4 Stocks That Touched Bottom Are Poised to Go Higher

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

Benjamin Graham once said:

“The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell."

I have to say that this is by far one of the most eloquent quotes that I have ever read and one of the truest statements regarding our market’s participants. Many (understandably) have different objectives; thus requiring different tactics. I am not suggesting that either camp (speculator or investor) is better suited than the other. Because, in the market, only the net result of the trade determines who is right and who is wrong. Currently, there are many battles being waged each day as well as many wars. The bulls and the bears are constantly at odds over the state of the market as well as in their predictions of where it is heading; it’s that constant friction between pessimism and optimism.

One side sees certain news as reason to buy or “call the bottom,” while the other side insists that the sky is falling and anything green is a head-fake. Regardless of what you want to believe, as investors the responsibility lies solely on the person paying the commission fees and receiving the transaction statements. Let’s take a look at four stocks that continue to be at the center of these heated battles between the bulls and bears.

Company

Ticker

Daily

Percentage

Shares Traded for the day

Current Price

Cisco Systems

CSCO

Rose 15.95%

286 million

$15.92

Level 3 Communication

LVLT

Rose 3.3%

17 million

$1.86

Sirius XM Radio

SIRI

Rose 7.51%

97 million

$1.86

Research In Motion

RIMM

Rose 9.41%

29 million

$24.18

Click to enlarge

Cisco Systems – Target $20

Cisco’s stock surged just shy of 16% on Thursday, to a price of $15.92 on 286 million shares. This arrived a day after the company reported better than expected earnings results. On Wednesday, Cisco reported profits that beat several analysts’ estimates. Excluding some costs, profit was 40 cents a share compared with the expected 33 cents. The company reported sales rose 3.3% to $11.2 billion in the period, which ended July 30, compared with an estimate of $10.98 billion.

It is clear that Cisco is now in the early stages of a remarkable recovery. These numbers proved that the magic that the company once had as the darling of Wall Street had never left and Cisco could once again regain its status as a growth company. As much criticism that I have given to John Chambers, I have to now give the man credit for what appears now to be the beginning of a significant return in the company’s stock since it reached its bottom of $13.30.

Sirius XM – Target $2.50

Sirius rose 7.5 percent on Thursday to a price of $1.86 on 97 million shares traded. This was by far one of its best days in the past several weeks in the midst of the market’s decline. On Wednesday, I told Sirius XM investors that greed was good. If you were one of the few lucky ones to have bought the stock on Monday, when it traded in the $1.60s, you likely have done pretty well. Thursday’s activity was precisely the reason why it is always a great idea to dollar cost average down.

Investors are eager to call the bottom on the stock as well as on the market. I am not so sure that I am prepared to make that statement on the latter, but it is becoming pretty clear that the bottom of $1.63 may have been reached on Sirius. Again, I keep going back one simple response, which is to keep things in perspective. Staying the course and understanding the improving fundamentals of the company is the best play for those who are long at the moment. Realizing that the stock’s decline has had nothing to do with the fundamentals of the company makes buying and holding a pretty easy decision to make even when the bears may want you to believe that “the sky is falling.” Instead, these authors will be better served writing about roofing companies in the midst of “falling skies”.

Level 3 Communications – Target $2.50

Level 3 rose 3.3% to $1.86 on 17 million shares traded. The stock has traded lower since releasing second quarter results on July 27. But I think that was a bit overblown. Investors were a bit disappointed upon the initial release of the quarterly figures, but that to me was the result of some lofty expectations; some of which were a bit too high. Also the stock had seen a considerable run prior to the announcement and it appears a lot of the good news had already been priced into the stock, which resulted into a “sell the news” type of a situation unfolding.

As I have said regarding Sirius, Level 3 investors need to keep things in perspective. 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 toward the latter part of the year, it's positioning itself as a force to be reckoned with. Since reaching its bottom of $1.69 on Monday, I don’t see any reason why the stock would not reach $2.50 and possibly higher by the end of the year.

Research In Motion – Target $30

On Thursday RIM surged 9.4 percent to close at a price of $24.18 on 29 million shares. If you have been following my articles over the past several months, you will see that I have been a long time bear of Research In Motion. I have called it the market’s falling knife as well as suggesting that its management come out with their hands up after holding the stock price hostage for most of the year. But I can’t help to realize that the company might have just reached its bottom on Monday, at a price of $21.60.

The stock price was just an arm's length away from my short target of $20 and seeing how it has bounced off of that price suggests to me that it may be time to take a second look at the stock. I am not bullish on the company and feel that most of the negative news has now been priced into the stock and more realistic expectations have been set regarding its recent struggles. I now have a new 12-month target on the stock of $30 and feel that it is now a tremendous value.

Disclosure: I am long SIRI, CSCO, LVLT.