BALTIMORE (Stockpickr) -- China's decision to make its currency more flexible should have a strong influence on markets this week, as investors react to the potential for more-attractive trading terms with the world's largest exporter. The Chinese government has previously been criticized by the West, its biggest customer, for unfairly manipulating the renminbi to encourage the importation of Chinese goods. The decision to make the currency more flexible means that the Chinese people could see additional buying power and that other countries could see additional exporting power.
It also means that China sees the economy's recovery as strong enough to warrant leaving a larger portion of the renminbi's value up to market participants. That fact has already has a bullish impact on the European markets -- and it should spill over to U.S. stocks at the market open.
This week, we'll take advantage of that upward momentum with five fresh Rocket Stocks plays.
For the uninitiated, Rocket Stocks are our weekly list of beaten-down stocks with near-term growth catalysts and long-term fundamental growth potential. In the last 48 weeks, Rocket Stocks have outperformed the
index by 53.14%.
Without further ado, here's
Tech Stock Short Squeezes for June
While big-ticket items such as cars have taken a sales dive in the last couple of years,
investors wouldn't know it. The company, which operates 100 used-car supercenters in 46 metropolitan areas, saw strong performance in fiscal 2010 thanks to a game-changing business model for the used-car industry.
We all know the stereotype of the used car salesman, but that's something that CarMax is attempting to change. By putting a national brand name and standardized inspection process behind all of the cars the company sells, CarMax is able to garner enough consumer trust to move more vehicles at a higher premium than its competitors. CarMax proved to be an increasingly attractive alternative during the credit crunch. As consumers sought to spend less, many turned to CarMax on their next auto purchase for a high quality used alternative.
As consumer spending picks up, though, I expect CarMax's growth to continue. That's because as many consumers turn their focus to the new-car market (where CarMax also operates in limited locations), consumers who had previously ruled out purchasing from a dealer will turn to CarMax in 2010. Expect to get the first inklings of that shift when the company announces earnings on June 23.
Who Owns CarMax?
It seems as if
makes our Rocket Stocks list ever quarter ahead of earnings. More important, it seems as if the company never fails to impress Wall Street thanks to the impressive growth the Oregon-based apparel giant is seeing in emerging markets right now. While the athletic apparel market in the U.S. is highly competitive and nearly saturated, focusing on selling Nike products in the places once known for Nike knockoffs has proven to be a profitable move for the company.
That's not to say that U.S. growth has stalled. Nike maintains a foothold on many of its retail customers, which are already seeing an economy-driven spike in sales. But international sales offer substantially higher growth rates, something that Nike's in need of thanks to significantly less attractive exchange rates in the EU, which accounts for more than 20% of the company's sales.
Nike's June 23 sales call should shed some light on the company's growth prospects for fiscal 2011, including whether the company can manage to maintain those attractive double-digit profit margins in the next year.
Who Owns Nike?
HR and payroll outsourcer
is another stock that's set to announce its quarterly numbers this week. The company, which handles everything from benefits management to cutting pay checks for small to medium-sized businesses, is highly dependent on a high level of employment to keep its business going strong. But double-digit unemployment numbers haven't stopped management from delivering double-digit profit margins in 2010. Expect that trend to continue as jobs come back online.
Paychex currently benefits from high switching costs and a capital-light operating structure, two factors that have kept profits from tumbling in the last couple of years. The company's core client base consists of a politically sensitive segment of the business world, which should mean that the government will continue to be an active participant in keeping jobs afloat for Paychex's 550,000 clients.
Despite economic headwinds that will continue for the rest of the year, this company has an excellent management team and nearly spotless balance sheet. Wall Street will have an eye on earnings on June 23.
Who Owns Paychex?
Arnold Van Den Berg
For more stocks that made this week's cut, including
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-- Written by Jonas Elmerraji in Baltimore.
Jonas Elmerraji 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