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Sunday, December 18, 2011

Top Stocks to buy in 2012 Mostly Dividends & Value (BRK-A, CMCSA, FCX, MET, PG, STX, RDS.A, VOD, SNY, AAPL, GOOG, IBM)

Barron's listed Berkshire Hathaway Inc. (NYSE: BRK-A), Comcast Corporation (NASDAQ: CMCSA), Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Metlife, Inc. (NYSE: MET), and Procter & Gamble (NYSE: PG). The list also includes some ADRs via Seagate Technology PLC (NASDAQ: STX), Royal Dutch Shell (NYSE: RDS.A), Vodafone Group PLC (NYSE: VOD), Sanofi (NYSE: SNY), and Daimler (DDAIF).

The aim was companies with low P/E ratios, somewhat high dividends, and companies with an expected upside of potentially 15% to 20%. This won't excite many investors. Apple Inc. (NASDAQ: AAPL) was not in the list nor was Google Inc. (NASDAQ: GOOG). Neither pays a dividend, but both have relatively low P/E ratios considering the recent growth (14 for Apple and about 17 for Google). If you use the Thomson Reuters consensus analyst price target, Apple has 29% upside and Google has 16% upside.

Berkshire Hathaway Inc. (NYSE: BRK-A) is interesting now that it has added International Business Machines Corporation (NYSE: IBM) and Intel Corporation (NASDAQ: INTC) to its portfolio. IBM yields a low 1.5% today and is buying back stock despite trading at all-times highs. The company's goal is $20.00 in earnings per share by 2015. Intel just warned about a large revenue shortfall but its dividend yield is now about 3.5%. , Panera Bread [PNRA 135.44 0.26 (+0.19%) ] has been the best-performing pick of the year, up nearly 30 percent.
The investing environment has been tough, though, and next year's favorites would have been disappointments in 2011. The group has fallen 3.7 percent this year, with three names down more than 24 percent. The S&P 500, a broader measure of the largest stocks in the U.S., has slumped 3.3 percent.

Of Raymond James' group of favorite stocks, Nuance Communications is the best performer so far this year, up 30 percent, while BMC Software lags the most, with a 29 percent drop.

"Once again, our analysts have been challenged to find the best stocks to own in 2012 from among the approximately 900 companies we actively follow," Chief Investment Officer David Henwood wrote in an introduction to this year's list.

The encouraging elements during a year of great market turbulence, Henwood says, are that corporate earnings and cash flows have grown impressively for most companies.

Analysts at Raymond James offer their best picks, with returns expected to be between 15 percent and 104 percent, based on price forecasts.

The 13 stocks on Raymond James' list are arranged below in order of potential upside, based on the firm's 12-month price target and the stock's price as of Dec. 14.

Company Profile: Brinker International [EAT 24.35 -0.24 (-0.98%) ] owns or franchises more than 1,500 casual dining restaurants in 32 countries under the names Chili's Grill & Bar and Maggiano's Little Italy.

Share Price: $24.21 (Dec. 14)

Potential Upside: 15.7 percent based on a price target of $28

Investment Thesis: Analyst Bryan Elliott says Brinker's is in phase II of its Chili's transformation, which should lead to a big margin and free cash flow opportunity.

"Brinker shares have been range-bound for most of 2011 despite management consistently meeting its goals from Phase I of the transformation (improved labor productivity)," Elliott writes. "We expect similar success with Phase II initiatives (a significant kitchen technology upgrade and a major store remodel program). If we are correct, investor sentiment should improve, which could materially increase EAT's valuation metrics."

Company Profile: Post Properties [PPS 42.16 0.32 (+0.76%) ] is a developer and operator of upscale multifamily communities. The company operates as a real estate investment trust, or REIT.

Share Price: $41.17 (Dec. 14)

Potential Upside: 19 percent based on a price target of $49

Investment Thesis: Analyst Buck Horne says Post Properties should outperform in 2012 as the apartment REIT sector is poised for near-record earnings growth in 2012.

"As part of that favorable backdrop, we believe Post Properties' accelerating rent growth, low rent/income ratios, and attractive development pipeline present a compelling multi-year earnings growth profile at a valuation that remains quite attractive," Horne writes.

11. Chevron

Company Profile: Chevron [CVX 100.86 1.19 (+1.19%) ] is one of the largest corporations in the U.S. and is engaged in oil and gas exploration, production and refining.

Share Price: $102.04 (Dec. 14)

Potential Upside: 22.5 percent based on a price target of $125

Investment Thesis: Analyst Pavel Molchanov says Chevron is structurally the best-positioned of the super-major oil giants, like Exxon Mobil [XOM 80.16 0.13 (+0.16%) ] .

"Despite Chevron's currently high capital intensity as it spends heavily on the long-term [liquid natural gas] projects, the free cash flow yield remains robust," Molchanov writes.

10. Nuance Communications

Company Profile: Nuance [NUAN 24.63 0.56 (+2.33%) ] is a provider of voice- and language-software services. The company makes the Nuance Dragon voice-recognition software.

Share Price: $23.59 (Dec. 14)

Potential Upside: 27.2 percent based on a price target of $30

Investment Thesis: Analyst Shyam Patil says Nuance should see "unprecedented business momentum" drive a strong 2012.

Patil says that with the success of the Apple [AAPL 381.02 2.08 (+0.55%) ] iPhone 4S and its voice recognition software, speech recognition is starting to become mainstream.

"Nuance is seeing the strongest momentum in mobile and expect this segment to grow the fastest in 2012," Patil says. "The strong business momentum combined with what we view as conservative FY12 guidance should allow for upward estimate revisions throughout the year."

Company Profile: BB&T [BBT 24.05 0.39 (+1.65%) ] offers a range of financial services to consumers and businesses. The company has about 1,800 branches in 12 states with $168 billion in assets.

Share Price: $23.46 (Dec. 14)

Potential Upside: 28 percent based on a price target of $30

Investment Thesis: Analyst Michael Rose calls BB&T "a bank stock for the times," noting that the U.S. banking sector remains "plagued by economic uncertainty, increasing regulatory burdens, and European debt/banking issues." Rose says market share gains and specialty business should fuel BB&T's loan growth.

"In sum, BBT is a bank stock for the times as continued progress in many fundamental areas will drive superior operating results and profitability relative to peers which in turn will benefit shares," Rose writes.

Company Profile: VeriFone [PAY 35.18 -1.62 (-4.4%) ] is a provider of secure electronic-payment technologies.

Share Price: $40.66 (Dec. 14)

Potential Upside: 30 percent based on a price target of $53

Investment Thesis: Analyst Wayne Johnson says VeriFone is Raymond James' top investment idea in the payments sector, "given the company's strong market position, exposure to secular tailwinds, and significant company-driven revenue and profitability expansion opportunities."

Johnson adds that VeriFone should benefit from favorable market dynamics such as improved competitive landscape, new payment products, adoption of electronic payments in traditionally cash-based industries like taxis, and the demand for value-added services such as multimedia, advertising, and mobile payments capabilities.

Company Profile: TW Telecom [TWTC 19.12 -0.17 (-0.88%) ] is the third-largest business Ethernet provider in the U.S.

Share Price: $18.94 (Dec. 14)

Potential Upside: 32 percent based on a price target of $25

Investment Thesis: Analyst Frank Louthan says the proliferation of data makes TW Telecom the name to own since it's best positioned in the highly competitive telecom industry.

"The company has valuable assets that we believe are positioned to benefit from the same data demand trends we see in that sub-sector, which can ultimately produce higher top-line growth than its peers," Louthan writes.

Company Profile: Stanley Black & Decker [SWK 63.10 0.11 (+0.17%) ] makes tools. The company's brands include Black & Decker, Baldwin, DeWalt, Kwikset, and Stanley.

Share Price: $63.76 (Dec. 14)

Potential Upside: 33.3 percent based on a price target of $85

Investment Thesis: Analyst Sam Darkatsh says Stanley Black & Decker is "significantly undervalued" headed into 2012 thanks to an attractive free cash flow yield.

"Valuation has reached a point where it may act as its own catalyst via a disproportionately heavy share repurchase and/or a business portfolio review," Darkatsh writes. "While macro trends in Europe and the U.S. housing market are certainly not favorable, modest low single-digit organic growth seems a reasonable expectation given potential revenue synergies from Black & Decker."

Company Profile: Lincoln National [LNC 18.51 -0.19 (-1.02%) ] , with assets of $153 billion, offers annuities, life insurance, 401(k) plans, savings plans and financial planning.

Share Price: $18.61 (Dec. 14)

Potential Upside: 45 percent based on a price target of $27

Investment Thesis: Analyst Steven Schwartz says Lincoln National remains undervalued as fundamentals improve.

Bank of America/Merrill Lynch analysts agree, picking Lincoln National as one of their top stock picks for 2012.

"Lincoln National has the potential for substantial share price appreciation," Schwartz writes. "Lincoln continues to perform as a top-ten player in various life insurance product arenas and remains well suited to continue to benefit from the demand for the investment and insurance guarantees provided by the life insurance industry."

Company Profile: BMC Software [BMC 33.17 -0.39 (-1.16%) ] is a provider of Cloud computing and IT service management.

Share Price: $33.36 (Dec. 14)

Potential Upside: 47 percent based on a price target of $49

Investment Thesis: Analyst Michael Turits calls BMC Software "a good defensive pick in the event of a worsening economic environment," noting that the stock was a top relative performer during the downturn of 2008 and 2009.

"We believe BMC has taken aggressive steps to address sales force compensation and quotas that should begin to 'right the ship' in the next twelve months," Turits writes.

Company Profile: Whiting Petroleum [WLL 45.27 1.87 (+4.31%) ] is an oil and gas exploration and production company.

It owns and operates properties in the Permian Basin, Rocky Mountain, Mid-Continent, Gulf Coast and Michigan regions of the U.S.

Share Price: $44.21 (Dec. 14)

Potential Upside: 58.3 percent based on a price target of $70

Investment Thesis: Analyst John Freeman offers an extensive list of catalysts for Whiting in 2012, including the company's so-called Lewis and Clark play, which he says will alleviate inventory concerns.

"In addition to Lewis and Clark, well results from several other areas across the Williston Basin (Hidden Bench, Starbuck, Tarpon, and Missouri Breaks) will help unlock the resource potential across the smaller plays in the Rocky Mountain region," Freeman writes.

"While Whiting boasts an attractive balance sheet (net debt/book cap of 29 percent), the company is also exploring monetization options including joint ventures and/or royalty trusts to fund operations before drawing further on its $1.5 billion borrowing base."

Company Profile: Superior Energy Services [SPN 27.33 1.18 (+4.51%) ] is a provider of oilfield services and equipment. It provides oil and gas companies with brand name rental tools and integrated well intervention services and tools.

Share Price: $26.65 (Dec. 14)

Potential Upside: 76.4 percent based on a price target of $47

Investment Thesis: Analyst J. Marshall Adkins is poised for outperformance in 2012 thanks to its growth strategy through a merger with Complete Production Services, an attractive valuation, and a recovery of activity in the Gulf of Mexico.

"Superior Energy Services continues to establish itself as one of the strongest performing companies in our coverage universe," Adkins writes.

"A top-tier management team paired with organic expansion as well as the recent acquisition of Complete Production Services should position Superior to reap the benefits of nearly every burgeoning fundamental theme we see unfolding in the oil service universe in 2012 and beyond."

1. Nvidia

Company Profile: Nvidia [NVDA 13.51 0.05 (+0.37%) ] is a visual computing technologies company and the inventor of the graphics processing unit.

Share Price: $13.71 (Dec. 14)

Potential Upside: 104 percent based on a price target of $28

Investment Thesis: Analyst Hans Mosesmann says that the bear case for Nvidia has been overstated and that headwinds won't materialize in the company's fiscal 2013.

"Investors have been increasingly concerned about Nvidia's applications processor, Tegra, and its ability to compete given new dynamics in the tablet and smartphone market," Mosesmann notes.

"In essence, we believe Qualcomm [QCOM 52.61 0.06 (+0.11%) ] will be successful in targeting the lower end of the market, but Nvidia's early lead at quad core will allow the company to have meaningful traction for Tegra in FY13."

Comcast Corporation (NYSE: CMCSA) is actually still interesting because of its growth and value and because it is changing its mix to include content. The 2% yield is one which has room for further dividend growth and the cable giant's share price actually offers almost 30% to the Thomson Reuters consensus price target.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) and Seagate Technology PLC (NASDAQ: STX) are both very opportunistic calls. Hard disk drive troubles around the globe, a prior discount to highs, and a dividend north of 4% helped Seagate. Freeport-McMorRan is an opportunistic call now that global growth has brought down shares of metals companies drastically. It has a 2.5% yield, which is not bad for a metals company, and at $39.00 the Thomson Reuters consensus price target is actually 30% higher than the current share price.

Perhaps the ADRs and European plays of Daimler (DDAIF), Royal Dutch Shell (NYSE: RDS.A), Sanofi (NYSE: SNY) and Vodafone Group PLC (NYSE: VOD) are opportunistic around the weakness of Europe today. After all, if the Euro Zone continues its downward trajectory and with the Euro currency at an 11-month low it would seem that the article could blame a worsening effect if these positions do not work out.

 predictions and expected upside. Our DJIA Stocks Soon To Raise Dividends has already seen some come to fruition even sooner than expected, and we have released to our free email subscribers the

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Barron's noted a 6.9% drop so far in 2011 for its Favorite Stocks for 2011 versus a 1.9% drop in the S&P 500 Index.
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