BALTIMORE (Stockpickr) -- New month, new market . . . Or at least that's the theme that stocks have been playing since the calendar ticked over to 2012. Now that we've hit the first full trading week of March, can the rally continue?
By and large, all of the key fundamentals -- from employment to corporate earnings -- still look the same. At this point, it's the extraneous market factors (such as Europe's debt crisis and the price of oil) that are posing the most risk to Mr. Market in March. As the broad market consolidates right around newfound support at 1365 in the
and 13,000 in the
, we'll need to see some sort of positive catalyst to start equities on the next leg of their rally.
Even though it's unlikely we'll see that today, there's a good chance that the spark could come later this week.
To take advantage of that potential momentum, we're looking at a handful of new Rocket Stock names that could benefit:
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 142 weeks, our weekly list of five plays has outperformed the
With that, here's a look at
has had a stellar run in the last year, rallying more than 65% as more dollars flowed across its network -- and into the firm's top line. Sometimes, playing second fiddle isn't such a bad role; the firm's No. 2 payment network may not have the sheer scale that rival
enjoys, but a rising tide is lifting all ships as consumers shed checkbooks and cash in favor of cards.
Even though MasterCard is the No. 2 name in the payment card business, the firm commands an impressive 31% of the world's credit card market. That large base is critical for MasterCard's growth right now -- a large number of users means that retailers need to accept MasterCard, and that large acceptance rate helps sell new users on the network. In the payment business, scale absolutely matters and barriers to entry are high.
Financially, MasterCard is in stellar shape, with no debt and nearly $5 billion in cash sitting on its balance sheet. Ultimately, as consumers (particularly those in emerging markets) make the transition from paper to plastic payments, MasterCard should see a direct benefit on its income statement. This week, with rising analyst sentiment for this stock, we're betting on its shares.
MasterCard also turns up on Roberto Pedone's list of
from the fourth quarter of 2011.
Construction and aerospace conglomerate
makes everything from
Pratt & Whitney
jet engines and
air conditioners. That broad industrial exposure was a major detractor during the height of the recession, but it's become a more bullish factor now that the economy is heating back up.
United Technologies owns a strong portfolio of established brands in businesses where reputation counts. That's especially true in the commercial segment, where UTX may be forced to find a bigger chunk of its revenue going forward. Concerns over the U.S. defense budget could lead to less spending from government channels -- but UTX has ample commercial exposure to deal with a setback in defense spending. While the firm already generates significant revenue abroad, that's one area where UTX has plenty of room to grow.
A huge installed base for UTX's products also means that the firm is able to generate significant revenue selling parts for its elevators, air conditioners and helicopters. Because all three are big-ticket items, owners are more likely to source authentic parts (if third-party alternatives even exist for a given problem). While debt is fairly high, UTX operates in a capital-intense business; the firm throws off enough cash to cover those expenses and even pay out a 2.27% dividend yield right now.
United Technologies was on
of Fisher Investments in the fourth quarter of 2011.
is having a stellar year in 2012. While the broad market has pushed around 8.9%, The Gap has rallied more than 31% year-to-date on the heels of positive fourth-quarter earnings numbers. And now, investors are expecting more of the same.
in addition to its namesake store brand. Including niche names like Piperlime and Athleta, the company operates more than 3,000 stores worldwide. In general, the fashion business is tricky - retailers have to be nimble to cater to consumers' changing tastes. Historically, Gap has been successful at attracting shoppers to its stores, even if it's had a few isolated missteps along the way. While competition remains a major challenge for Gap's brands, the firm's massive footprint and brand awareness should help to keep the firm performing at a high level.
This year, management is pushing through a new merchandising strategy designed to improve turnover numbers and margins. That, coupled with a more staid approach to store expansion, should help make Gap look even more attractive to investors in 2012.
Michael Kors Holdings
Michael Kors Holdings
is another fashion brand that's been rallying in 2012. The only difference is that the rally in KORS puts even Gap to shame -- the firm has seen its share price increase by nearly 76% since the first trading day of January. Now, the question is whether Michael Kors can continue its breakneck trajectory . . . .
Luxury goods have shown surprising strength for the past few years, remaining relatively inelastic in the headwinds brought on by the recession of 2008, but enjoying increased sales as those headwinds abated. Michael Kors is no exception. The firm's breakneck price action has been matched by breakneck revenue and earnings growth, spurred on by a fast-growing store footprint and an "accessible luxury" model that's proven so successful in the last several years.
While KORS' status as a recent IPO adds an uncertainty factor to shares, the fact that the company generates substantial cash and sports a debt-free balance sheet should impress even the most risk-averse investors right now. While shares are hardly cheap, now looks like a good time to take advantage of momentum in this stock.
Few stocks have gotten the attention that
has in the last 12 months. Granted, it hasn't exactly been all positive this year . . . .
Netflix got Wall Street's attention by making a serious of high-profile management flubs in 2011, from attempting to split off the firm's DVD and online streaming businesses into two separate companies (with separate billing) to a major price increase that caused the firm to shed subscribers. Despite the negative attention, there's a reason why Netflix has such a big target on its back; the firm is the league leader in a lucrative business that content companies would kill to control.
Scale matters in the streaming video business. Because of Netflix's giant customer Rolodex, the firm is able to negotiate big-dollar contracts for content, which in turn attract even more subscribers to its site. While content firms' rival networks don't need that same scale to build similar libraries, Netflix still benefits from the physical DVD business, which could be the deciding factor for customers looking for a unified video service.
Competition is hefty in the video business, and uncertainty remains high into 2012. Even so, the upswing in analyst sentiment is hard to ignore -- so we're betting on shares of Netflix this week.
To see all of this week's Rocket Stocks in action, check out
-- Written by Jonas Elmerraji in Baltimore.
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At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
and has been featured in
Investor's Business Daily