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Tickers in this Article: RIMM, GME, GRMN, HAR
Nobody loves a bullish stock rocket more than I, and July gave investors plenty to choose from. The tricky part about rockets though is that it doesn't always make sense to try and catch a ride on a rocket once peak altitude has been reached. I'd much rather jump on board at what (hopefully) is the beginning of the ride. It's a corny analogy, but a fitting one as we close the books on another month.

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Fundamentals Overpriced
Automobile stocks, building supplies stocks and household appliance stocks were July's best industry performers. But, I don't like any of them at their current prices following gains last month ranging from 27% to 40%. They're overbought, plain and simple, and itching for a pullback.

Instead, I'm attracted to a group that did fairly well in July, but didn't race out of control and end up in an overbought condition: consumer electronics. The Dow Jones Consumer Electronics Index was up 17% in July. That's still a strong gain, but not a dangerous one for this group of stocks, especially considering the group is still down more than 70% from its early 2007 high.

But what about the fundamentals? Won't a stronger economy - as evidenced by a not-so-bad Q2 GDP figure - boost auto makers and construction-related companies? Sure, but that same economic recovery will also boost consumer electronic stocks. It's just that electronics stocks don't come with the added headache of over-extended charts right now.

So which stocks should you consider? Great question. Here are a few to keep an eye on.

The Mobile Race
Did you know that Research in Motion Ltd. (Nasdaq:RIMM) never posted a loss through the 2008 recession? Though you may not have realized it from the buzz it's created, the iPhone isn't even close to being the wireless world's most common smartphone. RIM's BlackBerry is still the hands-down leader, controlling 55% of the market. In fact, iPhones are only owned by 19% of the market's customers.

BlackBerry sales likely took a hit in June and July after Palm Pre and a cheaper iPhone rolled out, but Research in Motion's new Tour phone is expected to undo that damage. The point is the company's still doing it right.

Game On
GameStop Corp. (NYSE:GME) is another of those companies that didn't miss a beat despite a nasty economy - the company's posted nine straight quarters of profits. There's an assumption that a tighter economy fuels demand for relatively cheap entertainment like video gaming. Thus, when the economy rebounds, gaming will suffer. Here's a reality check though - gaming is hardly cheap, and gaming revenues have been growing like crazy in good times and bad. Video game sales have increased every year since 2000, and I don't expect 2009 to be any different. Though the first half of 2009 has given us some troubling video game revenue trends, that's got more to do with a lack of blockbuster title launches.

I'll confess that for me, the chart of Garmin Ltd. (Nasdaq:GRMN) is at least as compelling as the earnings outlook. Take a look at a long-term chart, and you'll see a huge pullback since late 2007 has slowly - and that's the key - slowly changed direction for the better. The new uptrend is the kind that's sustainable, supported by analyst estimates. Garmin is expected to earn a couple of bucks per share this year and $1.98 per share next year. Not bad for a company trading in the mid $20s.

Turn the Stereo Up
And finally, take a look at Harman International Industries Inc. (NYSE:HAR). The recession was harsh for the high-end stereo manufacturer: the prior two quarters were two of only three losing quarters in the last eleven. The future doesn't look much better than the past either, according to analyst outlooks. However, with the stock making higher highs and higher lows since March, the average investor doesn't agree with the pessimistic views - shares are up 166% since then. I'm siding with the average investor on this one, which is easier to do with a rallying stock.

The Bottom Line
Once again I find myself bucking the conventional school of thought that one buys stocks based solely on fundamentals. I also find myself slightly out of bounds with the technical analysts who only care about charts and momentum, fundamentals be damned. Being caught in the middle can be lonely at times.

Right now, consumer electronics stocks pose a great looking risk/reward scenario. July's very hottest stocks - autos and construction - are heavy on the 'risk' and light on the 'reward' at current prices. I'll take a runner-up in this case. (For more, see 12 Ways To Shop Smarter.)

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