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TheStreet Open House

5 Rocket Stocks to Buy Before They Blast Off

BALTIMORE ( Stockpickr) -- Last week was "brutal" for U.S. stocks. The venerable S&P 500 fell a whopping 1.07%, the worst five trading sessions since the correction at the start of the summer. Ouch?

>>5 Stocks Setting Up to Break Out

It may sound like a joke, but a 1% weekly drop has really been that rare this summer. And now, as earnings season draws to a close, Mr. Market is firing on all cylinders.

Despite last week's pullback in equities, stocks are still excruciatingly close to the all-time highs that got set at the start of the month. Indeed, it's far too early to start thinking about a top here. And that's exactly why it makes sense to take a look at five new Rocket Stock names this week.

>>5 Huge Stocks to Trade for Gains

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 211 weeks, our weekly list of five plays has outperformed the S&P 500 by 82.4%.

Without further ado, here's a look at this week's Rocket Stocks.

>>5 Stocks Under $10 Set to Soar Apple

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Apple ( AAPL), a Rocket Stock? Yes, you read it right. Despite a 15% drop in this stock's share price year-to-date, Apple is some huge upside potential ahead of it.

Right now, one of Apple's biggest catalysts comes on Sept. 10, when the firm is expected to announce a new iPhone (or iPhones) as well as a long-awaited TV. But no matter how Apple's media day ends up next month, this stock is dirt-cheap right now.

>>3 Tech Stocks Spiking on Big Volume

As I write, Apple sports a price-to-earnings ratio of just 11-- a tiny multiple that reflects investors' belief that the firm can't continue the breakneck growth it's achieved in recent years. But back Apple's mammoth cash position out of the equation, and Apple's P/E drops flat to 7. That's a lower cash-adjusted P/E than just about any other company in the tech sector. Apple boasts product attributes that should make it trade at a premium, not a discount: It's the only remaining PC maker that actually earns meaningful margins, it's the incumbent smart phone and tablet maker, and it owns the biggest music, video, and app ecosystem in the world.

Clearly, Apple's price is out of sync with the market now. To counter that, management has been working to provide shareholder returns of their own in the form of dividends and share buybacks. Because of the material size of Apple's cash position, those payouts could significantly concentrate Apple's shareholder base in the next few years.

AAPL is testing a long-standing resistance level. If shares clear resistance this summer, it could be the end of the downtrend.

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