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Top Rocket Stocks for Week: Walter

James Altucher

Each week I hunt for stocks that I believe have the potential to climb higher in coming days. I compile and publish these ideas every Monday in the Rocket Stocks portfolio.

With the market's recent volatility, the best way to trade lately has been to find beaten-down stocks that have both short-term catalysts and strong fundamentals.

With such potentially volatile stocks, all you really need is a small chance that the shorts will start to panick on a rise in stock price, driving up the share price further as the shorts are forced to cover their bearish bets.

Back-testing on the Nasdaq 100 stocks shows that that a stock that drops 10% in a day will, on average, be 2% higher one week later. Conversely, if a stock is up 10% in a day, it is usually down one week later.

But before we delve into this week's Rocket Stocks, let's take a quick look at how last week's picks performed.

• Basic Energy Services (BAS Quote - Cramer on BAS - Stock Picks): Up 17.3% on the week.
• Arch Chemicals (ARJ Quote - Cramer on ARJ - Stock Picks): Up 8% on the week following earnings.
• Atlas America (ATLS Quote - Cramer on ATLS - Stock Picks): Up 7.7% on the week.
• NYSE Euronext (NYX Quote - Cramer on NYX - Stock Picks): Up 5.3% on the week.
• Bidz.com (BIDZ Quote - Cramer on BIDZ - Stock Picks): Finished the week up 1.8%, but was had been up about 10% following earnings earlier in the week.
• Nvidia (NVDA Quote - Cramer on NVDA - Stock Picks): Up 0.7% after missing earnings but getting an analyst upgrade.
• California Pizza Kitchen (CPKI Quote - Cramer on CPKI - Stock Picks): Flat on the week after an earnings beat and raised 2008 outlook
• Kaiser Aluminum (KALU Quote - Cramer on KALU - Stock Picks): Finished the week down 1%, but had been up some 12% ahead of earnings.
• Blackboard (BBBB Quote - Cramer on BBBB - Stock Picks): Up 5% following an adjusted earnings beat midweek, but ultimately ending the week down 1.2%.
• LeapFrog (LF Quote - Cramer on LF - Stock Picks): Down 4.9% on several Wall Street downgrades.

Now let's take a look at the Rocket Stocks for the Week of May 12-16.

First up this week is Shaw Group (SGR Quote - Cramer on SGR - Stock Picks), which could pop if investors start flocking back into construction companies.

Shares of Shaw Group have been under substantial pressure, down from an all-time high of roughly $77 primarily due to a belief that a U.S.-led slowdown will affect the broader global construction market.

Despite the recent drop in share price, Shaw Group has maintained its previous guidance for the 2008 year. With an almost $8 billion backlog and 68% of the that backlog going to be converted to revenue over the next 24 months, Shaw Group offers a potential snapback play.

Another name to keep an eye this week is LDK Solar (LDK Quote - Cramer on LDK - Stock Picks). Despite the parabolic move in oil, the solar names in general have lagged.

Down substantially from its all-time high near $77, LDK could snap back after it reports its earnings. The solar wafers company is scheduled to report after Monday's market close.

Another company worth looking into for a possible play is Walter Industries (WLT Quote - Cramer on WLT - Stock Picks), one of the largest servicers of coal and natural gas companies.

With coal prices ripping and names like Arch Coal (ACI Quote - Cramer on ACI - Stock Picks), Peabody Energy (BTU Quote - Cramer on BTU - Stock Picks), James River Coal (JRCC Quote - Cramer on JRCC - Stock Picks) and International Coal (ICO Quote - Cramer on ICO - Stock Picks) all near or at 52-week highs, it is only natural to assume that various Walter Industries products are in huge demand.

Walter Industries also got a few serious upgrades last week, notably from Brean Murray Carret, which boosted its price target to $150 from $107 a share. The stock closed Friday at $82.46. Brean Murry Carret said that "Walter would greatly benefit from higher coal prices."

Another stock making the Rocket Stocks for the Week of May 12-16 is Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks), which is set to report earnings this week. Other stocks making this week's list include Deere (DE Quote - Cramer on DE - Stock Picks) and Canadian Solar (CSIQ Quote - Cramer on CSIQ - Stock Picks).

As always, 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:

• Today's Hot List: This daily list is a must-view every midday to see what stocks are making the biggest moves and why.
• 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. They will be buying at the lower prices, so you should be also.

• Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks.
• Biotech Short Squeezes: Dendreon (DNDN Quote - Cramer on DNDN - Stock Picks) and others can often be found in this category.
• Stocks Rising on Unusual Volume: These are potential breakout stocks.
• 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 Option Activity: Perhaps someone knows something?
• Latest Activist Situations: These are beaten-down 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 your must-view list.

Another 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 Members' Forums section.