"While this has been an ugly period for equities, we believe an above-average risk/reward opportunity presently exists for the small-cap growth market," says Jim Oberweis, Jr., monoey manager and editor of The Oberweis Report.
He adds, "P/E valuations of our universe of high growth companies are now substantially below average. Most important, our research indicates that such periods are also opportune times to buy." Here, he offers a pair of retail ideas -- Guess? (NYSE: GES) and Lululemon athletica (NASDAQ: LULU).
"While it can be difficult to seize such an opportunity in the face of overwhelming pessimism, those who unemotionally understand the math of historical valuations should reap the rewards of seeing opportunity in the current difficulty.
"In each case, uncertainty at the time led to a large market decline that resulted in stock valuations substantially below historical averages. In virtually every period in which average P/E's for high growth stocks have dropped sharply below the mean, the economic outlook was bleak. It is exactly that pessimism and uncertainty that causes investors to relentlessly sell, creating cheap valuations.
"This doesn't happen too often folks, and when it does, our research suggests that those bold enough to buy tend to be rewarded with significantly above-average returns over the subsequent three-year period.
"Guess? designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products.
"As of November 3, 2007 the Company operated 365 retail stores in the United States and Canada and 560 retail stores outside of North America, of which 56 were directly owned. The Company also distributes its products through better department and specialty stores around the world.
"In the company's latest reported third quarter, sales increased approximately 43% to $469.1 million from $328.8 million in the third quarter of last year. Guess? reported earnings per share of $.62 in the latest reported third quarter versus $.48 in the same quarter of last year. Clients of Oberweis Asset Management own approximately 186,000 shares. These shares may be appropriate for risk oriented investors.
"Lululemon athletica designs and retails yoga-inspired apparel, creating components for people to live longer, healthier, more fun lives. Their products set the bar in technical fibers and functional design, working with yogis and athletes in local communities for continuous research and product feedback.
"Lululemon operates more than 60 stores located in Canada, the USA, Japan and Australia; they expect to roll out stores throughout Europe in 2009 and maintain a long term target of 200-300 stores.
"The company's Luon fabric wicks moisture away from the skin and has a 4-way stretch for full range movement, while their Silverescent technology incorporates actual silver into the fabric.
"In the company's latest reported third quarter, sales increased approximately 84% to $66.2 million from $36.0 million in the third quarter of last year. Lululemon reported earnings per share of $.11 in the latest reported third quarter versus $.02 in the same quarter of last year. Clients of Oberweis Asset Management own approximately 51,000 shares. These shares may be appropriate for risk oriented investors."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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