Nothing is more depressing for a shareholder than to see the stock of a great company hit a slump. However, I believe the depression may be over for several favorites this week.
Each week at Stockpickr we compile a list of stocks that have the catalysts to send them soaring in coming days. For the full list of this week's rocket stocks, check out the
portfolio on Stockpickr.
I used several Stockpickr portfolios to glean ideas for this week's list, and they may prove helpful in your own research. This week I got ideas from:
- Stocks Rising on Unusual Volume.
- Top 10 Potential Short Squeezes, this list of stocks with high short interest and high insider buying is like the gift that keeps giving.
- The Online Advertising Index, this portfolio has successfully called the acquisitions of 24/7 Real Media( TFSM) and aQuantive( AQNT), and I believe there are still names that could follow suit.
- Biggest % Losers, this list of the largest-percentage losers in terms of stock price is always a good shopping ground for snapbacks.
- Latest Activist Situations, the latest activist, or 13D, plays from the StreetInsider.com 13D Tracker page.
Let's first take a look at
, a stock that reached an all-time high of $112 before hitting a slump for the past two months. There's been a lot of discussion both in Jim Cramer's
blog posts and on Stockpickr.com about the recent slump, but let's take a step back and look at the basic fundamentals.
- NYSE has a $13 billion market cap but $1 billion in cash and no debt, leaving it with an enterprise value of roughly $12 billion. Its balance sheet is extremely healthy, particularly when compared with a competitor like Nasdaq Stock MarketI:IXIC, which has $2 billion in cash but more than $1.5 billion in debt and lower cash flows -- $341 million in earnings before interest, taxes, depreciation and amortization -- with which to pay that debt.
- NYSE has EBITDA of $1 billion, and that number is expected to see a double-digit rise over the next year. Its enterprise-value-over-EBITDA multiple of just 11 puts it in potential buyout territory. Now I don't believe NYSE will get acquired, but if at any point it can't find accretive acquisitions, it would make sense for it to use cash to buy back shares at these levels, particularly since it can leverage up at 6% and buy back shares with an earnings yield of almost 10%. Every hedge fund and buyout fund, incidentally, looks at those types of numbers as well.
- Earnings are expected to climb from $1.64 a share in 2006 to $2.48 in 2007 and $3.37 in 2008. The only other place I see that kind of growth with a market cap this big is on Google (GOOG) - Get Alphabet Inc. Class C Report.
- Last week, large NYX shareholder Atticus Capital took a 4% stake in the Bombay Stock Exchange. This deal underlines how in our trade-deficit reality, one of our biggest exports is the U.S. expertise in financial services and innovation. NYSE Euronext is quietly becoming the world's financial marketplace. It's a 50-year game plan that will win. Atticus Capital, which is one of Cramer's favorite hedge funds, understands this implicitly and has been placing its bets. To see all of the fund's holdings, check out the Atticus Capital portfolio page on Stockpickr.
I believe NYSE's stock will make its move back to $100 quickly, and can even hit there this week. The stock closed Friday at $82.44.
Next up is
James River Coal
, which also made its way onto our list of
. This stock has been nothing but pure pain, plummeting from the $40s to the $6-range in the span of just over a year.
With the price of coal steadily rising, everyone was making a big bet on this coal company. Unfortunately, the costs to extract that coal were rising steadily with the price of oil. So the big bet was for nothing. That is until now. With oil holding steady and coal rising, I believe now is the time to place the bet on James River Coal.
It already trades at 11 times trailing cash flows, and that multiple will be headed lower as the spread between the cost of coal and the cost to extract it rises. If you don't believe me, you can always go over to
and ask Grange Johnson, whose portfolio we track with the
page on Stockickr. LaGrange has been loading up on James River shares.
( CKR) is a classic case of the short-sellers vs. the deep-value investors. The parent of the Hardee's restaurant chain (among others) finds its way onto our list of
Other plays on the list, including
( BSG), which recently announced it was getting acquired, and Ron Perelman play
( MFW), have already had significant run-ups. CKE Restaurants has a short-interest ratio of 6, meaning it would take six days of nothing but short-covering for the short-sellers to stop the pain if the stock were to move higher.
On the investment side, however, are the
-- a deep-value investment fund run by my friend Whitney Tilson, who has had huge success with
, two other fast food chains, over the past two years -- and
-- a fund run by retail specialist Jason Ader that has had recent success with fast-food chain
The other seven names on this week's Top 10 list are:
- Analog Devices (ADI) - Get Analog Devices, Inc. Report
- Astro-Med (ALOT) - Get AstroNova, Inc. Report
- Metal Management (MM)
- KongZhong (KONG)
- Hurray!( HRAY)
- Natus Medicalundefined
- Hurco (HURC) - Get Hurco Companies, Inc. Report
To read more about these potential breakout stocks, please check out the
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Astro-Med, Hurco, Hurray!, James River Coal, Natus Medical and KongZhong to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Altucher and/or his fund had no positions in stocks metioned, 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 several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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