Hey, second quarter, good riddance to ya. The sharp drops in the
market were no fun, but with
around the corner, perhaps investors will again find reasons to
buy. Right now, it seems that most investors can find many more
reasons to be bearish than bullish. And that's actually good for
stocks. You have a chance to make money when stocks are
As investors have been digesting the ramifications of a possibly
slowing economy, they may have overlooked some important news
coming out of specific stocks. So it helps to take a look back and
point the spotlight once more on some of the most compelling stocks
from this week's StreetAuthority winners and losers.
PolyMet Mining (AMEX:
we noted on Monday morning
, PolyMet Mining stood to benefit from a decision by the U.S.
Environmental Protection Agency to let the company move forward
with its application to mine copper and nickel at a large Minnesota
mine. Shares initially surged higher, but ended the week even lower
than where it began, not far from the 52-week low. Perhaps that's
because investors realized that PolyMet still needs to file
mountains of paperwork, then begin the mining exploration process,
and won't see actual revenues for three more years.
But the mine near Duluth, Minnesota, has the potential to be a
blockbuster. It holds vast sums of copper and nickel, is near a
highly-skilled workforce and major transportation links, and should
prove to be a low-cost operation. Meanwhile, other major nickel and
copper belts elsewhere in the world are showing signs of quickening
Action to Take -->
Analysts at Canada's Wellington West research think shares will
eventually rise up to C$4 (or $3.80 in U.S. dollars). That's nearly
triple the current price.
Micron Technology (NYSE:
Investors continue to shun technology stocks, assuming that recent
stellar results cannot be sustained. But as
we noted on Tuesday
, the outlook for Micron Technology, the world's largest maker of
memory chips, remains bright. For investors, there are two key
metrics to track -- pricing and volume. It's pretty clear that
sales volumes should be decent to good, but some suspect that
pricing may take a hit if more supply comes on line. Notably, the
leading memory producers are keeping a tight enough lid on supplies
that pricing looks pretty firm.
Investors may have also questioned the earnings momentum relative
to expectations. In the prior three quarters, Micron topped profit
forecasts by at least 65%, but profits only beat forecasts by a
this time around. And profits rose only 15% sequentially after
rising more than 50% in the prior quarter. More than likely, Micron
could approach a cycle peak in profits in fiscal (August) 2011 of
around $1.75 to $2 a share. But there's no strong reason to think
that profits will plunge after that, since memory makers are now
acting much more rationally in terms of keeping output in line with
demand. That should keep pricing firm.
Action to Take -->
Shares trade for less than five times that peak run rate, and would
post a 30% gain if they traded up to six times the peak
. A more generous multiple, when investors no longer dislike tech
stocks, could push shares far higher than that.
Tesla Motors (Nasdaq:
that shares of Tesla Motors shot up so quickly following its
Well, sanity has been restored, as shares crashed back down in
subsequent sessions. But they're still
, and could eventually fall by half from current levels.
A look back at the history of Delorean Motor Cars is instructive.
That car maker -- made famous in the movie Back to the Future --
told investors that it needed to make 20,000 cars every year to
break even. But went on to make only 10,000 cars -- in its entire
Action to Take -->
Tesla has only sold roughly 1,000 vehicles in two years, and you
could argue that the total market for expensive niche cars like
this never exceed a few thousand. At some point, it will dawn on
investors that Tesla is unlikely to ever turn a profit. Despite the
pullback, this looks ripe for shorts.
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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