Stock Quotes in this Article: COST, HOT, PEP, V, KORS

BALTIMORE (Stockpickr) -- Buyers slapped on their capes and tights once again last week, saving the stock market from falling off the cliff that is the 50-day moving average. Both the S&P 500 and the Dow bounced off a key support level as buyers got more confident in their abilities to buy the bounce.

Since this rally started in November, we've been in a buy-the-dips market. Well, last week was a dip.

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One of my colleagues called this past month a "buzzword correction." And he's right. From the dreaded Fed "taper" to Abenomics, we're just in a 2013 version of the fiscal cliff and sequester of last year. If the bears can suspend their disbelief in this rally for just a moment, we should be able to see the S&P climb back up to trendline resistance just in time for a new buzzword to hit the headlines.

So while most investors sit fretting over just how fast Ben Bernanke's twisting the faucet, we'll turn to anew set of Rocket Stock names for outperformance 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 204 weeks, our weekly list of five plays has outperformed the S&P 500 by 80.01%.

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

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Visa

It's good to be the king -- just ask Visa (V). As the No. 1 payment processing network in the world, Visa's logo graces around 60% of all payment cards on earth. That means that Visa gets paid every time a customer makes a purchase on its proprietary network. It also means that merchants and customers alike are more likely to value Visa's logo over the firm's rivals. High acceptance rates and large numbers of cardholders create a positive feedback loop for Visa.

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Visa is enjoying dual tailwinds right now, in the form of increasing consumer discretionary spending here at home as well as a global shift away from paper money and towards electronic payments. Visa's scale guarantees it an enviable share of both. So far, newcomers haven't posed a real challenge to Visa's model. eBay's (EBAY) PayPal unit has limited presence in brick and mortar stores, for instance, and any ground gained is offset by notoriously horrible customer service. Because Visa is merely the network, not the issuer, it's able to dictate strong consumer protections from the banks that license its logo. There is a major risk from alternative electronic payments firms that can out-innovate Visa, so that puts an onus on developing new payment tech in the near-term.

Financially, Visa is in terrific shape, with no debt and a hefty $4.7 billion cash and investment balance. Make no mistake, this stock isn't cheap. Its P/E currently stands at 82, which means that shareholders are aware of Visa's growth argument. But a momentum focus has been paying off in 2013, so we're betting on shares this week.

PepsiCo

2013 is panning out to be a strong year for PepsiCo (PEP) too. Shares of the $127 billion soft drink company have rallied more than 20% year-to-date, besting the broad market by a wide margin. PepsiCo is one of the biggest snack and drink manufacturers in the world, with popular names such as Frito Lay, Quaker and Gatorade under the Pepsi umbrella. Despite its beverage-centric name, the firm earns around half of its revenues through its food units.

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PepsiCo's direct-line into consumers' pantries shouldn't be underplayed. The firm runs a distribution network that's extremely difficult to replicate, and because PepsiCo's products run such a wide spectrum, it's able to get the most bang for its distribution buck. That efficiency continues to look even more impressive as Pepsi finishes digesting its U.S. bottlers and squeezing out every cost savings imaginable. That type of acquisition management is nothing new for Pepsi -- the firm has a long track record of growth through acquisitions. Attractive investments in emerging markets should start paying off far more in the future.

Pepsi's position as the No. 2 non-alcoholic beverage stock (behind Coca-Cola (KO)) doesn't detract from the firm's financial performance. Pepsi's brands generate significant free cash flows, and its dominance in the salty snacks segment provides ample diversification away from the soft drink brutally competitive market. It also helps to fuel the firm's 2.8% dividend yield.

Costco Wholesale

Membership warehouse store Costco Wholesale (COST) has built a lucrative business out of helping retail consumers pull as much value as possible out of their big shopping trips. Need a gallon of shampoo or a 100-pack of chewing gum? Costco can sell it to you in volume cheaper than most other retailers can. Costco sells fuel and merchandise across more than 448 stores in the U.S. and 174 international locations.

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The secret to Costco's success? It's membership fees. By charging shoppers as much as $110 per year for the privilege of shopping at members-only stores, Costco is able to earn most of its profits on membership fees and charge next to no markups on the rest of its products. More conventional retailers can't compete with Costco's ability to fill its stores with loss leaders. Another attractive element of Costco's model is sourcing -- the firm employs a talented team of buyers, who are often able to secure high-end products at bargain pricing (grey market watches and high-end clothing labels are a couple of notable examples). That helps drive a more affluent customer base to the firm's membership counter.

The approach works too. The average Costco location brings in around twice as much revenue per square foot than rivals like Sam's Club or BJ's. Despite a pretty high earnings multiple, Costco's financials are pretty hard to argue with. COST presently carries $6.5 billion in cash on its balance sheet and less than $5 billion in debt, an impressive net cash position for a firm that's growing out its store footprint so quickly.

With rising analyst sentiment in shares, we're betting on this Rocket Stock this week.

Starwood Hotels & Resorts

Worldwide travel has been heating up in 2013, and that's been a very good thing for Starwood Hotels & Resorts (HOT), the biggest luxury hotel operator. Starwood owns Sheraton, St. Regis, Le Meriden and W, as well as boutique properties and more value-focused brands like Aloft. That collection of offerings provides some semblance of diversification for Starwood's income statement, but the product mix ultimately skews very much upscale. And that's a very good thing for investors right now.

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Luxury travel spending remains on the mend in 2013, growing faster than the bargain side of the business -- and with more room for price adjustments in the first place. While Starwood operates the properties, it only owns around 5% of them. That sort of positioning spares the firm from the sort of balance sheet leverage that got punished the most during the Great Recession, even if it means that HOT has to hand off most of the profits to the property owners.

A robust timeshare portfolio did get hit during the recession as timeshare buying ground to a halt. As the industry comes back around later than HOT's hotel business, it could provide a nice tailwind -- one that won't hit its stride for a while still. As Starwood adds rooms to its business in the next few years, its earnings potential should continue to ramp up dramatically.

Michael Kors Holdings

Apparel stock Michael Kors Holdings (KORS) has had a strong showing since it went public in late 2011. Shares have rallied more than 152%, besting the S&P's 33% climb over that same period and stomping the pop and fizzle performance of other IPOs that went public around the same time. Founded by the eponymous celebrity designer (who is now the firm's Chief Creative Officer), Michael Kors has a hand in every corner of the apparel and accessory business from clothes and handbags to watches and jewelry.

KORS' niche focus on mass-affluent consumers puts it in the sweet spot of luxury spending. The firm has done well catering to a population of spend-happy young professionals, a coveted group of super consumers. Because Michael Kors cut its teeth in department stores, it was able to fund early growth without paying rent. Today, as the firm's own retail store footprint swells, it's trading off the lower cost structure for a bigger piece of each sale. That's helped shove KORS' net margins deep into the double digits.

A pristine balance sheet at KORS means that the firm carries no debt – but it's been piling away considerable cash quarter after quarter. Today, that cash balance stands at $472 million, an amount that leaves the door open for boosted shareholder yield in 2013. Rising analyst sentiment for KORS is putting this apparel name on our Rocket Stocks list this week.

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

 

Follow Jonas on Twitter @JonasElmerraji