Why These 5 Stocks Could Make Huge Moves Next Week
If you actually get a thrill out of seeing your stocks make big moves, this article is right up your alley. I'm serving up five stocks that will likely make big moves this earnings season.
These stocks are heavily shorted, which means a lot of people are betting against their success. When big news comes out, these stocks can make huge moves either up or down depending on whether the shorts are right or wrong, or an epic short squeeze can occur.
I've looked for heavily shorted stocks heading into earnings season many times before, and every time, the stocks I highlight make big moves. For example, when I did this experiment back in April, the stocks I highlighted changed price by an average of 10.4%.
Here are next week's five stocks to be aware of:
% Sold Short
Expected Revenue (millions)
This tiny California company makes solid-state drives to boost memory capacity for its customers. Questionable accounting practices have led OCZ to the point where it needs to restate earnings for a number of quarters. All of those restatements should be released on Monday.
One bit of good news for the company is that it settled a major lawsuit with shareholders at the end of this week. Whether or not that good news is a sign of things to come remains to be seen. Investors should be on the lookout for any major changes in OCZ's past statements, as well current business performance.
America's largest aluminum producer has certainly seen better days. Alcoa's stock is underperforming the S&P 500 by more than 25 percentage points this year, and it recently got the boot from the Dow Jones Industrial Average.
There are several factors converging to bring the company's prospects down. After looking like it was making a rebound after the Great Recession, the price of aluminum has fallen almost 35% since early 2011. With high fixed costs and low commodity prices, shares have been hammered. One shining light: some analysts believe increased demand from car manufacturers could help pick the business up.
This company's claim to fame is that it is the leader in center-pivot irrigation systems -- which is a fancy way of explaining those circular farming fields you can see when looking down from your plane. Since water is becoming a scarce resource more and more, one would think investors would be bullish on a company charged with improving the efficient use of this resource.
But that doesn't seem to be the case, as one out of every five Lindsay shares is sold short. That's tough to reckon with a reasonable price -- about 15 times earnings -- and a five-star rating from our CAPS community. It's possible that some investors have doubts about Lindsay's ability to integrate some of the acquisitions it has made lately; or that the company's international growth may soon slow. The company may be worth digging into if you're after a short squeeze.
Shareholders in Micron have experienced a great 2013 thus far -- the stock is up 178%. The company is another one on this list that makes memory components and modules. As the use of personal computers continued to deteriorate in 2012, investors came to believe that the market for memory drives would be replaced in the mobile revolution with cloud computing. Those fears played out when revenue fell by 6% last year.
But midway through last year, Micron acquired Elpida. That was huge because Elpida has been providing the memory devices for the latest iterations of the iPhone. Though this is enormously positive news, bears are betting on prices for these memory devices to fall in the long term.
Finally, we have America's second-largest public grocery chain. It might be shocking to note that shares at this relatively underappreciated company are up a whopping 77% so far in 2013. A big part of that surge occurred in September when the company adopted a stockholder-rights plan .
Part of the surge is because Safeway should now be able to dispose of its Canadian operations cleanly, and part of it because Jana Partners has become so interested in the company that it has been accumulating a significant proportion of shares.
On the whole, however, I don't think things look too rosy with Safeway. The company's "O" organics line is great, and storewide improvements have been nice to see. But in an incredibly competitive landscape, there's little that sets this grocer apart, and I'm not the only Fool with this view.
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The article Why These 5 Stocks Could Make Huge Moves Next Week originally appeared on Fool.com.Fool contributor Brian Stoffel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.
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