Stock Quotes in this Article: BBT, CRM, IR, RMD, YHOO

BALTIMORE (Stockpickr) -- Could this be the bounce week that investors have been waiting for?

With the S&P 500 at support after correcting from a rally that’s brought the big index as much as 17% higher this year, too many people are wondering whether this is really the end of the rally. Sentiment numbers don’t help either. Investors are more bearish as a group than they’ve been anytime since the first quarter of 2009.

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But earnings season is coinciding perfectly with the S&P’s fall to trend line support -- and with analysts expecting pretty tepid performance from U.S. equities this quarter, any meaningful earnings surprise could help to fuel the next leg of this rally. Despite the excitement of earnings season’s start last week, only nine S&P components delivered their numbers so far. So with 84 S&P names scheduled to turn over their numbers this week and another 164 component firms handing over their quarterly results next week, it’s clear that the data is going to grow exponentially, starting now.

That’s why we’re turning to a new set of Rocket Stock names 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.

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In the last 172 weeks, our weekly list of five plays has outperformed the S&P 500 by 77.07%.

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

 

Salesforce.com

2012 has been a stellar year for customer relationship management software firm Salesforce.com (CRM). Shares of the $21 billion company have rallied more than 51% since the start of the year, despite spending most of the last few months moving sideways.

Salesforce serves more than 100,000 businesses spread across the globe, helping them interact with their own customer lists, enabling everything from sending newsletters to tracking sales. That mission-critical nature of Salesforce’s offering gives the firm a big economic moat for shareholders right now.

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Salesforce has been a leader in the cloud computing space, carving out a profitable niche using a tool that was little more than a buzzword for most tech firms. That first-to-market status for Salesforce means that it’s got a measurable jumpstart over peers who are attempting to move customers over to their platforms. Software-as-a-service is also a more lucrative model for software firms like CRM. Instead of selling a software license and then trying to convince customers to spend big bucks on the next iteration of the software, the cloud model lets CRM charge recurring fees while trickling feature improvements onto the platform. And because integration with customers’ systems takes place deep in the Salesforce platform, switching costs are extremely high for businesses to move to rival services.

A solid balance sheet rounds out the picture at Salesforce. The firm carries more than $1.8 billion in cash and investments, easily offsetting $508 million in debt. That’s not to say that CRM’s financial statements are flawless. Huge marketing costs have consistently eroded profits over the firm’s life. While recent losses are self-inflicted for the sake of growth, they’re losses nonetheless.

That said, rising analyst expectations are flashing a buy signal for Salesforce this week; watch out for earnings on Nov. 20.

BB&T

Most investors are fixated on the big banks right now. But they should be turning their sights to North Carolina-based BB&T (BBT), a $22 billion regional bank that boasts 1,800 branches spread across the Southeast and the Midatlantic.

Shares of BB&T have rallied more than 43% since I called the firm one of four bank stocks you should still buy last year. There’s reason to believe that BBT has more room to run in 2012.

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Regional banking names like BB&T have a big advantage in the simple fact that they’re banks first and foremost. The temptation of easy profits in tertiary businesses (like investment banking, trading, and derivatives) doesn’t exist for these guys, and as a result, they’ve largely been able to skirt the exposure that crushed the big banks in 2008. In BB&T’s case, the retail and commercial banking business has helped to fuel double-digit net margins, even in an environment where rates are near zero. That should set the stage for even more impressive performance once rates normalize a few years down the road.

BB&T’s loan book has remained conservative, even as its deposit base grew and sketchier loans became tempting. A push towards fee-based revenues has made services to banking customers add up to around 30% of revenues, adding some nice diversification that comes with hefty profit margins.

With a balance sheet that’s in solid shape and dividend payout tipping 2.47% right now, we’re betting on this bank.

BB&T shows up on a list of 5 Bank Stocks Bernanke Can't Hurt Anymore.

Yahoo!

Yahoo! (YHOO) continues to grab the headlines, most recently for unloading half of its stake in Alibaba for around $7.1 billion. The move is a big one -- in total, the deal means that close to half of Yahoo!’s market capitalization is now made up of cash or marketable investments. And according to management, almost half of that will be returned to shareholders.

So even though the firm continues to struggle right now, there’s good reason to pay attention to this stock.

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When Marissa Mayer moved from Google (GOOG) to the CEO chair at Yahoo!’s Sunnyvale, California-based offices, the firm sent a big message to investors -- they confirmed that the dot-com survivor was still capable of courting top talent. Now, it’s a question of what they’ll do with it. It’s already evident that acquisitions are on the table with the firm’s huge cash position, something that normally strikes fear in the hearts of investors; the possibility of overpayment is a big unknown.

That said, sentiment remains poor for equities, so the premiums on M&A deals are lower than they’ve been in years past. That and Mayer’s experience at a successful acquisition-hungry firm should help to make the right decisions about what they buy.

Ultimately, Yahoo! still has a strong search business that attracts more than 650 million unique visitors per month. It’s easy to write off Yahoo, but the bottom line is that the firm still makes money. That, coupled with investors’ anxiety over this stock’s future makes it an interesting contrarian name this week.

Ingersoll-Rand

It’s been an impressive year for industrial name Ingersoll-Rand (IR). Shares of the $13.6 billion firm have rallied more than 45% since the start of the year, outperforming the S&P 500 by a factor of more than 3. IR manufactures a large number of well-known brands, ranging from Club Car golf carts to Schlage locks to Trane air conditioners.

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Ingersoll was one of many industrials that decided to tighten its belt in 2008, cutting its overhead costs and ultimately ensuring that more of every dollar it brings in makes it to the bottom line of its income statement. That’s helped to generate net profit margins approaching 10% in the last year. IR’s brands may not be particularly complementary, but they are mainly league-leaders in their respective niches, a fact that provides for premium pricing and a stickier customer base of after market parts.

To be sure, Ingersoll still isn’t in a “normal” market for its products. Despite a pickup in construction, building is still depressed from prerecession levels. When those numbers start to pick up again, particularly on the commercial side, Ingersoll-Rand should benefit disproportionately.

In the meantime, a reasonable balance sheet and a growing emerging markets business should help investors wait things out. Just keep an eye on Friday’s earnings call.

ResMed

Medical device maker RedMed (RMD) rounds out our list of Rocket Stocks this week. RMD’s primary business is in manufacturing airflow generators and masks for sleep apnea patients, a business that could provide a springboard for ResMed to move into other breathing disorders with underserved device markets. The firm announces its next round of earnings on Oct. 25.

ResMed has built a business on being innovative. When the firm decided to move into the sleep apnea business, it used superior technology to take market share from the medical device makers who held the top spots. As RMD continues to innovate, it should open up new markets. New pushes toward home testing of sleep apnea should help lift the fortunes of all the medical device makers in the business, but a push toward treating other related breathing disorders holds the most promise in the longer-term.

Financially, ResMed is in good shape, with around $560 million in net cash on its balance sheet once debt is accounted for. Short sellers have historically mobilized against shares of ResMed, shoving the firm’s short interest ratio in the double-digits and making this stock a good candidate for a short squeeze.

With RMD’s short interest ratio sitting at 14.6, it would take around three weeks for shorts to exit their stakes in the stock. That adds some extra upside potential to this name ahead of earnings.

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, 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.