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"Rational" Plays for Hurricane Season
06/30/2006 12:00 am EST
"With hurricane season having started, I want to add two new stocks to The Rational Investor portfolio," says Jamie Dlugosch. "Both of these selections are great short-term plays that stand to benefit from the start of the hurricane season." Here’s his picks.
"Home Solutions (HOM ASE) is a restoration, rebuilding, and remodeling company providing services to commercial and residential customers. The company has greatly helped the reconstruction efforts along the Gulf Coast.
"Bookings are solid, and revenue growth is near certain over the next few years. In fact, there is simply more work than the company can handle. Valuation is cheap given that its growth potential and shares are significantly off their lows.
"The company recently has started trading on the NASDAQ. This is a good thing—more institutional access should reduce the volatility of the stock. I'm attracted to shares here in advance of another hurricane season that is expected to be quite severe.
"I expect this to be a short-term buy; my ‘Rational Target’ for HOM is $12, and I recommend you buy up to $8. This should be part of an aggressive portfolio with a weighting of no more than 1% of your total portfolio.
"Streicher Mobile Fueling (FUEL NASDAQ) is another volatile stock that benefited from last year's hurricane season. As its name implies, the company provides mobile petroleum transportation and delivery services. It also plays a key role in avoiding delivery disruptions.
"Take a look at FUEL's performance during last year's hurricane season. Shares traded in a range of $2 to $5.50. Now well off those highs, Rational investors can take a short-term position here before hurricane season explodes in full bloom. I recommend FUEL up to $2.50, and my Rational Target is $5. The position is an aggressive trade, and I would take a 1% position only."
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