4 growth stocks ready to pop in 2012

Tried-and-true fundamental and technical gauges point to continuing strength.

By MoneyShow.com Dec 29, 2011 1:44PM

By Kate Stalter, MoneyShow.com


As 2011 winds down, there are some growth stocks well positioned for gains in the new year. Higher beta names as well as smaller stocks have fallen out of favor recently, and the Nasdaq Composite and Russell 2000 are trailing the benchmark S&P 500.


It's not unusual for growth stocks to underperform the broader market during a downturn -- they also outperform in a market rally. But individual stocks that outpace the indexes in times of weakness are often poised for further gains.


As an investor, I avoid year-ahead predictions -- either my own or anyone else's -- all of which could easily go wrong. Instead, I rely on current charts and fundamentals. The stocks here show promise and are among the growth names I'll be tracking as we head into 2012.


One growth name that’s been a consistent performer lately is Questcor Pharmaceutical (QCOR), a California-based maker of drugs to treat nervous-system disorders. The stock is ending the year with several weeks in a row of tight trade above its ten-week line. That’s a good sign that institutional investors are holding shares, confident about share price valuation.


chart

 Click to enlarge

The stock is up an incredible 190% this year, and the pace of earnings and revenue growth accelerated in recent quarters.


Questcor is expected to report its fourth quarter in the latter part of January. Analysts expect the company to wrap up the year with earnings of $1.19 per share, almost double last year’s profit. In 2012, the company is expected to show a profit gain of 62%, to $1.92 per share.


Another 2011 winner that could be poised for more gains is HealthStream (HSTM), which offers online training for health-care sector business customers. The small cap has gained more than 130% year-to-date, fueled by a pickup in earnings growth, following a dip in 2010.


Last week, the stock rallied to a new peak, surpassing the high-water mark of $18.30, reached in November, just prior to a ten-week pullback.


chart

Click to enlarge

HealthStream is another company due to report its fourth-quarter and year-end results in the second half of next month. It’s seen earning 27 cents a share for the year, up 50% from 2010. Analysts estimate another 15% increase in 2012.


There’s one caveat about this chart: The stock has raced higher since the market rally began in 2009, without ever pulling back to undercut prior lows. It wouldn’t be out of the question to see another correction in the coming months, before the stock resumes its rally.


Another stock that’s brought out the firepower this year is gun maker Sturm Ruger (RGR), banging out a gain of 124% for 2011. However, this is another case where the stock really hasn’t taken enough of a breather to flush out investors lacking in conviction. A pullback to levels below $27.12, its October trough, could be constructive.


chart

Click to enlarge

The stock is positioned for more earnings growth in 2012, but at a lower pace than this year’s expected rate of 32%. The company reports 2011’s fourth quarter in February.


With fewer than 200,000 shares traded a day, on average, Sturm Ruger is on the volatile side, with a beta of 1.11. The stock is currently holding above its most recent buy point, at $33.89.


Given the strength of the chart in recent months, I’m cautious at this juncture, but if the stock rallies in heavy volume above $34.95, it could offer another entry opportunity in the coming weeks.


Liquidity Services (LQDT) is an online auctioneer of wholesale and surplus goods. Analysts expect profit growth to resume in 2012 following a slowdown this year—although quarterly results have been far better than average so far in 2011, with EPS gains of 79% or higher.


The stock is up 165% year-to-date. Like Sturm Ruger, it’s holding between its ten-week average and its previous high. Relatively recent IPOs—companies that went public in the past ten to 15 years—often show excellent price gains, and this one fits the bill.


chart

 Click to enlarge

It had a fairly steep and sudden correction over the summer, when the general market went into a freefall, but rallied back quickly in early September. Sometimes quick rebounds like that mean not enough weak holders got out—but the stock has notched gains for the past four months.


Trade here, too, is somewhat volatile. This is another smaller company, with a market cap of around $1 billion and 314,000 shares changing hands per day.


It’s currently consolidating price gains in lower-than-average volume, meaning investors are not selling off en masse. Watch to see if it retains support above its ten-week line, and if it can surpass its previous high of $39.76, reached earlier this month.


At the time of publication, Kate Stalter did not own positions in any of the stocks mentioned in this column.

16Comments
Dec 29, 2011 3:38PM
avatar
The 52 week spread on these stocks makes them prime targets for profit taking in the coming year.     I would not buy at these levels.  

Dec 29, 2011 4:53PM
avatar
I can tell you the weather report for Christmas 2011. It was nice and sunny where I live. It doesn't take much to foretell what's already happened.  It is outrageously irresponsible to get people who may not be rich, to buy now when they've already soared.  I'm starting to believe the rich pay off the media to put this out there to get the price up so they can do a dump.....and I mean a feces dump on the American middle class spirit  (tried to find a smiley face that was giving a blow,) but nothing else expresses it eloquently  enough but that disgusting image.
Dec 29, 2011 6:07PM
avatar
Unreal. Not a single mention that past performance of a stock is no indication of future performance. Stock prices are determined by expectations of future cash flows, not by what a company has done to date. At best this is irresponsible "journalism". At worst, it is a pathetic attempt to drive up stock prices artificially. Kate, you should be ashamed to be giving this "advice".
Dec 29, 2011 5:58PM
avatar
Where were they before Healthstream made it's 130% run, after a gain like that how much more can be left?
Dec 29, 2011 7:16PM
avatar
Ready to Pop? There's no more popping in these stocks. They're cooked.. 
Dec 29, 2011 6:19PM
avatar
The only good thing about these kinds of pieces of information is it may show you a new stock to put on your watch list, and when the stock dips down to a good buy level, you can snag it and go along for a possible good ride.
Dec 29, 2011 10:42PM
avatar
I get so tired of these obvious BS stock picks.  What do you do, look up stocks that have gone up the most and pick those.  These are all near their  3 year high. The chances of them going up are slim
Dec 30, 2011 1:34AM
avatar
You notice he does not have a position in any of these stocks and does not plan on buying any because he knows they have run there course.  This is an irresponsible article and these guys should find another way of making a living.
Dec 29, 2011 5:32PM
avatar
I love how these soothsayers come out and say "oh this stock is going to pop in 2012".  Talk about stock manipulation.  They always say that if you have a broker and a trader who loves your stock as well as a analyst, you are set!  If that isn't the pot calling the kettle black!!!
Dec 29, 2011 10:42PM
avatar

Putting these on my short sell list in 3 weeks.

 

Dec 30, 2011 10:41AM
avatar
A lot of posters are on the money here: the ship has probably sailed on these stocks unless they correct again.

It doesn't automatically mean "avoid," though. A similar column about APPLE said it was on a run back when it was around 130 and recommended getting in....and look where it is now.

STILL, the most salient point is BEWARE. If you want to gamble on these, do so lightly and without excessive investment. You could lose it all....

Dec 29, 2011 11:37PM
avatar
why even try? the game is rigged we all know it the only way it will change is with regulation of the casino and that will not happen because both partys are controlled by the 1%. these vampires will be destroyed once the light of the son hits their corrupted flesh
Dec 30, 2011 9:57AM
avatar
Perhaps Joetheunemployedplummer wouldn't be unemployed if he was out looking for work versus playing on the computer bad mouthing the President and just about anyone else not like him.
Jan 1, 2012 12:39AM
avatar
Ready to poop is more likely these days!Party
Dec 30, 2011 9:41AM
avatar
I'm not going near Wall st. until O' bagger is out in 2012,  when this administration picks the winners and losers only unions, blacks and O'Bagger hacks win!!!!!!
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.

114
114 rated 1
278
278 rated 2
474
474 rated 3
641
641 rated 4
639
639 rated 5
663
663 rated 6
640
640 rated 7
499
499 rated 8
284
284 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
COPCONOCOPHILLIPS9
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
KOGKODIAK OIL & GAS Corp9
CVXCHEVRON CORPORATION8
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.