Monday is the unofficial start of summer, and to celebrate the rising temperatures, I’ve identified two stocks to buy that are heating up. These stocks have gone from “holds” or “sells” to solid “buys” in the past few months.
I also have two stocks that are in a death spiral. They were good buys at one time, but now they threaten the wealth of anyone unlucky enough to own them. These are two portfolio-killers you don’t want to own this summer.
Making the Grade
Several months ago, these stocks were getting below-average grades, but they are now A students. These stocks worked hard to improve their sales and earnings growth, and now boast the highest grade in my Portfolio Grader ranking system. There’s still work to be done for these companies, so we’ll go through the details of each right now.
Stock to Buy #1 CVR Energy Inc. (CVI)
It should come as no surprise that energy companies have seen their sales rise given the dramatic rise in oil prices. CVR Energy Inc. (NYSE: CVI) not only refines and markets transportation fuels in the United States, it does the same for nitrogen fertilizer products. With the commodity boom we saw in the last few months, this company is profiting in two major ways. Revenues are up 30% over last year, and that growth is translating into higher earnings. For the upcoming quarter, analysts are expecting a 260% increase in earnings per share!
As you can see from the Portfolio Grader rankings from the last 12 months, CVI has made some major progress in its fundamental and quantitative strength in the last year and is a good stock to buy for smart investors right now.
Stock to Buy #2 ISTA Pharmaceuticals Inc. (ISTA)
ISTA Pharmaceuticals Inc. (NASDAQ: ISTA) is a pharmaceutical company, that has been making steady progress from a D grade back in September to an A grade in Portfolio Grader today. ISTA makes drugs for conditions of the eye. Its products cover everything from allergy irritation to glaucoma, and sales have been good. Year-over-year revenue growth is up 30%, and earnings are expected to be up six-fold in the coming quarter.
ISTA still has some work to do on converting revenues into profits and consistently beating expectations, but with the track this company is on, it looks like it’ll achieve this in the near term. I would classify this as a very aggressive A stock and should only be bought by those people who can handle the volatility that can come with this type of turnaround stock.
Headed for Summer School
Stock to Sell #1 Vimicro International Corp. (NASDAQ: VIMC)
Vimicro International Corp. (NASDAQ: VIMC) is a Chinese semiconductor company that has had it rough in the last year. Shares are down 40% in the last 12 months, and the company has not been able to post positive earnings per share or consistently beat analyst estimates — it’s a disappointment on all fronts.
Tech stocks and semiconductor stocks in particular have been on a fantastic run in the last year, but this is one company you should avoid this summer and beyond.
Stock to Sell #2 Talbots Inc. (TLB)
In just about any market environment, I can find strong retail stocks to buy. There’s always a hot product or a store that lures in shoppers no matter what is happening with the economy. Talbots Inc. (NYSE: TLB) is not one of those companies right now. TLB sells women’s apparel and accessories, but the ladies have been passing by stores in recent months.
Year-over-year revenue growth is down 7%, earnings growth is expected to be down nearly 90% over last year, and there is a large short position in shares. This is definitely one retail stock you should avoid this summer.
