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Buy Alcoa, Intel; Sell Infosys; Hold Johnson & Johnson

Stocks in this article: AA JNJ INTC INFY

NEW YORK ( TheStreet) -- Aside from M&A speculation, nothing gets investors more anxious on Wall Street than earnings season.

This is a time when investors receive confirmation or denial whether they have placed the right bets.

As we enter the second week of third-quarter earnings season, we are going to look at a few companies that are heading in three separate directions.

Reason to Buy Alcoa

The recent earnings of aluminum giant Alcoa (AA - Get Report) demonstrate not only how undervalued the stock is, but also just how overly cautious investors have been.

Alcoa reported a loss from continuing operations of $143 million, or 13 cents a share. This included a payout related to an environmental lawsuit totaling $175 million. Excluding one-time items, the company earned $32 million, or 3 cents a share.

For the quarter, Alcoa reported revenue of $5.8 billion, better than analysts' estimates of $5.54 billion. The prolonged weakness in the price of aluminum, which has declined by 5% from the previous quarter and by 17% annually, has hurt Alcoa's revenue growth.

However, Alcoa beat both top- and bottom-line estimates, showing that it continues to make the best of a bad situation despite significant market turmoil.

The company continues to turn in one solid performance after the other while reminding investors of just how committed it is about turning its fortunes around and returning value to shareholders. Though the market may wish to discount the shares, investors should take this as an opportunity to get in on a good company facing some headwinds at the moment but with a solid history of performance.

Reason to Buy Intel

Although I don't currently own the stock, I've become somewhat of an apologist for chip giant Intel (INTC - Get Report). Nonetheless, it's for good reason. I'll grant that Intel underestimated the transition to smartphones and tablets to the extent that Apple (APPL) and Google (GOOG) have contributed immensely to growth of several of Intel's rivals, namely ARM Holdings (ARMH) and Qualcomm (QCOM).

But that does not mean Intel is a lost cause.

The company has all of the makings of a successful turnaround story. The company earned $2.83 billion in its most recent quarter and beat analysts' estimates while meeting its revenue goals.

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