With the slowest trading week of the year out of the way, investors and traders can finally get back into the normal hustle and bustle of the markets. Unfortunately, though, the stories in the market will most likely be the same. Where is oil going? Have financials bottomed? Who is leading in the presidential polls this week? All the same stories!
Whatever the case might be, there are new stocks with unique catalysts and new strategies that need testing.
To see which stocks those are, check out the weekly Rocket Stocks portfolio.
I like Stec (STEC), which is an indirect play on Apple’s (AAPL) new product launch in mid-September.
Stec is focused on solid state drive technology that can massively outperform existing flash memory. Unlike flash-based memory cards, SSD emulates a hard-disk drive, thus easily replacing it in most applications. Aided by the continuation of the decline in flash component pricing, with hyper growth in unit volume growth, Stec is poised to outperform in the long term as well as the short term (in other words, the next week).
Stec's Mach8/MLC SSDs (notebook applications) represent a breakthrough in that they will reduce the cost per gigabyte of notebook SSDs by more than 50% compared with SLC-based notebook SSDs. In addition, Stec's Mach8/MLC SSDs achieve better performance than the SLC-based SSDs currently available in the market. The pace of qualifications of Stec's Mach8/MLC SSDs with several top-tier notebook customers (including Apple) has accelerated since the beginning of the year. Management expects that major notebook OEMs will ramp to sizable production volumes during the third quarter of 2008.
The recent Dell (DELL) laptop recall debacle was reportedly caused by Samsung SLC-based notebook SSDs, and Apple coincidentally switches suppliers away from Samsung to Stec. The company's products are also EMC (EMC) qualified, and Hewlett-Packard (HPQ) is reportedly in the works as well. Stec's patented technology is likely one to two years ahead of the competition, which includes such companies as Intel (INTC), Micron (MU) and Samsung.
It is selling for 25 time forward 12-month EPS with a five-year growth rate of 33%.
Stec beat consensus expectations handsomely last quarter (7 cents vs. 3 cents) and raised its outlook for the second quarter in a row.
Another name I like this week is Aluminum Corp. of China (ACH), which has a forward P/E of around 7 and EV/EBITDA of 2.055.
The company has been a serious underperformer, as its shares have slumped from a high of $90 late last year to around $22 today. The main cause is lower producing from a few of its plants, which hurt forward guidance.
That said, one of the biggest input costs for aluminum producers is oil and natural gas -- and with oil and natural gas prices down huge, gross margins for Aluminum of China could be higher than analyst models.
For more ideas, including Joy Global (JOYG), SAIC (SAI) and Valero (VLO), make sure to check out this week’s Rocket-Stocks portfolio.
To find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:
Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard.
When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. The funds will be buying at the lower prices and likely supporting the stock.
Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks that can snap back
Biotech Short Squeezes: Dendreon and others can often be found in this category.Stocks Rising on Unusual Volume: These are potential breakout plays.
Stockpickr's System Trades of the Day: These are trades triggering that day in various back-tested trading systems we've developed.
Stocks With Unusual Options Activity: Perhaps someone knows something?
Latest Activist Situations: These are stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on the must-view list.
One final place to frequent is the Answers section on Stockpickr, where ideas such as those presented in this article are thrown around daily. And you can further discuss your ideas and share opinions in Stockpickr's Member Forums section.
Posted on Sept. 1, 2008
