STOCKS

This diverse quartet is already showing signs of life, but there's plenty of headroom left if you're not in them yet, notes Richard Moroney of Upside.

Women's apparel retailer Ann (ANN) operates nearly 380 Ann Taylor locations and more than 600 Loft stores in 47 states and Canada. Favorable pricing and an improved product mix have bolstered sales and profits. October quarter earnings jumped 25% and outstripped the consensus, helped by stronger profit margins and improved same-store sales at both of its brands.

Shares have retreated 15% since hitting a five-year high in September, partly reflecting concerns regarding a sluggish holiday shopping season. But an improving employment picture and ongoing economic recovery bode well for consumer stocks. Ann's per-share earnings are expected to be up 34% to $2.27 for fiscal 2013 ending January.

The consensus calls for profit growth of 16% in fiscal 2014-a conservative estimate given recent results. Considering Ann's growth outlook, healthy cash flow, and strong balance sheet with cash of nearly $3.50 per share, the stock seems reasonably valued at 13 times expected 2014 earnings. Ann, with a Quadrix Value score of 77, is being initiated as a Buy.

Grand Canyon Education (LOPE)
This marks Upside's return to the for-profit college space. The industry has been hurt by a backlash over aggressive recruiting, high student debt loads, and low rates of graduation. But Grand Canyon, the nation's only for-profit Christian university, offers a traditional campus with more 7,400 students and online courses serving nearly 45,000 students.

Robust enrollment growth has fueled strong results. On September 30, total enrollment hit 52,300, up 18% from a year earlier and more than double the total at the end of 2008.

Wall Street sees per-share profits of $1.50 for 2012, implying 31% growth, and estimates are rising. For 2013, per-share earnings are expected to approach $1.70. Grand Canyon has beaten the consensus by at least 20% in the last four quarters. Shares rallied 47% in 2012. Still, the stock offers plenty of upside potential based on recent operating momentum. With an Overall score of 99, Grand Canyon is being initiated as a Buy.

Kaiser Aluminum (KALU)
Founded in 1946, Kaiser's focus on the rebounding automotive and aerospace industries contributes to its bright growth outlook. The company, a leading producer of specialty aluminum products, sells mostly higher-margin finished goods, instead of foil or cans.

Steady growth in global air travel should drive aircraft production, while increased auto production in North America bodes well for aluminum demand. The amount of aluminum used in aircraft and cars is growing steadily, reflecting a push to reduce weight and boost fuel efficiency.

An Overall score of 96 places Kaiser No. 1 among the five stocks in the aluminum group. Shares earn an impressive 98 in Momentum and 82 in Value. Kaiser is funneling its strong cash flow into investments to sustain growth. Since 2006, the company has invested more than $400 million in acquisitions and factory improvements.

Wall Street anticipates per-share-profit growth of 81% for 2012 and 9% in 2013. Kaiser is being initiated as a Buy.

Trinity Industries (TRN)
This company enjoys leading market positions in the industrial, energy, transportation, and construction sectors. But the company is best known for making railcars.

In the 12 months ended September, Trinity delivered more than 19,000 railcars, or an estimated 31% of industry shipments. On September 30, the order backlog was more than 31,000 railcars valued at $3.3 billion, representing 51% of the industry backlog.

Trinity's lease fleet of more than 71,000 railcars provides a recurring stream of cash flow. For 2012, per-share earnings should total about $3.13, implying 90% growth. Revenue is expected to jump 28%, partly reflecting acquisitions.

For 2013, the consensus is $3.65, up 17%. Trinity has surged more than 66% from its 52-week low of $21.53 set in July. Even with the rally, the shares trade at a sizable discount to their historical norm. If valued at the five-year average trailing P/E of 15.4, the stock would trade around $45, indicating 25% upside. Trinity, with an Overall score of 93, is being initiated as a Buy.

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Tickers Mentioned: Tickers: ANN, LOPE, KALU, TRN

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