The stock market trading game is all about picking the right stocks at the right time. While it is exciting to find stocks with huge growth ratios, you also have to consider if you are jumping on the bandwagon too early or too late. While I recommended passing on these three companies with large sales growth, I uncovered two other smaller stocks that I would feel comfortable recommending to buy.
Glu Mobile Inc. (GLUU) - Glu Mobile designs, markets, and sells games for the mobile phone market. While you may not be familiar with Glu, you may know some of its games based on licensed intellectual property such as Guitar Hero 5 and Family Feud, or lesser-known games based on its own IP such as Bonsai Blast and Brain Genius. What makes Glu such a hot stock?
Some disagree with its business model of giving away the games for free but charging for in-game features based on moral grounds. On a business level, I think this is a great way to get people involved first and only those that love the game will buy the extras. I have only out-right paid for a few games on my iPad and these were generally removed within two minutes of game play. This model is based on creating games that people love and want to keep playing, not tricking them through advertising and screen-shots.
Now that the company can make games for a wider range of platforms including the iPhone and Android-based ones, you can understand why there were some recent earnings revisions. From two months ago until today the earnings went from negative 13 cents per share for next year to a positive one cent. Also, the last four quarters have delivered some earnings surprises between 70%-85% which means it may hit profitability sooner than expected.
This pick was picked up on my screener three days ago and my settings are to re-balance every two weeks as needed. The price is above the $5.00 support level on decent volume.
Coleman Cable, Inc. (CCIX) - Coleman Cable, as the name suggests, is a manufacturer of electrical, electronic, and cable products for a variety of markets. Surging volume above the $14 level gives this the right moves on the price chart. Why might this be a timely buy otherwise?
With one marginal exception, sales have climbed quarter over quarter for the past seven reports. Earnings have been a bit more sporadic as profit margins have went up and down with volatility. Next year's earnings have been upgraded from $1.31 per share two months ago to $1.59 seven days ago, and now currently estimated at $1.64 per share. Over the past four quarters there have been a couple massive surprises. A forward P/E of 9.35 is roughly half of the current trailing P/E industry average.
This is a stock with high potential and it seems that the recent interest in buying makes it the right time. Of course, if things turn sour in the market you'll want to watch out as these little rockets are often the first to retract.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
