Embrace Volatility: Buy Google and Chipotle, Sell AMD

NEW YORK (TheStreet) -- With earnings season in full swing, investors are unsure of what to make of the markets' volatility. The broader indexes have been on a roller-coaster ride with huge swings in both directions.

Tuesday, the Dow Jones industrial average closed at 16,243 after rebounding from a session low of 16,063. The Dow's low point occurred despite positive earnings results from anchors like Johnson & Johnson  (JNJ) and Coca-Cola  (KO).

It is clear that investors have a hard time making up their minds on the earnings metrics that matter the most. One thing is certain; growth will never get overrated. And better-than-expected results from the following three companies will help set the tone for what is to come.

Let's begin with Google  (GOOG), which will report first-quarter earnings Wednesday after the close. The search giant made several headlines Tuesday. In addition to making its popular Google Glass available to the public at a price of $1,500 (for one day only), Google announced its acquisition of Titan Aerospace.

Recall, Titan Aerospace, which makes drones and robots that fly, was also pursued by Facebook  (FB). (Details of the deal weren't disclosed.) Google continues to demonstrate why, in every sense of the word, it is a true technology giant. Wednesday, analysts will be more interested in its earnings results, specifically, how its recent deals factor into the company's bottom line.

The Street will be looking for $6.40 in earnings per share on revenue of of $12.64 billion. In the January quarter, Google posted a 17% year-over-year jump in consolidated revenues to $16.86 billion. Even more impressive, when extracting out its position in Motorola, Google's revenue for its core business surged 22% to $15.70 billion. So growth is not going to be an issue this quarter.

Investors will be more interested in new developments with its mobile and PC search ad divisions. In addition to display ads for YouTube, mobile and PC search ads are key growth areas that will drive revenue and earnings over the next couple of years as Google battles Facebook for love from advertisers.

For now, Google is one of those companies that should be rated buy at any level. The company makes tons on money and Google remains one of only of a handful of companies that can support both its valuation (P/E of 28) and growth expectations, regardless of what the market does. At a split-adjusted price of $536, there's 15% worth of upside to these shares in 2014.

Every time I walk into a Chipotle Mexican Grill  (CMG) restaurant, I'm reminded of why the stock has doubled in value over the past the couple years. This is even though Chipotle has amassed several detractors, notably hedge-fund superstar David Einhorn, who famously predicted that Taco Bell would kill off the company.

As it stands, Chipotle is doing the killing, forcing rivals like Qdoba and Lime Fresh Mexican Grill to close locations. The company has built itself into leading fast-casual restaurant that's posting strong growth and above-average margins.

Despite Chipotle's recent successes, investors are anxious about holding the stock ahead of the company's first-quarter earnings report. But if Chipotle's 9% jump in same-store-sales serves as indication, there's no need to be unsettled. Management has its act together.

The Street will be looking for $2.85 in earnings per share on revenue of $873.6 million, which would represent 20% year-over-year revenue growth. What has kept the stock sizzling has been Chipotle's strong restaurant-level margins, which significantly outperforms that of both McDonald's  (MCD) and Yum! Brands  (YUM). And with the stock down 15% from its 52-week high, I see Chipotle as a strong buying opportunity.

Last on our list is Advanced Micro Devices  (AMD), which has been in a perpetual recovery mode. The chip giant will report earnings Thursday. While I have always liked AMD's business, lately the story has been one step forward and two steps back. There are now questions about the company's strategy to fully embrace a gaming industry that has become unpredictable.

Thursday, the Street will be looking for earnings per share of $0.00 (not a typo) on revenue of $1.34 billion. While revenue is expected to jump more than 23%, it has yielded very little in terms of profits. I do realize that management continues its cost-cutting initiatives. But it's time for investors to reevaluate what they are paying for.

There have been no meaningful signs that AMD is in better shape today than it was a year ago. While the balance sheet does appear more attractive, AMD doesn't present the sort of competitive edge to suggest there will be long-term outperformance. That gross margins recently decreased sequentially to 34.8% was a perfect example.

With revenue expected to decrease sequentially by 16%, I have to rate this stock as a sell. Both Intel  (INTC) and Nvidia  (NVDA) are better buys at this point, given the faster pace of their turnarounds.

At the time of publication, the author did not have a position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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