Stock Quotes in this Article: DIS, GS, MET, PCLN, RL

BALTIMORE (Stockpickr) -- With the first full trading week of February kicking off this morning, we’re about to find out if last year’s pattern of “new month, new market” is still going to hold true in 2013.

Stocks are starting off this morning’s trading session in correction mode, not an altogether bad thing given the 1% hurdle higher in all three of the big indices. All told, the S&P 500 rallied 5% in January, giving equities an annualized gain of 60% if they kept that pace for the whole year.

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No, a little correction isn’t such a bad thing after all right now.

But just how long it lasts is another question. With considerable data coming out this week, Mr. Market could get snapped out of his sideways pause sooner rather than later. With the S&P 500 now just 3.3% of a new all-time high, the significance of another upward push is even bigger.

That’s why we’re taking a look at five new Rocket Stock names this week.

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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. In the last 186 weeks, our weekly list of five plays has outperformed the S&P 500 by 75.17%.

Without further ado, here’s a look at this week’s Rocket Stocks.

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Walt Disney

Shareholders in Walt Disney (DIS) are enjoying a good year. The $100 billion company already hit all-time highs of its own back in the summer, and it’s up almost 40% in the last 12 months. Everyone knows Disney’s brand, but just a day after my Baltimore Ravens took the Super Bowl championship in New Orleans, many investors may not realize just how big football is to Disney’s business.

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Football matters to Disney because of ESPN, the crown jewel in the firm’s TV network portfolio. ESPN pays the NFL approximately $1.8 billion each year for the rights to broadcast Monday Night Football games during the regular season; not surprisingly, that costs the network more than ad sales contribute during the games. But the real value in the deal is broadcast rights for other games, giving ESPN the ability to sell countless ads in today’s inevitable Super Bowl post-game coverage. Disney’s other networks include ABC, as well as stakes in the History Channel and Lifetime.

The firm’s portfolio of intellectual property is unmatched, with beloved characters such as Mickey Mouse, Donald Duck and Winnie the Pooh generating considerable cash from film, TV, merchandise and theme parks. The purchase of Pixar should keep Disney’s portfolio growing in value as new favorite films come out of the independently run animation studio.

Disney has a solid balance sheet, it pays a modest dividend, and its technical trajectory is stellar. With rising analyst sentiment in this Rocket Stock, we’re betting on shares.

Goldman Sachs

Goldman Sachs (GS) is another name that’s enjoying excellent relative strength of late. In 2013 alone, shares have rallied more than 17%, buoyed by breakneck performance in the rest of the financial sector. Goldman is one of the last remaining legacy investment banks, a status that gives it attractive positioning right now as an equity rally starts making deals look attractive to capital-hungry firms again.

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Goldman’s legacy status counts for something in the financial sector. The firm has established a reputation as a well-connected firm that’s staffed by smart professionals. Even if stories of GS employees mocking clients tarnished the firm’s image somewhat, wealthy retail clients on the investment management side generally still feel that they’d rather be trading with Goldman than against it.

Investment banking deal sizes generally move in kind with the equity markets. That’s because, statistically, firms can capture bigger price premiums when stocks are moving higher. So equities being up more than 5% in 2013 stands to benefit Goldman Sachs more than most.

The firm’s decision to become a bank holding company was a matter of survival -- and it still is to some extent. Increased regulatory scrutiny helps to prevent Goldman from conspicuously over-leveraging itself in chase of returns. While that does mean that Goldman's profit potential is reduced, the bigger market share and more lucrative businesses that the firm has been enjoying post-recession should easily offset that.

I also featured Goldman recently in “5 Stocks That Want to Pay You More This Quarter.”

The return of William Shatner as’s (PCLN) advertising front man may have fans of the ads happy, but he can’t get all of the credit for the stellar price performance that this stock has seen for the past few years. Priceline has seen its share price increase by 535% in the last five years, and the trajectory is still pointed higher in 2013; shares are already up 10% year-to-date.

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Priceline is one of the world’s biggest online travel sites, offering bookings for hotels, airlines, rental cars, and vacation packages such as cruises. Here at home, there aren’t many big advantages in travel anymore -- the U.S. travel market is largely commoditized at this point thanks to “lowest price” guarantees with hotels, a phenomenon that effectively means that it doesn’t matter where you buy your next trip. But there is a lot more flexibility abroad, particularly in emerging markets in Asia and Latin America. And that’s where Priceline has been focusing its attention.

Financially, Priceline is in excellent shape, with $4.6 billion in cash and just $1.45 billion in total debt. The firm’s business is light on capital requirements -- PCLN is able to earn huge net margins for its trouble -- so how management decides to part with that cash matters a lot. We’ll either want to see acquisitions of mature, established travel outlets overseas or a big value return to shareholders in 2013.


As the largest life insurer in the U.S., MetLife (MET) has a pretty stolid business. Insurance isn’t that exciting, but sometimes, boring is better for your portfolio.

MetLife may be the biggest insurer here at home, but the firm has growth at its fingertips in overseas markets. With operations in more than 50 countries, MetLife has exposure to currencies and economies that are much better positioned to swell in size -- particularly if the U.S. dollar starts to slump on an exodus from treasuries. Latin America is an especially attractive market for MetLife right now, and management knows it – the region makes up around half of the countries that MET operates in.

Here at home, the commoditization of the insurance business has made profitability more challenging. That said, MET’s size provides a big advantage. Because MetLife can underwrite business that smaller insurer’s don’t have the scale to dump on their balance sheets, the firm has an operational advantage in an industry where advantages are few and far between.

MetLife is another financial firm that became a bank holding company in the height of the financial crisis, but the firm is trying to shed that status. Management has been selling off its banking assets for the past few years, decreasing its exposure to Europe, and working on gaining approval from regulators. Once that happens, MET will look more attractive to investors.

Ralph Lauren

Last up this week is Ralph Lauren (RL), the $15 billion apparel and accessory firm. RL owns a large number of sub-brands, most of which capitalize on the designer/CEO’s name in them in some form or fashion. That ability to build out individual franchises from a single firm are beneficial because they enable RL to grab at a wider set of markets and across multiple price points. The firm doesn’t have to risk devaluing its brand by selling lower-priced clothing -- it just sells them under a more value conscious brand.

Typically, RL’s core demographic has been older “mass affluent” consumers whose fashion tastes aren’t especially volatile. That exposure is doubly attractive because it gives RL the ability to earn deeper profit margins on every polo shirt and pair of jeans without worrying about falling out of favor next season.

73-year-old Ralph Lauren still helms his namesake firm as CEO, bringing the question of succession when the founder ultimately steps down from his daily duties. That said, the brand should be able to maintain its strength even without Lauren himself involved in the day-to-day operation of the firm.

With considerable room for international expansion in the firm’s lucrative company-owned stores, this Rocket Stock stands to benefit more than most in a stock rally.

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.


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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 Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.