This upcoming week offers amazing risk vs. reward to investors and traders who are looking for potential earnings plays. With technology and internationally based companies easily beating earnings expectations last week, we again are going to focus on such names with the Rocket Stocks for the Week of Oct. 22-26.
When you see a trend, stick with it.
Before we look at this week's Rocket Stock picks, let's review the action with
last week's Rocket Stocks
Volatility was again very high last week for traders as the markets swung back and forth. This type of market, along with some solid earnings reports, served a few of our Rocket Stock picks well, but several others fell the other direction. Here's a quick take on how each performed.
- Eaton (ETN) - Get Report, as I noted in my midweek update, was a sell when the stock was up 5%.
- CSX (CSX) - Get Report, another stock I recommended selling midweek for a quick 6% gain, ended the week up 4.7%.
- Intuitive Surgical (ISRG) - Get Report, ended the week 7.5% higher.
- SanDisk (SNDK) was up as much as 5.8% but ended the week down 10.5%.
- Halliburton (HAL) - Get Report, ended the week down 7%.
- St. Jude Medical (STJ) , up 2.2% at one point, nevertheless ended the week down more than 11%.
- Caterpillar (CAT) - Get Report, had a decidedly down week, ending 8.2% lower.
- Harley-Davidson (HOG) - Get Report, also had a down week, ending 3.8% lower.
- American Eagle Outfitters (AEO) - Get Report, fell 6.3% this week.
- LDK Solar (LDK) was up 4% at one point but fell hard Friday to end the week down 18.8%.
- Lundin Mining (LMC) (a midweek addition) was up just 0.8% at one point, but ended the week 5% lower.
- Genzyme (GENZ) (another midweek addition) was up just 0.5% at one point but ended the week 2.3% down.
First up this week is
. The Seattle-based Internet retailer, one of
, is a stock that trades on the quarter. That's because the stock's huge short -- 36 million shares on a 300 million-share float -- lays on it all the time.
There's no doubt this is one expensive stock, the most expensive of Cramer's four horsemen on a growth basis. But I don't believe people understand the leverage of this model. Amazon has spent and spent and spent. And that is now over for the most part. It doesn't need to spend much anymore. The infrastructure is in place. This kicks off huge cash flows and due to the fact that most of Amazon's costs are now fixed, a slight increase in profits could move the stock
higher. Amazon reports third-quarter earnings after the market close Tuesday, Oct. 23.
Weekly catalyst: A massive short position could propel this one higher. The company has constantly low-balled guidance. For example, the book retailer said it would not make a dime off the latest
book because it was applying such a discount to the new release. That simply was not true. The company made good money.
Level 3 Communications
is one of the most talked about stocks in the
on Stockpickr.com. I am not sure if all the talk is a result of the stock's low price or the fact that Cramer has called it one of his top speculative plays of the year. Either way, Level 3 receives almost as much chatter as
With that said, Level 3 shares have been severely beaten down in the last month. With earnings this week, I believe the stock offers a great risk/reward opportunity. The telecommunications company reports third-quarter earnings before the market open Tuesday.
After getting hit by a senseless downgrade last Wednesday by Cowen & Co., Level 3 is set up for a perfect earnings play. With most of its spending behind them, I believe management is going to focus this conference call on new business advantages, which has the potential to send investors back into the stock.
Another play worth checking out this week is
, which also reports quarterly results Tuesday morning. This stock has quietly moved from $8 to $13 since June, when RLR Capital Partners disclosed a 5.1% stake and expressed its support for the company's management.
With the holiday season approaching, guidance for this flower delivery company is essential. I am looking for a beat as the company is able to implement its new business models added with the fact that commodity prices have dropped. Considering all that, I believe 1-800-Flowers shares should move higher.
goes under $55 a share I feel compelled to recommend it. The retailer last month announced it will repurchase $2.5 billion worth of common stock over the next three years. That move makes sense as the stock is near its 52-week low. A buyback of this size -- 13% of total outstanding shares -- indicates that management thinks its shares offer a strong investment.
On top of the buyback, Deutsche Bank reiterated its buy rating and $75 price target. The bank believes the repurchase plan will add to full-year 2007 and full-year 2008 earnings-per-share growth. Kristin Bentz, former Lehman Brothers consumer equities analyst and now managing editor and consumer retail contributor at
, also feels that Kohl's is a buy.
Also worth looking at this week is Internet play
and Baby Boomer play
For more detailed analyses and the rest of this week's picks, check out the
portfolio at 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:
- Today's Hot List: This daily list is a must-view every midday 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 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 your 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.
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
. 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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