The Zacks Analyst Blog Highlights: Netflix, Amazon, Lululemon Athletica, IBM and Cummins

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Oct 27, 2011, 09:30 ET

CHICAGO, Oct. 27, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Netflix (Nasdaq: NFLX), Amazon (Nasdaq: AMZN), Lululemon Athletica (Nasdaq: LULU), IBM (NYSE: IBM) and Cummins (NYSE: CMI).

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Here are highlights from Wednesday's Analyst Blog:

3 Strong Stocks to Buy on Weakness

In the thick of earnings season now, investors better have their helmets strapped on. With notable misses from the likes of Netflix (Nasdaq: NFLX) and Amazon (Nasdaq: AMZN) on Tuesday afternoon, stocks with bad reports are getting shot.

One of the lessons here is to have the earnings dates and consensus expectations for all of your stocks on your trading calendar so you are not caught off guard. With nearly 190 companies in the S&P 500 reporting this week, the shrapnel is flying.

Another lesson is to be ready to protect your stocks with put options or, if you like to simply trade the earnings event, to speculate with an at-the-money straddle.

I profiled some simple, high-reward, high-probability option strategies for investors and traders on Tuesday before Amazon's miss that led to sizable profits for the put buyers and the straddle buyers.

Buying Strong Survivors

But the real focus of this piece is to have another proactive strategy during earnings season: buying the dips in solid companies that have already reported and who are holding up nicely during the cross-fire. Here are three to consider for the rest of this month...

Lululemon Athletica (Nasdaq: LULU): This Zacks #1 Rank (strong buy) stock is an exciting retailer with strong brand appeal and definitely one to evaluate if you are adding ideas in that space -- especially with 27% projected earnings growth next year.

IBM (NYSE: IBM): I like IBM for its strong and deep global footprint in technology infrastructure. Its "smart grid" energy systems are sold to governments and municipalities across Europe and Asia -- and those are nice contracts to have! With steady 11% expected EPS growth, and a forward P/E of 13.5, I would be a buyer on any dips below $180.

Incidentally, IBM was my "safe money" pick to outperform the S&P in 2010 for the next 3 years and it has done so 40% to 10% in that time thus far.

Cummins (NYSE: CMI): The king of diesel engines, doing business in over 190 countries, is also going to be the monster of natural gas engines when the country transitions that way.

Yes, they missed their earnings number this week. But analysts are not piling on to lower forecasts for next year and the stock has held up amazingly well. With strong exposure to emerging markets, this is still one of my favorite industrial companies to own and to trade.

I want to buy CMI every time it dips below $90, and its dominant global position, projected 16% EPS growth next year, and 10.6 forward multiple give me the "fundamental edge" I like to justify owning and trade the stock this way.

These are just three strong ideas to consider on these pullback days. I will look at three more next week.

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