3 Best-Performing Stocks in July

A rising tide lifts all boats, so when the stock market indexes hit new all-time highs, the shares of even the worst laggards are bound to get a boost. While that was true for some of the best-performing stocks in July, there were other factors at play.

Read on to find out why the market alone was not the cause for the surge of biggest gainers Hertz (NYSE: HTZ), Applied Optoelectronics (NASDAQ: AAOI), and Halcon Resources (NYSE: HK), as well as to see if they can hold on to their gains.

1. Hertz (up 63.4%)

There are plenty of reasons why car-rental agency Hertz was left abandoned on the side of the road for most of the year, including a collapse in used-car pricing and the ascendance of ridesharing services Uber and Lyft. Yet some of Hertz's wounds are self-inflicted: its ill-fated acquisition of budget rival Dollar Thrifty, which saddled it with significant debt, and an aging car fleet filled with vehicles that didn't match up with consumer demand.

But there were signs Hertz was ready to make a U-turn, including a new CEO with the experience to make a turnaround; a major $1 billion debt offering of senior second-priority secured notes, to pay down debt due in 2018 and 2019; and dumping at a faster rate the compact cars in its rental fleet in favor of SUVs.

In July, a few external factors turned in Hertz's favor. For example, industry car-pricing trends turned positive, and the airline industry said travel was staying stronger longer than expected. The news boosted Hertz stock, which jumped over 60% in the month, after having lost more than half its value during the first half of the year. It's still lower than it was at the start of 2017, but with the stock trading at only a fraction of sales and a turnaround in progress that's buoyed by some favorable factors finally, the car-rental agency may have more room to run.

2. Applied Optoelectronics (up 67.4%)

Unlike Hertz, Applied Optoelectronics has been on a tear, more than tripling in value since the start of the year and up over 667% over the last 12 months. That the fiber-optic network products provider has continued its run-up in the month of July may be the least surprising thing, except maybe to the short-sellers who keep expecting its shares to fall.

Short interest on Applied Optoelectronics has continued its torrid climb higher, and now stands at 56% of shares outstanding and 59% of float, or 10.75 million shares. That's 4% higher than a month ago, and five times more than where it stood at the end of last year. As the stock climbed, so did the bets against it.

It's possible the short-sellers are right in the short term -- even a broken clock is right twice a day -- but the long-term prospects for Applied Optoelectronics are bright indeed. Internet companies are upgrading to 100-gigabit-per-second technology, and their cloud-connected data centers need to be able to handle the burgeoning server-to-server traffic. Not to mention the necessity of providing high-speed data links between the centers.

With big-name customers such as Amazon.com to Microsoft, Applied Optoelectronics will likely be able to keep exceeding guidance, as it did two weeks ago when its reported revenue of $117 million handily exceeded its guidance of $106 million to $112 million; profits and margins also beat expectations.

There will be ups and downs for the fiber-optic network products provider, but the long-term outlook seems appreciably higher still.

3. Halcon Resources (up 71.3%)

The best-performing stock in July was independent oil and gas producer Halcon Resources, which surged more than 70% for the month. While it was a banner time for its shares, it was hardly a salve for investors, who first had to endure a bankruptcy late last year that forced them to give up 96% of their equity stake to creditors, only to see their shares fall further this year.

And the gains for the month were predicated on Halcon's unloading all of its assets in the Williston Basin in North Dakota in return for $1.4 billion. At the peak of the oil boom, the region was like the California during the Gold Rush, with everyone streaming in to stake a claim. The collapse in oil prices led to a bust, and Halcon Resources couldn't escape fast enough.

It still has its assets in the Permian Basin of west Texas that it will now focus on, but that's going to be a tough row to hoe -- or field to drill. While the price of West Texas Intermediate crude oil bounced higher this week to $49 a barrel, it's still depressed and may not be able to hold.

Considering its weakened state, Halcon Resources' gains may be ephemeral.

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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.