In the past few years, we've discussed the importance of
investing. This involves clearly identifiable events that, if they
come to pass, the they'll propel a stock sharply higher.
Here are a handful of stocks that could strongly benefit from
possible catalysts in 2011. Each stock could double if they receive
just a few good breaks.
1. Broadwind Energy (Nasdaq:
This stock caught my eye after a recent upward move.Shares had
fallen from the 52-week high of $4 to just $1.21 in early March.
Now that they're back up above $1.50 -- gaining more than 20% in
just three recent trading sessions, I've been giving the company a
fresh look. And I like what I see...
Broadwind, which makes components for the wind-turbine industry,
had been rumored to be on the cusp of a
moved up on word that
or a foreign suitor would soon make a bid. No such bid ever
materialized, prompting shares to hit new lows. I'm not ruling out
that such a bid may still emerge, but I like this stock for other
For starters, business appears to be rebounding. Sales had fallen
from $207 million in 2008 to just $137 million in 2010 as U.S.
spending on wind farms slumped. Fourth-quarter sales of $47 million
marked a turn, posting the first year-over-year quarterly increase
in nearly three years. Bookings for new orders surged to $60
million, the highest rate in more than a year.
rebounded sequentially by $16 million, to $226 million.
Yet it's the macro picture that I see as the big catalyst. As the
cost of wind power keeps dropping, major players are making big
investments. For example,
and a pair of Japanese firms are investing about $500 million in a
wind farm GE is developing in Oregon. Notably, the consortium has
predicted that the wind power generated will be competitive with
other fuels and won't require utility-level subsidies. The fact
that the wind farm will have zero emissions is just an added
Management has noted a positive change in industry tone from the
first half of 2010 to the second half. And they expect 2011 results
to show continued strengthening. The key is to at least move back
to break-even, as the company only has $25 million left between its
cash balance and an undrawn credit line. If that happens, investors
will re-embrace this fallen stock that trades for just 0.7 times
projected 2011 revenue. I would expect that multiple to double if
the sales rebound is sustained, implying similar upside for the
2. Winnebago (NYSE:
Talk about an ugly stock chart. Every time oil prices rise to new
highs, this maker of gas-guzzling recreational vehicles (RVs) falls
further. The stock has fallen in seven of the last eight sessions
(going into trading on April 19) as investors assume that demand
for RVs will dry up while gasoline is at $4 a gallon.
Well, the catalyst for this stock should be pretty clear. If oil
prices finally pull back, then shares are likely to see a decent
rebound. The more serious rebound is likely to come if the
employment picture continues to strengthen. In the middle of the
past decade, when employment trends were last on the upswing,
Winnebago typically generated roughly $1 billion in annual sales.
The recent economic weakness has altered that trend. Sales plunged
to just $211 million in fiscal (August) 2009 and only rebounded to
$450 million in 2010, less than half the level of the previous
Analysts think sales will rebound 20% in fiscal 2011 and 2012. The
key is the economic variables -- falling oil prices and rising
employment. If those two catalysts come into play, then long-term
investors are likely to note just how cheap this stock now is,
trading at roughly six times peakearnings from the last cycle. The
stock has come down from $30 in 2007 to a recent $12, but if
theeconomy appears increasingly healthier later this year, then
look for shares to move back up smartly into the $20s.
3. A123 Systems (Nasdaq:
This lithium-ion battery maker is now a "show-me" stock. After
missing sales forecasts for a number of quarters, shares have
slipped from more than $25 in late 2009 to less than $6. Those weak
sales results led to higher-than-expected losses, which led to
fast-sinking cash levels. As a result, investors began to realize
A123 would need to keep selling more stock to stay afloat.
That vicious cycle now looks to be at end. The company just raised
another $250 million and analysts increasingly think the era of big
cash losses will wind down. By the time the cash from this latest
capital infusion has been spent, A123 may actually be a profitable
A123 possesses strong engineering capabilities in its lithium-based
batteries that are aimed at the transportation and electrical grid
markets. This enabled the company to sign up an impressive roster
of major clients. Trouble is, those clients have been slow to get
going with their own cutting-edge programs. For example, Fisker
Automotive, a rival of
Tesla Motors (Nasdaq:
, has been dogged by delays in launching a new electric luxury
sedan, but the sedan should finally reach customers this summer.
A123 has also announced that a major unnamed automaker has signed
up as a customer. Investors await more details about this mystery
customer and to what type of deal both parties have agreed. But
this news could help clarify why analysts think that after several
years of disappointment, A123 is likely to see sales more than
double in 2011 to around $200 million and double again in 2012. If
that comes to pass, then A123 will be close to break-even and won't
need to raise any more cash.
With the stock now more than 75% from its late 2009 peak, these
catalysts highlight that shares now hold more reward than risk.
Action to Take -->
When you swing for the fences, you can also miss. Each of these
stocks may prove to be dead money if these catalysts fail to
develop. Yet they do appear to have found a floor at these levels,
so investors aren't absorbing the usual amount of risk when looking
at swing-for-the-fences-type stocks.
-- David Sterman
P.S. -- We've just identified six surprising events that could
break your portfolio wide open in 2011. Knowing these pivot points
in advance lets you focus your investing strategy like a beam of
light in the dark... and make a lot of money in a hurry. Get them
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Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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