) -- Investors didn't see it coming last Wednesday, when Bernanke and company at the
announced that the taper talk was being, well, tapered. And markets have been playing catch-up ever since.
With the winding down of QE postponed (at least for a little while longer) investors can turn their attention to more pressing matters: like yet another debt ceiling gun to Uncle Sam's head. Left unsettled, the government shutdown would kick off on Oct. 1.
I'll make a bold prediction: Politicians on both sides will prolong the drama until the last possible second, and then they'll resolve things by deciding to figure it out later on. The key difference between now and the last go-around is that at least the markets are getting used to the conspicuous dysfunction on Capitol Hill. In fact, some names are well positioned to rally into the end of September.
To get the most bang for our buck this week, we're turning to a
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 215 weeks, our weekly list of five plays has outperformed the S&P 500 by 90.7%.
Without further ado, here's a look at
2013 is panning out to be a stellar year for payment network giant
): Shares of the $128 billion firm have rallied more than 31% since the calendar flipped over to January. As consumers continue to show signs of strength, Visa should continue to show its shareholders the same.
Visa is the biggest name in payments. The firm's logo is printed on more than 60% of the world's credit and debit cards, a share of the market that's more than double that of its closest rival. In a lot of ways, payment card acceptance is a positive feedback loop: consumers see Visa's network accepted everywhere they shop, so they're more likely to get a Visa-braded card, and merchants see more customers use Visa than any other brand, so they're more willing to keep accepting Visa. That makes the firm's network extremely hard to replicate for new networks unless they're willing to take a huge haircut on the fees they charge.
Because Visa is the network, not the card issuer, it doesn't carry credit risk on its balance sheet from consumer borrowers. Visa facilitates the transaction, but it doesn't lend the money. As consumers shift continue their payments from predominantly cash and checks to predominantly electronic credit or debit card payments, the market should get bigger quickly enough for all of the participants to benefit. Visa's massive scale just means that it'll get to benefit more.
Let's face it, people love to hate
). In a lot of ways, Goldman was the posterboy for the problems of Wall Street that led to the financial crisis of 2008. But none of that changes how well GS has been executing in 2013.
Goldman Sachs is a diversified investment bank whose businesses include investment management, prime brokerage, and research on top of its traditional book-running. Think what you will of the regulations enacted since 2008, the smaller pool of large investment banks after the Great Recession means that GS automatically claims a bigger share of the market. Beyond that, the firm's reputation as a well-connected industry name holds a lot of cachet with many clients, particularly in the investment management side of the business, where wealthy retail clients want the Goldman Sachs name on their statements.
The firm's decision to become a bank holding company is likely to continue to constrain the level of risk that the firm is able to take on. The increased scrutiny isn't necessarily a bad thing -- it helps to prevent Goldman from conspicuously over-leveraging itself in chase of returns. The financial performance that GS has turned out in 2013 isn't likely to change much in the foreseeable future.
Another financial sector giant on our list of Rocket Stocks this week is
). Best known as a private equity firm, Blackstone actually offers its clients exposure to a wide array of alternative investments, ranging from those well-known private equity funds to real estate and hedge funds. As skittish high-net worth investors chase low-correlation investments in a market that's seen its share of scares, BX should continue to attract capital.
Blackstone's expertise in the private equity world gives it some big advantages. Unlike managers of public equity, PE firms take a more hands-on role with management of their portfolio firms, providing a mix of advice and outright orders. Blackstone's scale also means that it's able to pursue big deals that its smaller peers would need partners for.
The more conventional asset management business at BX is worth paying attention to as well. The firm runs one of the biggest real estate funds on earth as well as a colossal fund of funds, giving it major economies of scale that provide the flexibility to keep costs lower, greatly reducing what can often be one of the biggest barriers to meaningful returns for these types of investments.
As this equity rally continues to propel stock prices, Blackstone's unique menu of alternative investments should become increasingly important for investors.
Cognizant Technology Solutions
Cognizant Technology Solutions
) helps companies outsource high-cost IT services that range from software development to computer network maintenance. The firm has a pretty simple sales pitch: The company has a workforce with advanced technology expertise who work for less money than their Western counterparts. But it's how CTSH executes on that plan that makes it a unique name in the space.
Cognizant isn't the only Indian IT outsourcer out there. But it was one of the first Indian IT outsourcers to plant its base of operations here in the U.S. with a management team that's able to flatten cultural barriers to doing business from the onset. It combines outsourced low-level services (with huge labor cost savings) with localized consulting efforts. That gives Cognizant the flexibility to market multiple services to each client it serves, and the firm earns hefty profit margins for its trouble.
CTSH has a mature customer base in North America, but a less mature base in the Eurozone, where it's still got ample growth opportunities. Global IT needs have far exceeded global IT budgets for the last decade, and that trend is accelerating, not abating. As long as Cognizant helps to stretch those IT dollars, it should continue to perform well.
Another industry with huge tailwinds right now is automotive -- new-car sales continue to drive record numbers at automakers, spurred on by a combination of a record-aged auto fleet and record low interest rates. And auto parts supplier
) is one of the best ways to capitalize on that trend.
Delphi is one of the biggest auto parts suppliers for original equipment manufacturers, supplying everything from electrical components to safety products to powertrain modules to car factories around the world. Delphi got its start as a unit of
), and the Detroit giant still makes up around 20% of the firm's total sales. That means that the resurgence in the U.S. car industry specifically benefits Delphi in a big way.
Since Delphi provides car systems, not just simple parts, switching costs are high for its customers. Automakers can't go to another supplier without re-engineering its vehicles, and because of that, DLPH has a nice economic moat around its business. That, and the scale advantages of Delphi's size, provide a one-two punch that should keep its business performing at a high level for the rest of the year. Delphi has certainly had some missteps in the last decade, but it's healthier than ever before in 2013. With rising analyst sentiment in this Rocket Stock, we're betting on shares.
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, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to
. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in
Investor's Business Daily
, and on
Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji