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5 Rocket Stocks for Another Week of New Highs - views
BALTIMORE (Stockpickr) -- Last week came with some strong performance for stocks -- the S&P 500 managed to rally 1.56% between Monday's open and Friday's close, shoving the big index to a new all-time high.
But as well as the S&P performed last week, one small set of stocks managed to do better -- a lot better. I'm talking about our weekly list of Rocket Stocks.
Last week, our pared down list of plays returned 3.63%, besting the S&P's run by more than 200 basis points. That brings Rocket Stocks' total outperformance over the S&P to a hefty 91.3% over the last 223 weeks, a pretty strong record over an already stellar period to own stocks.
To make the most of that performance now, we're taking a closer look at five new Rocket Stock names worth buying this week...
For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows.
Without further ado, here's a look at this week's Rocket Stocks.
2013 is panning out to be a great year for shares of T-Mobile US (TMUS) -- since the $21 billion cellular carrier officially went public earlier this year, its share price has climbed more than 57%. Even though T-Mobile is only the number-four carrier here in the U.S., its comparatively small business gives it the ability to grow at a breakneck pace. And with more than 1.1 million new customers added to the carrier in 2013, TMUS is living up to the hype.
T-Mobile US is the result of a combination of legacy T-Mobile and discount carrier MetroPCS. T-Mobile got a spectacular deal on MetroPCS' customer list the micro-carrier traded for a tenth of the premium per user on the big names like AT&T (T) and Verizon (VZ). By joining forces, T-Mobile now serves 43 million customers across the two brands; as the firm unifies its business under the T-Mobile banner, shareholders should see some big efficiency improvements.
TMUS has been working hard to incent customers to come over. It's done that by investing heavily in widening its LTE footprint, and by making it easier to bring devices over to its network. The decision to offer tablet users a free 200MB per month data plan is likely to draw plenty of new devices to TMUS at a very low customer acquisition cost.
If T-Mobile can build a reputation as the value carrier in a commoditized space, expect the growth pace to continue.
As impressive as T-Mobile's rally has been in 2013, it doesn't hold a candle to the momentum in shares of Micron Technology (MU) this year: since the calendar flipped over to January, Micron's share price has exploded by 207%. And with the way this stock is positioned right now, it's not too late to take the reins in Micron.
Micron is a computer memory maker that until recently was best known for manufacturing RAM for PCs. But the company has spent the last several years building its flash memory business, a switch that exposes Micron to a far more lucrative niche. Flash memory is a supply constrained business -- it's costly for newcomers to try to ramp up production, and the surge mobile device purchases has driven demand for NAND flash memory through the roof. That's helped Micron collect heftier prices and deeper margins for its efforts.
Most of Micron's flash memory customers are original equipment manufacturers, not consumers. Those OEM connections are a big advantage because they keep sales efforts minimal. Instead, the firm just needs to keep creating flash technology that device makers want. The increasing use of flash memory in enterprise settings (such as servers) is another big trend that's helped to propel Micron's share price in 2013.
Chipotle Mexican Grill
There's no question about it -- Chipotle Mexican Grill (CMG) is the most attractive name in the most attractive corner of the restaurant business. Chipotle operates 1,500 restaurant locations in 43 states, Canada, the UK, France, and Germany. CMG's positioning in the fast-casual category has been a huge driver of its success -- as consumers look for quick, non-fast food options, the Mexican food chain has been there to take their dollars.
In the last few years, Chipotle has been one of the fastest-growing restaurant chains in the country. A focus on quality is a big differentiating factor -- while rumors abound about what's actually in fast food chains' burger patties, CMG happily advertises its use of naturally-raised meats, hormone-free dairy, and organic produce. Yes, quality ingredients are expensive to source, but they're one of the only factors that truly differentiates Chipotle from the competitors who have sprung onto the scene in the last decade. A look at CMG's earnings show that those costs aren't exactly hurting profitability; net margins are consistently in the double-digits.
That quality focus extends to Chipotle's balance sheet. Chipotle has primarily financed its growth with cash from operations, keeping its debt load at zero with around $840 million in cash and investments on its balance sheet. There's no question that this isn't a cheap stock right now, but with plenty of expansion opportunities in the years ahead, the premium on shares still looks justified. The momentum is certainly still intact.
Juniper Networks (JNPR) is the biggest underdog in the competitive IP networking market. While most investors fixate on standard-bearer Cisco Systems (CSCO), Juniper has been gaining market share and building its war chest. Now, this $10 billion tech name looks well positioned to benefit from big tailwinds pushing the IP networking business forward.
Juniper designs and sells hardware and software that enable IT infrastructure to communicate and remain secure. The firm has a stellar business in supplying carrier routers, telecom equipment that's been in high demand thanks to network expansion efforts from telcos. Enterprise IT appliances are another key to Juniper's growth strategy -- even though Cisco is the 800-pound gorilla in the room, JNPR has been able to take a bigger piece of the enterprise appliance business in recent quarters.
Despite its comparatively small size in the industry, JNPR sports healthy levels of profitability and a huge $3 billion net cash and investments balance. That mountain of dry powder is enough to cover a full third of the firm's current market capitalization, providing a big risk reduction over the firm's near-$20 share price. With rising analyst sentiment coming into JNPR this week, we're betting on shares.
Home improvement giant Home Depot (HD) remains one of the best ways to harness the relative strength of the housing market right now. Home Depot owns more than 2,250 big-box stores spread across North America, supplying tools and materials for home construction, remodeling, and maintenance. As homeowners continue to spend money on home improvements into 2014, HD will continue to benefit.
While most shoppers think of Home Depot as a purely retail operation, the firm's wholesale construction buyers offers a multiplier when the housing market is strong. After a relatively painful restructuring in the wake of the Great Recession, HD has improved efficiency considerably and made margin strides that most other retailers would kill for increasing reliance on private-label brands should continue to hold net margins high.
Growth opportunities look big for HD right now, especially in the Mexican market. The firm's foray into China was considerably less successful, and it should be enough to keep Home Depot focusing on the markets it knows in 2014 that's a good thing, particularly for shareholder value, especially for those who buy now.
To see all of this week's Rocket Stocks 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, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
Follow Jonas on Twitter @JonasElmerraji