Two Correction-Resistant Stocks

 | Dec 31, 2012 | 12:30 PM EST  | Comments
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Stock quotes in this article:

ryl

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mho

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cvi

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ipgp

As I've written before, I don't have much use for the traditional games of predicting what stocks or sectors will be hot in the New Year. Plenty of so-called "black swans" (which turn out not to be so uncommon after all) send particular sectors up or down with no warning. Likewise, unexpected company strength or weakness can have the same effect.

So the regular, tried-and-true methods of zeroing in on top-performing stocks still apply, no matter what the calendar says.

I recently looked at some top earnings performers that may be setting up for fresh 2013 gains. Over the weekend, I looked at my screen of stocks that are bucking the market's current downtrend. It may seem a bit counterintuitive, but sometimes stocks rising during a correction can be setting up for new rallies.

Some of the familiar names that are among the best leaders of 2012 popped up -- for instance, homebuilders Ryland (RYL) and M/I Homes (MHO) were on the list --but I was more curious about companies and sectors that hadn't been discussed ad infinitum over the past several months.

Oil and gas refiner CVR Energy (CVI) rose for seven months in a row. After rebounding from a pullback to its 10-week average in November, the stock charged to an all-time high of $49.63 on Christmas Eve. It retreated along with the market since then but closed Friday at $47.68, 13% above its 50-day line.

After seven months of gains, a 50-day pullback could be a constructive development, so it wouldn't necessarily be catastrophic if the stock retreated.

The company was in the news earlier this year because investor Carl Icahn bought a majority stake in May but backed away from purchasing the rest of the company in August.

Earnings are seen declining in 2013, to $6.13 per share. That doesn't necessarily sink a stock, as long as the company meets or beats views.

I still consider this stock a bit frothy, but it is one to keep watching.

Another mid-cap that's been showing good price action despite the market downturn is IPG Photonics (IPGP). The maker of fiber-optic lasers and other scientific measurement gear had a choppy 2012 but advanced 91% for the year. It closed Friday at $64.84, below its 52-week high of $65.77 from September.

I like that this stock has some ground to make up before regaining its prior high. That could indicate that it's not too extended and may have some room to run.

The stock has been trending along its five-day exponential moving average. For traders, that's not a bad indicator. For longer-term investors, the stock could also be in a buy zone, perched between its medium-term 50-day line and that prior high.

Fundamentally, there's also reason to see potential here. Analysts are eyeing per-share income of $2.87 this year, up 19% from 2011. Next year, that's seen rising another 14%, to $3.26 per share.

One caveat: This stock can trade in extremely volatile fashion. It has a beta of 2.05. Volatility is an investor's friend, as long as you can be patient to capture the upside gains and not get shaken out at the first whiff of a pullback.

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