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Rocket Stocks for the Week - 14119 views
The significance of that better-than-perfunctory performance hasn’t been lost on investors. With murmurings of a full-blown bull market right now, scores of market participants are feeling confident in stocks this year. In fact, 71% of investment professionals are bullish on equities right now, a reading that’s echoed by most other Wall Street sentiment measures.
That should come as little surprise even to casual market observers. Despite a shaky start to earnings season, the market has managed to shrug off nearly every questionable bit of economic data and bad news. On top of that, rising tides of volatility have impacted stocks almost exclusively on the upside. With an increase in flux projected to come back into the market soon, a stronger push higher could soon be in store.
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Meanwhile, we’re not waiting for the S&P’s say-so to play a broad-based increase in stocks. Once again, this week, we’re turning to our Rocket Stocks to find market-beating potential.
For the uninitiated, our weekly Rocket Stocks list consists of companies with short-term gain catalysts and longer-term growth potential. Despite the strong market performance of the last week, our plays managed to do even better: in the last 91 weeks, our Rocket Stocks have beaten the S&P 500 by 78.15%.
This week, we'll continue our trend of looking at stocks with rising analyst expectations. On Wall Street, expectations can mean everything -- and stocks with rising expectations often benefit from increased buying pressures from institutions and retail investors alike. To find them, I run a quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises.
Here's a look at this week's potential plays.
First up this week is Dish Network (DISH), the satellite-based pay television carrier that serves more than 14 million customers in the U.S.
From an industry perspective, Dish is one of the most disruptive players in the game thanks to a deep value proposition for consumers and designs on potential high-tech service offerings such as mobile television. While challenges are daunting for Dish -- and the industry as a whole -- this company has some attractive attributes worth watching right now.
Dish's positioning as a value-packed service provider is resonating with recession-wary consumers right now. While satellite television carries premium cost connotations, a series of aggressive advertising campaigns from Dish Network are challenging that consumer hang-up, and drawing new subscribers to Dish. While competition is incredibly tough in the television service space -- particularly with offerings from non-traditional cable providers such as Verizon (VZ) and AT&T (T) -- cost gives DISH an edge that shouldn’t be discounted.
At present, Dish's cash flow generation abilities are more than adequate to cover its moderate debt load. Potential entries into game-changing new markets are driving analysts to expect good things from this satellite provider. That’s why we’re betting on this Rocket Stock for the week.
The investment case for sin stocks has long been recession resistance. Even as other industries get hit by tough times, consumers will continue to find solace in their vices, or so the argument goes.
But while investors turned to sin stocks to fight off the headwinds of 2008, that argument didn’t quite pan out: The market’s most popular sin stocks got hammered alongside all the rest. 2011, though, could be the time to get back into these plays.
Take Constellation Brands (STZ), for example. This $4.2 billion winemaker and beer importer lays claim to some of the biggest brand names in both segments, including Arbor Mist, Robert Mondavi, and rights to distribute Corona, and St. Pauli Girl. The company’s pared-down sprits segment still lays claim to names such as Svedka and Black Velvet. Increased consumer spending should help boost Constellation’s business in a big way this year.
That’s primarily because of the premium bent to Constellation’s offerings. With a hand in a higher-cost product mix, relative consumer affluence has historically contributed a higher relative sales numbers for Constellation than for peers. At the same time, strong customer stickiness in the alcoholic beverage industry should play out well for the company as financially induced teetotaling customers start to increase their purchases at the liquor store once again.
Although Macy’s (M) has had more than its fair share of issues in the last several years, the rising tide of consumer spending has lifted all boats of late -- giving Macy’s an outsized rally over the course of the last 12 moths. All told, this retail stock has seen its shares climb more than 42% during that period.
The relatively rough performance of the recession has served as a catalyst for change at Macy’s, spurring a number of operational initiatives at the company that are designed to improve efficiency, draw in more customers, and ultimately have a palpable impact on the firm’s income statement. One of the biggest changes has been in realigning product mix with demographic demands, a focus that should halt market share attrition that Macy’s stores have suffered.
The luxury spending trend should also bode well for the company’s Bloomingdales brand, which sports 40 stores in the U.S., a shot in the arm that delivers a bigger bottom line impact than namesake stores. Also boosting profitability is the push for private-label products, which sport significantly higher margins than merchandise from higher-cost brand names.
Momentum is in favor of Macy’s right now -- and increased analyst expectations should bode well for shareholders in the short-term.
-- 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.