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Top Rocket Stocks for the Week of Sept. 17

Kohl's and Harley-Davidson could move higher.

For my weekly Rocket Stocks column, I like to find beaten-up stocks that I believe have the potential to snap back in the coming days because of a specific catalyst. I constantly check the 52-week low and analyst downgrade lists in the hope that I spot an oversold gem from which readers and fellow investors can profit. This week though, I decided to do things a little differently.

Most investors are speculating that the

Federal Open Market Committee

is going to cut the federal funds rate when it meets Tuesday. I have been quite clear in my writings and appearances on

TheStreet.com

and in other media outlets that there is no direct correlation between interest rate cuts and how the market and stocks in general perform.

However, there is and has been a general perception on Wall Street that stocks should rally (at least in the near term); last week was a good example of that thinking. This week's picks are going to be focused around such a move.

Before I make any recommendations, however, let's take a quick look at how last week's picks panned out.

Now let's look at this week's portfolio:

Rocket Stocks for the Week of September 17th-21st

.

First up is

Harley-Davidson

(HOG) - Get Harley-Davidson, Inc. Report

, a stock that's trading around its 52-week low. Last week, Rick Wagoner, the CEO of

TheStreet Recommends

GM

(GM) - Get General Motors Company Report

, said that a quarter-point cut in interest rates would help auto sales tremendously and would spark additional profits for the sector. Auto stocks were up huge last week, but Harley flat-lined.

Last week, Harley cut its earnings predictions and said it would cut bike shipments, news that sent shares lower. Considering its loyal brand following, Harley-Davidson is likely ripe for a snapback rally. With $1 billion in both operating cash flow and nearly $750 million in cash on its balance sheet, Harley just announced that it will be boosting its dividend by 20%. Look for a snapback rally.

Next up is

Kohl's

(KSS) - Get Kohl's Corporation Report

, which is a very similar play on the consumer just like

Saks

(SKS)

was for us last week. Many hedge funds are short consumer-oriented stocks as rising oil prices make it seem logical that consumers would stop spending. Down more than 20 points from its high, Kohl's should see increased sales as back-to school estimates appear to be too low, thus making it a perfect snapback play.

Next up is

Level 3 Communications

(LVLT)

. Since reporting disappointing earnings a few weeks ago, Level 3 has been on a slide, spurring serious chatter in the Answers section on Stockpickr.com.

Level 3 is one of Jim Cramer's speculative stocks of the year, as it is a play on the increasing demand for Internet-related bandwidth. What we're looking at here is to take the current situation and apply it in ways in which others have yet to do. If you listen to the

Corning

(GLW) - Get Corning Inc Report

call, it is clear that Corning is experiencing an overall demand for fiber lines, the heart of the broadband shortage. That is why we believe Level 3 is the perfect play off the Corning quarter.

Adding to the bullish case for Level 3 is the ramp that

F5 Networks

(FFIV) - Get F5, Inc. Report

shares have been climbing all year long. Its business is related to Level 3's. One other item is that Level 3 has a massive amount of debt in the form of convertible bonds. The stock should rally as the 10-year note falls, because its debt costs will become cheaper.

One last item to note is that there was a massive amount of option-buying in Level 3 on Sept. 6, with someone taking 30,000 of the January $7.50 calls for 20 cents. All of these factors could lead to a snapback soon.

Next up is

Suncor

(SU) - Get Suncor Energy Inc. Report

. The stock is the main holding at

T. Boone Picken's BP Capital

, which had $139 million invested as of the last regulatory filing.

Suncor's two main segments are oil sands -- the recovery of oil from places where it's typically more expensive to extract oil, such as the tar sands of Canada -- and natural gas. Suncor acquires, develops and produces natural gas from reserves in western Canada.

Suncor trades at 10 times cash flows, yet the full potential of this company is unknown. Because oil is right around $80 a barrel oil, companies will have to increasingly look toward natural gas reserves and the Canadian tar sands for oil. Pickens is making a huge bet that this is the future of energy production. Other Pickens plays include

Transocean

(RIG) - Get Transocean Ltd. Report

and

Schlumberger

(SLB) - Get Schlumberger NV Report

.

I looked at several other stocks for this week's picks, including

Lehman Brothers

(LEH)

,

Meritage Homes

(MTH) - Get Meritage Homes Corporation Report

and

New York Community Bancorp

(NYP)

. For the entire list, check out the

Rocket Stocks for the Week of September 17th-21st

on Stockpickr.com.

To find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:

  • Old Lane: Old Lane is the hedge fund that Citigroup (C) - Get Citigroup Inc. Report bought. It just reported that it is down 5% for the month of August and up only 2% year to date. Old Lane has $3 billion in assets.
  • Today's Hot List: This daily list is a must-view at midday each day to see what stocks are making the biggest moves and why.
  • Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard. When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. They will be buying at the lower prices, so you should be also.
  • Ditto for the 52-week low list. You must check the above two lists every day if you hope to find volatile stocks.
  • Biotech Short Squeezes. Dendreon (DNDN) and others can often be found in this category.
  • Stocks Rising on Unusual Volume: These are potential breakout stocks.
  • Stockpickr's System Trades of the Day: These are trades triggering that day in various backtested trading systems we've developed.
  • Stocks With Unusual Option Activity: Perhaps someone knows something?
  • Latest Activist Situations: These are beaten-down stocks where hedge funds are accumulating and demanding change. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on your must-view list.

One final place to frequent is the

Answers

section on Stockpickr, where ideas such as those presented in this article are thrown around daily.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for

The Financial Times

and the author of

Trade Like a Hedge Fund

,

Trade Like Warren Buffett

and

SuperCa$h

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

click here

to send him an email.

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