Watching Movies in Bed

The seasonal bull market is in full force and it's a good time to profit with companies that will ring the register in the fourth quarter holiday shopping surge. Looking at stocks with top-ranked earnings growth in the Consumer Discretionary sector, I offer two interesting, and relaxing, names with solid potential.

Coinstar (CSTR - Snapshot Report): This is my pick of the week. I think Redbox DVD sales growth continues to benefit from Netflix (NFLX - Analyst Report) subscriber frustration. People (myself included) love simplicity, convenience, and comprehensible, not just affordable, pricing.

And not everybody is streaming video at home. They like to stop at the cool-looking, tomato-colored kiosk on the way home from work, or while they are coming out of the store, or picking up the kids from school. I'm sure of the 33,000 kiosks there's gotta be some within 100 feet of a high school in some communities, especially now that they are offering video games!

Plus, we like to hold the movie disc in our hands. Watching movies is an entertainment event, whether you are going home to see it with your family, soulmate, or just your dog. We value what we can touch, and thus we perceive we get our money's worth with the movie we just watched that only cost a buck versus the endless content we may have access to online but never watch and forget how much we are paying for.

My take is that the current earnings growth estimates for Coinstar are conservative, given the Netflix defections they will continue to benefit from, piled on top of a steady consumer growth story. I am an aggressive buyer on any dips below $50 and will add as we breakout above $60.

Caveat: The Durbin legislation that will impact credit and debit card transactions could eventually cause Coinstar to raise fees on rentals. So what? My family will still pay $1.30 or $1.50 to watch the movie we want, when we want -- and we have Netflix streaming (which I never watch).

CSTR reports earnings Thursday October 27 and we will see what they say about their growth and opportunities -- especially since Netflix just reported moments ago that they lost 800,000 subscribers in the quarter!

Select Comfort (SCSS - Snapshot Report): The king of custom comfort sleep just woke everybody up with their earnings last week, beating the street by 15%, and making it their fourth consecutive earnings surprise with an average beat of 30%. Shares sat up in bed over 30% in two days last week and marked a new 52-week high today above $22.

As our own Bill Wilton noted last week, the maker of the "Sleep Number" bed also went on to raise guidance because it sees double-digit revenue growth. This kind of management confidence is indeed very comforting -- unless you are short the stock and losing sleep.

As you can see from the above tables, analysts followed company guidance nearly across the board and boosted estimates for the fourth quarter and next year. I will be a buyer of all SCSS pullbacks to between $19 and $20.

As the cold wind and rain of fall descend on my fair city, I'm going to be watching a lot of movies in bed for the next few months. If lots of people are like me, these two stocks could do very well.

Disclosure: I am long CSTR.

Kevin Cook is a Senior Stock Strategist with Zacks.com

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