5 Rocket Stocks Worth Buying This Week

BALTIMORE ( Stockpickr) -- Stocks corrected last week, the S&P 500 giving back just over a percentage point between Monday's open and Friday's close. But despite giving up the high ground, stocks still look strong as we head into October.

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You don't have to be some sort of market sage to figure out what's going on in stocks right now -- a quick glance at a chart of the big indices will do. The S&P is still definitively making higher highs and higher lows right now. Until that changes, we're still in a "buy the dips market."

And one subset of stocks continues to outperform the rest. I'm talking about the "Rocket Stocks."

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 216 weeks, our weekly list of five plays has outperformed the S&P 500 by 90.9%.

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

Cisco Systems

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Computer networking gear maker Cisco Systems ( CSCO) has some stiff tailwinds pushing at its back right now. The $125 billion firm is the biggest supplier of the equipment and software that connects devices around the globe. Cisco's routers and switches are ubiquitous in just about every enterprise IT setup out there -- and scale comes with some serious advantages for CSCO's shareholders.

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Because Cisco's gear is designed to plug-and-play with other Cisco components, IT departments that buy Cisco products can often see much lower integration and ongoing technical support costs. That gives Cisco an important economic moat right now, even if competition is trying to move in on its business. The biggest growth driver for Cisco is growth in demand for data services. With everyone from teenagers to octogenarians carrying smartphones with cloud data today, more data throughput means more Cisco gear in the server room.

Cisco looks especially attractive from a financial standpoint. The firm's business is high-margin, and that turns into hefty cash positions for the firm's balance sheet. As I write, Cisco carries more than $35 billion in net cash on its books, enough to pay for almost a third of the firm's market capitalization, a fact that dramatically reduces risk for shareholders right now. As CSCO returns some of that value to investors, expect shares to get buoyed.

Hertz Global Holdings

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Hertz Global Holdings ( HTZ) has been having a stellar year in 2013: shares of the car rental company have rallied more than 37% since the start of the year on the heels of hotter travel spending and a prolonged low interest rate environment. That's a welcome about-face from the shellacking that investors took on HTZ heading into the great recession.

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Hertz survived 2008 by the skin of its teeth, the result of carrying a hugely leveraged balance sheet into the worst travel industry downturn in a generation. But it did survive. Today, the firm's worldwide rental car empire includes brands Dollar and Thrifty in addition to its namesake yellow marquee. While competition is fierce in the car rental business (and extremely concentrated), key partnerships at Hertz and a sticky base of rewards program customers should keep sales stepping higher year after year.

Car sales have been extremely strong in the last few years, and that's been parlayed into extra benefits for Hertz. After all, a car rental firm's attractiveness hinges on a fleet of modern, well-equipped cars. For that, Hertz needs to turnover its fleet on the used wholesale market every few years. As used-car inventories remain in demand, HTZ should be able to buoy its bottom line in the quarters ahead.

Regions Financial

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It shouldn't be a huge surprise that Regions Financial ( RF) is faring well in this market. That's because the $13 billion regional banking name has huge exposure to insurance and wealth management, two businesses that make it a leveraged bet on stock market performance. In total, those non-banking units add up to around 40% of Regions' total revenues.

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Regions is on the big end of the regional bank spectrum. The firm Sports more than $120 billion in customer assets and more than 1,700 branches spread across the Southern and Midwestern U.S. That footprint means that Regions is concentrated in a geographic area that got knocked the hardest during the financial crisis. As a result, its huge diversification outside of conventional banking has provided a very welcome cushion for investors. As the firm continues to improve the investment quality of its loan book, shareholders should directly benefit.

A continued stock rally should continue to fuel gains in the portfolios that Regions manages. With rising analyst sentiment in shares of this Rocket Stock this week, we're betting on shares.

Delta Air Lines

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It's hard to believe that airlines are actually turning out some strong performance this year. And Delta Air Lines ( DAL) is leading the pack. Delta is a $20 billion air carrier whose 700 aircraft fleet serve more than 300 destinations in 59 countries. That makes Delta one of the biggest airlines in the world.

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While legacy carriers such as Delta have had a challenging road in the last decade or three, Delta had good timing in its own restructuring efforts, and it's been able to capitalize on new strength in the travel industry. It's also taken advantage of peers' weakness to strengthen its own business with moves like a merger with Northwest, an investment in Virgin Atlantic, and the acquisition of lucrative routes in New York. While discount carriers still pose considerable risks to Delta's model, the fact remains that Delta is able to service more highly competitive routes than domestic rivals, and that should keep high-revenue frequent fliers in the firm's seats.

The airline business is very cyclical, and airline stocks are coming off the heels of a stretched-out down cycle. While investors are likely to be slow to realize the uptrend in the industry, early investors should get rewarded once they do.

General Motors

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The car stock catching most people's attention in the last month has been Chrysler -- the Detroit carmaker is in the pre-IPO stage right now, an exciting time for any high-profile company. But while most investors remain transfixed on a stock that isn't even investible yet, there's an opportunity in General Motors ( GM) right now. A pricey valuation in Chrysler should unlock more value in GM too.

Just to be clear, this isn't the same GM you knew a few years ago. The firm shed unprofitable brands and significantly improved its build quality, churning out cars that are dramatically more competitive with their Japanese rivals than ever before. Renegotiated union contracts mean that keeping manufacturing in the U.S. still makes economic sense -- it now costs around a third as much in labor to build a car in Detroit. And by retaining brands with a clearly defined niche, it's able to avoid the consumer confusion that it dealt with a few years ago.

Financially, GM is in stellar shape. The firm carries huge amounts of cash on its balance sheet, though they're offset by a large underfunded pension liability that management needs to catch up on. GM actually has the cost structure to make the numbers work in the years ahead. We're betting on shares this week.

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.

Follow Jonas on Twitter @JonasElmerraji