Seasonality is pointing toward higher stock prices in the weeks ahead ...
While April showers bring May flowers, April has historically been a pretty flowery month for the stock market for the past decade or so: The S&P 500 index has charged higher during the month of April in eight of the past 10 years. And following a pretty perfunctory correction for the big market averages in March, the S&P is due for a retest of new highs this month.
But just because the market is being pulled higher doesn't mean that you should go out and buy anything--stock picking still matters in this market, and there are some clear-cut leaders that are dragging the rest of the market higher. To hone in on the big stocks to add to your portfolio in April, we're turning to a new list of "Rocket Stocks" that look primed to outperform here.
In case you're not familiar, 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 393 weeks, our weekly list of plays has outperformed the S&P 500's record-breaking run by 77.45%.
So, without further ado, here's a look at this week's Rocket Stocks.
Up first on our list of Rocket Stocks is perennial outperformer Facebook (FB) - Get Report. Facebook has been a market leader in 2017, charging 23.5% higher since the calendar flipped to January. That positive momentum isn't showing any signs of slowing down this spring ...
Facebook stands to benefit in a big way from the rising value of user data in advertising. The firm's social network is the most popular on the internet, boasting more than 1.6 billion monthly active users. That gigantic userbase translates into a large number of views that the firm can monetize through its advertising network. Because this social platform is built around knowing users' interests and friend networks, Facebook automatically owns a deeply valuable database of user stats that it can use to sell incredibly targeted ads at higher rates. Other, complementary platforms like Instagram and WhatsApp give Facebook the ability to ramp up ad impressions beyond its namesake site.
The big story at Facebook remains its ability to push international monetization closer to what the firm achieves here at home. North America contributes around half of sales despite making up a much smaller proportion of overall web traffic. If other regions start contributing more, Facebook has the ability to materially move its growth needle in the quarters ahead ...
Alibaba Group Holding Ltd.
Meanwhile, we're seeing another bullish 2017 price trajectory from shares of $264 billion Chinese e-commerce giant Alibaba Group Holding Ltd. (BABA) - Get Report. Alibaba's shares are worth 22% more today than they were when the firm started the year, leaving the big market averages in the dust. And macro tailwinds could help add fuel to Alibaba's growth in 2017 ...
Alibaba is the biggest e-commerce company in the world based on gross merchandise volume. The company owns the most popular online marketplaces in China, including namesake Alibaba, web marketplace Tmall, consumer-to-consumer sales site Taobao, and daily deals site Juhuasuan. Additionally, Alibaba also operates a payment network and a collection of cloud computing products.
Being the biggest comes with some equally big advantages in China's e-commerce scene: with more than 443 million active buyers, the firm's marketplaces attract sellers who want a big audience to market to. Likewise, buyers keep coming back because of Alibaba's selection of merchandise. The firm's cloud platform, AliCloud, throws another major competitor into the "platform-as-a-service" arena, which should benefit Alibaba because of its scale more than it hurts the attractiveness of the PaaS market. As black clouds surrounding China's economy start to clear in 2017--or, at least, if they're perceived to by investors--Alibaba could have an important tailwind pushing at its back this year.
Another major beneficiary from the increasing use of consumer data is Equifax Inc. (EFX) - Get Report. Even if you're not familiar with the financial situation over at Equifax, there's a pretty good chance that they're familiar with yours-that's because Equifax collects and analyzes credit data on more than 800 million consumers and 88 million businesses around the world. That massive database gives Equifax a wide economic moat ...
Part of that moat comes from the fact that Equifax's information products are critical to its users--for instance, lenders simply can't make risk-based underwriting decisions without a borrower's credit report. Likewise, the costs to license users' credit data is infinitesimal compared to the costs of replicating and maintaining the asset that EFX owns. Even better, credit bureau use is rarely mutually exclusive, as lenders look at multiple sources of data in making decisions and often pass credit-reporting costs on to borrowers, who aren't as price-sensitive as a wholesale data subscriber would be.
More than ever, non-lender customers like insurance companies, employers, property management firms, and others are beginning to use credit-worthiness data more regularly for their own risk management. That creates an important opportunity for Equifax in the years ahead, particularly if it can quantify the advantages that buying credit data provides. Equifax's business also scales well in emerging markets, where consumer debt is becoming an increasingly popular tool for burgeoning populations of middle class consumers.
Best Buy Inc.
A year ago, nobody liked Best Buy Inc. (BBY) - Get Report. In fact, at the time, I called it one of the "crappy" stocks that could give you the biggest payday in 2016. A year later, and priced 53% higher, investors are starting to warm to Best Buy. The good news is that this electronics retailer could still pay off handsomely for investors who've missed out on its 2016 upside.
Best Buy is the biggest bricks-and-mortar consumer electronics retailer, a title that it earned by virtue of the fact that all of its competitors have pretty much been unable to survive as viable businesses. But don't count Best Buy out just yet. The firm's biggest competitive advantage comes from the very thing that investors have hated the most about it: the 1,575 retail stores that the firm still operates.
While online-only rival
has been investing heavily in its physical infrastructure, Best Buy already has a massive footprint in place. And the firm is finally taking advantage of that asset by adding new distribution features like ship-from-store fulfillment from its Web site. That's helped it to out-grow Amazon online in the last year. With rising analyst sentiment in shares of Best Buy this week, we're betting on this Rocket Stock.
At the time of publication, author had no positions in the stocks mentioned.
Action Alerts PLUS, which Cramer manages as a charitable trust, is long FB.