By James Altucher
Posted on March 23, 2009

Due to capital constraints, time limitations or simply life getting in the way, most people cannot trade frequently enough to make most trading strategies work, and that is why I write this weekly Rocket Stocks column.

My main goal here is to find stocks that can rise in the coming week, no matter how the market moves. I like to look for snapbacks, earnings plays and other tradable market catalysts. As a general rule, we're looking to buy extreme weakness and sell extreme strength.

Before we get to this week's Rocket Stocks, let’s look back and see how last week’s ideas fared.

Adobe (ADBE) finished last week up 12% after surging almost 20% on Thursday despite posting a decline in its first-quarter 2009 profit and sales. For the December-February period, Adobe earned $156.4 million, or 30 cents per share, down 29% from $219.4 million, or 38 cents per share, a year earlier. Excluding one-time items, which analysts factor out during their forecasts, adjusted earnings totaled 45 cents a share in the latest quarter, beating average Wall Street estimates by a penny. Additionally, rumors regarding a potential buyout of Sun Microsystems (JAVA) by IBM (IBM) added additional froth in shares of Adobe.

Palm (PALM) finished the week down 5% after the company said retailers sold only 482,000 Palm handheld units during its third-quarter, representing a 42% year-over-year decline. Palm reported a net loss of $98 million, or 89 cents per share, compared with a loss of $57 million, or 53 cents per share, a year earlier, which was 3 cents worse than analyst estimates of a loss of 86 cents per share

3Com (COMS) finished the week essentially flat despite being down more than 10% on Tuesday. For the quarter, the company reported $49.1 million, or 13 cents per share, beating the average Wall Street estimate of 10 cents per share. Sales, however, declined on a quarter-over-quarter basis, to $324.7 million from $336.4 million just a quarter ago.

Appearing in this week's Rocket Stocks portfolio is Phillips-Van Heusen (PVH), a long idea ahead of the company's earnings announcement on Monday, March 23. Broadly speaking, PVH operates two seasonal businesses: wholesale and retail. Historically, its wholesale segment generates higher levels of sales in the first and third quarters, because spring and fall merchandise are sold directly to their outlet and retail stores in anticipation of the coming season. The retail segment generates higher levels of sales in the third and fourth quarters, as back-to-school and holiday shopping seasons take their full effect.

PVH generates revenue from five segments: wholesale dress furnishings, wholesale sportswear, retail apparel, retail footwear, and Calvin Klein licensing, which includes sales, royalty and advertising and other revenue from fees for licensing the use of the CK trademarks. Revenue from all segments has increased over the past five years at a 10% compound annual growth rate. However, given the current macroeconomic downturn, PVH has seen overall sales growth of just 4% year-to-date. CK licensing, which represents 12% of total annual sales and 48% of PVH’s operating profit, has seen sales and licensing revenues increased by almost 20% annually since the acquisition of CK in 2004.

While the operating environment for Phillips-Van Heusen has deteriorated substantially over the last several months, recent economic policies, both domestic and international, are likely to support economic growth ahead. Phillips-Van Heusen’s licensing revenue model allows the company to keep tighter levels of inventory, with fairly predictable cash flow, compared with its competitors.

In addition, less-capitalized retailers are now being forced to scale back growth initiatives to preserve current cash flow shortfalls amidst the worst consumer slowdown since the Great Depression. Alix Partners, a retail consulting firm, estimates that 25.8% of 182 large retailers are possible candidates to file chapter 11 in 2009. Invariably, over time, this will allow Phillips-Van Heusen to gain additional market share.

Phillips-Van Heusen is trading at 5.5 times 2009 earnings, which assumes -10% comps in its heritage business and flat to slightly positive sales and licensing revenues in Calvin Klein. Historically, Phillips-Van Heusen has traded for approximately 17.7 times trailing EPS and 12 to 15 times forward EPS. In addition, Phillips-Van Heusen, despite its competitive operating advantage, is currently trading at a substantial discount to its peers, which average an approximately 11.11 times trailing P/E.

For more ideas, including UltraShort Oil & Gas Proshares (DUG), a bearish position on Best Buy (BBY) ahead of the quarter, and a long position on China Life Insurance (LFC), check out this week's Rocket Stocks portfolio.

At the time of publication, Altucher had no positions in stocks mentioned.