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5 Rocket Stocks to Buy for Earnings Season

BALTIMORE (Stockpickr) -- Earnings season officially kicks off on Tuesday, when Alcoa (AA) reports its second-quarter numbers to Wall Street. With U.S. stocks pressing up against all-time highs this summer, the stakes are higher this quarter: good earnings numbers could help keep bears quiet about the record price tag on stocks.

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Meanwhile, price action continues to point higher. Despite some corrective action this morning, last week added 1.25% to the S&P 500, a hefty week that puts year-to-date performance at 8.54% when dividends are factored in. That puts the big index on track to record 17.6% gains for 2014, a big performance considering last year's earth-moving rally.

But as well as the broad market is performing this summer, there's one category of stocks that's stomping it. I'm talking, of course, about the "Rocket Stocks."

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 256 weeks, our weekly list of five plays has outperformed the S&P 500 by 80.19%.

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


We're starting things off with $153 billion oil field servicer Schlumberger (SLB). Schlumberger has been a spectacular performer in 2014, rallying more than 30% since the calendar flipped over to January. And with bullish analyst sentiment piling into shares of SLB this week, it makes sense to give this energy giant a closer look.

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Schlumberger is the largest oil servicer in the world. The firm's revenue comes from a menu of niche services such as seismic surveys and well drilling and positioning. In a nutshell, SLB's job is to pull oil out of the ground as efficiently as possible. Oil firms turn to Schlumberger because the tasks they need to accomplish are too nuanced or proprietary to pull off in-house. A consistently strong R&D budget means that SLB has been able to differentiate itself from other oilfield servicers thanks to valuable IP. Those investments will need to continue for Schlumberger to keep its edge.

High oil prices have been a major factor in SLB's recent success. The economics of SLB and oil prices are pretty simple: higher energy prices mean that more sites are economically viable for oil companies, and thus Schlumberger can do more work as its customers ramp up production. That makes SLB a good hedge against the ill effects of rising energy costs.

Look out for the firm's second-quarter earnings numbers to hit on July 18.

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UNH $112.74 0.00%


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