Two Great Growth Stocks

As to individual stocks, the cool thing about this correction is that it provides a great opportunity to build a watch list, a list that you can use to “go shopping” when the pressure comes off the market.  But how do you build a watch list?  By watching charts, and digging for true growth stories.

Ideally, what you want to see are stocks that resist the broad market’s selling pressure, stocks that are not yet well-loved (or even well-known) but that demonstrate the growing presence of institutional support, and stocks of companies that have great growth prospects.

Below are two to look out for that have been featured in recent weeks in Cabot Top Ten Report.  Both are technology stocks with great growth prospects, not least because demand is growing fast for their products!

Back on March 1, editor Michael Cintolo wrote this:

“Acme Packet (APKT) is the leader of the session border controller market. The 1% of you who know what that is may already own the stock. To the rest of you, we’ll explain. A session border controller is a box that controls the activity of a VOIP (Voice Over Internet Protocol) call as it passes from the border of one network to the border of another. The networks might be two ISPs, or even two networks of one business enterprise. In any case, the session border controller protects the networks, ensures quality of service and gathers statistics that empower managers to optimize performance. And business is very good, as more and more phone calls move to the Internet. The company was founded in 2002, and has grown revenues every year since. Profit growth has not been quite as smooth, but the company exceeded analysts’ expectations in the fourth quarter of 2009, and raised guidance for 2010, projecting that revenues would range from $182 to $186 million, and earnings would range from $0.44 to $0.47 per share. Note: 42% of revenues come from Alcatel Lucent, Nokia Siemens and Sprint. Fundamentally, we like it.”

Mike liked it so much, in fact, that he named it Editor’s Choice that week.  It was trading at 17.  Since then APKT has earned a spot in Cabot Top Ten Report three more times, most recently last Monday when it was trading at 27.

The market wildness on Thursday took it down (briefly, of course) to its 50-day moving average at 20, but it’s bounced right back up, showing strong institutional support, and I think it has further to go.

Then there’s SanDisk (SNDK), a stock that has appeared in Cabot Top Ten Report 15 times over the past seven years.

One of those was on March 22 of this year, when Mike Cintolo wrote the following:

{##34##}“SanDisk is the ultimate feast-or-famine chip stock. Its products are basically commoditized-flash memory-and fall in price most years. However, the flash storage business topped out well ahead of the economy, and thus the industry was slashing capacity even before the 2008 and early 2009 meltdown. That left the industry short of supply … just as demand was picking up! The biggest driver of this demand is the surge in smart phone usage-an iPhone, for example, uses much more memory than a standard cell phone-though the bigger picture is that, in the years ahead, untold amounts of data will be stored on possibly billions of consumer devices. In terms of bits stored, the industry could ship seven times as much within the next few years! Of course, long-term projections in this sector are not advised, yet the fact remains that SanDisk is firing on all cylinders right now.”

When that was published, SNDK was trading at 34.  Since then, it’s climbed to 44, thanks to a crackerjack earnings report (it earned 95 cents per share, while analysts had projected 59) and then pulled back to 34 at last Thursday’s low.  But now it’s back up at 41, showing that institutions are still in buying mode.  As long as this persists, I think short-term investments in SNDK (the King of Flash) will work.”