Mybull call for 2013 is well on its way to becoming a
reality.
The first several weeks of January have been amazinglybullish
for thestock market , as youwill see in the chart. If this trend
continues, then 2013 could truly turn out to be a year to be
remembered as super-bullish.
The Federal Reserve stimulus combined with thereal estate
recovery and ultra-low interest rates are fueling the market
higher. As the majority of the "Fiscal Cliff" fears turn into a
distant memory, the market has little choice but to push higher in
this economic environment. Obviously, my bullishness is pending no
extreme "black swan" type of event.
All the U.S. stock averages are up more than 4% so far this
year, with small caps leading the way as the Russell 2000 is up
more than 5%.
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As you can see from the chart below, six out of nine sectors in
the broad-based S&P 500 are pushing higher this year. Energy
and health care are leading the pack, with technology and utilities
lagging.
Utilities are often thought of as aproxy for thebond market due
to their steady performance. Therefore, when utilities are lagging
the overall market, then it is a clear sign of a major "risk-on"
attitude in the U.S. market.
This means right now is the perfect environment for taking a big
risk in the market.
Don't get me wrong, I'm not advocating risking your entire
portfolio or retirementinvestments . But taking a small percentage
from 3% to 5% (or even up to 10% as my colleague Andy
Obermuellercash and taking a big risk on a stock could pay off in
spades.
This is particularly true in this extremely risk-on bullish
environment.
Taking a risk-on attitude is not only fun, but it can turn you
into a millionaire. However, it's important to be very aware
themoney invested in this fashion could be permanently
lost.
Using this risk-on mindset, I searched forstocks that could
easily skyrocket or fall to zero this year. Here are two of my
favorite double-or-nothing stocks.
1. Groupon (Nasdaq: GRPN)
This online marketing stock will likely go down in history as one
of the biggest initialpublic offering disappointments of all
time.
The stock went public in 2011 at an initial price of $20 a
share. But Groupon has been plagued with scores of problems since
theIPO . Theseissues started with the initial greed of the
underwriters who decided at the last minute to ramp up theoffering
price from the initial $16 to $18 range, to $20 a share and
increase the number ofshares available by 5 million to a total of
35 million.
Accounting irregularities, apparent management ineptitude
fromCEO Andrew Mason and extreme competition from other copycat
companies and behemoths such as
Facebook (Nasdaq: FB)
and
Amazon.com (Nasdaq: AMZN)
all round out the commonly-cited issues surrounding the company's
demise.
As a result, the stock plunged to nearly $2 in November 2012,
but has subsequently bounced into the $5 range.
Why I like this stock as a risk-oninvestment
Thehedge fund Tiger Global Management bought a 10% stake in the
company when the stock was near its lows. The largefund run by
Chase Coleman and Feroz Dewan has already doubled its investment in
the company and is likely expecting to add much more of its money
into it.
In addition, Groupon's troubled CEO has developed the reputation
as a complete failure in the investment community. If and when he's
replaced, then shares could easily skyrocket. Remember, a double
from today is still only $10. Theearnings report arriving on Feb.
27 after the market closes could lift shares, granted the results
are better than expected.
However, it's important tonote that during the past fivequarters
, shares have plunged the day after earnings all but one time. The
company just acquired social-media firm Glassmaps and is ramping up
its analytical engines to help merchants market its products and
services.
That's why I wouldn't be surprised to see this stock at $10 a
share sometime between now and 2014.
2. Alpha Natural Resources (
ANR
)
This coal stock plunged from a high of $70 a share in early 2011 to
a low of less than $5 last September. The price has since been on a
steady, but rocky climb higher to more than $10, prior to pulling
back to the 200-day simplemoving average at about $9.
The company has amarket cap of just more than $2 billion and
ranks as North America's third-largest coal producer byrevenue and
production. However, the change from thermal coal to natural gas,
due to natural gas' ultra-low prices, has severely hurt this
once-leading energy company.
In addition, the threat of the Environmental Protection Agency
shutting down more than 10% of the coal capacity in the United
States has also knocked Alpha Natural Resources lower.
Why I like this stock as a risk-on investment
Although demand in the United States is falling quickly because of
environmental pressures and competing fuel sources that are
cleaner, worldwide demand is also increasing. In 2011 alone, coal
was the fastest-growing energy source after renewable energy,
reaching a record level of 7,678 million tons that year, a 6.6%
increase over 2010, according to the World Coal Association.
This growth is due to the massive economic expansion in India
and China. Growth overseas is so robust, the United States shipped
more coal overseas in 2012 than any year since 1981, a total of 124
million tons, according to the U.S. Energy Information
Administration. The coal industry expects global coal demand to
increase at an average of just less than 3% per year for the next
five years.
In addition, should natural gas prices start to climb, the
emphasis will switch back to coal as a readily-available fuel
source. These facts sparked the nearly 100% rally since September
2012.
As this risky stock right bounces from its 200-day simple moving
average, I expect it to reach $30 within the next 18 months, if
natural gas keeps going up and global demand increases.
Risks to Consider:
Both of these companies have the potential for substantial
gains in 2013. However, they are extremely high risk and their
success is dependent on factors that have unknown odds of
occurring. Only use money you can afford to lose wheninvesting in
these types of opportunities.
Action to Take -->
Groupon and Alpha Natural Resources are my two favorite "risk-on"
stocks because of their hugeupside potential. Between the two, my
favorite is Alpha Natural Resources because of its bullish
technical pattern on the daily chart and growing global demand for
coal.