BALTIMORE ( Stockpickr) -- Well, this isn't taking long. The S&P 500 pushed its way up to 1503.26 on Friday, putting itself within 4% of its all-time high close from back in 2007. As you might expect, that big move comes with some big trading implications for stocks. Why do new highs matter? In broad strokes, a new record high in the S&P 500 means that everyone who owns equities is sitting on gains, no matter when they bought. That's a big deal from a psychological standpoint because it shakes investors clean of the "back to even" mentality that's been plaguing Mr. Market ever since March 2009. >>5 Stocks Setting Up to Break Out That's a big part of why we're taking a look at five new Rocket Stock names 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 185 weeks, our weekly list of five plays has outperformed the S&P 500 by 74.4%. Without further ado, here's a look at this week's Rocket Stocks. >>5 Stocks Under $10 Poised to Pop
Honeywell International
From the thermostat on your wall to the advanced avionics sitting in an airliner's instrument stack, Honeywell International ( HON) has its hands in a wide array of manufacturing businesses. Other units include factory automation products, security systems, and advanced materials. That diversification is attractive for HON shareholders. It means that this industrial name isn't beholden to the economic health of any individual industry. Honeywell specializes in carving out well-defined niches. For example, the firm is the standard-bearer in the general aviation and regional jet avionics business, tailoring systems to those smaller aircraft, and ensuring that pilots are more familiar with Honeywell's systems. A renewed emphasis on specialty materials and chemicals offers some attractive growth prospects for Honeywell. The firm's products include safety applications (such as bullet-proof vests) as well as applications in the energy industry, two areas where demand should remain high in the coming years. An acquisition spree in the last several years has left Honeywell with big intangible balances on its balance sheet, something that the firm will need to work away at each quarter. That said, its hefty $6 billion in cash and investments substantially offsets a manageable $8 billion total debt load. And it leaves ample room for the firm to pay out its 2.4% dividend yield. With rising analyst sentiment in shares of HON, we're betting on this Rocket Stock right now.
BlackRock
Investment management behemoth BlackRock ( BLK) is benefiting more than most from the equity rally that stocks have been enjoying for the past couple of quarters -- and the stock shows it. Shares of the $41 billion firm have rallied more than 38% in the last six months alone. BlackRock is the biggest money manager in the world, with approximately $3.8 trillion in client assets in its book. Because the firm earns its keep based on that AUM number, ballooning equity values expand BlackRock's revenues in kind. While BlackRock started off as a fixed income shop, it transformed itself after the Great Recession created an opportunity to buy Barclays Global Investors at a discount. Now, equities make up almost half of the firm's total assets under management, a fortuitous change in allocation given the performance stocks are seeing right now. Stocks also come with heftier management fees, and bigger profits for BlackRock's income statement. More recently, BlackRock's investment menu has expanded to include all sorts of alternative investments and ETFs, products that make BLK's grasp on AUM a bit more tenuous (low-risk strategies tend to have stickier assets) but are necessary for the firm's strategy. Despite ramping up the number of retail investors it serves, BlackRock still gets two-thirds of its assets from fellow institutional investors. While institutional clients are stickier, they also come with smaller fees and fewer growth opportunities. Retail customers are BlackRock's biggest growth opportunity for the next few years.
EOG Resources
Oil and gas E&P EOG Resources ( EOG) is coming off the heels of a strong year itself. The $33 billion firm saw its share price rally by more than 20% in the last 12 months, easily besting the decline in the average oil and gas stock over that same period. That divergence in performance says a lot about EOG's unconventional approach to drilling, focused on pulling extra oil and gas out of fields that other E&Ps have abandoned. EOG owns low-cost energy assets spread across the U.S., with additional exposure to fields in Trinidad, the U.K. and China. For an energy E&P, cost is everything -- so while the firm lacks the scale seen at supermajor rivals, the only critical factors in EOG's profitability is how much the firm paid for its projects and how much it's paying to pull those commodities out of the ground. To be sure, the energy business is capital intense. Pulling oil and gas out of the ground takes pricey equipment and expert teams of employees. But EOG's debt load is easily tenable at $6 billion, especially when its $1.1 billion cash position is factored in. We're betting on shares this week...
Citrix Systems
Citrix Systems ( CTXS) wants to help you access your computer from anywhere. The firm is one of the biggest names in desktop virtualization, selling the software that enables remote access to other PCs over the internet. While competition is fierce in the desktop virtualization space, CTXS is the league leader with a bigger installed base and more advanced software than its competitors are offering right now. With corporate IT departments typically less willing to switch their platforms (barring a very good reason), that customer stickiness should bode well for Citrix in 2013. Citrix has some big growth opportunities in the "cloud" right now. The firm's hosted services cater to small and medium-sized businesses, a lucrative market that's been demanding virtualization for years. That's evident in the growth rates the firm's cloud services have been experiencing. Even though business services for the cloud have some big competition right now, few firms can offer the name recognition and technical capability that Citrix can. The firm has a spotless balance sheet, with approximately $1.5 billion in cash and investments and no debt. If Citrix starts putting more of that cash to work for the benefit of shareholder value, expect a strong year for shares in 2013.
NCR
There's a good chance you've used one of NCR's ( NCR) products before, even if you can't remember it. NCR designs automated kiosks like ATMs, point of sale terminals, and self check-in kiosks for airlines, focusing its efforts on helping customers interact with companies with minimal human interaction. The firm's leading market position in the businesses it operates in provides a nice cushion for investors right now. NCR has some big tailwinds pushing at its back. One of them is banks' desire to integrate newer technology (such as check processing and envelope-free cash deposits) into their ATMs. It's more than just appeasing customer desires. Adding those features dramatically cuts back on the labor costs that banks formerly needed to process those transactions, so the cost-benefit analysis for paying up for newer units is very attractive. As the world's installed base of ATMs get upgrades, NCR should get a huge chunk of that business. The firm's innovation has been another important growth driver. By developing products like self-check-out stations at grocery stores, the firm has introduced its customers to products that they didn't even know they wanted. And the decreased labor costs justify the hefty price tag of installing check-out stations, airline kiosks, and other novel automated systems. Around half of NCR's debt load is covered by cash right now, a fact that should give investors comfort over the firm's ability to handle any unexpected economic speed bumps. Significant overseas sales also creates some impressive opportunities as emerging market countries quickly grow their installed bases of ATMs and other self-serve systems. To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
