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Top 10 Retail Rocket Stocks

Large buybacks, insider buying and other catalysts could propel these names higher ahead of the holidays.

With the holiday season fast approaching, I thought it would be worthwhile to look at some of the retailers that have been severely beaten up these past six months.

Regardless of the economy, a lot of these stocks are trading at 8, 9 and 10 times cash flows, have recently launched stock-buyback programs or have experienced large insider buying. While no one can call a bottom, we can certainly sleep better at night knowing the CEO is confident enough to buy the stock of his own company.

Two weeks ago, Jim Cramer dedicated the opening segment of his

"Mad Money" TV show

to these lagging retailers. Cramer's logic was very simple: "A


rate cut and cold weather could rejuvenate some languishing retail stocks." He also made a strong case that "lower interest rates mean there will be more cash flowing around, making consumers feel richer." And just yesterday, Cramer laid out the case for the sector in a video he recorded for TV:

Cramer: Retail Rocks When Times are Tough


With all of this in mind, let's take a look at a few of these

Top 10 Retail Rocket Stocks


First up is


(KSS) - Get Kohl's Corporation Report

, a favorite of mine. About a month ago, Kohl's board approved a $2 billion stock-buyback plan for the upcoming year. The $2 billion represents about 13% of all outstanding shares. This is a massive amount of stock to repurchase and reveals the company's overall bullish tone regarding its own business.

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On top of the buyback, Deutsche Bank reiterated its buy rating with a target price of $75 a share. The bank believes that the repurchase plan will add to full-year 2007 and 2008 earnings-per-share growth.

Kohl's is one of the few stores where both middle-class and upper-middle class women shop. Couple this with a huge buyback, and this stock looks very attractive here.

Also worth looking at is


(TGT) - Get Target Corporation Report

. Cramer called Target the "gold standard of shopping" because of its variety and excitement as well as being "the


(WMT) - Get Walmart Inc. Report

killer." What makes Target worth owning is that it generates more growth than any other broad retailer and that it is planning to sell its credit-card business. Recent figures suggest that Target's credit-card business could be worth more than $5 billion.

Another retail stock I like is

American Eagle Outfitters

(AEO) - Get American Eagle Outfitters Inc. Report

. It is nearly impossible to call a bottom when you invest in stocks, but if you are an insider, you certainly have a good idea of when your stock is cheap. American Eagle has seen solid insider buying from its CEO and other directors in the last few weeks.

Trading at just 7 times cash flows, here are some recent insider purchases at AEO from August and September:

  • Aug. 22: Jay Schottenstein, chairman, bought 29,500 shares at $22.99-$23 each = $678,000
  • Aug. 22: Michael Jesselson, officer, bought 16,800 shares at $23.48-$23.54 each = $395,000
  • Aug. 23: Schottenstein bought 122,000 shares at $23.94-$24.25 each = $2.9 million
  • Aug. 23: Jesselson bought 10,000 shares at $24.17 each = $241,000
  • Aug. 23: Joan Hilson, CFO, bought 5,000 shares at $24.90 each = $121,500
  • Sept. 7: Schottenstein bought 433,100 shares at $24.15-$24.25 each = $10.5 million

Insider buying during this short two-week time came to a total of $15.7 million. I believe AEO is a solid play worthy of a strong look.

To get more analysis on all the other retail stocks in this group, check out the

Top 10 Retail Rocket Stocks


At the time of publication, Altucher and/or his fund had no positions in stocks mentioend, although positions may change at any time.

James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for

The Financial Times

and the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett



. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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