A “Monster” of a Momentum Play

Global financial markets had another rough-and-tumble week as stocks struggled to regain momentum. The U.S. S&P 500 did bounce off of its 200-day moving average — which is a positive sign. But after Friday’s sell-off, it again is trading right at that crucial technical level.

Market uncertainty notwithstanding, you did see a gradual strengthening of some of your positions in your Bull Market Alert portfolio. I’d highlight the strong performance of both Alliance Resource Partners L.P. (ARLP), up 6.98%, and last week’s pick, CROCS Inc. (CROX), up 4.2%. Toyota (TM) and Rayonier Inc. (RYN) also ended the week higher. But you were stopped out of ELEMENTS Rogers Intl Commodity Agri ETN (RJA) for a loss.

This week’s Bull Market Alert pick is similar to last week’s pick, CROCS Inc. (CROX), in that it is a pure momentum play. But this pick also has the additional twist of a possible takeover.

Based in Corona, Calif., Hansen Natural Corporation (HANS) manufactures natural soft drinks, energy drinks, and fruit drinks, including the highly popular and edgy Monster Energy brand.

Hubert Hansen and his three sons began selling fresh, non-pasteurized juices to film studios and retailers in Southern California as far back as the Great Depression. But it only has been over the past few years that the company has begun to enjoy national success. This expansion has been reflected in its financial results. In the first quarter of this year, Hansen grew earnings 69% and revenue 50%. That was the best growth in earnings per share and sales in 13 quarters.

Thanks to its strong momentum, rumors are swirling that one of the “big boys” in the soft drink world — like Coca Cola (KO) — may be looking to acquire Hansen. This would echo the acquisition of Snapple by Dr Pepper in 2004.

In fact, investors are increasingly speculating on just such a deal. On Friday, Hansen Natural (HANS) jumped 4% in three times its usual volume, notching a new 52-week high. The number of call options contracts traded on the stock also exploded, with a total of 1,072 put and 9,183 call contracts on the stock. That’s a reliable clue that investors expect the stock to make a big move.

Just to be clear: I don’t have any more information on the stock than what is available in the market. But both the price movement and the pattern in options trading indicate that an event may be coming up that will continue to drive Hansen’s stock price higher.

So buy Hansen Natural Corporation (HANS) at market today, and place your stop at $70.00.

With the big jump in the stock’s price on Friday, I’m holding off on recommending any call options right now. But keep your eye out for possible options recommendations in the coming days or weeks in the form of a Special Alert, as the stock’s volatility settles.

Portfolio Update

Alliance Resource Partners L.P. (ARLP) soared 6.98% this past week. Boasting a dividend yield of 4.9%, and now trading above its 50-day moving average, ARLP is a HOLD.

CROCS Inc. (CROX) ended the week 4.2% higher, even after Friday’s drop of 1.59%. Firmly above its 50-day moving average, this momentum play remains a BUY.

UltraShort Euro ProShares (EUO) jumped 1.62%. The euro slid to $1.4128, down 0.4% this morning and is now within striking distance of the June low of $1.4070. Trading above its 50-day moving average, EUO remains a BUY.

Bank of Ireland (IRE) fell 5.98%. The bank raised nearly 2 billion euros ($2.8 billion) in core Tier 1 capital after 74% of its junior bondholders took part in an early debt swap offer with the vast majority opting for equity over cash. Trading below its 50-day moving average, IRE remains a HOLD.

National Bank of Greece SA (NBG) ended a volatile week 2.24% lower. This morning, Greek lawmakers began debating a 28 billion euro ($40 billion) package of measures to increase taxes and cut fiscal spending that is critical to winning a new round of international funding to keep it afloat. NBG remains a HOLD.

Novo Nordisk A/S (NVO) dropped 3.72% this past week. The stock may get a boost today as the company announced Saturday that Novo Nordisk’s insulin degludec lowered blood sugar levels with significantly reduced rates of hypoglycaemia when compared with rival Sanofi’s Lantus. NVO is a HOLD.

Rayonier Inc. (RYN) rose for the second consecutive week. Although showing a lot of relative strength, this play on lumber is still a HOLD.

Toyota Motor Corp. (TM) rose 2.24% this past week. Toyota announced it will roll out the hybrid Prius’ big brother this fall in the U.S. market. Back above its 50-day moving average, Toyota is now a BUY.