Friday December 23, 2011
by Mike Cintolo, editor Cabot Market Letter
The very long trend, of course, is up, as it has been since people began buying and selling shares in New York City 219 years ago.
As long as our country’s economy grows, and public markets exist for the shares of growing companies, that trend will continue. For now, however, the market remains in a wide, choppy trading range, as do most stocks.
Our Model Portfolio continues to hold a huge cash position, which has helped us avoid some of the recent recent damage.
Selling pressures on most stocks have eased, and sporadic buying pressures tell us deep-pocketed investors are picking up attractive stocks.
The cash is there, but the energy of the crowd has thus far failed to coalesce into a coherent whole that can lift the market into a lasting uptrend.
In sum, the odds are that the next major move of the market will be up, away from that August bottom and above the highs of October.
But there is still substantial potential for short-term drops back down toward that August low, and until that probability is greatly reduced, it will be prudent to continue to hold a large cash reserve.
In the meantime, we continue to track numerous stocks with great growth potential; here, we present the current top prospects.
If you do chose to invest in some of these, take care to buy on dips. And if you incur losses, keep them small, so you’ll still be in the game when the next big bull market gets rolling.
Below are our current top ideas:
Chipotle Mexican Grill (CMG): The story isn’t new, per se, but Chipotle’s business continues to thrive and, with about 1,100 locations, there remains huge potential for expansion in the years ahead, both in the U.S. and overseas (including its new Asian-themed restaurant concept).
The stock has had a big run during the last year, but it has been hitting higher lows in recent months and selling pressures have dried up.
MercadoLibre (MELI): MercadoLibre, the eBay/Amazon of Latin America, saw a big acceleration in its business metrics during the third quarter, including a doubling of its payment volume through MercadoPago (very similar to PayPal).
The stock has shown excellent buying clues and wants to go higher if the market can get its act together.
Nuance Communications (NUAN): Nuance is the leader in voice recognition software and is the engine behind the new iPhone’s Siri.
Growth has been decent, but the potential for Siri-type applications on most smart phones means huge potential for Nuance. The stock staged a monstrous, huge-volume breakout during the October rally, and is now constructing a new base.
Oasis Petroleum (OAS): Oasis has some of the best acreage in the Bakken, and the ﬁ rm is ramping up production at lightning-fast speed. Earnings are forecast to more than double in 2012, with sales up 90%.
After nearly doubling off its October low, shares are now tightening up. If energy stocks advance, OAS should do well.
Rackspace (RAX): Rackspace is beneﬁ ting as more and more companies realize it’s faster, cheaper and more effective to use a specialized service provider for their information technology and hosting needs.
The ﬁrm’s cloud offerings are driving growth, while the “regular” hosting business continues to steadily expand. The stock has built a great looking launching pad; now it just needs a strong market.
Ulta Salon (ULTA): Ulta Salon continues to crank out solid results; third-quarter sales and earnings jumped 22% and 68%, respectively. And management believes 2012 will show square-footage growth of nearly 20%, keeping the company on the growth path.
ULTA has had a mega-run since September 2010, but it continues to hold up well with excellent volume patterns telling us big investors are nibbling.
Learn more about this financial newsletter at Mike Cintolo's Cabot Market Letter.