Last week, the Dow Jones finished with a loss of more than 2%, and my picks for the week performed much worse than the 2% loss in the market. After last week's 1/7 performance, my three week total is now 12/21, in choosing stocks to post gains. That isn't bad, but is still nothing to brag about. I realized very soon after choosing my stocks for last week that I'd made a few mistakes. I had chosen five stocks that have a history of trading lower with the market and being reluctant to gain. I also failed to consider the possibility of profit-taking after the previous two weeks of decent gains within the market. I expect this coming week to perform very similar to last week, but with a near flat return. Therefore I am choosing stocks with market moving news during the next week or stocks that are oversold, with limited amounts of downside.
Red Hat's (RHT) been a hot stock over the last five years because of its increasing market share in cloud computing along with revenue that consistently grows by large margins. However, the stock has been stuck in a $40-$50 range for the last 15 months and has traded with volatility alongside the market. Shares are currently trading near the top of their range, at $47.64, and I believe they may break through this range next week and trade higher. The company will announce earnings on Monday, and if earnings are strong, then I expect the stock to trade higher throughout the week. Analysts are anticipating an EPS of $0.26 which is somewhat high compared to its previous earning reports. However, the company continues to grow and is yet to show any signs of slowing down. Therefore I expect it to continue its trend of beating expectations, which it has consistently accomplished each of the last nine quarters, and then trade above its range in new territory.
Food Processing stocks have been hot as of late, with investors searching for safe high yield stocks in markets that will not decline. General Mills (GIS) has been consistent over the last couple years and has either met or beat expectations. With a modest expectation of $0.79, it should be able to at least meet its goals. If the company meets expectations, it would only be a 3.9% gain in earnings year-over-year. However, analysts are expecting $4.6 billion in revenue, which would be a 13% gain year-over-year. I believe the company will exceed expectations. And if it's short, I don't look for strong selling because it's a high yield, fast-growing company, which makes the stock safe in a volatile market.
Nike (NKE) has posted incredible growth over the last year and is now trading near all-time highs. I am encouraged with the stock's recent trend as it's outperformed the market since the downtrend began in late July. The company will announce earnings on Tuesday and is attempting to beat expectations for a third quarter in a row. The average analyst expects an EPS of $0.97 and for profit to rise 13.7%, which is at a slower pace than its growth during the previous quarter. I am actually a little more hesitant to choose this stock than any other on the list, because I'm curious to see if the NBA lockout will affect its earnings or guidance. Nike has an incredible presence in all sports, but most would agree that the NBA is its largest market, therefore this earnings report will show the true strength of this company and tell us if the company can overcome the lack of advertising, which was a result of an NBA lockout.
Bed Bath & Beyond (BBBY) is one of my favorite stocks to buy before earnings because I know that I will always return a quick 4-5% after it beats expectations. The company is expected to announce $0.88 per share, and I'm confident that it will meet or beat expectations, since it's done so in each quarter during the last two years. Bed Bath & Beyond is one of the better stocks to own in this market, for its consistent growth and solid returns year-over-year. And one of the largest drivers to the stock's yearly gains is its earnings, which will be announced on Wednesday.
Endeavour Silver Corporation (EXK) is by far my favorite gold and silver growth stock in the market. The company is growing at an incredible rate and is constantly making acquisitions to grow the company or is making new discoveries to increase earnings. Endeavour has trended higher over the last year, however it trades with high volatility. The stock has traded in a range between $9 and $12 since July and fluctuates with the performance of both the market and commodities. Last week, commodities traded lower, which then caused Endeavour to trend lower as well. However, after Friday's 5% gain, I expect that it will continue its pattern and trade higher until reaching a price near $12 a share. This trend usually occurs quickly and if silver and gold can stabilize, it should be a good week for Endeavour investors.
Spectrum Pharmaceuticals (SPPI) has been one of the better performing stocks of 2011 and is now trading near 52 week highs. A couple weeks ago I wrote an article calling SPPI the best value in biotech because of its incredible growth and modest valuation compared to other biotech stocks with similar growth. At the time, the stock was creating new highs on a daily basis and showing no signs of slowing down. However, an article that reported a potential generic to Spectrum's fast growing drug Fusilev pushed the stock much lower. Yet on the same day, the company announced and reassured investors that its patent for the drug is safe until 2019 and that there would be no generic. The stock has been slow to recover all of its losses but is now trading near the same price as it was before the generic drug article was published. I expect for this stock to continue its trend higher and for it to retest and ultimately surpass 52 week highs during this week, as it continues its trend of larger gains.
Caterpillar (CAT) is one of the fastest growing large cap stocks in the market with more than 40% year-over-year growth in revenue and earnings during its most recent quarter. However, it's been a rough December for the stock, which has resulted in a loss of nearly 11%, of its value, after showing resistance at $98. The stock is currently priced at $87.20, and had previously reached this price in November before reversing to trend higher to a price above $95. I believe the stock will once again reverse from this level and will begin to trend higher throughout the week and return solid short-term gains.