If spring was any indication of what the summer has in store for investors, the next few months could be grueling. But don’t even think about throwing in the towel and heading to the beach for the next three months. That’s no way to make money!
Instead, you need to select the stocks to buy carefully. To help you do that, we asked our OptionsZone experts to offer up their top stock picks to heat up your portfolio this summer.
Summer Stock #1: Apple (AAPL)
By Michael Shulman
Apple Inc. (NASDAQ: AAPL) is a stock to own for this summer, next summer and for as many summers as one could anticipate.
People just cannot get enough of the iPhone, and Wal-Mart Stores, Inc. (NYSE: WMT) just lowered the price of the iPhone 3GS to $97 in anticipation of new 4G phones. And don’t forget that Apple still only has a tiny fraction of the overall cell phone market.
The same goes for computers, but MacBooks are picking up a point or two of market share every year. And our proprietary ChangeWave Alliance research shows the iPad is picking up steam and is going to be a blowout success story.
If you can’t fork over the $250 per share for Apple stock, long-term options, or LEAPs, can be a much cheaper alternative to gain upside exposure to the stock.
Summer Stock #2: Cabela’s (CAB)
By Chris Johnson and Jon Lewis
Summer lures most people outside. Whether it’s to fish, boat, camp of hike, people find what they need to enjoy the great outdoors at Cabela’s Incorporated (NYSE: CAB).
While we like store, we love the stock right now. Recently, CAB shares bounced off of support at their 200 day moving average, signaling a technical buying opportunity.
Investor sentiment signals that there aren’t too many investors that are bullish on the stock, meaning that this outperforming stock is still undiscovered. It also means this stock has the potential to attract a crowd of buyers, which should help catapult CAB back toward its highs near $22 as we move through the summer months.
Summer Stock #3: Dominos Pizza (DPZ)
By Sam Collins
Americans’ favorite “comfort food,” regardless of the season, is pizza, but in the summer months, pizza sales really soar.
In response to customer feedback, Domino’s Pizza, Inc. (NYSE: DPZ) recently reformulated its dough and sauce recipes and launched its “New Inspired Pizza” early this year. And the result has been a huge success, leading to a 14% sales increase in its first quarter. Dominos also initiated a system to analyze its franchisees and improve or close underperforming stores. Finally, the company has taken steps to reduce its debt.
S&P feels so strongly about Dominos that it has put a “five-star strong buy” rating on the stock with earnings estimated to be $1.20 for 2010 and $1.40 for 2011. S&P’s 12-month price target is $19. Technically, DPZ has found support at the $13 area after falling from over $16, and could make its $19 target by year-end.
Summer Stock #4: Dick’s Sporting Goods (DKS)
By Michael Shulman
Even though I see a double-dip recession coming, I believe customers will continue to spend money at stores like Dick’s Sporting Goods, Inc. (NYSE DKS). Consumers are still pinching pennies, but not as much when it comes to their kids or their own personal health and related indulgences. I should know, I have twin boys, one a baseball catcher and the other a lacrosse goalie (couldn’t they just kick a soccer ball?). My son’s game bat costs $400, and his new college coach wants him to play first base, another $220-$300, and my other son needs new golf clubs, which should run me about $750.
Dick’s is outperforming its peers in the clothing category, managing inventory much better, and actually posted top-line growth in its past two fiscal years. Profits doubled last quarter, and the company raised its outlook.
If you prefer to trade options rather than buying the stock outright, the calls are fairly liquid and they now have 2012 LEAPs.
Summer Stock #5: Marriott (MAR)
By Chris Johnson and Jon Lewis
For those summer travelers that prefer a hotel room to a tent, you can usually find a Marriott property to stay in. Global hotel giant Marriott International, Inc. (NYSE: MAR) has seen an improvement in their bookings and rates, as both business and leisure travelers have started to take to the road again.
The “buy Marriott” trade is far from crowded, despite the fact that the technical picture for the shares has been very positive. We expect this market-leading stock to attract buyers as its fundamental picture continues to improve.
Our price target over the next three months is $35.
Summer Stock #6: Nike (NKE)
By Sam Collins
For travel or for sports this summer, you’ll need to take good care of your feet, and Americans think of Nike, Inc. (NYSE: NKE) when they buy athletic shoes.
This household name has had strong and steady demand for its products with solid gains in April. But the big news is that Nike is expected to announce a new market strategy that will focus on two formats for both mall and street locations: 1) a smaller, dual-gender Nike store with both technical and fashion products; and 2) a teen/skate lifestyle shop that carries the popular brands Converse, Hurley and Nike 6.0.
The stock is above its 200-day moving average and gave two strong buy signals this month following a pullback from its high of the year, which was over $80. Credit Suisse has a 12-month target of $85 on NKE.
Summer Stock #7: Cerus (CERS)
By Michael Shulman
With more time spent on outdoor activities, summer often brings with it the occasional scrapes and scratches. Hopefully a little Neosporin is enough to heal them, but if you require more serious treatment, say a blood transfusion, don’t you want to know that blood is clean?
The United States is actually way behind Europe and other parts of the world in insuring the supply of blood platelets is free of pathogens like Dengue fever or the XMRV virus associated with chronic fatigue syndrome. The answer to this problem is Cerus Corporation’s (NASDAQ: CERS) INTERCEPT Blood System, approved in most of Europe and negotiating the design of their final trial in the United States. The company cold turn a profit next year, as it is far from a struggling start-up; it has been kept out of the United States because of one intransigent FDA statistician who should probably look for another day job.
I recommended the stock here under a buck; it is now around $3. The five-year high is about $15, with the all-time high a bubble price north of $50. I think it is worth $11 right now.
Editor’s note: Michael Shulman holds a position in CERS.
