Each week, in my research for potential rocket stocks, I look for the possible near-term catalysts that could drive specific stocks higher. This past week, despite the volatility, most stocks ended up higher. Google (GOOG), Ford (F), Oracle (ORCL) -- you name it. They were up.
The goal for this week is to look for stocks that are likely to trade with more volatility in the coming days, with the hope that those big moves in stock price will be in a positive direction.
Here are three stocks found in this week's Rocket Stock portfolio.
3Com (COMS): The stock moved 20% higher intraday when it last reported earnings. Last year, private-equity firm Bain Capital and Chinese-based Huawei Technologies proposed a $2.2 billion deal, which was rejected by the U.S government over concerns that sensitive military technology could be compromised by the Chinese government. The market has totally forgotten that on Aug. 5, 3Com raised its forecast for the fiscal first quarter to $335 million to $340 million, compared with the previous estimate of $325 million to $330 million. The company also expects its non-GAAP earnings per share to be in the range of 6 cents to 8 cents, compared with the prior view of 3 cents to 5 cents. 3Com seems like a good risk/reward trade ahead of the quarter
Anheuser-Busch (BUD): Anheuser-Busch, which is trading 10% below its takeover price of $52 billion, or $70 per share, is the best risk arbitrage out there today in the market. Acquirer InBev proposed to purchase the shares of Anheuser-Busch for $70 per share. Typically, until an acquisition is completed, the stock of the target typically trades below the purchase price. An arbitrageur will buy the stock of the target and make a gain if the acquirer ultimately buys the stock. Recently, Brazilian antitrust regulators approved without restrictions the sale of Anheuser-Busch to InBev.
Huntsman Chemical (HUN): As we speak, Huntsman's management is in court fighting a nasty lawsuit against private-equity firm Apollo and its founder, Leon Black. Huntsman agreed last year, in principal, to be purchased by Apollo for $28 a share. However, Apollo recently invoked an "adverse change" clause and walked away from the deal, spurring a nasty lawsuit. Huntsman currently trades with a forward P/E of 15 and an EV/EBITDA of 9.1. Last quarter, Huntsman's revenue rose to $2.9 billion from $2.47 billion during the year-ago period, helped by higher selling costs. Revenue from the company's polyurethane segment increased to $1.16 billion from $1.01 billion during the second quarter last year. Materials and effects revenue increased to $688.8 million from $621.5 million. Performance products revenue jumped to $725.1 million from $548.4 million, while pigments revenue increased to $320.7 million from $293.2 million.
We also like Research In Motion (RIMM) ahead of the quarter
For more ideas, including Winnebago (WGO), Christopher & Banks (CBK), State Street (STT) and Celgene (CEG), make sure to check out this week's Rocket Stock portfolio.
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. 21, 2008
