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TheStreet Open House

Sell Sprint, Buy CA Technologies, Trade Alcatel-Lucent

It is due to report earnings on Thursday and the question is, will that report provide a catalyst to send shares higher?

CA Technologies is one of the largest independent providers of IT management software. Its shares first started to climb after reporting third-quarter earnings that surged 32%. The company also announced plans to raise its annual dividend to $1.

While it can be argued that the surge was due to the announced dividend, its earnings were also very impressive. The company's revenue has been on an uptrend and most recently grew by 10% to $1.2 billion, the second straight quarter of double-digit growth.

With the stock trading at $26 and with a fairly inexpensive price-to-earnings ratio of 13, I would be a buyer ahead of the report on Thursday to add to an existing long-term position. The stock certainly has the potential to reach $30 by year's end, which will represent a premium of 15% above its most recent closing price.

Trade Alcatel-Lucent

It seems the fortunes of once-embattled networking equipment maker Alcatel-Lucent (ALU) are starting to take a more favorable turn. Although it is hard to tell of late, the IP and optics business for the company is looking better as well.

Its newest routing platform competes extremely well when compared to similar models from Cisco (CSCO) as well as Juniper (JNPR). Depending on whom you ask, you may hear that its model is even superior.

The company is also seeing an uptick in its wireless segment business, and ALU desperately needs this trend to continue. Although the company has shown moderate growth by having forged some good deals with U.S. businesses -- namely the aforementioned AT&T and Verizon -- Alcatel has shown that it is not restricted solely to U.S. business.

It has managed to get contracts from the three major Chinese service providers in China Mobile (CHL), China Telecom (CHA) and China Unicom (CHU). But that has meant very little to the broader market.

With the stock trading close to its 52-week low of $1.14, I think there is a good trade opportunity here to buy on this weakness as it might offer a nice surprise when it reports earnings on Thursday. I don't see this as a recovery play nor as a long-term hold. But for investors looking for quick pop in the range of 10% to 15%, this stock might be a good candidate.

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