3 Retail Stocks Could Get 45% Premium, Says Analyst

Private equity activity has been picking up across the retail sector with the latest announcement coming out of JCrew last week.

Analyst Patrick McKeever of MKM put together a list of his potential takeover targets within the hot retail sector. It follows:

Citi Trends
Big Lots
99 Cents Only
Fred's
The Cato Corp
Collective Brands
Source: MKM Partners

How did McKeever come up with this list?

”I screened my universe of 15 names for companies that have an enterprise value of less than $5 billion because the bigger deals are just not getting done,” he says. “Then I looked at valuations, cash flow, debt levels and potential for operational improvements under private ownership.”

And he goes on to tell the desk that the 3 that screen the best are Cititrends, Big Lots and 99 Cents Only Stores.

"If you look at any of these they’re fairly depressed from where they traded historically. It shouldn’t be hard for them to get a premium between 35-45%."

Hear our entire interview with Mckeever as well as Simon Baker's favorite retail trade. Watch the video now!

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Trader disclosure: On December 2, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders;
Joe Terranova Owns (FCX), (CMA), (UPL), (C), (PEP), (VRTS), (OXY), (GS), (POT), (AAPL), (NKE) and (OIH). Guy Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC) and (MSFT). Tim Seymour owns (AAPL), (BAC) and (F). Jon Najarian owns (AAPL), Is Short (AAPL) Calls. Jon Najarian owns (GS), Is Short (GS) Calls. Jon Najarian owns (JPM), Is Short (JPM) Calls. Jon Najarian owns (CME), Is Short (CME) Calls. Jon Najarian owns (TIF), Is Short (TIF) Calls. Jon Najarian owns (RIMM), Is Short (RIMM) Calls. Jon Najarian is long (AMZN) call spreads. Jon Najarian is long (IBM) call spreads. Jon Najarian is long (NFLX) call spreads. Jon Najarian is long (DE) call spreads. Jon Najarian is long (GT) calls. Jon Najarian is long (AA) calls. Jon Najarian is long (CMC) calls. Steve Cortes is short (XRT). Steve Cortes is long S&P 500. Steve Cortes is short (LVS). Steve Cortes is long (TSN). Steve Cortes is long USD vs. Mexican Peso, Australian Dollar, Euro. Steve Cortes is long U.S. 2-year Treasuries.

JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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GUY ADAMI
Adami’s wife works at Merck

BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (GLD)
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Accounts Managed By Kanundrum Capital Own (JPM)
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SIMON BAKER
Baker Ave owns (AAPL) for clients
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Baker Ave owns (F) for clients
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Baker Ave owns (LEN) for clients

JOE LAVORGNA
***No Disclosures***

PATRICK MCKEEVER
***No Disclosures***

ANTHONY SCARAMUCCI
Scaramucci and SkyBridge Capital owns (KIRK)

BRIAN STUTLAND
pending...

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