Top Stock Picks For 2012

Top Stock Picks For 2012: Yongye International

by Jim Trippon, editor Global Profits Alert


Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.


Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.


As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?


ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.


While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.


From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.


Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.




Top Stock Picks For 2012: Uranium Resources

by Brendan Coffey, editor of Cabot Green Investor


Zero emissions is the holy grail of green technology as the world looks to grapple with the converging pressures of tight fossil fuel supplies, air quality issues and global warming.


I see the push for zero emissions reviving a technology once largely written o": nuclear power. In light of this, my top pick for 2011 is Uranium Resources (URRE). At this moment, some 60 nuclear plants are under construction worldwide. In the U.S., where nuclear plant construction has been dormant for decades, as many as eight new plants are scheduled to be built by 2020.


China, the fastest growing energy user in the world, should be a major driver in the market: It's building 30 nuclear reactors right now to add to its existing 12 and has an additional 157 planned.


In the next 20 years, global annual uranium demand is projected to double and the supply pressure is already starting to be seen.


From May to December 2010, uranium prices rocketed up 50% and appear set for a stronger 2011 as the market prepares for the end of the Megatons to Megawatts program in 2012.


Uranium Resources is a small uranium miner in Texas, which has produced 8 million pounds of the commodity in its 33 years of operation.


The real value in URRE isn't in its mining abilities however—it's a relatively high-cost producer, and it stopped mining for the first part of 2010 due to soft prices. Rather, over the years it has amassed parcels in New Mexico that hold over 101 million pounds of uranium, giving URRE the eighth-largest uranium reserves in the world.


By comparison, industry leader Cameco has just nine times the reserves of Uranium Resources but 50 times the market value.


That makes URRE ripe for a takeover. Until then, its share price tends to trade in tandem with uranium's price, meaning the coming year should benefit shareholders regardless of whether a takeover bid materializes.


Learn more about this financial newsletter at Brendan Coffey's Cabot Green Investor.



Top Stock Picks For 2012: Scientific Games

by Jason Shade, editor Texting Trader


As is the case with most of my trades and recommendations, my stock prediction for 2011 is a company that many of my peers are not giving much attention.


Scientific Games (SGMS) is a turnaround story that intrigues me and I select owning it as my top stock idea of 2011.


SGMS is an $882 million global leader in providing customized, end-to-end gaming solutions to lottery and gaming organizations worldwide.


Scientific Games' integrated array of products and services include instant lottery games, lottery gaming systems, terminals and services, and internet applications, as well as server-based interactive gaming machines. Scientific Games serves customers in approximately 50 countries.


After peaking at a high of $40 in 2007, this legalized gaming services provider has seen its shares collapse during the recent economic crisis.


The stock bottomed out earlier this year at $6.58 following a weak quarterly earnings report in which the company reported a .04 a share miss with revenues that also were on the light side.


Whether it was this earnings report or the prior three years of underperformance, the board and investors decided to reinstate SGMS's Chairman and former CEO Lorne Weil as CEO of the company.


Weil was at the helm during the stock's last major run from 2000 to 2005 and his returning to lead the firm is a positive catalyst for the success of SGMS and its potential return to prosperity.


Investors also can take heart in the recent binge of insider buying that accompanied Weil's return to the C-suite.


In December, management and insiders accumulated more than 4 million shares of company stock between the prices of $7.89 and $9.75 a share. One buyer of particular interest is long-time Wall Street investor Ron Perelman. Perelman now owns more than 30 million shares of the company stock. Most of his ownership is at much higher prices, including a large purchase of 400,000 shares at $14.26 a share last March.


Finally, you can't have a good corporate turnaround story without improving business fundamentals. Herein lies the challenge to management, the company and its stock. The last earnings report was anemic, but there are encouraging signs demonstrating that SGMS is committed into cleaning up its balance sheet and positioning the firm for sustainable growth in the coming years.


At the end of November, the company retired nearly $80 million in short term debt by issuing Senior Subordinated Notes due in 2018.


SGMS already boasts an 80% market share in the U.S. lottery market. Thus, the real growth engine for the firm will come from emerging markets.


SGMS is already focusing on growing these markets by working on gaining a larger footprint in the China market where its instant ticket retail sales have posted an impressive 28% gain in the latest quarter.


Following this success is a recent agreement signed between SGMS and China Sports Lottery Printing which o"ers great growth opportunities for this fast-expanding market. I find this even more intriguing as we have seen gaming stocks such as Wynn Resorts and Las Vegas Sands provide investors with huge gains based on their sales growth in Macau.


At some point, I expect analysts and investors alike to begin waking up to the Asian growth story happening at SGMS.


Like all companies, SGMS does face competitive pressures in all markets. In fact, last year the firm reported operating margins of 23%, a 5 year low for the company. This will need to be monitored over the next couple of quarters along with EPS and revenue growth.


Nevertheless, I see the recent management shakeup, swell of insider buying and market expansion in Asia to o"er investors a compelling turnaround story worth gambling on. I have a 12-month price target of $17 on SGMS.



Top Stock Picks For 2012: Seadrill

by Elliott Gue, editor The Energy Strategist


Seadrill (SDRL) is the best-placed contract driller in my coverage universe. The company doesn't produce or explore for oil and natural gas; rather, it is in the business of owning drilling rigs that are leased out to major producers for a daily fee known as a day rate.


There are three major reasons to buy Seadrill. First, the company has the youngest and most advanced ?eet of drilling rigs of any of the major contractors.


Second, Seadrill's rigs are primarily booked under long-term contracts at attractive rates for several years into the future, providing a guaranteed backlog of cash how regardless of the path of commodity prices.


And finally, Seadrill has a policy of paying out sizeable quarterly dividends supported by its backlog of rig contracts.


In the most recent quarter, Seadrill paid $0.65 per share, equivalent to an annualized yield of approximately 8 percent at the current price.


I see the company boosting its payout to around $0.75 per quarter by the fourth quarter of 2011; given strong investor preference for income-paying stocks, a growing dividend will continue to drive further upside in the stock.


Seadrill owns a feet of sixteen deepwater drilling rigs including ten semi-submersibles and six drillships.


The average operating Seadrill rig is less than five years old and that only includes the 13 rigs currently working on contracts.


The remaining 10 rigs in the feet were all built between 2008 and 2010 and are of the most modern and capable design.


All are ultra-deepwater rigs able to drill in waters more than 10,000 feet deep and are powerful enough to complete wells more than 6 miles in length.


Deepwater operations are only going to get more complex in coming years; as a result, producers need the most advanced, state-of-the-art rigs In addition to its deepwater feet, Seadrill also owns around 20 shallow-water jackup rigs and 17 tender rigs that are used to ferry people and equipment and to support o "shore drilling operations.


Seadrill has a backlog of over $8.5 billion in contracts covering its deepwater rigs, $2 billion covering its jack-ups and $1.5 billion for tender rigs.


Since these revenues are essentially guaranteed under long-term deals signed with major oil and gas producers, this represents a highly visible stream of cash?ow over the next few years.


With a ?eet that's ideal for the current market, a growing 8 percent yield and opportunities to grow via new rig construction, the stock rates a buy under $38.



Top Stock Picks For 2012: Siga Technologies

by Dennis Slothower, editor Stealth Stocks


Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.


In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.


SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.


Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.


In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.


It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.



Top Stock Picks For 2012: PMC Sierra

by Paul McWilliams, editor Next Inning


PMC Sierra (PMCS) is a top speculative investment for the coming year. The company is a leader in the field of integration. By integrating more functions into a single chip, the company has doubled its market share in the SAS storage market as the industry moved from 3Gbs to 6Gbs."


The company is also building significant traction with its single-chip "RAID on a Chip" solution and has leveraged its integration talent to become one of the dominant suppliers in the FTTx space serving both GPON and EPON requirements.


Most recently, PMCS announced its acquisition of Israeli based Wintegra -- a private company and the world leader in network processors for access networks. "


The market for network processors in access applications, which includes broadband wireless backhaul, is just now building traction, and Wintegra will likely dominate the market for at least the next few years."" As I see it, the acquisition makes a ton of sense from many perspectives." First, as I noted, Wintegra is the leader in a market that is set to expand rapidly during the next few years. "


Second, once we factor in the Wintegra balance sheet and PMCS minority ownership (yes, PMCS was a venture" investor in Wintegra), PMCS paid only about $205M net for the company. "


Third, PMCS and Wintegra" have worked together for years and in many of the design wins you'll find a PMCS and a Wintegra chip sitting side-by-side. "


This means there is a very good integration opportunity for PMCS to put the functions of both chips into a single chip, and by doing so extend competitive advantages and lower costs.


The short story is that in spite of the fact that the company has topped the earnings consensus for six out of the last seven quarters, and equaled it for the" seventh, Wall Street still insists on slapping the stock with a huge risk discount. "


I believe as PMCS maintains this practice of topping Wall Street projections the risk discount will be removed, and with that, the forward price to earnings (valuation multiple) will rise considerably.


Top Stock Picks For 2012: PowerShares DB Agriculture ETF

by Gene Inger, editor The Inger Letter


One of the easiest ways to participate in the long-term demand for corn, wheat, cotton etc. is with a soft commodity-based exchange traded fund.


We recommend the PowerShares DB Agriculture ETF (DBA), our top pick for 2011. We believe the economy is entering a period of 'hyper-stag?ation', where prices for life's necessities -- such as gasoline, food and utility rates -- will rise persistently over time.


The owerShares DB Agriculture ETF -- soft commodity-oriented exchange traded fund -- is one of the easiest ways to participate in the long-term demand for corn, wheat, cotton etc. is


This ETF has shown fairly steady progression over time. Given steady in?ation in food costs, soft commodities are likely to rise, with periodic bouts of selling and volatility. We think an investment retained over time in 'soft commodities', is relatively low risk contrasted to volatility in markets such as Oil, or the extended Gold market for now. Why? With Asian demand bound to increase over time, soft-commodity demand will too.


Nevertheless we caution investors against chasing strength; rather, one strategy to avoid timing is to scale into one's position over time. If you scale-in, you get benefits of ensuing pullbacks while holding an initial stake.



Top Stock Picks For 2012: Canadian Oil Sands Trust

by David Dittman, contributing editor Canadian Edge


Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.


And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.


New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.


Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.


At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.



Top Stock Picks For 2012: Catlin Group

by Vivian Lewis, editor Global Investing


Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.


It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.


It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.


It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..


It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.


It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.


Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.


It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.


Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.


Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)


"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.


BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.


What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.


Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.


And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.


If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.


Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).


Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.


Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.




Top Stock Picks For 2012: Aflac

by Richard Moroney, editor Dow Theory Forecasts


Aflac (AFL) represents a top year-ahead pick based on its solid operating momentum and modest valuation. In our proprietary ranking system (known as Quadrix), the stock earns an Overall score of 99. At 10 times trailing earnings, the shares trade 33% below the five-year average P/E ratio of 15.


The insurer's sales rose 13% in the first nine months of this year, while free cash how rose 12%. At 10 times trailing earnings, shares trade 32% below the three-year average P/E ratio. Arac continues to grow in Japan (about 75% of sales), but growth in the U.S. (roughly 25%) has been tougher to find.


Management remains cautious about its U.S. outlook, but it should benefit as small companies, which make up a large portion of the domestic business, begin to hire again. A?ac -- yielding 2.2% -- is a Focus List Buy and a holding on our Long-Term Buy list.


Top Stock Picks For 2012: Allot Communications

by Ian Wyatt, editor Small Cap Investor PRO


The smartphone revolution -- with web-browsing, video-watching, music-streaming mobile devices -- has made bandwidth a scarce resource.


That's where Allot Communications (ALLT) comes in. Allot is an Israeli company that develops deep packet inspection (DPI) technology specifically designed to manage bandwidth use Consumers want phones that let them listen to music, surf the web, watch video, and access a wide array of applications. Maybe even occasionally make a call or two. Allot's solutions are critical for Internet Service Providers (ISP), cable companies, landline operators, mobile phone companies, businesses and governments.


The company has consistently grown overseas in Europe, Asia, and South America. The U.S. still represents a huge growth market, if and when regulations permit carriers to implement Allot's technology. Allot's third quarter was a good one. The company increased revenue by 36 percent to $14.7 million year-over-year.


Quarter-over-quarter revenue also increased, by 8 percent, marking the sixth consecutive quarter of sequential revenue growth. On a GAAP basis, Allot earned $0.03 per share, a nice improvement over a $0.10 loss in the third quarter of 2009.


But what I really like here is that the company ended the quarter with $56.2 million in cash and essentially zero debt. Allot is a play on the future growth of smartphones, and the near certainty that service providers will segment bandwidth in order to design service plans tailored to customer behavior.


What's more, this tiny company is a potential takeout candidate and management has shown an ability to orchestrate acquisitions in the past.



Top Stock Picks For 2012: Cisco Systems

by Lou Basenese, editor White Cap Research


One a theme that hasn't worked in, well, forever - large cap technology stocks; many large cap tech are trading at historically low valuations.


As a contrarian, I'm picking the most contrarian large cap technology stock out there: Cisco Systems (CSCO), which could be a top-performer in 2011. Cisco also happens to be one of the cheapest of the large cap tech stocks.


I'm well aware the network equipment maker isn't exactly enjoying halcyon days. After all, when the company reported third quarter results, it lowered guidance. And investors dumped the stock en masse. Shares fell 16% in a single day. Mind you, that's a colossal move for a $100 billion market cap company.


Here's the thing - the shares are dirt cheap, trading at almost a 40% discount to their historical price-to-earnings ratio. In fact, at 14 times earnings, Cisco's the cheapest it's been in over a decade.


Not only that, it remains the dominant player in the space. Its Ethernet switches, which move data along local networks, control 70% of the market.


Meanwhile, its closest competitor only boasts a 10% market share. Cisco's routers, which move data across long distances, also enjoy similar market share advantages. I'm sorry, folks. Internet tra#c is only headed in one direction. Straight up By as much as 50% per year, according to some estimates.


And such a steady increase all but guarantees steady demand for Cisco's products. Especially since switching costs in the industry are high. In short, this dominant market leader, which expects to grow earnings up to 15% per year, is just too darn cheap.


While most investors fear buying stocks bouncing around their 52-week lows, don't fear this one. A historically low valuation, $39 billion cash pile and a newly announced $10 billion worth of stock repurchases provide ample downside protection.