"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.

Continue reading Small cap retail values: Guess (GES) and Lululemon (LULU)

Small cap retail values: Guess (GES) and Lululemon (LULU) originally appeared on BloggingStocks on Wed, 20 Feb 2008 13:58:00 EST. Please see our terms for use of feeds.