5 Stocks to Buy While Others Are Afraid

I outlined how LULU scores on all three counts in previous articles on TheStreet.

I almost blew my afternoon martini through my nose when I read what a contributor to Seeking Alpha had to say about how LULU CEO Kristine Day operates her Canadian juggernaut:

The company has a curious business plan: It runs out of things on purpose (an attempt to boost demand by creating scarcity), it doesn't generally discount its products, it doesn't open new stores very often, and it doesn't electronically track customer purchases.

That was not an earthquake you just felt. It's a Steve Jobs' Bozo explosion bubbling to the surface.

I see LULU getting to the point where Ralph is now in about five-to-10 years.

LULU's revenue jumped nearly 41% between fiscal year 2011 and FY 2010, from $712 million to a cool $1 billion. Ralph, on the other hand, makes more than LULU makes in a year in just one quarter. In the third quarter of FY 2012, Ralph reported revenue of $1.81 billion vs. $1.55 billion in the same period of FY 2011. You do not necessarily expect to see 16.7% revenue growth, year-over-year, from an old heritage company like Ralph Lauren, but there it is.

I'm a fan of buying the leaders in a space alongside their indirect offspring. LULU amounts to the illegitimate love child Ralph Lauren never knew he fathered. By the same token, LULU follows in her father's footsteps none the wiser.

The market crushed both stocks on Tuesday. RL was down 3.1%, closing at $163.38. The stock dove as low as $154.25 intraday. LULU shed 3.0% to $74.93, but bottomed at $70.50 intraday. Heck, if you got in at or near Tuesday's intraday lows, you've more than outperformed the guy sitting next to you.