BALTIMORE (Stockpickr) -- The calendar officially flips over to October this week -- and that means that investors have their fingers crossed for a "new month, new market" situation. We're now officially nine months into 2015, and the S&P 500 is on track to close the year down about 8.3%.
If that negative price action holds through the end of the year, it'll make 2015 the single worst year to own stocks since 2008.
The good news is that there are some pockets of the market that are actually working for investors right now. For instance, despite the negative move for stocks year-to-date, 171 of the 500 stocks in the big S&P 500 index are actually up on the year. To hone in on the stocks that look predisposed to outperform in the final stretch of the year, we're turning to a fresh set of 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 317 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 79.04%.
Without further ado, here's a look at this week's Rocket Stocks.
BlackRock
Up first on our list is investment manager BlackRock (BLK - Get Report) . BlackRock provides investment management, with a focus on institutional investors -- and while shaky global markets have spurred a decline in shares this year, there's reason to bet on a comeback. And importantly, third quarter earnings, BlackRock's next update for investors is just two weeks away.
With $4.7 trillion in assets under management, BlackRock tips the scales as the biggest investment management firm in the world. Size matters in the asset management business, and that makes BlackRock's hefty scale a significant advantage. Historically, BlackRock has been a fixed-income shop, but the acquisition of Barclays Global Investors in the wake of the financial crisis added considerable exposure to equities -- especially popular instruments such as its iShares line of ETFs. That shift away from fixed income means that a bigger chunk of this firm's AUM is focused on asset classes that generate higher management fees.
The majority of BlackRock's clients are institutional. That exposure to professional investors is a good thing, because they tend to be less fickle than retail clients. A return to a more directional trading environment should encourage more AUM growth in the coming quarters at BlackRock.
With rising analyst sentiment in shares this week, we're betting on this Rocket Stock.
With rising analyst sentiment in shares this week, we're betting on this Rocket Stock.
Delta Air Lines
It's a good time to be an airline. Legacy air carrier Delta Air Lines (DAL - Get Report) is posting record profits thanks to some major economic tailwinds in 2015. For starters, fuel is cheap. A collapse in oil prices means that jet fuel, Delta's biggest cost, costs substantially less than it did a year ago. Likewise, low interest rates have given Delta and its peers the ability to update their fleets and ground facilities at record low costs of capital.
Delta is one of the biggest airlines in the world, with a fleet of more than 780 aircraft that serve approximately 250 destinations. The firm has been revamping its service offerings in recent years, re-branding its top-tier business class product and expanding its premium economy offerings to court more fee revenue from occasional travelers and to appeal to frequent flyers.
Those frequent flyers are a key component of Delta's business, and it's been working hard to realign the benefits of its SkyMiles rewards program with the customers who generate the biggest profits for Delta. For instance, last year, the firm introduced a system of racking up frequent flyer miles based on dollars spent rather than miles traveled. Those changes should go a long way in cutting costs without alienating the airline's most lucrative passengers.
The airline business is extremely cyclical, and the way Delta is positioning itself today is going to have a dramatic effect on how the firm performs at the next cyclical low. At this point, there's still a lot to like about this airline stock.
The airline business is extremely cyclical, and the way Delta is positioning itself today is going to have a dramatic effect on how the firm performs at the next cyclical low. At this point, there's still a lot to like about this airline stock.
Home Depot
The housing market has been one of the big success stories of 2015, and that's a very good thing for shareholders in home improvement retailer Home Depot (HD - Get Report) . As housing prices continue to tick higher, homeowners are building equity and becoming increasingly willing to spend money on household projects. And that's translating into higher revenues at Home Depot and its peers.
Home Depot tips the scales as the world's largest home improvement store chain -- the firm boasts more than 2,260 stores spread across North America. That big footprint means that Home Depot has the scale to get pricing power with suppliers and to create a deep inventory of higher-margin private label offerings. The introduction of more service-based products, such as product installation and light remodeling referrals, should provide an increasingly important source of high-margin revenues.
Historically, Home Depot has a strong track record of returning value to shareholders. This stock has managed to return about 20% of its market capitalization to shareholders in the past five years, while seeing its share price quadruple. Those previously mentioned industry tailwinds, plus an added emphasis on store efficiency should give management more value to return to investors in the year ahead.
Activision Blizzard
No doubt about it, 2015 has been a spectacular year for shares of Activision Blizzard (ATVI - Get Report) . Since the calendar flipped over to January, this $23 billion video game company has seen its shares rally more than 59%, leaving the S&P 500's weak performance in its dust. And that bullish momentum isn't showing any signs of shifting as we head towards the end of this year.
Activision Blizzard is one of the most successful video game publishers on the planet, with titles like Call of Duty, World of Warcraft and Destiny in its library. By launching consistent new titles within a given franchise, Activision is able to produce successful follow-on titles that gamers are already invested in, taking away the creative and marketing burdens of developing entirely new concepts. On the other side of the spectrum, subscription-based games, such as World of Warcraft, are an extremely attractive model, even if WoW subscription numbers have been weakening in recent years. The firm's ability to apply that model to titles outside of the fantasy genre could be a serious cash cow.
Mobile gaming is starting to come into its own, and that's been an increasingly important focal point for Activision Blizzard. Porting existing successful games onto mobile devices provides a relatively easy source of profitability for Activision. Finally, this stock looks excellent from a financial standpoint: The firm currently carries approximately $4.5 billion in cash and just $4 billion in debt. That positive net cash position provides an important safety net for investors who are thinking about jumping onto Activision's bullish momentum this fall.
Best Buy
Last up on our list of Rocket Stocks is Best Buy (BBY - Get Report) , a $12 billion electronics retailer that's had no shortage of critics in recent years. Despite ongoing operational challenges and major competition, the rumors of Best Buy's death have been greatly exaggerated.
Best Buy is the biggest brick-and-mortar consumer electronics seller in the country, a position that it earned by essentially outliving all of its peers. And while Best Buy's 1,731 big box locations are seen by some investors as a liability, the truth of the matter is that the firm's huge geographic footprint is actually its biggest asset. For example, at the same time that online firms are scrambling to get products to customers in a shorter timeframe, Best Buy already owns the physical infrastructure to do just that.
Meanwhile, management has been aggressively cutting costs through its "Renew Blue" turnaround plan. Already, the firm has shed approximately $1 billion in ongoing expenses from its cost structure, and it's boosted margins significantly. More importantly, investors have been avoiding this stock long enough to make it almost approach "bargain" status in this market, a rare thing indeed in 2015. And with more than $1.9 billion in net cash on its balance sheet, around 15% of Best Buy's share price today is covered by cash in the bank. That's a big risk reducer at current levels.
With rising analyst sentiment in shares of this electronics retailer, we're betting on Best Buy this week
Source:http://www.thestreet.com/story/13303350/1/5-rocket-stocks-that-look-ready-for-blastoff.html?kval=dontmiss
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