6 stocks to buy for October

These pickings represent good values and could make major moves higher in the month.

By InvestorPlace Sep 25, 2013 11:34AM

Businessman with newspaper © H-Gall, Vetta, Getty ImagesBy Sam Collins


iplogo

In mid-September, the market survived the latest Federal Reserve surprise -- no tapering of its bond-buying program.


The Dow Jones industrials ($INDU) hit another new high, the Standard & Poor's 500 Index ($INX) rose to record territory, and the Nasdaq Composite Index ($COMPX) reached its best levels since September 2000. The bull market is still very much alive.


But it seems unlikely that the S&P 500 can sustain a run to another new high before testing support at 1,672 to 1,679 (20-day and 50-day moving averages), and perhaps even the intermediate trendline at around 1,650. Internal indicators are overbought and RSI on the leading index, the Russell 2000, flashed a "non-confirmation."


Despite the Fed's surprising decision to continue buying bonds in September, sources at their regional banks say that the Fed will soon taper, QE will end, and interest rates will normalize. Currently, equity values are slightly overbought, and investors who have cash to invest should focus on stocks with a solid history of earnings growth. Household names with broad support should perform well despite a slight correction in the overall market. So, this month, I've focused on names familiar to most investors and generally suggest buying them on weakness.


Here are your top stocks to buy for October:


Amazon.com 

Leading online retailer Amazon.com (AMZN) is expected to increase net sales 22% in 2013, while earnings are expected to come in at 85 cents per share, up from a loss of 9 cents a share in 2012. The consensus estimate for 2014 is $2.81 per share.


The stock attempted to break out of a well-defined bull channel in July and failed. Now, it is again attempting to break above the resistance at about $320, and if it succeeds, it will probably make a run to $340. But the chances of profit-taking are high, and trying to buy AMZN on a pullback to $300 seems prudent. However, if buying volume increases and the stock closes above $320, buy it at the market.


AMZN Chart
Click to Enlarge

Chart Key


Eaton Corp.

Eaton Corp. (ETN) makes electrical systems and components for power management in the aerospace, hydraulics, truck and automotive, and power transmission industries. Analysts expect earnings per share (EPS) of $4.19 in 2013, up from $3.94 in 2012, and $5.02 in 2014. The high target of fundamental analysts is $81, and the stock has a dividend yield of 2.4%.

Technically, ETN is attempting to break from a broad triple-top, which is being propelled by higher-than-average upside volume. Buy ETN for a trade to $78. Investors may also want to buy the stock as a long-term hold.

ETN Chart
Click to Enlarge

Chart Key


Pitney Bowes 

Pitney Bowes (PBI), once known solely for its postage machines, now provides hardware, software and services to integrate physical and digital communications channels. For example, it recently helped turn one of North Florida's largest commercial print and mail operations into a "White Paper Factory," which no longer uses pre-printed forms and envelopes, saving the company $1 million a year.


Earnings are expected to improve from an estimated $1.70 per share this year to $1.75 next year. The stock has a dividend yield of 4.1%.


PBI is trading at the top of a well-developed bull channel but could pull back to its 50-day moving average, now at $16.50. Buy PBI on a drop to its 50-day moving average or on a high-volume breakout through the resistance line at $18.50.


PBI Chart
Click to Enlarge

Chart Key


Qualcomm

Qualcomm (QCOM) is a leader in developing products and services based on its advanced wireless broadband technology. It expects solid chipset sales throughout the coming year, and it is believed its Snapdragon chipset will provide an advantage in the wireless area over competitors. It has a strong royalty base in markets like China, which are converting from 2G to 3G. The consensus estimate for fiscal year 2013, ended in September, is for EPS of $4.55 and $4.96 in FY 2014.


I recommended QCOM on May 2, at the $62 area, noting that high-volume sell-offs like the one we saw in April have usually led to rebounds. Since then, the stock has pierced its old high and appears capable of continuing the move to my trading target of $76. But profit-taking could drop it to support at its 50-day moving average at $65. Thus, it would be prudent to buy a half position now and add to it if QCOM breaks out on increasing volume or pulls back to support at $65. Long-term investors have an excellent opportunity for gains in excess of the fundamental 12-month target of $85.


QCOM Chart
Click to Enlarge

Chart Key 


Stratasys

Stratasys (SSYS) is a maker of three-dimensional printers and 3-D production systems for office-based rapid prototyping. The company's only competitor is 3D Systems (DDD), which I recommended on Aug. 27. Stratasys' merger with Objet Geometries took out the other major player in this industry. And the merger, it is reasoned by analysts, created a worldwide leader in 3-D printing.


While 3D Systems has a slight edge in marketing, Stratasys has a greater geographic footprint, and both companies should prosper. SSYS is expected by analysts to earn $1.85 per share this year and $2.49 in 2014. The mean target of fundamental analysts is $111.23.


On Sept. 13, the stock gapped down nearly $5 because of a 4.5 million-share offering of new stock at a 4.9% discount from the closing price the day before. However, the stock held at its bullish support line and is moving up on high volume. SSYS should be bought at the market with a trading target of $110. The stock can also be held for long-term appreciation.


SSYS Chart
Click to Enlarge

Chart Key


Texas Roadhouse

Texas Roadhouse (TXRH), a national chain of casual dining restaurants, has had five successive years of earnings growth and is expected to earn $1.31 per share next year versus $1.15 in 2014. It has taken market share from LongHorn Steakhouse, owned by Darden Restaurants (DRI), and Ruth's Chris (RUTH) through lower price points and store expansion.


Some analysts believe that the company can't keep up the pace of the last two years, but company management is optimistic, planning a 1% increase in prices that should make Wall Street's estimates too conservative.


The stock broke above a triple-top in mid-September on high volume and appears headed to a trading target of $28 to $32. Buy TXRH at the market with a stop-loss order at $23.


TXRH Chart
Click to Enlarge

Chart Key


More from InvestorPlace

2Comments
Sep 26, 2013 7:00AM
avatar
You win an award as the Dumbest Greedy Stupid Loser on Earth for buying into stocks in October. The era of financial tyranny expires 9/30/2013.
Sep 26, 2013 7:04AM
avatar
Your 401K won't be okay starting 10/01/2013. Use your brain for once... any change orders you make don't take effect until the Closing Bell on the day you make them. The market can and will fall hugely while you watch what is likely your ONLY savings go down the drain. But then... you stood in line over the weekend to get the gold-version of that cheap knock-off I-Phone so why sweat it... your brain isn't working now.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

109
109 rated 1
276
276 rated 2
421
421 rated 3
629
629 rated 4
511
511 rated 5
538
538 rated 6
686
686 rated 7
507
507 rated 8
331
331 rated 9
109
109 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.