"Skechers USA (NYSE: SKX), a trendy California-based retailer, is a new buy on our 'hot list'," says John Reese, who selects stocks based on the criteria used by "legendary" stock pickers.

In his always-fascinating Validea newsletter, he explains, "Skechers gets approval from two of my guru-based strategies, those that I base on the writings of Peter Lynch and Kenneth Fisher."

"My Lynch-based model considers the firm to be a 'fast-grower' because of its 23.08% long-term growth rate (based on the average of the three- and five-year earnings per share figures.

"Lynch was perhaps best known for using the P/E/Growth ratio, which divides a stock's price/earnings ratio by its growth rate to identify growth stocks that are still selling at a good price.

"P/E/Gs below 1.0 are acceptable to my Lynch-based model, with those under 0.5 the best case. With a P/E of 10.99 and that 23.08 percent growth rate, Skechers has a P/E/G of 0.48, passing this critical Lynch-based test with flying colors.

"In addition, Lynch liked companies that were conservatively financed. The model I base on his writings requires a firm's debt to be no greater than 80% of its equity. With a debt/equity ratio of just 2.52%, Skechers easily makes the grade.

"Lynch also made a very astute observation about inventory. He saw it as a red flag when a company's inventory is increasing faster than its sales are (having unwanted inventory pile up is never a good sign).

"My Lynch-based model thus looks for firms whose inventories aren't rising appreciably more quickly than their sales. Last year, Skechers inventory/sales ratio was 16.67%, and this year it has fallen to 14.65%. Sales are growing faster than inventory is piling up, a good sign.

"Skechers is also one of the few companies that pass one of my Lynch model's cash-based bonus criteria. Lynch likes to see companies that have a lot of net cash; at 30.6%, Skechers earns the bonus.

"While Lynch used the P/E/G ratio to find attractively priced stocks, Fisher focused on sales rather than earnings. Earnings, he believed, can be negatively impacted by a number of factors from year to year, but a good company's sales rarely drop.

"To identify stocks that are selling at a good price, he thus used the price-to-sales ratio (PSR). For non-cyclical companies like Skechers, my Fisher-based model considers PSRs below 0.75 to indicate tremendous values. With a PSR of 0.64, Skechers makes the grade.

"Fisher also liked companies with little debt, so the strategy I base on his writings looks for companies with debt/equity ratios less than 40%. With a debt/equity ratio of just 2.52%, Skechers easily passes this test.

"Profit margins were also important to Fisher. My Fisher-based model requires companies to have average profit margins of at least 5% over the past three years. At 5.25%, Skechers' margins are high enough to pass.

"My Fisher-based model also targets companies that have inflation-adjusted EPS growth rates greater than 15%. Skechers' inflation-adjusted growth rate of 20.76 makes the grade."