JBL: A Perfect Storm

The large brokerages have come out with earnings that easily exceeded estimates. Unemployment is at a historic low. The market is finally starting to move up, and we can see an end to interest rate hikes on the horizon. These are good times.

I have two stocks that will capitalize on good market conditions and both could easily have 20% to 25% upside.

Applied Materials (AMAT Quote) is a stock under $18 that has a rock-solid balance sheet. With just under $6 billion in cash, AMAT has a mere $400 million in debt. Also, AMAT just announced a share-repurchase program of $5 billion, which could result in the buyback of more than 17% of outstanding shares.

AMAT is scheduled to earn $1.12 a share next year, giving it a forward multiple of around 16. Compare this with a projected growth rate of 15% and you have a P/E-to-growth ratio of just over 1 for a large-cap technology company. Those are my kind of numbers.

AMAT has seen its stock price drop about 15% from a recent $21 due to a glut in inventories. I consider this a buying opportunity and believe the risk/reward ratio is now in the court of the smart investor.

AMAT is a world leader in developing, manufacturing, marketing and servicing integrated circuit fabrication equipment. The glut in inventories hurts global demand for integrated circuits due to excessive supply; however, while supply is abundant right now, demand from the end-user is also high and will remain high given the insatiable demand the world has for consumer electronics.

AMAT has been punished too much for this rise in inventories. New orders were up 22% to over $2 billion. With AMAT's pristine balance sheet and future growth at 15%, I believe the stock is a great buy right now at the bottom of a cycle.