By Larry Gellar
Many investors are looking to ride the market’s latest momentum, and we’ve identified 5 stocks that look ready to move higher. These companies work in a variety of industries ranging from Internet to aluminum:
Popular, Inc. (NASDAQ:BPOP) has been volatile lately, although good news comes in the form of an upgrade from Cantor. That firm has a $2.25 price target on BPOP, although investors should be aware that this stock could be rather risky. Popular has major operations in Puerto Rico, and many industry insiders don’t like the future of banking in Puerto Rico. Some argue that the island already has too many banks, which has been one factor contributing to low interest rates over there. Economic problems in Puerto Rico, fueled by economic troubles in the United States, also have some shareholders worried. On the other hand, Popular will be reporting earnings on October 19th, and a strong earnings report will probably send this stock skyrocketing. Other interesting foreign regional banks include The Bank of Nova Scotia (NYSE:BNS) and First Bancorp (NYSE:FBP). Popular falls in the middle of those stocks for ratios like price to earnings, price/earnings to growth, and price to sales, although operating margin is pretty low at 41.71%. As for cash flows, $225 million flowed out during 2010 and $135 million flowed in during the first half of 2011. Two more important statistics are quarterly revenue growth (year over year) of 13.9% and beta of 1.92.
Disappointing earnings have hurt Alcoa Inc. (NYSE:AA) stock, but we still think this stock could move higher. Alcoa’s problem right now isn’t its business but rather demand issues that are being caused by a weak global economy. Numerous debt issues throughout Europe are also contributing to the uncertainty that has businesses unsure whether they should buy more aluminum. A flood in one of Alcoa’s facilities in Pennsylvania also hurt earnings this quarter. Regardless, cost-cutting measures are doing well, especially in the Engineered Products and Solutions division. Financing measures for Alcoa are also being undertaken wisely. A $3.75 billion 5-year revolving credit facility has been opened up, which is important because it will allow Alcoa flexibility depending on what the future holds. Investors should also keep an eye on Alcoa’s success in China. Speaking of China, Aluminum Corporation of China (NYSE:ACH) is also worth taking a look at. That stock is significantly more expensive using ratios like price to earnings and price/earnings to growth, although price to sales for ACH is lower. On the other hand, ACH’s margins are much weaker than Alcoa’s. Clearly, the price for aluminum will be a major factor affecting these companies going forward. Substitution of aluminum in favor of other materials could also affect future success.
The Yahoo Inc. (NASDAQ:YHOO) saga continues, with the latest news actually coming from AOL (NYSE:AOL). In fact, a variety of sources are now reporting that AOL CEO Tim Armstrong is putting together a plan to sell his company to Yahoo. How much Yahoo would be willing to pay for the one-time Internet giant remains to be seen. There’s also speculation that Yahoo could turn itself over to a private equity firm, and co-founder Jerry Yang would actually play a role in such a plan. Chinese Internet site Alibaba too has been rumored to be a possible buyer. There’s even a list of less likely candidates that includes Digital Sky Technologies (from Russia), News Corp. (NASDAQ:NWSA), and even Microsoft (NASDAQ:MSFT). Yahoo! Japan has been one complication preventing a deal from getting done, and Yahoo is weighing advice from UBS on how to handle that subsidiary. In other news, Yahoo is planning to add another large building to its headquarters in Sunnyvale, although no timeframe has been announced for the project. As for value metrics, Yahoo remains a bit cheaper than Google (NASDAQ:GOOG) in terms of price to earnings and price to sales ratios. On the other hand, Google’s price/earnings to growth ratio is about half of Yahoo’s, and it boasts significantly stronger margins.
An important change to Aetna (NYSE:AET) healthcare plans could have a big impact on Baxter International Inc.’s (NYSE:BAX) business. That insurance giant might require its customers to use a different company’s intravenous immunoglobulin unless they want to make a higher co-payment. Meanwhile, Baxter is working on getting a separate immunoglobulin treatment approved in Europe. Here’s what Hartmut Ehrlich, one of Baxter’s vice presidents, had to say:
“The trial we conducted found that the combination of our IG with this dispersion enhancing enzyme will facilitate subcutaneous administration and, if approved, may become an important new therapeutic option for this patient community.”
In other news, Baxter International will have to pay $30 million in punitive damages to a patient who contracted Hepatitis C. The incident is being blamed on vials used for the anesthetic Propofol, although Teva (NASDAQ:TEVA), the other company involved in this case, and Baxter plan on filing an appeal. This actually isn’t the first case involving hepatitis that Teva and Baxter are being held accountable for, and sufferers of this disease throughout Nevada believe that these pharmaceutical companies are to blame. As for value metrics, Baxter’s price to earnings, price/earnings to growth, and price to sales ratios are all reasonable. Margins are good too, with gross margin at 51.09% and operating margin at 23.42%.
While Europe’s debt situation has certainly affected MetLife (NYSE:MET), bigger news is now presenting itself. Specifically, the company may sell its mortgage business, as it looks to focus more on insurance and employee benefits. This, combined with a previous announcement that MetLife will try to sell its depository division, is evidence that the company is trying to avoid the notorious bank holding company classification. Once the sales are complete, MetLife would presumably be free from the regulatory pressures that many banks are now quite worried about. Other news for MetLife has focused on the vast numbers of expenses that the company had during the third quarter. These extraordinary expenses will total about $275 million and include everything from catastrophe losses to complications regarding its life insurance business. MetLife also $40 million tied up with the Executive Life Insurance Co. of New York. Important competitors for MetLife include Allianz (OTCQX:AZSEY), AIG (NYSE:AIG), and Prudential Financial (NYSE:PRU). Those companies are cheaper using price to earnings ratio, while MetLife’s price/earnings to growth ratio and price to sales ratio are closer to average. Additionally, margins are pretty strong – those numbers are 35.56% gross and 12.22% operating. Meanwhile, quarterly revenue growth (year over year) has been a whopping 56.9%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.