BALTIMORE (Stockpickr) -- Stocks cratered last week, the big S&P 500 index dropping approximately 2.7% between Monday's open and Friday's close. For those keeping score, that's the worse single-week run for stocks in two years. And there could be more selling on the way.
By most accounts, the correction in the S&P 500 was well overdue. That big consensus on the need for a retracement in stocks is a concern – after all, the crowd is rarely correct en masse at key turning points. Likewise, the technical picture points to more selling as well before this correction calls it quits.
So, what better way to tackle the downside risk than with a new set of "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 260 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 79.61%.
Without further ado, here's a look at this week's Rocket Stocks.
Entertainment giant Walt Disney (DIS) is having a strong showing in 2014. While the S&P has delivered run of the mill 4.16% returns year-to-date, Disney shareholders are sitting on 11.75% gains. That's nearly triple the performance of the broad market. The gain multiplier is thanks in large part to a model that's continuing to deliver fundamental growth right now -- and investors should expect more of the same from this Rocket Stock in the second half of the year.
Disney's entertainment empire spans multiple formats, from film and television to theme parks and action figures. It's important to note that the firm's intellectual property portfolio includes a collection of some of the most beloved children's characters ever created, assets that Disney has adeptly leveraged throughout its business. But while Mickey Mouse gets the spotlight, the ESPN TV network is getting the glory now that football season is right around the corner. ESPN is the most valuable network in the world, capturing a bigger part of your cable bill than any other network out there, and the firm's humongous contract with the NFL is a key part of that success.
Meanwhile, theme parks are coming alive again thanks to a recovering economy. Because Disney is highly integrated, it's able to take popular characters from a film and move them into TV, theme parks and merchandise, multiplying the value of its efforts and trimming costs. The huge capital costs of running theme parks and cruise ships were a drag on earnings when they were underperforming, but they should make up for that drag on this side of the economic cycle. We'll get a closer glimpse at Disney's numbers when the firm releases its earnings after the bell tomorrow.
Disney shows up in Steven Cohen's SAC Capital portfolio as of the most recently reported quarter.