BALTIMORE (Stockpickr) -- New month, new market? Let's hope so anyway.
The S&P 500 shed 3.56% in January, and while that's not an earth-shattering loss from an absolute basis, it is a significant selloff for a single-month stretch of trading. But a correction in the S&P was looking inevitable as we headed into the New Year, so as stocks settle near their long-term support lines, February may bring investors a reprieve.
To take advantage of a market sentiment swing, we're taking a closer look at five Rocket Stocks worth buying in February.
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 234 weeks, our weekly list of five plays has outperformed the S&P 500 by 83.96%.
Without further ado, here's a look at this week's Rocket Stocks.
Chipotle Mexican Grill
First up is momentum name Chipotle Mexican Grill (CMG). Chipotle put another stellar growth quarter in the books last week, boosting same store sales by 9.3%.
In many ways, Chipotle's quarter caught Wall Street by surprise; analysts couldn't fathom that the firm could increase both sales and margins so dramatically. Chipotle's strategy is deceptively simple; as the firm continues to execute in 2014, expect more of the same.
Chipotle operates around 1,600 stores spread across 43 states, Canada, the UK, France and Germany. The fast-casual chain was built on the concept of a simple menu of high quality Mexican food, and that model has resonated with eaters in search of quick non-fast food options. A focus on quality is a big differentiating factor. While rumors abound about what's actually in fast food chains' burger patties, CMG happily advertises its use of naturally raised meats, hormone-free dairy, and organic produce.
Yes, quality ingredients are expensive to source, but they're one of the only factors that truly differentiates Chipotle from the competitors who have sprung onto the scene in the last decade. From a financial standpoint, it's impressive that CMG has thus far financed all of its growth through cash from operations and shareholder equity the firm carries nearly $900 million in cash and investments, with no debt. Shares don't look like they're cooling off this week.
$22 billion gaming firm Wynn Resorts (WYNN) is coming off the heels of a spectacular year. In the last 12 months, the casino giant has seen its share price rally more than 72% thanks to strength in its most important markets -- and even Las Vegas. While Vegas was the subject of a sluggish recovery, Sin City is bouncing back in a big way right now. But it's China that's getting most of Wynn's attention in 2014.
Even though the Wynn name is synonymous with Las Vegas, round 70% of revenues actually come from Macau, the high-end Chinese gambling district. Macau is Wynn's crown jewel in large part because the firm is one of the few that's been granted a gaming license from the government. Wynn has two properties in Macau, with a third on the way.
Wynn's positioning as a high-end gambling paradise for VIP players has helped the firm earn more money per chair in its casinos than any of its peers. Likewise, investors should appreciate a rising dividend payout and a balance sheet that's not overleveraged considering the fact that Wynn lays claim to four multi-billion mega-resorts across the globe.
With rising sentiment in WYNN this week, we're betting on shares.
Health care stocks have shown exemplary relative strength in the last few months, a fact that makes Pfizer (PFE) look interesting this week.
Pfizer is the largest pharmaceutical company in the world, with a portfolio of household name drugs like Lipitor, Viagra, Celebrex and Lyrica. What's notable is Pfizer's marketing machine. While looming patent expirations are on the horizon for PFE, expect well-established brand names to protect against some of the threat from generic competitors. That's exactly what happened when Lipitor's patent protection ended in the U.S.
More recently, Pfizer has been investing in its future pipeline names. The firm bought Wyeth in 2009, in a deal that dramatically increased Pfizer's drug IP.
Pfizer is another name with a solid balance sheet position. The firm currently carries $12.9 billion in net cash and investments, a war chest that helps to protect investors from economic hiccups in the year ahead.
So does Pfizer's dividend: At current levels, Pfizer's cash payout adds up to 3.42%. Look for an aggressive share buyback plan to drive even more value for shareholders in the coming months.
Despite the broad correction of the last month, Micron Technology (MU) is holding onto its title as a momentum heavyweight. Shares of the computer storage stock are up nearly 200% in the last 12 months, enough to make it one of the hardest-rallying large-cap names of the last year. And there's good reason to expect more of the same going forward.
Micron is a computer memory maker that until recently was best-known for manufacturing RAM for PCs. But the company has spent the last several years building its flash storage business, a change that exposes Micron to a far more lucrative niche. With mobile device demand still strong, and upgrade cycles shorter than ever before, the solid state storage that Micron makes should continue to drive performance. And as flash memory makes its way upstream to higher-end prosumer PCs, demand for MU's offerings has a lot of runway in front of it.
It's important to note that Micron has some deep inroads with original equipment manufacturers, the firms that actually make the devices that use MU's storage. The firm's OEM connections are a big advantage because they keep sales efforts minimal. As long as scarcity remains a factor in the flash memory market, Micron's shareholders will keep getting rewarded.
Even though Xerox (XRX) is best-known for the office copiers that bear its name, the firm has been maturing its business in recent years to skew more towards services. As that transition takes shape, XRX is opening up to far more lucrative opportunities in 2014.
Printing has become commoditized in the last few years. Print quality has essentially become the same across most major black and white laser printer manufacturers, so Xerox has taken its resources from black and white printing tech and moved it over to areas where it can rebuild an economic moat. Likewise, services are becoming a much more important part of Xerox's business. Servicing printers historically generates more revenues than the printer's original cost, a fact that provides XRX with sticky recurring revenues.
With a bigger emphasis on service revenues and document outsourcing, printer and copier sales (which still provide a material chunk of sales) will provide a good way for XRX to cheaply bring on more customers. If it can afford to sell its equipment at zero margin, it can push customers through its other services at much more attractive margins.
With rising analyst sentiment in shares this week, we're betting on Xerox.
To see all of this weeks Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.