that gasoline prices could soar towards the $4 psychological mark later this year given that historically, prices have been able to rise as much as 15% to 20% in the weeks between January and the May Memorial Day holiday weekend.

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FDO $0.00 0.00%
TRW $105.46 0.00%
WAG $81.65 2.05%
BEN $37.34 0.00%
BWA $35.92 0.00%


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