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BALTIMORE (Stockpickr) -- Tumult in Libya, continued post-tsunami fallout in Japan, and the sharp decline in stocks for the past two weeks will continue to be major factors in the market’s movement coming into this new trading week. But despite arguably bearish forces at play, stocks appear to be holding up well so far on Monday, with the major three indices in the green.
While uncertainty abounds right now, this week is significant particularly because of the questions that are scheduled to be answered on Wall Street. Investors should be on the lookout for updates on consumer confidence numbers, housing metrics and commodity data this week -- each of which could have a buoying effect on stocks if they fall lock in step with analysts expectations.
That’s why we’re turning to another set of sentiment-driven stocks this week. To find those, we turn to our weekly Rocket Stocks list, a set of companies with short-term gain catalysts and longer-term growth potential. In the last 95 weeks, our Rocket Stocks have beaten the S&P 500 by 74.02%.
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As usual this week, we'll continue our trend of looking at stocks with rising analyst expectations. On Wall Street, expectations can mean everything -- and stocks with rising expectations often benefit from increased buying pressures from institutions and retail investors alike. To find them, I run a quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises.
Without further ado, here's a look at this week's potential plays.
Even though share price growth has been tepid for Phillips-Van Heusen Corporation (PVH) in the last year, the company has nonetheless been a major long-term beneficiary of increased consumer spending. In the past five years, shares of the apparel stock are up more than 64%.
Much of that has come from a consistent strategy of growth through acquisitions, most notably the purchase of the Tommy Hilfiger brand in mid-2010. Today, PVH owns a broad portfolio of valuable clothing names that includes Calvin Klein, IZOD, and Van Heusen. Because PVH focuses on deep value propositions in its acquisition strategy, the company is able to get astronomical growth rates out of its flagship brands -- something that many expect to be the case for newly acquired Hilfiger.
To be sure, the Hilfiger acquisition has significantly increased the amount of leverage on PVH’s balance sheet. While that may have been a problem two or three years ago, the increased availability of capital coupled with the bargain price PVH paid for Hilfiger’s impressive cash-generation abilities means that this stock is in commendable shapre right now. Despite a tough trading session for shares on Friday, we’re betting on shares to start the week.
Typically, when investors talk about “the market”, they’re talking about the instruments that they trade – instruments like stocks, options, and futures. But lately, Wall Street’s fixation has been on the markets themselves following a proposed merger between NYSE Euronext (NYX) and Deutsche Borse -- and speculation that top competitor Nasdaq OMX Group (NDAQ) could make a hostile bid for the Big Board. That attention focused on the exchange business has increased the focus on other big players too, which explains this week’s analyst interest in IntercontinentalExchange (ICE).
IntercontinentalExchange is a global exchange that’s one of the largest markets for commodity and financial product derivatives. Historically, ICE has primarily been an energy exchange, but the 2007 acquisition of the New York Board of Trade expanded the company’s footprint to include soft commodity trading and financial instruments, diversification that’s significantly boosted ICE’s bottom line.
Even though ICE plays second fiddle to larger, more established competitors, the company’s push to offering unique and exclusive products (like Russell Index futures) should be a big contributor to growth in the next few years. That’s particularly true if equities remain under pressure; retail investors’ need for strong returns should help fuel increased profits for this firm.
Power management giant Eaton (ETN) has been seeing some relatively slow growth of late, but it’s the company’s exposure to overseas customers that makes it particularly interesting right now. The company is one of the world’s biggest manufacturers of electrical components designed to manage industrial power use, a need that clearly hasn’t been in-line with the market conditions of the last several years. As firms cut back on capital spending, the issue was excess capacity, not demand for more.
Now, however, the company is seeing that uptick in demand come into play. That’s largely a result of the broad exposure to overseas markets, where the company generates more than half of its revenues (of which nearly half come from emerging markets). Like many firms that were under the gun in late 2008, Eaton worked hard to lean out its operations and become a significantly more profitable concern – as a result, the company should be able to provide returns that are substantially larger than their historical equivalents.
With competition considerably more docile than in the past, investors should expect Eaton to take a large chunk out of this powerful niche market in the next several quarters.
For more stocks that made this week’s cut, check out the Rocket Stocks portfolio at Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.