BALTIMORE (Stockpickr) -- 2015 has been a stealth bull market. While the price action hasn't really seemed all that impressive on the surface -- the big S&P 500 index is just 2.78% more than a third of the way into the year -- some stocks have actually been working.
In fact, as I write, one in five S&P 500 stocks is up more than 10% year-to-date.
That's a pretty substantial chunk of the market that it really pays to own right now. But that's all in the past at this point. To find the next set of stocks that's primed to outperform here, we're turning to a new set of Rocket Stocks that look ready for blastoff in May.
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 298 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 81.45%.
Without further ado, here's a look at this week's Rocket Stocks.
Up first is payment card network Visa (V). Visa has shown investors alright performance in 2015, up about 6% since the start of the year -- but its price action has been heating up more recently. And some big macro tailwinds are setting the stage for momentum to keep heating up in the second quarter.
Visa is the standard bearer in the global electronic payments business. Visa handles about half of all credit card transactions and three-quarters of all debit card transactions, collecting fees on an absolutely huge volume of payments. Globally, the world still has considerably further to go in adopting electronic payments on a large scale, and that ample clear runway gives Visa significant growth potential in the years ahead.
Financially speaking, Visa is in excellent shape. Because the firm is only the transaction network, not the card issuer, it doesn't actually lend money. Because of that, the firm doesn't have exposure to credit risk from consumers who carry Visa-branded cards. Visa's balance sheet is debt-free, plus another $8.5 billion in net cash and investments. That's enough to cover approximately 5% of Visa's current shares outstanding, a meaningful risk-reducer.
With rising analyst sentiment in shares of Visa this week, we're betting on this payment stock.
April showers could be bringing May flowers in shares of $47 billion defense contractor General Dynamics (GD). After shares corrected in the first part of the year, they've been in rally mode in the last few weeks, shoving up to new 2015 highs as recently as Friday. There's a lot to like about this big defense firm right now.
For starters, General Dynamics is one of the most entrenched contractors in the Department of Defense, manufacturing everything from submarines to armored vehicles to computer systems. Those specialized, capital-intense products mean that competition is somewhat limited (for example, GD owns three of the six major submarine shipyards in the U.S., limiting competition for big-dollar sub fleet upgrade projects). About 60% of GD's revenue come from the U.S. government. The balance comes from allies and GD's Gulfstream aerospace division, which manufactures medium and large-category jet aircraft.
Plummeting fuel prices and aging fleets have been major positives for GD in the last year, both in the firm's defense business and its business jet operation. Likewise, the recent reduction in General Dynamics' reliance on the U.S. government is a positive that pulls some of the political risks off of the firm's income statement.
With positive first-quarter earnings behind it, look for GD to keep boosting its profitability and performance in 2015.