"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.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"My 'home run' speculation for 2008 is The Buckle (NYSE: BKE), a retailer of medium- to better-priced casual apparel, footwear and accessories for fashion-conscious young men and women," says value investor Charles Mizrahi, editor of Hidden Values Alert.

"The company focuses on personal service, including free alterations, free gift-wrapping,easy layaways, the Buckle private-label credit card and a frequent shopper program. The Buckle operates 350 retail stores in 38 states. Most stores are located in regional, high-traffic shopping malls and lifestyle centers.

"The balance sheet is strong with $157 million in cash and current liabilities of only $56 million. Net profit margin is 11.5%, in line with previous years. The company has no long-term debt, and management and directors own 56.1% of outstanding shares.

"BKE is a good company, and a price of $32 or less per share represents very good value. If BKE can grow earnings at 11% per annum and maintain a P/E of 15, the stock will handsomely reward investors in the next five years."

According to the New York Post, luxury goods maker Burberry Ltd. (OTC: BBRYF) could be a buyout target for a competitor like Coach Inc. (NYSE: COH). The speculation started with a research report from Merrill Lynch. According to the Post, "Merger activity is likely to pick up this year in the $218 billion industry as family-owned companies face generational transitions, while 'predators' such as LVMH Moet Hennessy Louis Vuitton SA are flush with cash."

With the private equity boom subsiding, strategic mergers and acquisitions are likely to take center-stage -- ya know, those deals that take place based on some goal other than financial engineering.

If you're interested in finding other fashion stocks that might be in play (or might just make good investments for other reasons), ApparelSearch.com has a pretty comprehensive list of the publicly traded fashion stocks. Buyout targets generally will trade at reasonable P/E and P/Cash Flow ratios, and will have clean balance sheets.

Given the status of the credit markets, companies seeking to acquire will need to have strong cash flow and balance sheets as well.

Move over Coach (NYSE: COH). Prada may be planning its own IPO. According to the Financial Times, CEO Patrizio Bertelli has hinted that the Prada could go public in the next year, and it's currently looking for an investor relations director.

The Italian company may need the cash to expand aggressively into China, Brazil, and India, as well as to increase its presence in the United States and in Japan. Based on its sale of 5% of the company to Intesa Sanpaolo last year, the company is worth at least $2.7 billion. Given sales of about $1.9 billion in 2006, that would give the stock a pretty conservative price/sales multiple.

Considering the recent strength of Coach, this is an IPO that investors would probably be hungry for -- I may have to buy my mother a few shares. If you're going to invest in fashion and apparel stocks, I think the high-end names are the way to go. Companies like Crocs (NASDAQ: CROX) that don't have strong, established brands could see their competitive advantages wane as competitors move in in search of their high margins. Prada seems to have a pretty good moat.