Updated from 7:01 a.m.
Trading stocks can be a cruel and unpleasant process, especially in the short term. Stocks go though all sorts of growing pains all the time: There are missed earnings, misunderstood press releases, negative management meetings and all other sorts of company nonsense.
But sometimes the stocks that drop the most snap back the hardest.
And that's what we look for in developing each week's
Despite last week's nasty selloff, the
was up nearly 1% vs. a decline in the
Dow Jones Industrials
of roughly 3%.
There are a lot of interesting opportunities in
, but let's review the individual picks from last week first.
- China Medical( CMED): Up 17.7% on the week after posting quarterly earnings of 53 cents per share in the fourth quarter, as revenue almost doubled to $40.5 million on strong sales in its diagnostics business.
- Krispy Kreme Doughnuts (KKD) : Up 24.2% on the week with first-quarter earnings of $4.0 million, or 6 cents a share, which was much better than what the Street was looking for.
- CMGI( CMGI): Down 23.5% after announcing a third-quarter loss of $2.6 million, or 5 cents per share. That coupled with lowered guidance going forward really hurt the stock.
- Nova Biosource Fuels( NBF): Down 10.6% for the week, although the company did get an interesting upgrade from Ardour Capital.
- Pep Boys Manny Moe & Jack(PBY) - Get Report: Up 17.4% on the week, after earnings of $4.7 million, or 9 cents per share, for the 13 weeks that ended May 3. That compared with earnings of $3.2 million, or 6 cents per share, in the year-earlier period at the automobile accessories and services company. The average estimate of analysts polled by Thomson Financial was a loss of 3 cents per share.
- Casey's General Stores(CASY) - Get Report: Up 13.9% after the discount general store posted earnings that topped the Street's view.
- Piedmont Natural Gas (PNY) : Down 3% on the week, after net income fell by 5%.
- Capstone Turbine(CPST) - Get Report: Flat on the week.
- EnerSys(ENS) - Get Report: Up 12.5% on the week after increasing its outlook and posting super-solid earnings.
- Stec (STEC) : Down 8.6% on the week.
First up in this week's
, which reports earnings on Tuesday and could move substantially higher.
Colfax, which is one of the few pure plays in the fluid management business, just came public last month and is firing on all cylinders.
With huge amounts of capital being spent to extract oil, rigs are under substantial pressure to drill as much as they possible can in order to take advantage of the inflated price. This is where Colfax comes into play.
Colfax's revenue is broken up in the following regions: 47% Europe, 24% U.S., 16% Asia, 7% Middle East and Africa, 3% Central and South America and 2% Canada. International sales now account for over 75% of the company's revenue, meaning that Colfax is not tied to the slowing U.S. economy.
Robbins & Myers
, all of which are involved in the fluid management business, are making 52-week highs almost daily. This vote of confidence from investors in the sector should prove to be a huge positive for Colfax going forward.
In the latest conference calls for all of these companies, each management team highlighted the incredible strength in the European and Asian end-markets; however, they were quick to complain that they did not have enough market share for this noticeable increase to make a substantial difference in the bottom line.
Colfax has the majority of the market share in Europe and in Asia, meaning the Street is going to be shocked once it sees Colfax's earnings power.
This came from the Gardner Denver call: "Year-over-year order growth was strongest in Asia followed by strength in Europe and then North America, but we did still see growth in North America, both compared to the first quarter of last year and also compared to the fourth quarter. So year over year and sequentially, we are still seeing growth in North America."
This came from the latest Robbins & Myers conference calls: "Asian markets remain extremely strong," and "while the U.S. and Europe remains major chemical producers, a large part of our success in glass line reactors is driven by the investments in Asia."
Looking at the company's prospectus, net sales grew from $393 million in 2006 to $506 million in 2007, while earnings per share, based on current shares outstanding ballooned from 7 cents in 2006 to $1.79 in 2007; EBITDA in 2006 went from $29.65 million to $138 million in 2007. Colfax should also get a huge bump from the weak dollar.
Bottom line: Colfax, which has the dominant market share in the booming international markets of Europe and Asia, is poised to move much higher ahead of the quarter.
Also worth looking at next week are shares of
, which is an indirect way to play the rally in commodities prices. Titan, which is a retailer of various farm equipment, has posted some very impressive sales growth, which should be exacerbated by the recent boom in corn and soybean prices.
Here are two interesting statements from the latest conference call: "As most of you are aware, we are benefiting from a strong agricultural economy. Commodity prices are substantially higher than a year ago. USDA stock reports, 2008 planning intention reports, and 2008-2009 total U.S. estimates indicate the potential for 2008 new crop carry-overs at very tight levels."
Also from that call: "A long term future for sustainable farm equipment demand has never been brighter. In addition to agriculture, the economy in our construction market is much improved over national trends due to the impact of agriculture and the energy commodities in our region. Both North Dakota and South Dakota are hot spots for energy, there is significant oil, natural gas, coal and wind energy in our states."
Titan Machinery has a 15% short position, which could fuel a move higher.
For more ideas, including
, check out this week's
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:
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. The funds will be buying at the lower prices and likely supporting the stock.
Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks that can snap back.
Biotech Short Squeezes: Dendreon and others can often be found in this category.
Stocks Rising on Unusual Volume: These are potential breakout plays.
Stockpickr's System Trades of the Day: These are trades triggering that day in various back-tested trading systems we've developed.
Stocks With Unusual Options Activity: Perhaps someone knows something?
Latest Activist Situations: These are stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on the must-view list.
One final place to frequent is the
section on Stockpickr, where ideas such as those presented in this article are thrown around daily. And you can further discuss your ideas and share opinions in Stockpickr's
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
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
and 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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