5 stocks to watch for next week

Dollar General and J.M. Smucker report earnings. April new construction starts data is due. May vehicle sales to be released. Samsung's Galaxy S4 has been a strong seller.

By MSN Money Partner May 31, 2013 10:30AM

Trading floor (© Image Source/SuperStock)By Michael Fowlkes, InvestorsObserver


May auto and truck sales due Tuesday

What's happening: On June 4, the May results for motor vehicles sales will be announced. The auto market has been rebounding, and a strong showing for the month of May will reinforce the enthusiasm that investors have towards the industry. General Motors (GM) has been a strong performer over the last year, with the stock up 19.5% year-to-date to trade just shy of its 52-week high.


Technical analysis: GM was recently trading at $34.05, just $0.25 under its 12-month high and $15.33 above its 12-month low. Technical indicators for GM are bullish and the stock is in a strong upward trend. The stock has support above $32.00. Of the 15 analysts who cover the stock 10 rate it a "strong buy," two rate it a "buy," and three rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: The auto industry is expected to be strong through the remainder of the year. However, Europe remains a problem. In April, GM sales rose in the U.S. and in China, but Europe was disappointing. I expect that May sales will continue to point to a strong market for GM in both the U.S. and China, but ia worsening in the situation in Europe. The stock's recent gains could begin to stall. U.S. auto sales are expected to rise 8% during the month of May, so we will be paying close attention to the report to see just how accurate that forecast is.


Stock-only trade: If you're looking to establish a long stock position in GM, consider buying the stock under $33.50, and sell if it falls below $30 or take profits if it gets to $38.50.


Option trade: If you are looking for a hedged options trade on GM, consider a July 28/31 bull-put credit spread for a 30-cent credit. That's a potential 11.1% return (79.5% annualized*) and the stock would have to fall 8.1% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $28 call. If GM rises just 6.5% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



April new construction spending due Monday
What's happening:
On June 3, the market will get data on the dollar value of new construction activity in April. The report includes spending on residential, non-residential and public projects. Caterpillar (CAT) has been struggling this year, but a positive reading on April construction spending could help turn things around. The stock got off to a strong start in 2013, but has been trending lower over the last few months since hitting its 52-week high at the beginning of February. Over the last month a bit of strength returned to the stock, but it still remains down 2.9% year-to-date.


Technical analysis: CAT was recently trading at $86.49, down $13.21 from its 12-month high and $8.24 above its 12-month low. Technical indicators for CAT are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $84.50 and resistance below $88.00. Of the 20 analysts who cover the stock 11 rate it a "strong buy," one rates it a "buy," and eight rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: There is no questioning that Caterpillar has run into trouble. The mining industry has been weak, and this has put a lot of pressure on the company. What it has going for it is increased construction equipment production. The global economy remains shaky but has been improving, and this should translate to higher construction spending by nations and help improve Caterpillar's bottom line. With the recent selling in the stock, it is currently looking like a value play with a price-to-earnings ratio of just 11.6, so a positive report on April construction spending could result in a nice jump in the stock.


Stock-only trade: If you're looking to establish a long stock position in CAT, consider buying the stock under $86.50, and sell if it falls below $80 or take profits if it gets to $99.


Option trade: If you are looking for a hedged options trade on CAT, consider a July 75/77.50 bull-put credit spread for a 25-cent credit. That's a potential 11.1% return (79.5% annualized*) and the stock would have to fall 10.1% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $80 call. If CAT rises just 4.8% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Dollar General reports earnings Tuesday

What's happening: Discount retailer Dollar General (DG) will report its first quarter results before the market opens on June 4. Analysts are forecasting earnings of $0.71 per share. During the same period last year the company had earnings of $0.63. After a rocky latter part of 2012, the stock has been extremely strong thus far in 2013, trading up 22.3% year to date.


Technical analysis: DG was recently trading at $53.93, down $2.11 from its 12-month high and $14.20 above its 12-month low. Technical indicators for DG are bullish and the stock is in a strong upward trend. The stock has support above $52.00. Of the 18 analysts who cover the stock 13 rate it a "strong buy," and five rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: Dollar General has posted better than expected earnings in the last seven quarters in a row, and I see little reason to expect that streak to be broken. The recent recession created a more cost-conscious consumer who has continued to shop at deep discounters such as Dollar General even as the economy has improved. Consumer confidence has been on the rise, and I believe that this will translate to another strong quarter for Dollar General.


Stock-only trade: If you're looking to establish a long stock position in DG, consider buying the stock under $53.50, and sell if it falls below $50 or take profits if it gets to $61.50.


Option trade: If you are looking for a hedged options trade on DG, consider an August 45/49 bull-put credit spread for a 45-cent credit. That's a potential 12.7% return (58.6% annualized*) and the stock would have to fall 8.3% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $49 call. If DG rises just 4.9% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



J.M. Smucker delivers earnings Thursday

What's happening: J.M. Smucker (SJM) will report its fiscal fourth quarter results on June 6. Analysts are expecting the company to report earnings of $1.15 per share, up from $1.10 during the same period last year. Over the last two years, the company has been in a steady upwards trend, having gained 20.7% year-to-date.


Technical analysis: SJM was recently trading at $103.02, down $2.16 from its 12-month high and $29.82 above its 12-month low. Technical indicators for SJM are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $102.00. Of the 14 analysts who cover the stock four rate it a "strong buy," two rate it a "buy," and eight rate it a "hold." The stock receives Standard & Poor's 5 STARS "Strong Buy" ranking.


Analyst's thoughts: Over the last year, the company has posted better than expected earnings three times, and earnings that were in-line with analyst estimates once. Smucker has progressed from a company that makes fruit spreads and peanut butter to a highly diversified food products business. Recently, there has been a growing consumer appetite for individual K-cups coffee makers, and Smucker is one of the largest producers of the K-cups. The company sells its coffee products under the Folgers brand, and has partnered with Green Mountain Coffee Roasters (GMCR) since 2010, allowing Green Mountain to manufacture K-cups with Smucker's coffee brands. In fact, the company's main revenue source has become coffee, accounting for 42% of its total revenues. Because of its wide diversification across many food segments, and its highly profitable coffee business, I expect to see ongoing strength in Smucker stock.


Stock-only trade: If you're looking to establish a long stock position in SJM, consider buying the stock under $103, and sell if it falls below $92 or take profits if it gets to $118.


Option trade: If you are looking for a hedged options trade on SJM, consider a July 90/95 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (62.2% annualized*) and the stock would have to fall 7.4% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $100 call. If SJM rises just 4.1% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Samsung Galaxy S4 flies off the shelves
What's happening:
During the last week of April, Samsung's (SSNLF) new Galaxy S4 went on sale in 155 different countries, across 327 different networks, and so far it appears to be a big seller. At stores where the phone is being sold, 57% have reported that it is has already become their best selling device. Maxim Integrated Products (MXIM) is a Samsung supplier, so it should benefit as well. The stock has had a volatile year, but has managed to trade up 2.4% year-to-date.


Technical analysis: MXIM was recently trading at $29.36, down $4.31 from its 12-month high and $5.81 above its 12-month low. Technical indicators for MXIM are bearish and the stock is in a weak downward trend. The stock has resistance below $30.00. Of the 20 analysts who cover the stock eight rate it a "strong buy," four rate it a "buy," and eight rate it a "strong sell." The stock receives Standard & Poor's 2 STARS "Sell" ranking.


Analyst's thoughts: There were concerns that Samsung would stop using Maxim as a vendor, but that did not turn out to be the case. While the overall mobile market is entering saturation, Samsung is one of the only companies that is gaining market share, so that should definitely work in Maxim's favor going forward. Maxim does have a big exposure to Samsung, but with the company retaining its vendor status with Samsung the future remains bright for Maxim.


Stock-only trade: If you're looking to establish a long stock position in MXIM, consider buying the stock under $29.50 and sell if the stock drops under $27.00 or take profits if it gets to $33.00.


Option trade: If you are looking for a hedged options trade on MXIM, consider an August 22/26 bull-put credit spread for a 35-cent credit. That's a potential 9.6% return (43.8% annualized*) and the stock would have to fall 10.3% to cause a problem.


Speculative option-only trade: We do not want to set up an option-only trade at the current time on MXIM. We believe the stock could be close to correcting so we would not want a bearish trade, but until it does turn higher we would not want to make a speculative call-only trade either.



*Annualized returns provided for comparison purposes only


Get InvestorsObserver's free report 18 Warning Signs to Know When to Dump a Stock


At the time of writing, Mr. Fowlkes has a long position in Caterpillar (CAT) and does not have direct ownership in any of the other stocks mentioned.

0Comments

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.

133
133 rated 1
286
286 rated 2
441
441 rated 3
737
737 rated 4
614
614 rated 5
606
606 rated 6
621
621 rated 7
441
441 rated 8
317
317 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
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.