Shift Retail Bets From AEO, KSS to GPS

Here we go again with the "lowered expectations equals higher prices" game: Kohl's (KSS - commentary - Cramer's Take) and American Eagle (AEO - commentary - Cramer's Take). A month ago I said I liked these stocks, along with Gap (GPS - commentary - Cramer's Take), and I am willing to say that I knew I was putting a gun to my head. Retail had just been awful and I expected it to continue to be awful.

But retail is a group best bought when it is awful.

Sure enough, when I saw the Kohl's, Gap and American Eagle numbers today, I said "Well, there goes that theory. Those are awful, awful numbers."

But American Eagle isn't down, Gap's been up and Kohl's is soaring.

That's because things were so lowered, so shorted, so hated, that it didn't matter.

At this point, I think that American Eagle is the most dangerous of the three. That one tailed off as the quarter went on. Only the insider buying makes me want to stick with it.

Kohl's is worth taking profits in just because it is up so much with nothing good happening. Kohl's is bad; it just isn't as bad as the others.

And Gap? This is the best one of all, because there were more sacred cows in Gap than I ever thought. Glenn Murphy, the CEO, is taking the chainsaw out -- hopefully, he isn't going to be another Al Dunlop! -- and clearing out all the dead wood.

Here's what I would do if you traded on my liking those stocks: I would just take the breakeven in American Eagle, ring out half of the Kohl's, and take the American Eagle money and double down with the Gap.

Retail's not great. But that doesn't mean a lot of money can't be made there.

Random musings: VMware's (VMW - commentary - Cramer's Take) not done. So many people are short that and long EMC (EMC - commentary - Cramer's Take) that it is causing VMware to go bonkers! ... Does Angelo Mozillo have a death wish? What the heck was he doing selling at all? Why did he modify his plan? Sometimes you just have to take your lumps. I repeat that I can see what is going to happen: A grand jury will be convened here. And a reputation will vanish.

At the time of publication, Cramer was long EMC.

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