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This week, in our focus on the winning analysts in each industry category from our

Analyst Rankings -- Equity 2000

, we profile the top analysts tracking the department store stocks. We then skip two weeks for the holidays, resuming on Jan. 9 with a sector that's taken investors on a wild ride this year: energy. First up on the energy slate: energy equipment and services. (Our last focus was on

home improvement retailing.)

No one talking to Michael Exstein of

Credit Suisse First Boston

or George Strachan of

Goldman Sachs

these days would be tempted to race out and buy retailing stocks. At least, not if they're hoping for near-term gains. Both Exstein and Strachan, the No. 1 and No. 3 analysts covering department and discount stores, are continuing to underweight the sector. (Second-place winner Gary Balter, who moved to CSFB when that firm acquired

Donaldson Lufkin and Jenrette

, no longer covers this group.)

Exstein says if he were an investor he would "short the group." Meantime, Strachan hasn't placed any of these stocks on his firm's recommended-for-purchase list.

The two analysts not only hold the same industry view, they also agree on which stocks they would buy for the long term: the two major discount chains,


(TGT) - Get Free Report



(WMT) - Get Free Report

, in that order.

Exstein bases his preference on his belief that Target's growth in comparable-store sales will exceed Wal-Mart's. He also thinks that Target isn't as apt to disappoint investors, given its modest

price-earnings ratio and its reduced earnings-per-share

estimates for 2000. Strachan, too, points to the fact that Target sells at a 25% to 30% discount to the

S&P 500 P/E, based on current estimates. He is impressed with how the store is "reinventing the whole concept of discounting" by aiming its "business mix at middle-to-upper-middle-market customers" while at the same time offering "excellent prices."

On the department store front, Exstein picks

Federated Department Stores


and Strachan favors


(KSS) - Get Free Report

. The CSFB analyst finds Federated's low valuation "unwarranted," given its strong industry position, its ability to withstand brand migration to nondepartment stores and cost-cutting initiatives at its ailing catalog unit,



Meanwhile, Strachan asserts that Kohl's, "essentially a discounter in disguise," is both growing its square footage and increasing its same-store sales. This combination, he says, "should fuel top-line growth of 25% or more."

Department Stores*

*Second-place winner Gary Balter no longer covers this sector.

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