Five Stocks to Watch for the Next Rally

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Given the stock market's mild correction, my firm's Buy and Strong Buy ratings must be tempered a bit. For now, this is really a watch list for the next rally.


My firm's buy ratings will apply when the market correction bottoms out and stocks head into a confirmed rally.

Nevertheless, in the meantime, a very strong watch list it is. These recommendations have far outperformed the market during the August correction, and over other benchmark periods.

What all of them have in common are: 1) expectations for very rapid three-to five-year earnings growth averaging over 21%, and 2) attractive price valuations relative to those growth prospects.

First and foremost, we like Equinix ( EQIX ) of Redwood City, CA, the data center pioneer we discovered at $50 four years ago and rode to $220 last spring.

Strong in all key revenue-driving niches, including cloud and interconnect, we foresee 25% per year earnings growth and possibly an advance from $175 to $235, with 13 of 16 analysts calling EQIX a strong buy.

Two other choices are engineering and construction leaders with 20% to 25% per year earnings growth estimates by analysts following them: Dycom Industries ( DY ) and MasTec Inc. ( MTZ ). Both are off their highs but trade at rock-bottom price/earnings to growth (PEG) ratios around 0.65.

With crude prices looking stronger, we're adding two oil services stocks: Tetra Tech Inc. ( TTI ), which specializes in wellhead services, and much larger Weatherford International ( WFT ), which provides a full range of services worldwide.

Both oil services stocks offer 25%, plus earnings growth, and trade at bargain-basement PEG ratios of 0.42 and 0.46.

Editor's Note: This article was written by Stephen Quicknel of US Investment Report of MoneyShow .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Stocks

Referenced Stocks: DY , EQIX , MTZ , TTI , WFT

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