5 Rocket Stocks for a Short Trading Week

BALTIMORE ( Stockpickr) -- Investors can thank George Washington and Abe Lincoln for the extra breathing room stocks got yesterday. Short trading weeks can be a godsend, especially when Mr. Market is coming off a major rally move.

The extra reprieve from trading this week should give investors a little bit longer to let emotions die down before deciding on their next moves in the market. With the S&P 500 consolidating sideways just a couple percentage points off of all-time highs, that's a very constructive place for stocks to be.

>>5 Stocks Poised for Breakouts

To take full advantage, we're zooming in on 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 188 weeks, our weekly list of five plays has outperformed the S&P 500 by 77.72%.

Without further ado, here's a look at this week's Rocket Stocks.

>>Hedge Funds Hate These 5 Stocks -- but Should You?

United Technologies

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2013 is panning out to be a good year for United Technologies ( UTX). Shares of the $82 billion firm have climbed more than 10% since the first trading day in January, outpacing even the broad market's brisk climb. UTX is an industrial conglomerate that owns a big portfolio of construction, aviation and security products. The company's brands include everything from Carrier air conditioners to Sikorsky helicopters.

If there's a single word to describe UTX's total business, it's "cyclical."

Each of the key product lines that United Technologies makes is subject to some serious ebbing and flowing with the economic cycle, and as a result, when it rains economically, it pours for this company. To fix that, UTX has been working to diversify its product lineup to include more recession-resistant offerings.

In the meantime, service and parts have been a saving grace for UTX's bottom line. Because the elevators and jet engines that UTX makes are big ticket items, keeping them serviced well is a good investment for the firm's customers -- and it means that UTX can lay claim to consistent, sticky revenues for its troubles.

While acquiring aviation firm Goodrich added considerable debt, the firm's balance sheet is in reasonable shape. Ample cash flows help to finance a 2.36% dividend yield in shares -- and rising analyst sentiment bodes well for this stock right now.


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eBay ( EBAY) is another large-cap name that's been on fire in 2013. Since the start of the new year, shares of the online auction site have climbed more than 11%. And if this firm's Rocket Stock moniker is any indication, investors haven't missed the boat on eBay yet.

eBay operates the largest online auction Web site in the world, helping more than $69 billion in merchandise trade hands last year alone. That number is growing too. eBay has been expanding the footprint of its Marketplace offerings, gaining exposure to emerging markets, where the firm is going to find the majority of new users.

But don't let the name fool you. eBay's eponymous auction site isn't its most exciting income source anymore. Almost 50 cents of every dollar eBay made last year came from its payment network unit, PayPal.

PayPal is a unique name in the fast-growing global payments business. The network boasts more users than some conventional payment card brands, and it's accepted at more than half of all online retailers. The real growth opportunity for PayPal comes in brick-and-mortar retailers, though, where PayPal is seeing an expanding presence. With a rising tide likely to keep lifting all ships in the payments business, PayPal is well-positioned to keep growing quickly -- especially in emerging markets where consumers aren't as invested in conventional plastic payment cards.

A huge $8 billion net cash and investment position on eBay's balance sheet gives the firm plenty of options right now. As long as management can avoid overpaying for acquisitions, investors should be rewarded.


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Keeping with that cash-rich theme brings us to Accenture ( ACN), one of the biggest consulting firms on the globe. Accenture sports a $5.68 billion cash position, with zero debt on its balance sheet. That's $8.31 per share in cold, hard cash -- a balance sheet position that takes a material chunk of risk out of shares.

Accenture counts 96 of the world's 100 biggest companies among its clients, with a geographic footprint that spans 50 countries. As a technology and outsourcing consulting firm, ACN is all about service -- and the firm's huge net cash position is the result of deep net margins and cash flows that only service companies are capable of generating.

Post-recession, some consulting firms have been challenged to justify their hefty fees. Accenture does it through increased efficiency or revenue-generation ideas -- and its strong pipeline is a testament to that fact, particularly in recent years when companies have been trimming discretionary spending. The firm's ideas directly impact clients' ability to make money.

With rising analyst sentiment in ACN, we're betting on shares this week.

Anadarko Petroleum

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Texas-based Anadarko Petroleum ( APC) is one of the largest independent exploration and production firms, with proved reserves that come in at more than 2.5 billion barrels of oil equivalent. Anadarko's positioning has been ideal lately; at the exact same time that other integrated oil and gas firms are trying to shed their downstream assets to become more profitable, APC doesn't have to -- it never had any to begin with.

Downstream businesses (such as refining or retailing) smooth out sales when oil prices are low but also smash margins lower when crude prices are high. As oil sits on the high end of its historic range right now, APC's lack of downstream exposure is a very good thing.

So is Anadarko's geographic diversification. In addition to projects in the U.S., APC owns offshore sites in places such as the Gulf of Mexico and Cote d'Ivoire.

With a nearly 50/50 mix of gas and oil, Anadarko is in good shape right now. Nat gas is skimming along historic lows, and oil prices are high. APC's mix means that it stands to benefit when nat gas does eventually change in trend, but it's not beholden to the commodity's climb to stay in business. Supermajors have been shelling out considerable cash to increase their natural gas exposure in the last several years; APC already has it.


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Last up on this week's Rocket Stocks list is Cummins ( CMI), the manufacturer of diesel, hybrid and natural gas engines, primarily for heavy trucks. Like our other Rocket names, CMI has enjoyed some stellar relative strength vs. the broad market year-to-date. That trend looks likely to continue from here.

Cummins is an integrated engine builder. That means that the firm is responsible for everything from the turbochargers to the power units and filtration systems used on its engines. Building more parts may take extra specialization to pull off, but it means that Cummins is able to earn bigger net margins by not shelling out profits to a supplier too.

Going green is a big trend in the commercial truck market, and Cummins owns a significant chunk of that. It's already the biggest builder of natural gas-powered engines in the world, offering operators efficiency that's all the more attractive while gas prices remain high.

Not all of Cummins' business is commercial; the firm also makes the turbo diesels found in Dodge Ram trucks. While the Cummins engine is a pricier option, it's one that around 80% of eligible Ram buyers opt for. That may sound trivial at first, but pickup truck engines now make up around 10% of CMI's total sales -- that's no joke.

Financially, the firm is in great shape, with a net cash position (a rarity for such a capital-intense industrial firm). A 1.7% dividend yield rounds out the story for this firm right now.

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.


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

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to
TheStreet . Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily , and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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