In order to make money in stocks, you've got to invest. Not just
money -- you've got to invest time to watch and watch and watch a
gathered list of stocks and be ready to pounce when opportunities
present themselves. Here are three stocks that have been on my
watch list and now look like promising buys.
1. Couer D'Alene Mines Corp. (NYSE:
At the start of each year, investors fret that this may be the year
that China finally cools. But that's been a bad bet recently and
I'm betting that this year's China scare will also prove to be
unwarranted, despite possible troubles in that country's housing
sector. The rest of theeconomy simply has too much momentum, which
is why I agree withcommodity bulls that China's insatiable demand
for all kinds of metals and minerals will keep this asset class on
the rise in 2011.
My favorite current commodities play is Couer D'Alene, an
80-year-old company that is ramping up production of gold, silver,
zinc and iron ore. It's been a "show-me" stock lately as it starts
to boost output at some new mines.Shares have fallen 15% since last
week, creating a compelling entry point. Although Couer D'Alene has
decent exposure to gold, it's first and foremost a play on silver.
And demand for silver, especially in industrial applications, looks
set to keep rising in 2011. Silver is an excellent electrical
conductor, is used as a reflective material, as an anti-bacterial
agent, a heat conduit (think rear-window defrost units in cars) and
of course in jewelry.
So why is Couer D'Alene, which is expected to mine more than 20
million ounces of silver by next year, seeing a slumping share
price? Because press reports are circulating that silver is due for
a bit of profit-taking. It surged to $31 an ounce in early January,
has fallen back to $28, and some think it's headed toward the $25
But silver has plenty of bulls as well. Standard Bank's Bruce
Ikemizu told Bloomberg last month that he sees a move to $40 in
2011, citing new industrial applications for the
eponymously-colored metal in 2011. Analysts at Deutsche Bank are
even more bullish, predicting that silver will rise to $50 in 2011.
If that happens,shares of Couer D'Alene would likely double from
current levels as analysts sharply elevate their cash-flow
forecasts for the company.
Time will tell how the silver trade plays out. It looks like some
see roughly 10% downside from current levels while others see 30%
or even 60% upside. This means
of Couer D'Alene will likely simply tread water in coming quarters
(after slumping badly in recent sessions), or see its shares rise
sharply. Potentially high-reward and moderate risk are an appealing
2. NuVasive (Nasdaq:
I wrote about this stock several times in 2010, most recently
noting that the company's suite of back surgery tools enables
doctors to more effectively treat patients while lowering the total
cost of the surgical process. Insurers increasingly agree.
United Health Group Inc. (NYSE:
already covered the system, and earlier this week,
reversed course and decided to cover surgeries performed using the
NuVasive system as well. Shares surged nearly 10% on Wednesday
morning, but have subsequently given back most of the gain. That's
a compelling entry point for investors that missed the move.
Shares of NuVasive are off roughly 30% since April, in part due to
expectations that sales will grow just 10% this year (after having
grown at least 48% every year from 2002 to 2009 and a likely
additional 25-30% in 2010). The slowdown is in part due to the
uncertain health care reimbursement environment. But as noted
above, insurers are now getting behind the company and I expect
sales growth to re-accelerate back up 15-20% next year, as the
company continues to train more doctors on how to use its
equipment. International sales efforts are just now getting
These moves could help the bottom-line grow even faster in 2012.
Per share profits, which were likely around $1.40 in 2010, may
slump a bit this year as the company builds out its infrastructure,
butearnings per share (
) may rebound and hit a new peak -- perhaps $2 -- in 2012. Put a
multiple of 20 on that, and shares would rebound to $40, or 40%
above current levels.
3. Cree Inc. (Nasdaq:
This one's anearnings season casualty. I first wrote about Cree
back in October, when shares traded for $48. Shares quickly
rebounded to the $70 mark as fears of a slowdown subsequently
looked overblown. Yet shares were slammed again this week on, you
guessed it, fears of a slowdown for this maker of LED lighting.
Everything I said about Cree in October still applies: "You want to
own Cree for its pole position in an exciting new industry that
will eventually generate billions in revenue. Cree's slice of that
industry revenue may shrink, perhaps to 20%, as competition builds.
Yet a smaller slice of a much larger pie is not a bad thing."
Quarterly results are another story. Cree just delivered tepid
fourth quarter preliminary results, missing forecasts by nearly
10%. Cree's end markets are in flux, especially as Chinese rivals
looked to stealmarket share . However, those rivals have developed
inferior products that are quickly failing when deployed. In time,
the industry's biggest buyers will realize that Cree's
longer-lasting LED lights represent the lowest total cost of
ownership. More importantly, we're in the early innings for the LED
A number of analysts have downgraded their rating on Cree, noting
that the company has lagged forecasts for the past three quarters.
"We view these misses as a somewhat extended period of speed bumps
over the course of a long journey," note analysts at Sterne Agee,
who are sticking by their $87 price target. In my view, Cree can
now benefit from a lower threshold of expectations. As the company
gets past this lull in sales, shares are likely to look
newly-appealing, as they trade for around 15 times lowered fiscal
(June) 2012profit forecasts when cash is excluded.
Shares rebounded quickly after I wrote about Cree in October. I
don't expect to see a quick rebound this time around, but instead I
see this as a slow and steady rebounder.
Action to Take -->
Whether it's silver price forecasts, insurer reimbursement changes
or anearnings season miss, you need tospot opportunities in a range
of areas, identifying where the herd's attention may be misplaced.
These three stocks still look set for powerful growth
opportunities, despite the near-term noise and are my favorite
three stocks to own now.
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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