Top Picks 2007: Pacific Sunwear shines for Sparks

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Pacific Sunwear of California, Inc. (NASDAQ: PSUN) is the favorite speculation for 2007 from Richard Sparks, editor of Trend Maximizer. He notes, "The firm targets trendy young men and women with name-brand casual apparel (jeans, shorts, T-shirts, swimwear), shoes, and accessories through some 1,100 stores.

"Technically, the stock has performed well during the past few months. From its late-August base near $13, the stock has gained more than 50%, using its 40-day moving average as support, to now stand at a six-month high.

"Moreover, the stock leaped more than 7% in response to recent earnings news as some of the pessimistic sentiment unwound. The stock also benefited from the better-than-expected same-store sales numbers. I believe that the equity should continue to advance as more skeptical observers on the sidelines step in to buy.

"Meanwhile, the speculative options crowd is displaying pessimistic expectations and short interest rose slightly in November to a five-year high. Further, there is ample opportunity for a short-covering rally to push the stock higher.

"I view the pessimism on PSUN bullishly, given the stock's recent technical outperformance and improving fundamental picture. Evidence suggests that sideline money exists, which could step in and create buying power that could push the stock higher."

To see Richard's top conservative investment for 2007, click here.