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5 New Rocket Stock Plays for April - 27162 views
BALTIMORE (Stockpickr) -- The market laid off April fool’s jokes last week as performance tracking closed the books for the first quarter of 2011. All told, the S&P gained a fairly strong 1.42% last week, yanking the index’s total performance for March to -0.1%; that makes March an essentially flat month performance-wise. More significant, it sets up April for a more aggressive bull run now that the bears have made their attempt at pulling stocks lower.
To make the most of an upward push, we’ll turn to our weekly Rocket Stocks list.
For the uninitiated, Rocket Stocks are a set of companies with short-term gain catalysts and longer-term growth potential. In the last 97 weeks, our Rocket Stocks have beaten the S&P 500 by a very material 75.55%.
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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.
The first quarter of 2011 gave a strong start to $216 billion conglomerate General Electric (GE). The firm has already seen its shares rally 11.2% this year; the S&P 500 has returned around half that. Now, with a portfolio of strong businesses under its belt and the first-quarter earnings release slated for April 21, investors will be looking to GE for strong performance.
GE is probably the prototypical example of a blue chip stock. The firm’s mammoth footprint and wide-reaching product offerings give the firm significant diversification when times are tough -- and enviable growth potential when the economy is expanding. More significantly, GE’s business units leverage each others’ expertise to the benefit of the larger entity, a tactic that’s yielded the company hefty double-digit margins.
While the company’s financial services arm has been a drag on earnings for the last few years, the unit is recovering and should soon be an attractive (albeit more conservative) element of GE’s overall business once again. As peers continue to struggle in this economy, a well-capitalized lending arm will become a crucial capability for GE.
General Electric, one of Warren Buffett's Top 10 Dividend Stocks in the most recently reported period, shows up on a recent list of 8 Nuclear Stocks With Upside and is one of TheStreet Ratings' top-rated industrial conglomerate stocks.
It may be time for investors to turn their attention to mined commodities such as gold, silver, and copper once again. While prices have had a few setbacks in the last month, all three are looking very technically attractive right now. A breakout in any of the three could spur massive margin expansion in miners such as Freeport-McMoRan (FCX), which has producing properties that yield all three metals.
Freeport is the largest copper and molybdenum producer in the world, with massive operations that span from the Americas all the way to Indonesia, where Freeport lays claim to the world’s largest copper and gold mine. Among miners, cost is key -- the more insignificant per-ounce extraction costs are, the better profitability will be. In the case of this miner, those costs are low enough to deliver net margins that ring in at around 30%.
Investors should expect those margins to grow significantly if metals appreciate in step with expectations.
Media giant News Corporation (NWSA) has already had a stellar year in 2011 thanks to a more than 23% increase in share prices. But investors and analysts are expecting that bout of outsized performance to continue as we enter the second quarter. News Corp. owns a slew of media assets, including the Fox network, a number of TV stations and networks internationally, magazines, newspapers, book publishers and online destinations such as MySpace.
The company has been hard at work digging out a defendable economic moat in the last decade, differentiating its television offerings, penning coverage deals with sports networks, and amassing a deep vault of film properties. Despite that focus on differentiation, the firm’s online properties have languished for lack of that very descriptor, and remain the least attractive element of News Corp’s total business.
Regardless, analysts have been paying added attention to News Corp. in the last couple of weeks. With earnings still a while away, tactical investors should have an opportunity to ride that sentiment this month.
Point-of-sale terminal giant VeriFone (PAY) has been on fire in 2011; shares have rallied more than 42% year-to-date. That phenomenal relative strength hasn’t gone unnoticed. Revenue and EPS growth have been touted by analysts as catalysts for a share price increase in the near-term, an opinion that should help fuel institutional buying this quarter as portfolio managers seek out growth potential.
Consumer sales could be another factor for VeriFone, as the company outfits new PoS devices for retailers, and takes an growing chunk fee-based business from competitors.
VeriFone shows up in the portfolio of Michael Price's MFP Investors as of the most recently reported period.
Sweden-based Autoliv (ALV) is a major supplier of safety systems for automakers, with a truly massive patent portfolio and an outsized market share of airbag modules, seatbelts and other safety gear.
The company’s growth looks good from multiple angles right now, as existing customers in Detroit’s Big 3 see growth and as new emerging-market carmakers look for new safety vendors to help improve safety enough to claim a higher-end chunk of their domestic markets, and even enter the U.S. market.
With a spotless balance sheet, and impressive income generation capabilities for the new year, expect Autolive to fare well ahead of first-quarter earnings later this month.
To see this week’s sentiment plays in action, 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.