The Top 10 Rocket Stocks for This Week

Southern Union and Solarfun are ready to climb higher.
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When shares of a good company head into free fall, investors often arefaced with tough decisions regarding their overall exposure to thatstock. It appears, however, for at least a few such stocks that the freefall may be over this week. Each week at Stockpickr we compile a new list of Top 10 Rocket Stocks of the Week that havecatalysts that could make them explode to the upside in the comingdays bringing home big-time profits.

To generate ideas for this weekly list, we use several portfoliosthat could prove helpful in your own research. This week I got ideasfrom:

  • Stocks Rising on Unusual Volume.
  • Top 10 Potential Short Squeezes, a list of stockswith high short interest and high insider buying.
  • Biggest % Losers, a list of the largest-percentagelosers in terms of stock price.
  • Latest Activist Situations, the latest activist, or13D, plays from the StreetInsider.com 13D Tracker page.

Let's first take a look at

Southern Union

(SUG)

. Shares ofthis natural gas company have been breaking out as of late. The stocklast week traded up some 6% on 300 times normal volume, a bullishindication.

Due to its primary business of gathering, processing, transporting,storing and distributing natural gas in the U.S., Southern Union hasbeen as hot as the commodity it deals with. Despite the fact that it'sbeen breaking out to the upside, the stock is still cheap.

With a market cap of $4 billion and earnings before interest, taxes,depreciation and amortization (EBITDA) of $708 million, Southern Unioncould prove to be a profitable takeover candidate. In addition, withexpectations for a hot summer, natural gas prices have only onedirection to move -- Southern Union should benefit from that.

Southern Union has a decent balance sheet withthe only blemish being the amount of debt it carries, around $3.2billion. Most of that debt though is invested back into the company, andsince it can leverage up at 5.5% management must feel their rate ofreturn will be very positive.

Sandell Asset Management, a $7 billion hedge fund, late last yeardisclosed it owns a 9.8% stake in the company. In a letter to SouthernUnion CEO George Lindemann, Sandell said that Southern Union's currentstock price "reflects a large and unwarranted discount to the intrinsicvalue of the company that also does not recognize the strategictransformation of SUG from a regional gas utility to a naturalgas-focused midstream and pipeline powerhouse." For the rest of thefund's investments, check out the

Sandell Asset Management portfolio page on Stockpickr

Next is

Solarfun Power Holdings

(SOLF)

, which last Wednesday cutits 2007 revenue prediction, citing current operating conditions for thepotential fall.

Since the Chinese maker of solar cells and modules came public in aninitial public offering six months ago, its shares have hit a high ofroughly $17 on heavy volume but recently have tested a 52-week lowaround $9. The combination of the potential for a fall in revenuecoupled with the nasty 6% drop in the Shanghai Composite, I believe,made market overreact to its potential upside.

Solarfun could be an easy double at these pricelevels; it has a super clean balance sheet and a ton of cash on handcompared to its market cap. It also represents a great play on China,solar modules and photovoltaic energy. The company has incredible growthand is posed for a snapback rally.

Other names on the list of stocks that could break out this weekinclude

Sears Holdings

(SHLD)

, which has been getting hammered becauseof its recent store sales figures;

Bruker BioScience

(BRKR) - Get Report

, which isseeing a short squeeze with a short interest ratio of 5 and recentinsider buying of more than $1 million; as well as

Google

(GOOG) - Get Report

,

PacificEthanol

(PEIX) - Get Report

and

MasterCard

(MA) - Get Report

.

For the rest of this week's potential breakout stocks and why theyare on the list, please check out the

Top 10 Rocket Stocks I portfolio on Stockpickr.

Again, the other porfolios I use to help research this one are:

  • Stocks Rising on Unusual Volume.
  • Top 10 Potential Short Squeezes, a list of stockswith high short interest and high insider buying.
  • Biggest % Losers, a list of the largest-percentagelosers in terms of stock price.
  • Latest Activist Situations, the latest activist, or13D, plays from the StreetInsider.com 13D Tracker page.

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 several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of

Trade Like a Hedge Fund

and

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;

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to send him an email.

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