My latest column is up at RealMoney.

I think Rent-A-Center (RCII) can benefit from the slowdown in consumer spending and the tightening of credit standards.

If Rent-A-Center were to receive the same price-to-book multiple as Aaron Rents, it could trade above $28 per share today. While I don’t believe that will happen overnight, over the next five years Rent-A-Center could see high-single-digit earnings per share growth and also expand its price-to-book multiple to the 1.9 level. The combination of earnings growth and valuation expansion could generate annual returns averaging 15% or more.

Here’s how the company scores on the Stock Market Beat models:

• Earnings momentum: Positive
• Earnings quality: Positive
• Price momentum: Neutral
• Free cash flow: Positive
• Return potential: Positive

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

We’re pretty sure we aren’t the driving force behind Eddie Lampert’s business decisions, but we thought it worth pointing out that what we suggested purely as speculation - that Sears Holdings may be inclined to pursue acquisitions including, dare we say, a wholesale club - now appear to be materializing into something still less than fact but perhaps more than mere speculation.

Sears’ earnings report included an unusually long section discussing possible uses for its cash pile, which includes $3.2 billion in domestic cash and $500 million from Sears Canada Ltd. (Toronto:SCC.TO - news). The retailer also repeated that Lampert had authority to invest excess cash.

Investors have long expected Lampert to use his hedge fund expertise — and Sears’s cash — to orchestrate big takeovers, but the only major deal so far has been a bid to buy the remaining stake in Sears Canada. That deal is tied up in a court battle with dissident shareholders.

“I think it’s a sign that there is something on the horizon,” said Kim Picciola, a retail analyst with Morningstar. “The fact that they are reiterating his authority to invest the surplus cash makes me think that there is more news to come.”

We’ll be waiting patiently for our finder’s fee.

Summary: 
Watch List News:
BJ’s Wholesale Club Inc. stock got an upgrade from a Credit Suisse analyst Monday who said shares have almost bottomed out, though he lowered his earnings forecasts in light of competitive concerns.

Other news:
McDonald’s Corp. (MCD) on Monday posted preliminary quarterly earnings that topped analysts’ expectations, pushing shares 4.1 percent higher. June sales at stores open-at least 13 months rose a better-than-expected 5.9 percent, with sales in Germany lifted as it hosted the World Cup. The company earned about 67 cents a share for the second quarter, including 10 cents a share in income from the sale of shares in Chipotle Mexican Grill Inc. (CMG) and an expense of 2 cent a share from a tax law change. Excluding one-time items, earnings were 59 cents a share. Analysts, on average, looked for 56 cents a share, according to Reuters Research. Some are reading the McDonald’s earnings surprise as a sign that consumers are shifting to lower-priced goods. Wal-Mart (WMT - Annual Report) may disagree.

Target (TGT) now expects 3 percent to 4 percent growth in July same store sales down from the original forecast of 4 to 6 percent.

When we saw this article on Watch List company BJ’s Wholesale (BJ) and the possibility of it being acquired, it got us to thinking. Specifically, it got us thinking about whether there might be a fit with Eddie Lampert’s Sears Holdings (SHLD).

For one, BJ’s stock is cheap and getting cheaper, trading at around five times its cash flow. That’s especially compelling to private equity firms routinely shelling out more than eight times cash flow for retail assets — and taking some heat lately for overpaying.

BJ’s has virtually no debt and owns about 40 percent of its real estate, both seen as positives to potential buyers.

“BJ’s is concentrated in the Northeast in good markets,” said an investment banker who did not want to be named. “There is $800 million to $900 million in real estate value in this company alone.”

It sends us back to the days when pundits were speculating that Lampert’s buyouts of Sears and K-Mart were all about the real estate. Boy were those pundits fooled when Eddie turned out to have an affinity for merchandising. Still, he may just be playing his cards close to his vest while waiting to put the last piece into the puzzle. More »

Watch List Companies

Jos a Bank (JOSB): Men’s clothing retailer JoS. A. Bank Clothiers Inc. said Thursday that sales at stores open at least one year, or same-store sales, increased 8.5 percent for the month of June, easily beating Wall Street expectations for a 4.3 percent boost.

BJ’s Wholesale (BJ): June sales fell 0.1 percent at its stores open at least a year as record-breaking rainfall hurt demand, and it lowered its quarterly profit forecast. Analysts, on average, expected 2.4 percent growth, according to estimates compiled by Reuters.

TJX Companies (TJX): Discount clothing retailer TJX Cos. on Thursday said June same-store sales rose 4 percent, beating both internal and Wall Street estimates, and prompting the company to estimate second-quarter earnings will be at or above the high end of its previous forecast.

Wall Street expected same-store sales, or sales at stores open at least a year, to add 2.7 percent, according to Thomson Financial.

Other Notable Retailers

Wal-Mart Stores Inc. (WMT) and other top U.S. retailers posted disappointing June sales on Thursday as soaring energy prices and record-breaking rains in the Northeast curbed consumer spending.

But mid-priced chains such as J.C. Penney Co. Inc. (JCP) and Kohl’s Corp. (KSS) reported strong gains, suggesting that some shoppers stayed away from more expensive department stores. Federated Department Stores Inc. (FD), owner of Bloomingdale’s and Macy’s, recorded lower-than-expected sales.

Overall, sales rose 2.8 percent at stores open at least a year — a key retail measure known as same-store sales. That was slightly below forecasts for a 3 percent gain, according to research firm Retail Metrics.

Apparel retailer Limited Brands Inc. (LTD), warehouse club operator Costco Wholesale Corp. (COST), and home decor chain Pier 1 Imports Inc. (PIR) were among the chains missing Wall Street’s sales targets.