Four Stocks on Breakout Alert
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A one-day pop is nice, but a multi-day/month rally is better. We can sometimes find these stocks by looking at charts or identifying expectations during an earnings season. Therefore, in this article I am looking at four stocks that look to be breaking out to trade higher.
Deep value restaurant stock that may trade higher
As you can see, Bloomin’ Brands has traded with slow and steady gains over the last month, and even moreso over the last year. However, on Friday, the stock broke out into new highs with gains of more than 5%.
The company owns and operates five different restaurants, including: Outback Steakhouse, Carrabba’s Italian Grill, and the Bonefish Grill. Over the last year the company has seen a rise in sales and has managed to improve in efficiency.
Currently, the company is trading at 17.45x next year’s earnings with a price/sales of 0.54. Therefore, compared to other companies such as Yum! and McDonald’s, the company is incredibly cheap. As a result, with its recent breakout, and with it trading in uncharted territory, it’s very possible that it continues to trade higher.
SolarCity: The only solar related stock trading with great momentum
SolarCity filed for an IPO back in December of last year, and has continued to rally ever since. The stock is now fast-approaching new all-time highs, less than $1 away, and is attracting the interest of numerous retail investors.
The company, which sells solar products, has great growth potential and is just now barely scratching the surface of its potential. In the last 12 months the company has posted revenue of $124 million compared with sales of less than $60 million in the year prior; therefore it’s growing rapid.
My only problem is the company’s price/sales ratio of 8.95, which is expensive for a solar retail company but somewhat attractive for a recently filed IPO. Therefore, despite my beliefs that it’s overvalued, I still think it could breakout further if all-time highs are breached.
3D printing continues to rally
I’ve had trouble explaining the trends of Stratasys and 3D Systems for the last six months, and I have constantly said that a downtrend is coming, yet both continue to rally higher to new highs. On Friday, both stocks once again broke into new highs, and with authority. Judging by recent history, both stocks have a tendency to rally for several days, even weeks, when breaking through to new highs on higher volume and with large gains.
Both companies are expected to see earnings growth of roughly 100% in 2013, and are quickly gaining the attention of institutional investors. Therefore, with rumors of an acquisition vastly increasing, I think it’s highly likely that both stocks could continue to breakout and rally even higher, assuming growth continues.
The first thing you might notice is that aside from 3D Systems and Stratasys, these are all different companies in different industries. Yet all of these companies could breakout for the reasons that I mentioned above. However, you shouldn’t just take my word for it, or make an investment decision based on charts. If any of these companies interest you, additional due diligence is required, and hopefully the research will pay off and the investment will breakout and trade higher.
BrianNichols has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!