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Five Stocks to Watch for the Next Rally


These stocks have performed well during the August correction and might be good buys on the next market rally.

Given the stock market's mild correction, my firm's Buy and Strong Buy ratings must be tempered a bit. For now, this is really a watch list for the next rally.

My firm's buy ratings will apply when the market correction bottoms out and stocks head into a confirmed rally.

Nevertheless, in the meantime, a very strong watch list it is. These recommendations have far outperformed the market during the August correction, and over other benchmark periods.

What all of them have in common are: 1) expectations for very rapid three-to five-year earnings growth averaging over 21%, and 2) attractive price valuations relative to those growth prospects.

First and foremost, we like Equinix (NASDAQ:EQIX) of Redwood City, CA, the data center pioneer we discovered at $50 four years ago and rode to $220 last spring.

Strong in all key revenue-driving niches, including cloud and interconnect, we foresee 25% per year earnings growth and possibly an advance from $175 to $235, with 13 of 16 analysts calling EQIX a strong buy.

Two other choices are engineering and construction leaders with 20% to 25% per year earnings growth estimates by analysts following them: Dycom Industries (NYSE:DY) and MasTec Inc. (NYSE:MTZ). Both are off their highs but trade at rock-bottom price/earnings to growth (PEG) ratios around 0.65.

With crude prices looking stronger, we're adding two oil services stocks: Tetra Tech Inc. (NYSE:TTI), which specializes in wellhead services, and much larger Weatherford International (NYSE:WFT), which provides a full range of services worldwide.

Both oil services stocks offer 25%, plus earnings growth, and trade at bargain-basement PEG ratios of 0.42 and 0.46.

Editor's Note: This article was written by Stephen Quicknel of US Investment Report of MoneyShow.

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No positions in stocks mentioned.
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