- 4 Tech Stocks to Trade (or Not)
- 3 Big Stocks to Trade (or Not)
- 5 Stocks Setting Up to Break Out
- 5 Dividend Stocks That Want to Pay You More
- 5 Stocks Under $10 Set to Soar
5 Stocks That Could Rocket Higher - views
BALTIMORE (Stockpickr) -- With wrapping paper still sitting around many Americans’ Christmas trees, and just a few days left until the official end of 2011, many investors are taking their eyes off of the market this week.
Traditionally, the week between Christmas and New Year’s Day offers relatively low trading volume as traders spend a few days away from their screens. That’s likely to be especially true this year, as a frustrating investing environment left plenty of opportunities for both longs and shorts to take losses. As I write, the S&P 500 is up only 0.6% on the year, making 2011 the least-changed year since 1970 if stocks don’t post a material move this week.
But don’t let “least changed” fool you -- 2011 has also been one of the most volatile years on record. To combat that, we’re looking for gains in a new set of Rocket Stocks this week, our final list for 2011.
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 133 weeks, our weekly list of five plays has outperformed the S&P 500 by 82.89%. With that, here’s a look at this week’s Rocket Stocks.
Even if it’s been a flat year for the market, it’s been a stellar year for shares of IBM (IBM) -- Big Blue has rallied nearly 26% since January. That strong performance has been predicated on a series of strategic acquisitions, dividend increases, and positive earnings performance that’s put investor eyes back on IBM this year.
With new trends in enterprise computing getting plenty of attention, IBM is poised to take full advantage.
IBM is one of the largest enterprise IT firms in the world, with a portfolio of product offerings that encompass everything from mainframes to infrastructure software and consulting services. That mix of products gives IBM plenty of cross-selling opportunities between different clients in its massive customer Rolodex, the majority of whom are located outside the U.S.
Because the company made the conscious decision to exit the PC business years ago, it’s several steps ahead of rivals whose core computer business is still a drag on earnings. A strong balance sheet and attractive growth strategy should keep IBM’s rally going as we enter 2012.
PNC Financial Services
Pittsburgh-based PNC Financial Services (PNC) is one of the largest second-tier banks in the country, with more than 2,500 branches spread down the East Coast from Pennsylvania to Florida, and parts of the Midwest. In the banking business, conservatism has become the new gold standard for firms -- and that’s a trait that PNC exemplifies. The firm was quick to pay back TARP funds and take on bargain acquisitions during the downturn, and as a result, the firm’s net margins exceed 20%.
Because PNC remained primarily a banking business before the recession (unlike bigger names currently struggling), the firm has been able to keep its tier 1 common ratio in the double-digits. That banking mindset also means that underwriting risks were more thoroughly scrutinized by PNC before they got piled onto the bank’s balance sheet; that’s part of the reason that the firm has posted better numbers than many larger peers in 2011.
One result of PNC’s health is its dividend. At present, the firm’s yield rings in at 2.39% -- a larger payout for a financial sector stock. As PNC continues to grow, investors should expect that income to ratchet higher in kind. Keep an eye on fourth0quarter earnings on Jan. 18.
In a business where size matters, UnitedHealth Group (UNH) has scale to spare. The $55 billion health insurer covers more than 78 million Americans, providing major incentives for healthcare providers who want access to a massive chunk of the country’s population. That fact gives the Minnetonka, Minn.-based firm significant pricing power over the companies that it does business with.
Customer stickiness is one of the big advantages that comes with the health insurance business. By and large, individual policyholders are locked into plans picked by their employers, who pick plans in this commoditized industry based on cost for services. Because UNH can drive down its costs through its size, the firm remains in an enviable position right now.
While health care reform does create several economic headwinds for UNH, most of the changes are neutral to the firm – and any negative reforms have been priced into shares long ago. Shares of this stock have been on fire in 2011, climbing more than 42% -- with rising analyst sentiment, we’re betting that the climb will continue.
Mylan (MYL) is one of the largest generic pharmaceutical developers in the world, with more than 900 products distributed worldwide. Insomuch as the looming cloud of patent drop-offs is threatening the profitability of most big pharma firms, that patent cliff presents a potential windfall to generics firms such as Mylan, which stand to benefit by adding scores of popular drugs to their offerings.
Because of its size, one of Mylan’s biggest advantages is the ability to manufacture technically difficult drugs. Because generics don’t face the intellectual property protections of new drugs, competition can theoretically be quite challenging for genetic drugmakers. By focusing on more advanced drugs that have lost patent protection, the firm is able to carve out a small economic moat. It gets significantly more protection through its own drug development efforts.
Even though generics remain the lion’s share of the firm’s business, Mylan has been expanding its own efforts in developing biopharmaceuticals and other branded drugs in order to widen its margins. That factor, coupled with the expanding number of blockbuster drugs falling off patent from other firms, should help fuel growth at this generic giant.
It’s been a strong year for shareholders of Wisconsin Energy (WEC): Shares of the $8 billion power and gas utility have rallied more than 18% this year on top of a 3.45% dividend yield. As many investors look for defensive positions heading into 2012, WEC’s tenor should continue to attract capital.
WEC operates both regulated and non-regulated businesses in its namesake state, generating around 66% of sales from electricity and the balance in gas. While the recession has lowered demand for electricity across the board in the U.S., Wisconsin’s harsh winters and inadequate electric infrastructure have helped to provide some semblance of a backstop for WEC’s returns.
Dividends continue to be a priority for management, as the firm tries to reward investors who are able to choose from a growing pool of high-yield utility stocks. Recent capital investments have ramped up leverage on WEC’s balance sheet, but the firm’s cash generation capabilities should keep the dividends flowing for the foreseeable future.
Wisconsin Energy is one of TheStreet Ratings' top-rated integrated utilities stocks.
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, 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.