Expecting to Profit Off These 4 Stocks Within 5 Months

 |  Includes: BBRY, CSCO, LVLT, SIRI
by: Richard Saintvilus



Weekly Percentage

Shares Traded for the Week

Current Price

Cisco Systems


Fell 3%

301 million


Level 3 Communication


Fell 10%

122 million


Sirius XM Radio


Fell 2.3%

336 million


Research In Motion


Fell 10.4%

84 million


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Sirius XM Radio (NASDAQ:SIRI) – Target $2.90

Sirius closed down 2% for the week at a price of $2.11 on 336 million shares traded. To say that the stock was volatile during the week would not only be a statement of the obvious, but likely the understatement of the year. The remarkable aspect during the week’s trading activity is that the stock did not end up lower. After reaching a high for the week on Monday, July 25, the stock edged down on the open on Friday at a price of $1.99. That would have been a difference of 10%. Instead, as it always does, the stock recovered to close at $2.11, for a net loss for the week of only 2%.

Earlier in the week, I wrote about a game of “cat and mouse”; one that has been a staple in the stock since the beginning of July. Investors have noticed plenty of head-fakes where the stock often appears as if it’s going to take a beating in early trading activity only to recover moderately as the trading session progresses and then close with a less than stellar finish. On Friday, July 29, the game was in full effect and unknowing investors likely got stopped out of some soon-to-be valuable shares on the cheap.

Sirius is due to report earnings on Tuesday August 2 and I expect the numbers to be pretty stellar. The company expects to generate approximately $3 billion in revenue and $715 million in adjusted EBITDA for fiscal year 2011, while projecting free cash flow to now approach $350 million. From an operations standpoint, it is also projecting to add another 1.4 million net subscribers by the end of the year and to experience full-year conversion and self-paid churn rates, similar to that of 2010.

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Cisco Systems (NASDAQ:CSCO) – Target $20

Cisco fell 3% for the week to $15.97 on 301 million shares. The company continues to be in the midst of a turnaround as the stock has almost 12% from its bottom of $14.84. I’m starting to develop some mixed feelings for John Chambers; basically I’m not quite certain that I approve of some of the structural changes that the company has undertaken. Admittedly, I have asked for them.

You see, several weeks ago, Cisco decided it was time to conduct some “restructuring” and abandon the “committees of executives” way of operating and revert back to a more conventional “top-down” structure while also reducing its workforce by 9%. The question is, will these measures work and are they too drastic? I called these changes “cutting the fat” but upon learning that 6,500 people would be out of a job, I had to adjust my thinking a little bit.

Although I believe cost-cutting is always a great strategy for companies that are thriving for more profits, I can no longer be pleased and cheer that people will be out of a job. So I have some re-assessing to do. But so far, the stock price has responded favorably to these measures. Therefore, it is definitely something worth keeping a close eye on.

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Research In Motion (RIMM) – Target $20

Research In Motion closed down 10% for the week on 84 million shares traded. The stock reached another 52 week low on Friday, July 29 at a price of $24.81. I was fed up and asked that RIM’s management come out with their hands up and let the hostage go; the “hostage” in this case being the stock price, which in my opinion would take off under new management. It is undeniable that the anemic performance of the company’s stock price continues to be the result of poor management and an uninspired leadership team

The RIM bulls continue to tout the fundamentals of the supposed strong fundamentals of the company, but the reality is, these fundamental aspects have not changed since the stock was at $80. So the better question is why has the stock dropped 60%? Clearly, investors are bailing on the company for a reason; strong fundamental standing and all. RIMM bulls should look up the term "cognitive dissonance". There is a clear case of it spreading around. The stock continues to be a short.

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Level 3 Communications (NASDAQ:LVLT) – Target $3.00

For the week, Level 3 Communications fell 10% to a price of $2.18 on 122 million shares traded. The company reported earnings on Wednesday, July 27 but investors were a bit unsure of what to make of the numbers. The only way that I could describe investors’ reactions was “an unraveling”. Investors were a bit disappointed upon learning that the company reported a loss of $181 million, or 11 cents a share. This was compared to only a loss of $169 million, or 10 cents a share in the year-ago period. But I think what happened to the stock was a bit of an over-reaction.

Not only has the company shown to be improving its revenue growth rate, but it's also doing extremely well in improving operating margins. The question investors want answered is: Can the company continue to not only maintain but improve this growth rate over time? I think the best times are ahead for Level 3 and, with Global Crossing coming onboard towards the latter part of the year, it's positioning itself as a force to be reckoned with.

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Disclosure: I am long SIRI, CSCO, LVLT.