5 Rocket Stocks to Buy in a Shaky Market

BALTIMORE (Stockpickr) -- U.S. markets got a wakeup call last week, falling the most since May 2012 as investors sold stocks en masse. For the S&P 500 it was a 3.12% decline that effectively halved the big index's performance year-to-date.

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That's right, the S&P 500 unwound nine months of gradual gains in just five trading sessions.

And as volatility gets dumped back into the broad market in October, it's not hard to see why investors are becoming fearful again. The S&P has run long and hard without a "meaningful" correction. To get positioned on the right side of the move, we're turning to a fresh set of "Rocket Stock" names worth buying this week.

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 269 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 81.43%.

Without further ado, here's a look at this week's Rocket Stocks.

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Johnson & Johnson

Up first is health care behemoth Johnson & Johnson (JNJ). As far as defensive names go, JNJ is hard to beat. It's the prototypical blue-chip stock. That makes it an appropriate name to own right now, given that there's still a material amount of room to move lower in this market before anything "changes" from a big-picture perspective.

With a 2.8% dividend yield and a huge, stable business, JNJ has been a go-to for risk-averse investors, and it's worked. Year-to-date Johnson & Johnson is up more than 10% in price alone, compared with a measly 3% run from the S&P 500.

Johnson & Johnson is the biggest health care company in the world. The firm's popular consumer brands include Band-Aid, Tylenol, Neutrogena and Acuvue. And while those names are universally known, it's actually JNJ's non-consumer pharmaceutical and medical device units that provide the lion's share of sales. That diversification within health care means that JNJ has exposure to big tailwinds from aging demographics in countries like the U.S., without oversized exposure to any specific drug or treatment.

JNJ is also hugely profitable. The firm converted more than 22 cents of every sales dollar into profits last quarter, and management has performed at that level pretty consistently. The sheer amount of cash that Johnson & Johnson throws off from its business makes it an attractive name to own -- and rising analyst sentiment in shares this week makes it a Rocket Stock.

As of the most recently reported quarter, Johnson & Johnson was one of Renaissance Technologies' top holdings and also showed up in Ken Fisher's Fisher Investments portfolio.

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Simon Property Group

Retail REIT Simon Property Group (SPG) is another name that's managed to perform well in spite of the drag of the broad market. Since the calendar flipped to January, SPG has appreciated by more than 10%, on top of a 3% dividend payout, and this big mall and outlet center landlord looks well-positioned to keep up that performance for the rest of 2014.

SPG is the largest retail REIT in the market today. The firm owns more than 200 commercial properties, with a focus on malls and outlet centers in the U.S. and some additional exposure in Asia. SPG also owns a 29% stake in European shopping center owner Klepierre. In recent years, SPG has been working on concentrating its ownership in the most attractive retail assets it can find. Most recently, it spun off its strip mall assets and smaller properties into Washington Prime Group (WPG) -- and that should have a positive impact on margins (and thus dividends).

Don't mistake SPG for being a pure play real estate name. Instead, the firm's REIT structure makes it more of a pure play on income generation -- SPG's REIT status means that it must pay out the vast majority of income back to shareholders in the form of dividends. Given an environment that makes more Fed intervention look likely in the coming months, dividend payers like Simon Property Group look well-positioned to outperform.

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Keurig Green Mountain

Coffee stock Keurig Green Mountain (GMCR), on the other hand, isn't what most people would think of when they think "defensive." After all, this $22 billion beverage name has more than doubled in the last year, performance that would typically leave a stock vulnerable to downside risk. But GMCR isn't your typical name.

Shares of this momentum mover have been some of the best-performing equity choices for investors this year, even now as stocks correct. That's evidenced by the fact that GMCR hit a new all-time high on Thursday. So what's spurring the relative strength?

GMCR owns Keurig, the brand of beverage brewers that use self-contained K-Cups to make coffee, teas and other drinks. K-Cups provide a sticky revenue stream, and because they're proprietary, the firm can command premium pricing for them. A huge installed base means that Keurig has a deep economic moat around its business,- and partnerships with large beverage companies such as Coca-Cola (KO) (on the forthcoming Keurig Cold) mean that GMCR's moat is only getting deeper despite growing competition.

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Polaris Industries

Polaris Industries (PII) is riding a tidal wave of growing consumer discretionary spending. Polaris makes toys for grown ups, manufacturing and selling ATVs, motorcycles and snowmobiles through a network of more than 1,650 North American dealers as well as distributors in more than 100 countries. Record low interest rates, combined with a recovering middle class, have been fueling growing sales of the firm's offerings.

It's not just sales. Polaris has also widened its margins, taking advantage of new lower-cost manufacturing facilities to pull more profit from every sales dollar. Today, the firm's net profit margins consistently weigh in at more than 10%. Polaris has two big paths to growth right now. First, the firm has been acquiring valuable brands in the recreational vehicle business, including GEM electric golf carts and Indian Motorcycle. Those brands don't just grow the firm's stable of names, they also push into categories that go beyond PII's bread and butter ATV sales. The second growth avenue for PII right now is international. As rising middle class populations in emerging markets become interested in participating in motorsports, Polaris' huge dealer network is there.

Financially, the firm is in good shape. Despite the costs of building new factories and buying famed brands, Polaris' $367 million debt load is offset by more than $200 million in cash and investments. With rising analyst sentiment in this stock, we're betting on shares.

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Moody's

Last up this week is credit ratings agency Moody's (MCO). Shares of Moody's have seen a strong year in 2014, rallying more than 17% so far thanks to a strong bond market that's fuelled new issues and spurred the need for more ratings. There are big barriers to entry in the credit ratings business, and that gives Moody's a very defensible position right now.

Size -- and reputation -- matters for credit ratings agencies. For that reason, Moody's positioning gives it some big advantages: as one of the "big three" ratings agencies, MCO controls approximately 40% of the market for debt ratings. So despite the colossal failures of ratings firms in the wake of 2008, MCO continues to thrive simply because it's one of the few games in town. With rate-hike talk coming from the Fed, expect debt issuances to continue to flood the market as firms and governments try to borrow money while it's cheap.

Beyond debt ratings, Moody's has expanded its reach into research and quantitative databases. Those are logical extensions of the credit ratings expertise that the firm already has, and they're equally capital-light. In recent years, MCO's management has positioned the firm's balance sheet neutrally, offsetting any of its own debt with cash. That's a big risk reducer as volatility spikes in the stock market this fall.

As of the most recently reported quarter, Moody's was one of Warren Buffett's top holdings.

Must Read: 10 Stocks Billionaire John Paulson Loves in 2014

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in the names mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji