Reiterating Potash Corp. Buy; Recommending First Solar

Something happened this past week that is significant. Not only was there positive action from the Federal Reserve and the markets moved higher in reaction to that but all three major indexes showed a buy signal for the first time this year. In addition the new highs (stocks that are making a new 52-week high) vs. new lows (stocks dropping to a new 52-week low) was above one in a fractional sense. These are both very good technical indicators for the market going forward.

With new optimism for the market recovering based upon the above indicators, I am reiterating a call for Potash Corp. (POT) from last week and adding First Solar (FSLR) for this coming week. Potash hit a new 52-week high on Friday with a 2% gain to finish the week 6.5% higher. Analysts are predicting more strength in earnings going forward with very bullish calls of 7.92 EPS in the current year and 9.91 next year up from 5.54 and 6.61 respectively, just 90 days ago. The stock has a trailing P/E ratio of 50 with revenue growth (year over year) of 42% and EPS growth (yoy) of 103%.

First Solar has been a great company to own in the last year and could be headed for another great year of returns for investors. Also running to a new 52-week high on Friday up 10.5% for the day, First Solar has solid earnings estimates and an acceptable P/E at its current prices. A trailing P/E of 136 seem steep but knock-out quarterly revenue growth of 281% (yoy) and quarterly earnings growth of 682% (yoy) put its high trailing P/E into perspective. One might want to wait for a pullback to purchase First Solar as the big gain on Friday could consolidate a little bit before the stock moves higher.

Disclosure: None

Comments

[Yona:]

I would short these stocks for the very short term as they are due for a major pull back since it's run up in the last 7 days. Technically speaking it is due for a pull back. If you feel uncomfortable shorting since that is risky I would buy pot at 160 and fslr at 225-230.

2008 Apr 07 06:15 PM

[user 2lakes:]

Fslr is just another momo stock. It's market cap is 21 BILLION with all of 500 MILLION in current sales. It's technology is based on a rare element that will soon be in short supply. We need solar but we need lots of it and fslr probably will not be the one to supply it. It's basically the NOW investment idea, remember ethanol?

2008 Apr 08 04:08 PM

[fodi MD.:]

in a shakey market PE too high on both

2008 Apr 09 03:37 PM