5 Rocket Stocks to Buy This Week
How the fiscal cliff impacts Mr. Market still remains to be seen, but as the New Year's deadline draws near, you can bet that the drag on stocks will only get stronger. That's why it's so important for Washington to figure out a workable deal early on -- we don't want a repeat of the debt ceiling debacle that happened last year.
In the meantime, it's important to remember that the fiscal cliff isn't the only factor impacting the markets. With bargains still to be had in equities after this past quarter's correction in the S&P 500 , there's at least one very good reason not to hate stocks as we approach 2013. That's especially true given the S&P's historical propensity for a push higher in the last couple of months of the year.
So, despite all the noise that's going on this week, we're turning to a new set of Rocket Stocks that look ready to move higher.
For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows.
In the last 176 weeks, our weekly list of five plays has outperformed the S&P 500 by 75.57%.
Without further ado, here's a look at this week's Rocket Stocks .
First up is Watson Pharmaceuticals (WPI) , the world's third-largest generic drug maker. While Watson may not have the same household name sported by conventional big pharma stocks, investors shouldn't ignore this firm right now -- especially as patent drop-offs plague conventional drug makers.
Watson's recently-closed deal to acquire Actavis is a game changer for the firm. It gives Watson considerable global scale, ramping up Watson's total share of the generics market to around 10%. Size matters in the generics business, and as a result, the combined firm boasts some serious advantages over smaller rivals who lack the wherewithal to pursue more complex drugs. Complexity is Watson's bread and butter -- the firm focuses on drugs that are more challenging to manufacture, generating bigger margins for its trouble.
The Actavis acquisition ratcheted Watson's balance sheet leverage, but overall the firm remains in solid financial shape. Management has already announced an aggressive debt paydown plan over the next couple of years that should bring WPI back around its historical averages -- with rising analyst sentiment in play this week, we're betting on shares.