BALTIMORE (Stockpickr) -- The new year's first full week of trading kicks off this morning, ushering in 2014 in earnest after the best broad market rally in 16 years.

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Can Mr. Market pull it off again? Probably not.

Are we likely to see a big drop in stocks in 2014? Probably not.

That's not just me saying so; the precedent's already long been set for consecutive big gain years. The S&P 500 has managed to turn out investment gains greater than 20% in 11 of the years since 1975. On average, during the year that followed that mammoth gain, the big index tacked another 12.8% onto its winnings.

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So, while another 29% year for the S&P looks a little unlikely, not getting another double-digit gain of some degree this year would be a break from the norm.

That's why we're taking a look at five new Rocket Stocks worth buying 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 230 weeks, our weekly list of five plays has outperformed the S&P 500 by 84.83%.

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Without further ado, heres a look at this weeks Rocket Stocks.

Goldman Sachs

Investment banking giant Goldman Sachs (GS - Get Report) doesn't need much of an introduction. Goldman is one of the last remaining vestiges of the legacy Wall Street investment banks, and it bears all of the benefits baggage that comes along with that title. One of the benefits was upside; Goldman's shares gained 32.4% in the last year, even besting the S&P's performance by another 7.6%.

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Goldman's businesses span the financial gamut, from investment banking and institutional prime brokerage to wealth management and lending. Because Goldman's business is tied to the health of the financial markets, it acts like a leveraged bet on equities. That means that the current stock market rally gives GS shareholders claim to even bigger upside. Even though the risk (and thus potential profits) that Goldman is allowed to take has been reduced by regulators, a rising tide should continue to lift the ship.

Reputation matters on Wall Street. That means that Goldman Sachs' status as one of the most well-connected financial firms still holds a lot of cachet, especially with high-net worth retail clients. As GS gets comfortable with lower margins and more deal volume, the firm should settle into its new structure -- and get some premium put back into its bargain valuation.

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


It's probably fair to call Yahoo! (YHOO) the most underrated tech company in Silicon Valley. Sure, the search engine got its lunch eaten by Google (GOOG) in the wake of the dot-com bubble, and it's suffered some very public dramas in recent years. But none of that changes the fact that Yahoo owns an immensely valuable collection of assets that can still be had for a lot cheaper than its earnings multiple may suggest.

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Today, Yahoo! still owns some of the most heavily-trafficked Web sites on the Internet. The firm originated the ad-supported e-mail model, and by offering valuable sticky Web services, it still enjoys a base of more than 650 million users. While CEO Marissa Mayer hasn't turned the $40 billion ship around just yet, revitalizations take time -- especially when they're as overdue as Yahoo!'s is. But it's the firm's present-day fundamental performance that should get investors excited.

As I write, Yahoo! carries around 16% of its market capitalization in cold hard cash. And it generates margins in excess of 26% each quarter. In short, Yahoo has a lot of dry powder and it's able to generate a lot more. While management has been spending at a breakneck pace to acquire attractive new assets, the shopping spree should slow with ample shareholder value intact in 2014.

Bottom line: Yahoo! is a far more functional company than most investors give it credit for.

Bank of New York Mellon

Like Yahoo!, Bank of New York Mellon (BK - Get Report) isn't what it first appears to be. That's because it isn't a conventional bank. Instead, the firm is one of the world's largest fund custodians and asset managers, two investment-driven businesses that operate a world apart from the lending at regular banks.

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As traditional banks work on growing their service income, BNY Mellon is already there. The firm's positioning as one of the biggest custodians in the world gives it cost advantages and lowered counterparty risk that makes it more attractive than most of the rivals it comes up against. As the firm grows its focus on asset management, it should be able to collect more cash for every dollar on deposit than it currently can.

Like Goldman Sachs, BNY Mellon is basically a leveraged bet on the stock market. After all, as the assets in BK's accounts grow, so too do the custody, trust, and management fees that it's able to charge. Profitability is exemplary in BK, ringing in at more than 26% in the last quarter.

For investors looking for a different kind of "big bank" exposure, it's hard to beat this Rocket Stock in 2014.


It's been a solid year for railroad operator CSX (CSX - Get Report); in the last 12 months, shares have rallied approximately 37%. While rail travel may not be commonplace for most Americans, it's still an exceptionally popular mode for freight, particularly commodities. For CSX, the cash crop is coal; the firm generated almost a third of its revenue shipping coal products last year.

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Scale matters in the rail business, where shipping abilities are predicated on network size. CSX weighs in as one of the largest railroad operators in the world, with more than 21,000 miles of track concentrated in the eastern U.S. That means that the firm has a big economic moat, with a network that's effectively impossible to replicate today. In the last five years, CSX has improved its efficiency by leaps and bounds, wringing bigger margins out of every train car that it pulls across its tracks. In a world with prolonged high oil prices, rail travel should continue to be a winning bet.

After all, while trucking (the biggest alternative to rail freight) is generally a more simple solution for a distribution chain, it's also more expensive -- generally four times more expensive than train shipping per ton. As cost inflation starts to work its way into this recovery, expect to see an uptick in shipment volumes at CSX.


Last up is Beam (BEAM), the Illinois-based spirits maker thats best-known for its namesake Jim Beam brand. The firms other labels include Makers Mark bourbon, Canadian Club whiskey, Sauza tequila, Pinnacle Vodka and Cruzan rum. As more drinkers around the world become connoisseurs, Beam stands to benefit in a big way.

Nowhere is that more true than with Beam's core bourbon business. Beam owns some of the most storied names in bourbon, and they're growing their exposure to high-end "small batch" spirits with a collection of four new premium labels. As bourbon drinkers become willing to spend more on unique bottles, Beam's margins should continue to expand. Better still, the firm shows promise in extending that high-margin "small batch" model to its other liquor brands.

From a financial standpoint, Beam has done a good job of getting over the hangover after its split-off from Fortune Brands Home & Security (FBHS) in 2011. Debt has basically halved in the last few years, and Beam's cash levels remain decent. As the firm parlays its cash generation into more debt reduction and dividend payouts, expect the share price to make up for lost time in 2014.

To see all of this weeks 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 Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji