Trading the stock market can be a frustrating process: Back in March and April every market pundit was jumping on CNBC, Bloomberg, Twitter, etc and screaming “BUY EVERY PULLBACK!” Two months later, these same folks are freaking out and calling for a double dip recession or worse, a global depression.
It just so happens the stock market followed the same exact playbook as it did last summer, selling off in May. This selloff was attributed due to the uncertainty with the Greek elections and a banking crisis in Spain. Less than two months later, its safe to say that for now both issues have been resolved.
However, market pundits are preaching caution even though the S&P 500 looks to be flashing a buy signal after it completed a follow through day Monday and a pause day on Tuesday. I could see the market potential moving up to the S&P 1400 area again before the wheels fall off. Todays sell off can be attributed to the Federal Reserve staying on hold yesterday. For some reason, the market was obvious pricing in QE 3. On Twitter today Goldman Sachs is getting credit for the sell off. As the investment bank is out with a note recommending short positions because of the lack of QE and the weak Philadelphia Fed number.
This smells like a shake out. Remember back in April Goldman said to buy stocks (wrong call), then just this week the bank was calling for the Federal Reserve to implement a new QE program (wrong call) and now today they are recommending clients get short the market. To these eyes, it looks like Goldman wanted to cover some shorts.
After big scary shakeouts like the one we just had and are having today, I like to focus my attention on stocks that haven’t gone down too much (or actually have gone up) and have good sales and EPS growth (+20% or more). Typically, this easy formula is a good way to spot the next bull cycles winners.
I ran a screen searching for those three traits above and below are some of the names I hand picked to buy for the next Bull Run.
3D Systems (DDD) – The maker of 3D printing, prototyping and manufacturing systems. This company is the leading public company in the fast growing innovative 3D printing industry. It is my favorite stock in the market right now and I would love to buy it under $30. Sales are growing at 63% and EPS is growing at 47%.
Tripadvisor (TRIP)- If you aren’t familiar with this company, it creates online travel related content and trip reviews. If you are going on a vacation, this site is a must read. It’s sales are growing at 32% with a 43% profit margin!
Zillow (Z)- If you are looking to purchase a house, you better be using Zillow. The company provides online real estate data, connects buyers with sellers and helps connect buyers with mortgage professionals. Currently sales are growing at 92% and EPS at 180%! This could be the next great growth stock.
Sourcefire (FIRE)- Sourcefire provides businesses with network security and hardware. Their products are said to be next generation and superior competition. The company is growing sales at 50% and EPS at 175%.
Coinstar (CSTR)- This company operates the Redbox DVD rental kiosks, coin counting machines and soon to be Starbucks vending machines. Its 3-year sales growth is 34% and 3 year EPS growth is 74%. Full Disclosure: I own shares in CSTR.
I would use this list as a guide. I always like to buy stocks low and sell high. So today’s sell off is welcome. If we get a couple of more days like today, I would consider adding small positions in one or two of these names. As always, just do your own research.
Editors Note: The Investing Oracle believes all investment picks should be tracked and we intend to do so.
Matthew Theal holds a position in CSTR.