IN THE MIDST OF A LACKLUSTER FALL, many big retailers are fearing the Grinch this holiday season. Blue chips like Wal-Mart, the Gap and others are 30% to 50% off their 52-week highs.

Marcia L. Aaron, analyst with Deutsche Banc Alex. Brown, says investors should consider one chain that is bucking the trend, Limited Inc. (nyse: LTD). The apparel retailer had $9.5 billion in sales last year from its growing stable of mall shops, including its flagship as well as specialty shops Victoria's Secret and Bath & Body Works, which are owned through its 84% stake in Intimate Brands.

While other concerns struggle with poor sales and lower operating margins, Limited's strong brands have been pulling in mall traffic. Shareholders have also benefited from its spinoffs of smaller divisions, like Limited Too and Abercrombie & Fitch.

In the third quarter Limited's earnings climbed 22% to $49 million, against an 11% drop for the specialty apparel industry, Aaron says. She expects healthy growth for the rest of the year even if customers don't flock to the malls this holiday season. Some customers would rather shop online or buy a Victoria's Secret teddy by mail.

At $25 the stock sells for 24 times trailing earnings, higher than the Gap's ratio, but worth the premium. —Ian Zack

JAMES DIMON, THE FORMER SANFORD Weill protégé at Citigroup, took over Bank One in March. Since then the Chicago-based bank has enjoyed a Wall Street resurgence, with shares up 25% to $35. But that puts the price/earnings ratio on this stock (nyse: one) at 16, well ahead of the average P/E of 12 for other large regional banks, says Merrill Lynch analyst Sandra J. Flannigan. Loan problems persist in areas like credit cards, and the net interest margin is dropping. Flannigan expects operating income (before nonrecurring gains and losses) to slide 38% to $2.15 a share this year. Short the stock and cover at $28.

—Mark Tatge

LOWER-INCOME CUSTOMERS SOMETIMES have eyes bigger than their bank accounts, and the rent-to-own industry has exploited the fact. The chains sell furniture and appliances via monthly payments. If the customer misses a payment, a repo man comes to take the purchase back. If all payments are made, the buyer has in effect borrowed money at a usurious rate.

If you can stomach the business model, you might find Rent-A-Center (nasdaq: RCII) an intriguing buy at a recent $26, or seven times earnings.

Dennis Van Zelfden, analyst with Robinson-Humphrey, says this $1.6 billion (sales), 2,400-store chain is quite capable of dealing with defaulters. A 32-inch television set, for example, will be rented on average by four customers over 24 months before someone finally pays it off. Van Zelfden expects earnings to grow 15% in 2001. A recession could, paradoxically, help its business. One reason Rent-A-Center shares are so cheap: an accounting and management mess at competitor Rent-Way has taken that company's stock down 85% since Jan. 1. —Daniel Kruger

ONCE COMPLETED, CHEVRON'S $35 BILLION merger with Texaco will create the fourth-biggest oil company. Though the deal still has to pass regulatory muster, John Carey, manager of the Pioneer Fund, suggests buying Texaco (nyse: TX) now to benefit from cost savings to come.

First, the companies plan a 7% work force cut that should save $300 million a year. Then there's consolidation of exploration activities. And to please regulators, the duo may have to sell some gas stations and refining capacity. But that's a blessing, as Texaco has some low-returning operations it will be happy to get rid of. All told, Carey expects savings of $1.2 billion a year at a company with pro forma net income of $6.8 billion.

If the merger is consummated, each Texaco share, now trading at $60, will be converted into 0.77 shares of Chevron. The combined company should be able to earn $6.35 a share next year. That means today's Texaco buyer is getting in at 12.5 times forward earnings. ExxonMobil goes for 20 times. —Christopher Helman

INVESTORS AREN'T USED TO SEEING slower sales and earnings growth from McDonald's. That's a simple explanation for the 45% slump the burger giant's shares suffered this year. From its September low of $27, the stock has been inching back up. Anthony Maramarco, manager of the Babson Value Fund, thinks now is the time to get in. He points out that much of the short-term weakness in McDonald's (nyse: MCD) is attributable to the euro. With 25% of sales and 36%of profits coming from Europe, any recovery in that currency—which could come if the U.S. economy weakens or our interest rates fall—will boost McDonald's net.

The company has begun building other promising concepts like Chipotle Mexican Grill and Donatos Pizza. Next year it will continue expansion of these chains. Maramarco sees 8% earnings growth this year and 10% in 2001. At $33, the shares look cheap at a below-market trailing P/E of 23. —C.H.