U.S. stocks rallied for a fourth straight week, as military
tensions cooled off between Russia and Ukraine and the
February jobs data came in ahead of expectations. Next week
is shaping up to be quieter on the economic front.
Several model portfolio names participated in the rally this
week Depomed (DEPO:Nasdaq) and TherapeuticsMD (TXMD:Nasdaq)
led the pack, the latter of which posted double-digit
percentage gains. Elsewhere, we used a post-earnings selloff
in McDermott (MDR:NYSE) to add to our position on Tuesday.
Here is a list of companies in the model portfolio that have
confirmed reporting dates for this earnings season:
March 14 -- Ballantyne Strong (BTN:NYSE) and
March 18 -- Pacific Sunwear (PSUN:Nasdaq).
As a reminder:
-- A Game Breaker is going to change the landscape of an
industry, as Intel (INTC:Nasdaq), Microsoft (MSFT:Nasdaq)
and Wal-Mart (WMT:NYSE) did in their sectors. Investors can
make big money in these stocks by getting in before the
-- Inflection-Point stocks have a broken business model
that's on the mend, but have yet to be recognized by the
market. Investors who recognize a turnaround early can
pocket strong returns.
-- Stealth Stocks are often names unknown to the general
public, but can be hugely profitable investments --
especially when they have catalysts to boost their share
Also, Ones are stocks that we would buy at their current
quotes, Twos are stocks that we would buy on a pullback and
Threes are names that we would sell into strength.
Active Power (ACPW:Nasdaq; $3.42; 2,200 shares; 3.61% of the
model portfolio; Game Breaker; $4.75 price target): Active
Power's flywheel energy technology keeps its customers'
mission-critical processes up and running. Its hardware uses
half as much space as existing technologies do, but
generates twice as much power. The stock ticked higher this
week on little news. That said, we were encouraged to see
another round of insider buying reported. Active Power's
core business demand remains strong and we believe that
management has the company back on the right track for 2014.
Atmel (ATML:Nasdaq; $8.31; 900 shares; 3.58%, Inflection
Point; $10 price target): The company makes microcontrollers
that are used in electronics. The shares added 3% to recent
gains this week, as management gave an upbeat presentation
at a Morgan Stanley investment conference. We maintain our
belief that Atmel can expand margins in the coming quarters.
Ballantyne Strong (BTN:Amex; $4.87; 2,300 shares; 5.36%;
Stealth Stock; $6.25 price target): The company distributes
digital movie projectors and manufactures screens and
lighting equipment for theaters. The stock rebounded more
than 5% this week, ahead of the company's upcoming quarterly
report, which is scheduled for Friday, March 14. We will
provide a detailed earnings preview earlier in the week. We
continue to believe that Ballantyne deserves a premium to
its tangible book value.
Builders FirstSource (BLDR:Nasdaq; $8.60; 1,075 shares;
4.43%; Inflection Point; $10.50 price target): The company
distributes materials to homebuilders in the southern U.S.
It was a quiet week for the shares, which ticked lower. We
believe that Builders FirstSource can continue to gain
market share in the coming quarters.
Cott (COT:NYSE; $8.06; 800 shares; 3.09%; Stealth Stock; $10
price target): Cott produces and distributes soft drinks,
noncarbonated beverages and bottled water, primarily
focusing on private-label items for major retailers. The
stock ticked lower this week on little news. The company
continues to generate consistent cash flow, which management
uses to support the stock's 2.7% dividend yield.
Extreme Networks (EXTR:Nasdaq; $5.94; 675 shares; 1.92%;
Inflection Point; $8.75 price target): The company makes
Ethernet switches and recently doubled its size with the
acquisition of Enterasys Networks. The shares rebounded
nearly 4% this week. We are convinced that the stock offers
investors growth at a reasonable price.
McDermott (MDR:NYSE; $7.82; 675 shares; 2.53%; Inflection
Point; $11.50 price target): This engineering and
construction firm focuses on building and designing offshore
oil and natural gas facilities. We bought 125 shares on
Tuesday, as the stock lost 6% this week. In his bid to begin
fixing the mistakes of the previous management team, new
chief executive David Dickson, announced massive, "kitchen
sink" charges along with the quarterly results on Monday.
The company went on to announce three new contracts later in
the week and the stock finished Friday trading about 5%
higher than where we added to our position.
Pacific Sunwear (PSUN:Nasdaq; $2.92; 2,200 shares; 3.08%;
Inflection Point; $4 price target): This specialty retailer
operates more than 500 stores in the U.S., selling surf- and
skating-style apparel to teens and young adults. The shares
added more than 2% to recent gains this week on little news.
We believe that shopper traffic will improve -- along with
the weather -- this spring.
SandRidge Energy (SD:NYSE; $6.45; 1,200 shares; 3.71%;
Inflection Point; $8 price target): The company explores for
natural gas and oil in the U.S., primarily onshore. The
stock was unchanged this week, even though SandRidge
received two brokerage upgrades. We are encouraged that
management is boosting production and cutting costs and we
would consider adding to our position if the shares fall
Standard Pacific (SPF:NYSE; $8.94; 750 shares; 3.21%;
Inflection Point; $11 price target): This homebuilder
generates the majority of its revenue in California. The
shares were hit with some profit-taking this week and moved
fractionally lower. The company has solid pricing power and
we expect that it will continue to generate consistent
earnings growth over the coming quarters.
Synovus Financial (SNV:NYSE; $3.53; 1,650 shares; 2.79%;
Inflection Point; $4.75 price target): This Georgia-based
bank operates branches throughout the Southeast. The stock
added fractionally to recent gains this week, along with the
broader market. We continue to believe the company can
generate above-average growth over the coming quarters.
TherapeuticsMD (TXMD:NYSE; $7.78; 750 shares; 2.79%; Game
Breaker; $9.50 price target): The company is developing
female hormone replacement medicines. The shares added more
than 13% to recent gains this week. Management posted
quarterly earnings results on Monday, but TherapeuticsMD's
headline financial results will likely have little influence
on investors until 2015 and beyond. In the meantime, the
stock is trading 51% higher than our initial purchase, on
the prospects of the company's clinical pipeline. More
nimble traders may well choose to book some profits, but we
are letting our gains ride for the time being.
Huntington Bancshares (HBAN:Nasdaq; $9.80; 600 shares;
2.82%; Inflection Point; $11 price target): This Ohio-based
bank operates more than 600 branches across six states. The
stock added nearly 3% to recent gains this week, as the
financial sector led the way higher. The company is trading
89% above our average cost-basis and we would consider
taking some profits into the next market rally.
Kodiak Oil & Gas (KOG:NYSE; $12.05; 400 shares; 2.31%;
Inflection Point; $14.50 price target): The company explores
for oil and gas in the Williston Basin and Green River
Basin. The shares added 2% to recent gains on little news.
We remain convinced that management can deliver industry-
high production growth over the coming quarters.
Martha Stewart Living Omnimedia (MSO:NYSE; $5.24; 1,200
shares; 3.01%; Inflection Point; $5.75 price target): The
company operates in the home-goods segment, publishing
magazines, producing broadcasts and licensing products to
retailers. It was a quiet week for the stock, which digested
recent gains. We continue to believe the new management team
can unlock value from the company's core brands.
ON Semiconductor (ONNN:Nasdaq; $9.68; 700 shares; 3.24%;
Stealth Stock; $11 price target): The company makes analog,
standard logic and discrete semiconductors for use in data
and power management. The shares rebounded nearly 4% this
week and touched a two-year high on Friday. We believe that
ON Semiconductor remains leveraged to a gradual, global
TriQuint Semiconductor (TQNT:Nasdaq; $12.72; 600 shares;
3.65%; Inflection Point; $14 price target): TriQuint
produces integrated circuits for a wide range of industries,
including wireless handsets and communications networks. The
stock added nearly 4% to recent gains this week and touched
a new three-year high on Friday. The stock has now moved 38%
higher over the past two weeks and we would consider booking
some profits during the next market rally.
Unilife (UNIS:Nasdaq; $4.19; 1,300 shares; 2.61%; Game
Beaker; $6.50 price target): This manufacturer of
retractable and prefilled syringes offers products with
convenience, safety and comfort advantages. The shares lost
9% this week, as the biotech sector was a considerable
laggard. The company is scheduled to present at a Barclays
investment conference on March 13 and we would consider
adding to our position if the shares move below $4.
Vantage Drilling (VTG:Amex; $1.75; 5,900 shares; 4.94%;
Inflection Point; $2.25 price target): This offshore driller
contracts its rigs for the exploration of oil and natural
gas. The stock marked time this week, along with the
underlying price of crude oil. Even so, the company's fleet
is fully booked through 2014 and the shares trade at a
discount to the industry.
Yamana Gold (AUY:NYSE; $10.10; 775 shares; 3.75%; Inflection
Point; $12.50 price target): This gold-and-copper
exploration company operates seven mines and several ongoing
development projects in Brazil, Argentina and Chile. The
shares ticked higher this week, along with the underlying
spot price of gold. Management remains focused on improving
margins over the coming quarters.
Zix (ZIXI:Nasdaq; $4.61; 1,700 shares; 3.75%; Stealth Stock;
$5.75 price target): The company is a leading producer of
email-encryption software that enables doctors to
automatically send information to pharmacies. The stock
moved 2% higher this week, along with the broader market.
Zix has a lot of sales momentum and we continue to believe
the shares can move up through $5 by midyear.
Depomed (DEPO:Nasdaq; $13.70; 250 shares; 1.64%; Game
Breaker; $15.25 price target): The company markets specialty
drugs around its oral drug-delivery system, Acuform, which
are used to treat Type 2 diabetes as well as post-shingles
pain. The shares rebounded nearly 14% this week and touched
a new 15-year high on Tuesday. Depomed is trading 154% above
our average cost-basis and we would consider booking some
profits into the next market rally. We are also boosted our
price target to $15.25.
Graphic Packaging (GPK:NYSE; $10.45; 200 shares; 1.00%;
Stealth Stock; $11.25 target): The company produces
paperboard packaging that is primarily used by food and
beverage makers. The stock rebounded 2% this week on little
news. We continue to believe that Graphic Packaging in
leveraged to strong industry pricing and demand.
SunOpta (STKL:Nasdaq; $10.00; 125 shares; 0.60%; Stealth
Stock; $11 price target): This producer of natural and
organic food products also operates a joint venture that
recycles industrial waste and makes cleaning products. The
shares 3% this week to recent gains, as management posted
quarterly results on Tuesday. The company is reorganizing
its business to promote sales and margin growth over the
Swift Transportation (SWFT:NYSE; $26.44; 125 shares; 1.58%;
Inflection Point; $27 price target): This trucking company
transports goods throughout the U.S. and Mexico. The stock
added nearly 9% to recent gains this week and is now trading
211% above our average cost-basis. We will consider closing
out our position if the shares reach our price target in the
David Peltier & the TheStreet Research Team
We will add to McDermott after this kitchen-sink quarter decline.
Will management miss estimates again?
Kodiak Oil & Gas announced mixed quarterly earnings results while SandRidge exceeded expectations.
We added to two of our model portfolio positions during this week's rally and trimmed another during a post-earnings selloff.
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