Rocket Stocks: Apple, Freeport, Covidien

BALTIMORE (Stockpickr) -- Today's the first trading day of 2011 -- and you can bet that market participants are waiting with baited breath to see whether the New Year will start off on the right foot.

Not surprisingly, light trading was the rule last week as traders took reprieves from the market to spend time with their families; as a result, market direction has been somewhat less convicted to end December. Today is the first time since Christmas that we'll get a reasonable glimpse at investor sentiment.

All told, the S&P 500 gained 12.78% in 2010, a strong year by conventional standards. But nearly all of those gains came in the final quarter of the year as bulls struggled to take control of price action. With a bevy of economic data scheduled to be released this week, we should have a good opportunity for one side of the market to become dominant.

Related: 3 Investments That Could Rally in 2011

Once again in 2011, we'll turn to our weekly Rocket Stocks plays to maximize our upside potential. For the uninitiated, Rocket Stocks are our weekly list of companies with short-term gain catalysts and longer-term growth potential. In the last 85 weeks, our Rocket Stocks have beaten the S&P 500 by 77.27%.

This week, we'll continue our trend of looking at stocks with rising analyst expectations. On Wall Street, expectations can mean everything -- and stocks with rising expectations often benefit from increased buying pressures from institutions and retail investors alike. To find them, I run a quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises.

Here's a look at this week's potential plays.

Apple

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Apple ( AAPL) made regular appearances on our Rocket Stocks list in 2010, a trend that's unlikely to be bucked this year. That's thanks in large part to Apple's hardcore "Wall Street darling" status that's helped catalyze a 53% rally in the nearly $300 billion company in the last year.

Of course, that's not to say that the rally hasn't been deserved from a fundamental perspective as well. Apple is consistently beating its own sales records with its transformational products, and it's sitting on $35 billion in cash, a couple of attributes that investors clamor for.

While that attention has meant that this stock is far from a deep value play, that hasn't kept shares from moving higher in the past. Apple's cult-like niche of the computer market had been attractive for the last several years, but it's the firm's mobile iOS products, such as the iPhone, iPod Touch and iPad, that offer the biggest growth potential right now. These devices, and complementary services like the iTunes Store, have been a colossal channel to growth during the recession.

Expect that prowess with lower-cost mobile devices to cross over into the company's premium-priced computer division. Apple saw a similar "Halo Effect" with its wildly popular iPod line of music players in the last decade -- but the pace could accelerate in 2011.

In the most recent reporting period, David Einhorn's Greenlight Capital increased its stake in Apple by 168%; the stock now makes up 5.9% of its total portfolio. Other major holders include Renaissance Technologies, with a 2.38% position, and Steven Cohen's SAC Capital. Apple is one of Barclays' 30 best stock picks for 2011 as well as Fortune's best stocks for 2011.

Covidien

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Medical device maker Covidien ( COV) had a somewhat less successful 2010; shares took a 4.7% hit on the year. But that doesn't change the attractiveness of shares' upside in 2011.

Covidien is one of the market leaders in surgical instruments used for bariatric surgery, one of the fastest-growing discretionary medical procedures today. Significant macroecononomic tailwinds are poised to boost the number of bariatric patients in the next decade, and this company should be one of the primary beneficiaries. Health care reform could be a major catalyst for sales growth, as insurance companies are forced to spend a larger chunk of proceeds on health care costs in 2011.

A push toward developing more broad-based instrument offerings is the most attractive change going on at Covidien right now. With an increasing focus on other instruments used for minimally invasive surgeries, the company has a strong complement to its more niche bariatric business.

Major holders of Covidien include Private Capital, which has a 1.95% position in the stock as of the most recent period, and David Tepper's Appaloosa Management. The stock is another Barclays pick for 2011, and with a B buy rating from TheStreet Ratings, it's one of the top-rated health care equipment stocks.

Freeport-McMoRan

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Freeport-McMoRan ( FCX) is the dominant force in the copper mining business, with production that rings in at more than 12% of global capacity. And although the company's exposure to gold and molybdenum mining represents a much smaller chunk of revenues, it's an equally attractive portion of the business right now.

With the rally in commodities not showing any signs of slowing in 2011, this looks like a strong play to start the year.

Freeport's shares gained 50% last year as a result of higher prices in the metals it mines. Those prices continue to provide the company with high levels of profitability at its mining sites.

Because of the sheer scale of Freeport's operations, the company is able to adjust production to get the maximum benefits from commodity price swings, ramping up capacities as metals hit new highs. Expect that flexibility to expand the company's already deep net margins in early 2011.

With fourth-quarter earnings due to come up fairly soon, expect strong sentiment for this stock to help push shares higher in the short-term.

Major holders of Freeport include Ken Fisher, with a 1.7% stake, and Ken Heebner at Captial Growth Management, with a 5.65% position. Freeport was one of Dan Dicker's top commodity stock picks for 2011, and Jim Cramer said recently that it was a commodity stock to consider.

For more stocks that made this week's cut, including TRW Automotive ( TRW) and Cerner Corporation ( CERN), check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:



Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.

More from Investing

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

Jim Cramer on U.S.-China Trade: The Media Has it Wrong

Jim Cramer on U.S.-China Trade: The Media Has it Wrong

Is Tesla's Stock Set to Nearly Double to $500?

Is Tesla's Stock Set to Nearly Double to $500?

Tesla's $78,000 Model 3 Is a Bargain. Here's Why

Tesla's $78,000 Model 3 Is a Bargain. Here's Why