Apparently, a few of you did not shop enough last month while awaiting the war's end. Retailers reported their April sales in the middle of last week, and large chains such as Wal-Mart Stores ( WMT), Target ( TGT) and Whole Foods Market ( WFMI) not only said they missed their targets, but also forecast light earnings for the quarter.

Investors reacted explosively, and in some cases counterintuitively:

  • Shares of high-end retailers for which expectations were top-shelf, such as Whole Foods, were sent packing. The natural-foods pioneer, sporting a price-to-sales ratio about seven times higher than its industry's average, lost 12% of its market value in a single day after announcing results.

  • Shares of mundane retailers for which expectations are bottom-shelf, such as Trans World Entertainment ( TWMC), rocked. The music and video chain, with a price-to-sales multiple one-fifth its industry's average, has risen 60% in the past month.

  • Shares of online e-commerce companies for which expectations are beyond belief, such as Digital River ( DRIV), arched lazily higher. The Web-services provider, with a price-to-sales multiple five times higher than that of Whole Foods and twice that of its own industry, has risen 35% in the past month.

    The longer-term differential among these three companies paints a compelling picture of the nexus of glamour, expectations and performance. Whole Foods has ridden a big demographic wave, as wealthy baby boomers concerned about their advancing age are willing to pay up for high-margin natural foods. Shares have nearly tripled over the past three years. Trans World faces a declining market for music and video as online piracy has diminished demand. Its shares are down 63% in the past three years. And Digital River, which specializes in helping software makers deliver their goods electronically, still hasn't proven its utility. Revenue is up, but earnings are mixed. Shares are down 8% in the past three years.

    So which of these stocks will ring investors' cash registers over the next two years -- the sure thing, the beat-up thing or the next new thing?

    Shunning Shiny Stocks

    If there's anything investors should have learned from the bear market, it's to be skeptical but cautiously bold. So while I admire the business plans of both Whole Foods and Digital River, I lean toward the stock of Trans World.

    After all, not much has to go right at Trans World for the stock to double in the next two to three years. It is still very cheap vs. its own history and its peers, with a price-to-sales multiple of 0.11 vs. an industry average of 0.5, and a price-to-book multiple of 0.35. In better times it has sold for a price-to-sales multiple of 0.25 to 0.95, so there is plenty of room for a multiple increase.

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