Stock Quotes in this Article: MA, TSCO, VMW, LNKD, MDLZ

BALTIMORE (Stockpickr) -- Could the S&P 500 hit new record highs in the first quarter of 2013? It’s looking more and more likely by the day.

Right now, the big index is just 5% shy of the record highs that it hit back in 2007, meaning that it’ll only take a bit more than the year-to-date performance the S&P posted in the first couple weeks of January again to top that high water mark for stocks. The fundamentals support a climb too. We’re knee-deep in earnings season right now, and more than 70% of firms have bested analysts’ estimates so far; that’s a signal that Wall Street has sentiment pointed in the wrong direction in January.

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Also, stocks are still cheap. Major indices are all sporting P/E multiples below their multi-year averages right now, a signal that stocks have ample room to appreciate before equity prices get “expensive.” An uptick in equity inflows in the last couple of months is critical too -- it indicates that cash is starting to move from the negative real rate environment of favored risk-free assets like treasuries and back into the positive real returns of stocks again.

That’s why we’re taking a look at anew set of Rocket Stock names today.

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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 185 weeks, our weekly list of five plays has outperformed the S&P 500 by 74.4%.

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

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Mondelez International

Even though the name is still not that familiar to investors, Mondelez International’s (MDLZ) business should be. The $50 billion former parent of Kraft Foods Group (KRFT) spun off its grocery unit last fall, breaking the firm’s snack food unit into a completely separate publicly traded entity and changing its name. Mondelez owns brands such as Oreo, Cadbury, Trident gum, and Ritz crackers.

The move to split up operations makes a lot of sense, particularly for shareholders of Mondelez. Because MDLZ’s brands have historically carried some of the heftier margins in Kraft, the firm stands to offer some stellar profitability improvements -- once the hangover from spinoff and acquisition costs wears off.

Mondelez benefits from mature product lines here at home with relatively high consumer stickiness, but more than 80% of the firm’s sales come from outside of North America. Much of that remaining exposure comes from emerging market economies, exactly the mix that investors should be targeting from this stock. As economic tailwinds start kicking up again, key exposure to countries like China and India should materially boost MDLZ’s top line.

Mondelez picked up considerable debt after the grocery business spin-off, but with close to $4 billion in cash on its balance sheet, the firm is still in solid shape for 2013. Analyst sentiment is on the upswing for MDLZ, so we’re betting on shares of this Rocket Stock this week.

VMWare

Software firm VMWare (VMW) is one of the industry’s biggest vendors for virtualization solutions that help to wring more utility out of computer servers. The firm’s tools are used to transform a single physical PC into multiple virtual machines, enabling data centers to offer more hosts without shelling out (or finding space) for new physical servers. With the demand for cloud services that we’ve seen in the last several years, that’s a good side of the trend to be on.

VMWare has been courting desktop users more recently too. With a big installed base and a reputation for being a reputable IT infrastructure software provider, the firm has some big advantages in trying to grab share from other virtual desktop software platforms. Even though the popularity of cloud computing has led to some ramped up competition for VMW’s business, the firm hasn’t ceded its leadership role to new comers so far.

Financially, VMWare is in stellar shape, with $4.4 billion in cash offsetting a paltry $450 million debt load. If management can push away any urges to overpay on acquisitions, that cash position should come in handy at adding onto shareholder returns in 2013.

MasterCard

Sometimes, playing second fiddle is a pretty good deal. Take MasterCard (MA), for instance: the firm is the number-two payment network in the world, with a logo that’s printed on around 31% of payment cards in consumers’ wallets. Together with industry standard-bearer Visa (V), MasterCard forms a duopoly in the payment business -- and a lucrative one at that.

Because MasterCard is the network, not the lender, the firm’s balance sheet is free from exposure to credit risks that could send banks reeling if defaults started climbing. Instead, spending is the only thing that’s tied to MasterCard’s financial performance. And that spending creates a positive feedback loop for MA’s card growth: since MasterCard is accepted almost universally, it’s a card that consumers want to carry. And in turn, it’s a card that more merchants have to keep accepting.

MasterCard currently carries $5.9 billion in cash and investments and no debt. While that cash position accounts for nearly a tenth of the firm’s market capitalization, investors shouldn’t see MA as a deep value name -- it trades at a pretty loft multiple. Even so, the uptrend in MasterCard is stellar, and shares aren’t showing any signs of backing off new highs.

With a massive tailwind as consumers shift to electronic payments, that valuation premium looks justified.

LinkedIn

LinkedIn (LNKD) went public back in the summer of 2011, joining a cadre of social media IPOs that hit the market around the same time. LinkedIn, though, is the sole survivor of the battle for investor dollars; since going public, the firm has rallied 30%, making it one of the few social media names that hasn’t lost investors money from the get-go.

A big part of that has to do with LinkedIn’s business. While other social media firms earn revenues by distracting their users from what they’re trying to do (and getting them to click on ads while stalking their friends, for instance), LNKD makes money by helping users with the exact task they’re trying to accomplish: find a job, network, or hire someone. That seems like a small distinction, but it’s critical to LinkedIn’s ability to make money off of each user. The historically high employee turnover we’ve seen in recent years makes LinkedIn a must-use product, particularly in an environment where traditional job websites are being seen as less and less useful.

LinkedIn sports a big user base that gives it a hefty economic moat. New potential competitors can’t merely hang up a shingle and expect the type of user engagement that LinkedIn enjoys. That fact should keep rivals at bay. The firm’s spotless balance sheet includes close to $700 in cash and no debt, a solid position to enter 2013 on.

While this stock is no value name either, its trajectory warrants jumping onto shares ahead of Feb. 7 earnings.

Tractor Supply

It’s been a great year for Tractor Supply (TSCO). Shares of the $6.6 billion retail chain have rallied close to 18% in the last 12 months, besting any performance the S&P 500 could turn out over that same period. Tractor Supply is a big name in niche retail, offering up everything from clothing to home and garden products, to pet care items in its 1,000 store network.

And yes, the company sells tractors too.

Tractor Supply is a niche name because its target market isn’t the mainstream consumer. Instead, it caters to more rural consumers who court a country lifestyle. The firm’s catch-all inventory would normally looks like a liability, but in TSCO’s case, the overly diverse product mix can be forgiven -- it clearly works for the firm’s demographic.

TSCO’s store footprint is still relatively small. The company builds its locations in rural communities outlying major metropolitan areas, positioning that offers enough consumer concentration to support a store with the demographics that will want the products Tractor Supply sells. As more stores get opened, sales numbers should expand considerably. The firm’s ability to finance new store builds with cash (rather than a mountain of debt) is commendable too. Home improvement sales continue to move higher in 2013, and they should keep dragging Tractor Supply higher too.

To see all of this week’s Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.


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