RBC's 5 Stocks to Buy on Near-Term Weakness

After pushing ever higher since the mid-October lows, the stock market is starting to hit an overbought wall. While the overall indicators for equities remain very bullish, the short-term indicators are indicating that this past week’s sluggish market action is due to an overall overbought condition. A new report from the RBC analysts pinpoints five momentum growth stocks that test out well on technical and fundamental measures and should be bought on any reversal and stock weakness.

Here are the five momentum growth stocks that could be solid additions to aggressive portfolios on an overbought market pullback.

Chipotle Mexican Grill Inc. (NYSE: CMG) has become the momentum trader’s dream stock, and it has absolutely eviscerated short sellers trying to time the downfall of the company’s huge momentum. Chipotle has more than 1,500 restaurants worldwide and is planning on opening up to 195 new restaurants this year. Like many companies, Chipotle has also spoken favorably to the idea of increasing its stock buyback program, which speaks to the company’s confidence in the growth of its business. A stock split could also be in order soon.

The Thomson/First Call consensus price target for this rampaging restaurant chain is a gigantic $716.55. The stock closed trading Friday at $669.80.

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F5 Networks Inc. (NASDAQ: FFIV) provides solutions for an application-based world and helps organizations seamlessly scale cloud, data center and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. These are the areas, along with security, where analysts expect possible big orders. Also, checks at this year’s VMWorld conference point to a number of incremental revenue drivers for F5 Networks, especially when related to VMware directly.

The consensus price objective is $130.01. Shares closed trading on Friday at $126.66.

MasterCard Inc. (NYSE: MA) concluded its massive 10-for-one stock split at the start of this year, and finally the average investor has a shot at owning some shares again. The company has plowed through a $3.5 billion share buyback, which has kept a nice floor under the stock all year. While Wall Street analysts have kept a sharp eye on volume loss from MasterCard after losing the contract it had with J.P. Morgan, the drop-off appears to be negligible after almost a year.

MasterCard investors still only receive a small 0.5% dividend. The consensus price target for the credit card giant is $91.47, and shares closed Friday at $84.05.

Rackspace Hosting Inc. (NYSE: RAX) posted very good third-quarter numbers and won a record number of new deals in the period. It also announced that it was updating and modernizing its relationship with Microsoft and now offers support for Microsoft’s private cloud offering, along with added support for Google Apps. The company caught Wall Street’s attention back in the spring when it said it was looking at strategic alternatives. Blue Harbor group continues to add to its holdings in the stock, and other hedge funds have shown interest in the cloud hosting company.

The consensus price target for this leading tech company is $45.11. Shares closed trading on Friday at $43.25.

Visa Inc. (NYSE: V) is another credit card stock to buy at RBC on any near-term market weakness and selling. Many Wall Street analysts feel that the company is best positioned to provide the necessary large-scale security for omnichannel payments, which they believe will become a larger talking point with investors. Given recent security concerns, that makes very good sense. Visa is returning almost 95% of free-cash-flow to shareholders via dividends and stock buybacks.

But Visa investors are paid a small 0.8% dividend. The consensus price target for this leading credit card company, which looks poised to see benefits from the new Apple Pay platform, is $257.91. Shares closed on Friday at $248.84.

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Given the market’s inclination, and the history of trading higher at the end of the year, any pullbacks may be brief. Investors looking to add these stocks to portfolios may want to see if there are winners or losers from this year that can be sold to raise new capital in advance of a pullback.

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