PowerRatings Weekly Outlook: LLL, BAX, SYK, ATVI, ISCA

This week at PowerRatings.net saw the resurgence of medical stocks, a feature on a major technology-related defense and homeland security contractor, and a pair of companies whose businesses are all about recreation and entertainment.

I was listening to a money manager this morning on Bloomberg bemoan the fact that medical stocks were not performing as well as they should be given the weakness of the economy and concerns of a possible recession.

Traditionally, medical stocks - including drug manufacturers - have been among those stocks that investors have sought out for their stable, if unspectacular growth during challenging economic times. However, with many drug manufacturers facing rising competition from generic drugs and questions over a post-Bush national health policy, many of these stocks have not performed as well as expected.

That said, we found this week a pair of stocks in the medical field that active investors and long term traders might find worth taking a look at over the next few days. Those stocks are Baxter International Inc. (BAX@BAX | Quote | Chart | News | PowerRating) and Stryker Corporation (SYK@SYK | Quote | Chart | News | PowerRating).

Both Baxter International and Stryker come from the Medical Instruments and Equipment industry group and have Long Term PowerRatings of 8. Baxter International is in the business of creating a number of medical devices to treat diseases and conditions like hemophilia, cancer and immune disorders. Stryker, for its part, is a major player in the orthopaedic device industry.

Click here to read our PowerRatings analysis of Baxter International and Stryker.

Locked, Loaded, Upgraded, Featured

Is L-3 Communications Holdings (LLL@LLL | Quote | Chart | News | PowerRating) the most serious stock in the market?

This company develops and deploys high-tech products for what is called "ISR", which stands for intelligence, surveillance and reconnaissance, for the defense, aerospace and homeland defense industries. L-3 was recently in the news due to the announcement that the company had earned contracts with both the Air Force and NASA. The Air Force contract involves installing high definition TV sensors on the turrets of aircraft. The NASA contract calls for L-3 Communications to provide space systems training for their engineers.

Click here to read our Stock Spotlight for the week featuring L-3 Communications.

In addition to being our Featured Stock of the week, L-3 Communications was noted for the Long Term PowerRatings upgrade the stock received early in the week. The stock's PowerRating climbed from an 8 to a 9, putting LLL in that category of stocks which, according to our research, have been higher one year later more than 79% of the time. 9-rated stocks have also been among the best performing stocks after one year, typically gaining in excess of 18% over that time period.

Guitar Heroes and Kings of the Speedway

It is always nice to see stocks that have a little pizazz to them, the kind of stocks that investing sages like Peter Lynch used to tell us to look out for when we are shopping at the mall or driving through town.

This week we noted at least one of these kinds of stocks in Activision (ATVI@ATVI | Quote | Chart | News | PowerRating). Activision makes a number of best-selling videogame titles, perhaps most famously "Guitar Hero." For all the companies in this very competitive space that have come and gone in the past near-30 years, Activision has been the most enduring. Activision was founded back in 1979 and competes today with the likes of Electronic Arts (ERTS@ERTS | Quote | Chart | News | PowerRating) and Take-Two Interactive (TTWO | Quote | Chart | News | PowerRating).

Another stock featured this week that moves us away from the more staid, recession busters in utilities and medicine is International Speedway Corporation (ISCA@ISCA | Quote | Chart | News | PowerRating). ISCA promotes motor speedway and auto racing events in the United States and owns MRN Radio, which is the largest independent sports radio network in the country.

ISCA, like Activision, has a Long Term PowerRating of 8. Our research indicates that stocks with Long Term PowerRatings of 8 have been higher one year later more than 74% of the time. 8-rated stocks have also tended to gain more than 17% after one year. Both of these figures compare favorably to the average stock, which has been higher one year later less than 68% of the time. The average stock has also tended to gain between 12-13% after one year - significantly less than the 8-rated stock.

Stocks in the News

Headlines this week included a court ruling that will allow for the largest leveraged buy-out in history, more positive news from companies involved in the commodities business (though grains as opposed to crude oil this time!), and tougher times for companies relying on the spending of American consumers.

The Supreme Court of Canada this week cleared the way for the leveraged buyout of BCE (BCE | Quote | Chart | News | PowerRating) by the Ontario Teachers Pension Plan. The $51 billion deal represents the largest LBO in world history.

Agriculture giant Bunge Ltd. (BG | Quote | Chart | News | PowerRating) announced on Monday that it would acquire Corn Products in a deal estimated between $4-5 billion. Shares were down sharply on the news.

Google (GOOG | Quote | Chart | News | PowerRating) announced that its new Android mobile phone platform was on track to be available in the second half of 2008 as originally planned, despite growing suspicions to the contrary by a number of industry observers. Investors sold the stock aggressively toward the end of the week.

General Motors (GM | Quote | Chart | News | PowerRating) is looking to offer no-interest loans for up to six years in an effort to help move its 2008 inventory of cars and trucks.

Agribusiness king Monsanto (MON | Quote | Chart | News | PowerRating) announced earnings of $1.45 for the quarter this morning before the bell, handily beating analyst estimates.

Boeing (BA | Quote | Chart | News | PowerRating) lost more than 6% on Wednesday as traders absorbed news that the stock had been downgraded by Goldman Sachs from neutral to sell. Traders continued to unload shares over the balance of the week.

Operator of popular restaurants, Red Lobster and The Olive Garden, Darden Restaurants (DRI | Quote | Chart | News | PowerRating) topped analyst estimates for quarterly earnings and upped its dividend. By Friday, however, the gains picked up mid-week has been almost completely retraced.

An Olympic year marketing push continues to weigh on Nike (NKE | Quote | Chart | News | PowerRating) and its bottom line. The sporting goods company beat analyst estimates this week but warned of a challenging consumer environment in the U.S.

The Wall Street Journal reported that Anheuser Busch (BUD | Quote | Chart | News | PowerRating) has rejected the $46.3 billion unsolicited bid from the Belgian brewer, InBev. Anheuser Busch was among the few stocks moving higher on Friday.

What To Look For Next Week

Monday: Chicago PMI
Tuesday: Construction Spending / Consumer Sentiment
Wednesday: Factory Orders / ADP Employment Report
Thursday: ECB Announcement / Jobless Claims
Friday: Markets Closed for Independence Day Holiday

Best Performing Stocks (PR 8-10) of the Last Five Days

Here are some of the best performing, high Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 8 or 9.

Universal Health Services (UHS@UHS | Quote | Chart | News | PowerRating) Long Term PowerRating 9
Edwards Life Sciences (EW@EW | Quote | Chart | News | PowerRating) Long Term PowerRating 9
Covance Inc. (CVD@CVD | Quote | Chart | News | PowerRating) Long Term PowerRating 8
Lincare Holdings Inc. (LNCR@LNCR | Quote | Chart | News | PowerRating) Long Term PowerRating 8
Nabors Industries (NBR@NBR | Quote | Chart | News | PowerRating) Long Term PowerRating 8

Worst Performing Stocks (PR 1-3) of the Last Five Days

Here are some of the worst performing, low Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 1 or 2.

Lehman Brothers Holdings (LEH@LEH | Quote | Chart | News | PowerRating) Long Term PowerRating 2
Interoil Corporation (IOC@IOC | Quote | Chart | News | PowerRating) Long Term PowerRating 2
Raymond James Financial (RJF@RJF | Quote | Chart | News | PowerRating) Long Term PowerRating 2
Washington Mutual (WM@WM | Quote | Chart | News | PowerRating) Long Term PowerRating 1
Fannie Mae (FNM@FNM | Quote | Chart | News | PowerRating) Long Term PowerRating 1

David Penn is Senior Editor for PowerRatings.net.