But don't be fooled. Just because the market indices got gutted doesn't mean that all the individual stocks did. Even though most stocks ended the first week of the year lower, it was a pretty nondescript week from a performance standpoint for a pretty big chunk of S&P components. Those names -- the outperformers -- are the very same ones that look best-positioned to rally hard when the broad market stays flat or rebounds.
To hone in on the stocks that look most likely to rally in 2016, we're turning to a fresh set of Rocket Stocks to buy this week.
For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 331 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 79.25%.
Without further ado, here's a look at this week's Rocket Stocks.
Beverage giant Coca-Cola (KO) - Get Coca-Cola Company Report owns some of the most valuable brands on the planet. In addition to the extraordinarily valuable Coke label, the firm's brands include Sprite, Dasani, Fanta and Powerade. In total, 20 of the brands Coke owns are worth a billion dollars or more today. That stable of products, coupled with a massive distribution network, means that Coca-Cola is responsible for more than 1.9 billion daily average servings. Calling that scale immense doesn't really give the full picture here.
That huge size is a double-edged sword. While it gives Coke some huge advantages over rivals, it also makes it very difficult for the firm to meaningfully move its sales growth needle. To offset that, the firm has actually been working to make its main business more boring, acquiring 80% of its North American bottling in an effort to boost margins by cutting out the middle man. It's also made more interesting side bets on assets such as large stakes in Monster Beverage (MNST) - Get Monster Beverage Corporation (MNST) Report and Keurig Green Mountain (GMCR) .
If Coke's biggest asset is its brand portfolio, the firm's second-biggest asset is its distribution network. The firm's distribution system spans more than 200 countries and helps the firm move product in volume at an extremely low cost. That infrastructure is extremely difficult for competing beverage companies to replicate -- and that gives Coca-Cola some important advantages, particularly in acquiring new brands that aren't able to stay consistently profitable on their own.
Look for upside in Coke ahead of fourth-quarter earnings numbers hitting the market next month.
While the rest of the market has been struggling, Public Storage (PSA) - Get Public Storage Report has actually been in rally mode. This $43 billion real estate investment trust has managed to climb 26% higher in the last six months, leading the rest of the broad market by an enormous margin. And Public Storage's momentum isn't showing any signs of slowing as the calendar flips to 2016.
Public Storage s one of the biggest self-storage operators in the world, with ownership in more than 2,000 facilities in the U.S., plus another 200 in Europe. Beyond that, Public Storage also holds a nearly $1 billion stake in PS Business Parks (PSB) - Get PS Business Parks, Inc. Report , a separate REIT that spun out from Public Storage in 1998. The self-storage business is enjoying some strong demographic tailwinds right now, as Millennials, the largest generation in history, begin buying homes and entering the family formation phase of their lives, they're boosting demand for storage. That's especially true around the trendy urban areas where real estate is expensive and Public Storage has properties.
REITs go hand-in-hand with dividends, so it's not uncommon to assume that Public Storage faces pressure on its stock price as the Fed raises rates. In reality, this is one REIT that could actually benefit from higher rates in 2016. Higher interest rates give Public Storage the justification to reset its short-term storage unit leases at higher rates more quickly than its cost of capital, something conventional landlord REITs can't do. Likewise, this stock has generally relied on debt as a last resort, instead financing much of its growth through much more flexible preferred shares.
With buyers clearly in control of shares in January, it makes sense to buy into Public Storage right now.
Cruise line Carnival (CCL) - Get Carnival Corporation Report has been another outperformer of late. In the last 12 months, this $41 billion vacation stock has seen its price rally almost 12.5%. For comparison, the S&P 500 is down 6% over that same timeframe. And now the world's largest cruise operator is still within grabbing distance of new highs this winter.
Carnival is the biggest name in the cruise ship business, with 10 brand names painted across more than 100 ships globally. The firm's banners include the Carnival, Holland America, Princess and Cunard lines. Size matters in the capital-intense cruise business, and Carnival's scale is second-to-none. This year, the firm expects to serve more than 10 million vacationers.
One of Carnival's biggest tailwinds in 2015 has been fuel prices. As oil prices have plummeted, so too have the costs of sailing the firm's fleet of diesel-powered cruise ships. In 2016, as oil prices test new multi-year lows and fuel hedges expire, cruise operators like Carnival should be able to see even bigger profitability than before.
With rising analyst sentiment in Carnival this week, we're betting on shares.
Shareholders in $30 billion beverage stock Constellation Brands (STZ) - Get Constellation Brands, Inc. Class A Report have had good reason to raise their glasses in the last year. Since this time last January, shares of this alcoholic beverage maker have rallied almost 37%. And while more than 95% of large stocks are down since the calendar flipped to 2016, Constellation Brands is one of the very few large-cap stocks that actually ended last week higher than it started. That trend doesn't look like it's coming to an end anytime soon.
Constellation Brands owns a familiar collection of alcoholic beverage labels, ranging from Arbor Mist and Robert Mondavi wine to Corona beer, Svedka vodka and Cook's champagne. The firm's pending acquisition of craft brewery Ballast Point late last year for approximately $1 billion gives the firm instant exposure to the red-hot craft beer market and expands Constellation's beer business to more than half of total earnings.
That increased beer exposure is a very good thing, particularly because it sits at the higher end of the market. Currently, the firm sells more beer than it is able to produce in-house, creating ample opportunity to ramp up supply in the next few years. The ability to wring deeper margins out of Ballast Point by boosting production and low-cost distribution through Constellation's existing network, and then selling at craft beer prices, shouldn't be underestimated.
This stock looks far from cheap right now, but that hasn't had any bearing on shares' trajectory in 2016.
Last up on our list of Rocket Stocks is $26 billion video game publisher Activision Blizzard (ATVI) - Get Activision Blizzard, Inc. Report . Activision Blizzard is one of the biggest video game companies in the world, with approximately $4.5 billion in annual sales. The firm's flagship franchises include Call of Duty, World of Warcraft and Destiny.
Activision Blizzard's unique business models provide a considerable advantage over one-and-done peers. The firm has built a huge business producing follow-on titles to games that customers are already fans of, taking away the creative burden of developing entirely new concepts. Activision also has a cash cow in its online role-playing franchises, generating recurring monthly sales from subscriptions. Even though subscriptions have been slowly declining, they remain an important business with equally important potential for the future if Activision can pull gamers over to new titles.
Activision's balance sheet is in excellent shape. The firm currently carries more than $4.5 billion in cash and investments on the books, enough to completely offset its $4 billion debt load. Like many of the other Rocket Stocks we've looked at today, Activision Blizzard has been a serial outperformer in recent months, and momentum isn't showing any signs of slowing down.
We're betting on shares of this game maker this week.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.