5 Great Stock Buys Outpacing the Market

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It's tough to find stocks to buy in this market. Each time you feel like you've found a winner, the market can snatch it away from you in a heartbeat. I've had a few stocks this week change from being double-digit winners to breakeven or even in the red. It can be maddening and frustrating. All you have to do to profit is loosen up your time horizon and change what you're looking for.

Usually I'm out here looking for breakout stocks to buy. The high flying stocks that everyone is talking about. But what do you do when the market is beating the pulp out of everything? You don't have to be Einstein to know that everything is relative (See what I did there?) Rather than needing to have a stock breaking out from 52-week highs, look for stocks with solid earnings stories that are showing lots of strength relative to the rest of the market.

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That means we can still look for Zacks Rank #1 (Strong Buy) stocks. Those give us the greatest probability of success and have an established track record. Also, by screening for stocks with a Momentum Style Score of "A" or "B" we can identify stocks with volume increases that are showing a little momentum, even in this harsh market. The wrinkle we're going to add here is we want stocks that have outperformed the market so far this year and are in the green this week. If a stock can have all the characteristics listed above and still be beating the market during this downturn, just imagine how well they'll perform when things finally turn around.

Tesoro ( TSO )

As one of the largest independent refiners and marketers of petroleum products in the United States, Tesoro plays an integral role in fueling the communities they serve. They are committed to safe, clean, reliable operations, while creating value for everyone invested in their success. Through their advantaged crude supply and integrated network of refineries, transportation and terminal operations, logistics assets and retail stations, they are intentionally positioned to capitalize on today's opportunities and tomorrow's possibilities.

Tesoro shares have continued to benefit from the "crack spread" on crude oil. That spread refers to the price of the refining outputs from a barrel of crude and the price of crude. When a barrel is much cheaper than the sum of its parts, refiners do very well. That's why TSO has been on a rampage all year. The current resistance at $100 is a little troubling. A very overbought CCI implies a retrace will happen before the next leg higher. Trend line support coinciding with the 21-day moving average down near $94.50 would be a great entry price.

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Napco Security Technologies ( NSSC )

In the current environment investors are looking for solid companies with good growth potential, NAPCO Security Systems, Inc. (NASDAQ: NSSC ), a leader in the security equipment and systems field, meets the requirements.

Since the founding 30 years ago by Richard Soloway, NAPCO's Chairman and CEO, the Company has become a leading manufacturer of electronic security equipment including alarms, locks and building access control systems. NAPCO products have earned a reputation for technical excellence and quality from its worldwide selling network of professional security dealers.

After trading in the $7 for much of 2014, shares of NSSC dipped to $4 before the market bottomed out in October 2014. From there a big bullish push has taken shares close to $6. A great deal of volume has gone out at $6, indicating that it's currently an area of heavy topside resistance. If shares ever manage to leapfrog that level it should provide staunch support for the stock price. The near term bottom lies at $5.40.

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Culp ( CFI )

Culp, Inc. manufactures, sources, and markets mattress fabrics used for covering mattresses and box springs, and upholstery fabrics primarily for use in production of upholstered furniture (residential and commercial). The company competes in a fashion-driven business, and we differentiate ourselves by placing sustained focus on creative designs, product innovation and new product introductions.

Culp shares have looked great since breaking out from the $18 level in October of last year. Since then it's been slowly climbing as buyers have continued to jump in. The 50-day moving average is beginning to flatten here, implying some range bound trading lies just ahead. The top end could be the 52-week high at $35 while the bottom end sits about a buck and a half shy of the current price at $31.

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Connecticut Water Services ( CTWS )

Connecticut Water Service, Inc., is a non-operating holding company whose income comes solely from its subsidiaries. The core business is water service to people throughout towns in Connecticut and Massachusetts.

CTWS shares aren't exactly the runaway momentum stock I'm used to talking about here. Really it's a utility company that happens to be outperforming the market right now. Shares have traded bewtween $33 and $38.50 for most of the year. With shares bouncing off the bottom at $33 recently there could be an easy $3 to pick up here with the stock in the mid $35s.

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Foundation Health ( FDNH )

Foundation Health Care is an industry leading Surgical Hospital company focused on partnering with physicians and employees to create an outstanding patient experience, while maximizing partner and shareholder value. Founded in 1996 by its current Chairman, Tom Michaud, Foundation Health Care has grown to a portfolio of three surgical hospitals, 10 surgery centers and 57 sleep centers.

I went back and forth between whether or not I'd put this stock in. It's a very thinly traded stock that I would never add to one of my trading services. But the numbers are there to support the bull case. This micro cap stock is only an 83.7 million dollar company. But estimates are moving in the right direction and it is a Zacks Rank #1 (Strong Buy). Certainly a risky play with low liquidity but maybe the recent run is implying there is increased interest in this stock.

Bottom Line

Don't let the market give you the blues. Times like this provide some of the best buying opportunities. Sometimes you just have to hold your nose and take your medicine. Stick to the basics that worked in bull markets, just adjust and adapt to the times. With the Zacks Rank in your back pocket, you can find the big stock winners of tomorrow today.

Be sure to click FOLLOW THE AUTHOR above to stay on top of all the hot momentum stocks at David Bartosiak is the Momentum Stock Strategist with Zacks, editor of the Momentum Trader and Home Run Investor, and host of "Trending Stocks"

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

TESORO CORP (TSO): Free Stock Analysis Report

NAPCO SECURITY (NSSC): Free Stock Analysis Report

FOUNDATION HLTH (FDNH): Free Stock Analysis Report

CONN WATER SVC (CTWS): Free Stock Analysis Report

CULP INC (CFI): Free Stock Analysis Report

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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 Nasdaq, Inc.

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

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