The Christmas trading period is a key time for retailers with Debenhams (LSE: DEB) set to update the market next week on its festive season performance. Undoubtedly, UK shoppers have enjoyed their most prosperous Christmas since the credit crunch kicked-off, with wages rising by more than inflation for the first time in over eight years.

This should have provided a boost to Debenhams’ performance, although there have been mixed reports from other retailers with John Lewis delivering strong growth and Poundland saying UK footfall was weak in recent months.

As such, Debenhams’ short-term share price performance could be volatile. But, in the long run, buying a slice of the midmarket retailer seems to make sense. That’s at least partly because it trades on a price-to-earnings (P/E) ratio of just 8.8, which indicates that there’s significant upward rerating potential. And with Debenhams forecast to increase its bottom line by 4% in the current financial year, it seems to justify a higher rating.

Clearly, Debenhams has struggled in recent years with customers trading down to discount stores. While Debenhams has attempted to retain customers through deep discounting, this strategy ultimately didn’t pay off. As such the company is now focused on margins over sales and in the long run, this could prove to be a prudent move if shoppers are less driven by price alone owing to their improved financial outlook.

Therefore, with a low valuation, improving growth prospects and a sound strategy, Debenhams appears to be worth buying. But the next week could, of course, be a volatile one given that its Christmas trading update is due.

Risks and rewards

Also offering a high degree of volatility now is BHP Billiton (LSE: BLT). The mining major continues to see its valuation tumble as falling commodity prices hit its profitability and investor sentiment in the wider sector. However, the company isn’t shying away from the tough external environment it faces and is rumoured to be considering the purchase of assets within the resources space as it seeks to take advantage of discounted valuations.

Undoubtedly, this is a risky move since asset prices within the mining and oil industry could fall further. But with global energy needs likely to rise in future years, M&A activity happening now could be rewarded in the medium-to-long term. Certainly, it may mean that dividends are cut. But with BHP yielding 11.5% at the present time, the market appears to be pricing this in. So buying BHP now may prove to be a sound move in the long run.

Down, down, down

Meanwhile, shares in currency manager Record (LSE: REC) have slumped by over 10% today after it announced that a dynamic hedging mandate it won in September 2015 has been suspended due to a potential restructuring. The assets under management equivalent attributable to the mandate were $500m at the end of 2015, with the annualised fee rate on the mandate having been consistent with the company’s dynamic hedging management fee scales.

Clearly, the market has reacted negatively to the update and looking ahead, Record’s forecasts prior to today indicated that profitability was due to come under pressure. Earnings were due to fall by 12% in the current year and by a further 10% next year. With the company’s shares trading on a P/E ratio of 10.5, they may be cheap but there still appear to be better options elsewhere.

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Peter Stephens owns shares of BHP Billiton and Debenhams. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.