3 Buys to Escape the Agony of Low Treasury Yields

Will marvels never cease? France, Germany and Japan are in recession. China is slowing abruptly. But the good ol’ USA is trucking along just fine. With initial jobless claims hitting their lowest reading in nearly four years, the Dow jumped 123 points on Thursday for its best close since May 19, 2008. It then added another 47 points on Friday to seal that best close since 2008.
For the sake of America’s 13.5 million unemployed, I’m happy to see the definite signs of strengthening in the job market. The private sector is adapting, in amazing ways, to the tough economic climate we’ve been in. Entrepreneurs are overcoming a host of obstacles (including some thrown up by our own government), and businesses are hiring again.
Kudos to them!
As investors, our challenge is to figure out how much to pay for this somewhat improved state of affairs. It would be a lot easier to know what stocks are really worth if the Federal Reserve allowed interest rates to seek a normal level.
Instead, we’re left to compare stock P/Es and dividend yields against artificially depressed bond and money market yields. Maybe equities, on the whole, are fairly valued. If, however, Bernanke’s “quantitative easing” has created the economic equivalent of a sugar high, many stocks — particularly in the market’s riskier sectors — could be quite seriously overvalued at today’s prices.
How do you protect yourself from making a major miscalculation? First, of course, by maintaining a balanced portfolio, with an ample fixed-income component. A fund like DoubleLine Total Return Bond (MUTF:DLTNX) can help you escape the agony of extremely low Treasury yields, while giving you a cushion should the stock market stumble.
Current yield: 7.87%
In the stock market itself, you should focus your buying on the very few situations that still offer great value — even after the monster rally of the past four-plus months.
I include PepsiCo (NYSE:PEP) in that select list. Over the long haul, the company’s latest organizational shake-up, with $600 million to be spent on North American marketing this year, should pay handsome dividends (literally).  Meanwhile, you’re collecting a safe 3.3% dividend.
For income seekers, I’m also finding renewed value in Buckeye Partners (NYSE:BPL). Some analysts and investors panicked after the pipeline partnership reported lackluster Q4 earnings last Friday.
However, BPL went through a similar earnings slowdown in 2006, when the partnership was financing another hefty expansion program like today’s.
Back then, Buckeye’s investments paid off. Not only did the partnership keep its distribution intact but it also continued to raise its cash payout — and has now done so, without fail, for 31 quarters in a row. Current yield: 6.9%, largely tax-deferred. Please note that because BPL went ex-dividend yesterday, your first cash distribution will arrive in late May. It’s also important to note special tax rules applicable to master limited partnerships make Buckeye unsuitable for retirement accounts

Ranking the 10 Best Stocks to buy for 2012

InvestorPlace.com launched a feature in late December highlighting the 10 Best Stocks for 2012. The idea was to offer a list of buy-and-hold investments that, if held all year, would provide market-beating returns for individual investors.
It’s awfully early in our little contest, but so far the 10 Best Stocks for 2012 list has simply blown away the broader market. Thus far, the Dow is up about 6% and the S&P is up about 8% year-to-date. Our 10 stocks average a stunning 17% gain!
What’s more, nine of the 10 stocks are in the green — and eight of 10 are up by double digits!
Obviously there’s a lot of time left in 2012, and a lot of things can happen. But it’s worth pointing out the big winners so far.
Here’s a recap of InvestorPlace.com’s 10 Best Stocks for 2012:

the 10 Best Stocks for 2012 No. 10: Hershey

Current Return: -2%
Investor
: Jon Markman
The lone decliner on the list of 10 Best stocks, don’t count Hershey (NYSE:HSY) out just yet. Jon Markman’s original recommendation of the confectioner pointed out a rather bearish outlook for the broader market in 2012, and strength in Hershey based on its low-risk potential.
“Hershey is a best-of-breed operator that deserves and gets a premium valuation. Even in a tough environment, it could appreciate by 10% or more,” Jon wrote.
The trouble is that after a 31% run in 2011, as investors took shelter in Hershey’s low-risk appeal and decent dividend, Wall Street now is looking for growth. Defensive plays like consumer staples and utilities stocks have lagged the market so far.
But if things get rocky, the low-risk appeal could cause this top stock to rise in a hurry.

the 10 Best Stocks for 2012 No. 9: Arcos Dorados

Current Return: +6%
Investor
: Josh Brown
Arcos Dorados (NYSE:ARCO) is Spanish for “Golden Arches” and operates one of the largest McDonald’s franchisees in the world — focused mainly on Latin America. As Josh Brown wrote in his original ARCO stock recommendation, Arcos Dorados is a play on four key themes:
  1. Expanding consumer spending in Latin America
  2. The ferocity of McDonald’s as a global brand
  3. Growth within a defensive sector
  4. The comeback potential for emerging-market equities in 2012
Arcos Dorados continues to hit all the right notes on those four original points. Unfortunately, ARCO is lagging some other emerging-market stocks — consider that the iShares MSCI Emerging Markets Index ETF (NYSE:EEM) is up 15% year-to-date gain — but still is riding the upward trend.
And as Josh wrote in a recent Arcos Dorados stock update, the company reports Q4 earnings on Feb. 22. That will be the real litmus test for how this company is growing after its 2011 IPO.

the 10 Best Stocks for 2012 No. 8: Banco Santander

Current Return: +11%
Investor:
Jim Jubak
Jim Jubak summed it up nicely in the headline of his initial recommendation, “A European Bank Is Your Best Buy for 2012 … Really!” That European bank was Banco Santander (NYSE:STD), a Spanish financial stock at the heart of the eurozone meltdown.
So far, though, Jim has been right on with his assessment that the worst is past and STD stock has strong upside. He wrote in his original recommendation, “I think Banco Santander’s price has been a victim to standard investor behavior: In a panic, the motto is ‘Sell everything and sort it out later.’”
Bargain hunters have been rewarded with a double-digit gainer so far in 2012. And if the eurozone nonsense continues to move toward some resolution of Greek debt, there could be bigger gains ahead.
Of course, if there’s a default, it could be trouble too. As Jim points out, the panic mentality isn’t rational. Every European stock, even STD, could suffer in the event of a Greek default.

the 10 Best Stocks for 2012 No. 7: FedEx

Current Return: +14%
Investor
: Paul R. La Monica
Paul R. La Monica, the brains behind CNNMoney’s daily “The Buzz” column and a prolific tweeter at @LaMonicaBuzz, is not one to let the market’s hourly antics pass him by. But for our InvestorPlace.com feature, the CNNMoney assistant managing editor made a pick with a much longer time frame behind it — and it has turned out nicely.
His reasons to select FedEx (NYSE:FDX) for our little contest: A low-risk investment with the ability to profit for organic growth if and when a recovery takes shape in 2012.
“Don’t get me wrong. I don’t think the economy is going to surge in 2012,” Paul wrote in his original FedEx post. But I don’t think it’s going to pull a Tom Petty and freefall out into nothing, either.”
So far, the bull market of the first several weeks this year have really lifted stocks — and FedEx has outperformed nicely thanks to investor optimism. The real question is whether FDX will continue to rev up in 2012 or if it will downshift if the economy hits a snag later this year.

the 10 Best Stocks for 2012 No. 6: Turkcell

Current Return: +15%
Investor
: Charles Sizemore
Charles Sizemore, editor of the Sizemore Investment Letter, is a firm believer in emerging markets as part of your portfolio. Last year, Charles picked the Best Stock for 2011 with his recommendation of Visa (NYSE:V) — based in large part on a thesis of strong emerging market growth for the payment processor. And this year, he once again looked to overseas opportunities with Turkcell (NYSE:TKC).
“The best-performing stocks on the (Best Stocks for 2012) list are some of the most cyclical, and I am quite happy to see that,” Charles said in a recent Turkcell update. “It means investor risk appetites are returning. Barring a major blowup coming out of Europe, I expect this to continue, and I recommend investors maintain overweighted positions in the beaten-down markets of Europe and emerging markets.”
In short, TKC was a bargain buy amid the panic and should continue to show strength as the eurozone moves towards some favorable conclusion to the debt crisis.
Of course, like Santander, we could see a backslide in Turkcell stock if things go south for Greece. However, it’s hard to argue with market-doubling returns year-to-date in TKC.

the 10 Best Stocks for 2012 No. 5: Capital One

Current Return: +15%
Investor
: Philip van Doorn
In his initial article, “Capital One: Top Bank Stock Pick for 2012,” TheStreet.com contributor Philip van Doorn makes the case that financials in general aren’t as bad as you think — and certain smaller banks like Capital One (NYSE:COF) are, in fact, ready to soar.
His reasons included “continued strength in earnings and a historically low valuation to forward earnings estimates and book value.” And those reasons continue to hold firm, delivering Philip’s pick impressive year-to-date returns of 17%.
It’s worth noting, too, that the broader financial sector has just been on a tear. Bank of America (NYSE:BAC) is up more than 43% so far in 2012, and Citigroup (NYSE:C) is up more than 25%.
There are real risks of financial stocks overheating, since earnings remain choppy amid persistent eurozone troubles and continued foreclosure problems. But the gains so far leave a very nice cushion in Capital One and other financial stocks.

the 10 Best Stocks for 2012 No. 4: Alcoa

Current Return: +19%
Investor:
Jeff Reeves
My personal pick for the Best Stocks for 2012 lineup is Alcoa (NYSE:AA). My thesis was a simple one — the valuation was great, the company already had flopped dramatically from pre-recession levels and streamlined its way back to profitability, and there really was nothing but upside considering that aluminum has a certain baseline demand built in. If Alcoa wasn’t at the bottom in December, I reasoned, it was pretty darn near the bottom.
That buy was very well timed, with Alcoa soaring 19% so far to start out 2012. Most recently, Alcoa earnings showed a quarterly loss (as expected) but offered encouraging revenue increases. What’s more, aluminum prices remain at rock bottom — and Alcoa has continued to adjust production to ensure supply is as thin as possible. That means there really is nowhere to go but up as demand increases and prices rise.
OK, that’s an oversimplification. A shock in Greece and continued weak demand from the housing and manufacturing sectors could cause aluminum demand to remain at ultra-low levels for years to come. But there are reasons to be cautiously optimistic about the recovery, and bullish on Alcoa after its previous troubles in 2011.
Disclosure: Jeff Reeves owns a personal position in Alcoa stock.

the 10 Best Stocks for 2012 No. 3: Microsoft

Current Return: +21%
Investor
: James Altucher
When making his call for InvestorPlace.com’s 10 Best Stocks for 2011 a year ago, James Altucher picked “A tiny company called Microsoft (NASDAQ:MSFT).” James went back to the well again in 2012 with the same call for this year’s feature.
James picked Microsoft because it has:
  • A forward price-to-earnings ratio of less than 8 (less cash), signaling bargain valuation.
  • A $40 billion stock buyback plan to boost shareholder value.
  • More than $30 billion in cash in the bank at MSFT, and predictable revenue.
That provides great value in the tech stock. But there also was growth potential in the fact that Microsoft could change smartphones forever with Skype. Granted, that’s not something that’s going to happen tomorrow — but if investors get excited about the prospect, it could really prop up this mature technology play.
So far, the value proposition alone has paid off for Microsoft. The stock has rallied nicely with the rest of the tech sector.

No. 2: Caterpillar

Current Return: +26%
Investor
: Dan Burrows
If you’re looking for a broad-based recovery play, it’s hard to get better than Caterpillar (NYSE:CAT). The world’s largest maker of construction and mining equipment has its fingers in a lot of pies, and will benefit nicely from any sustained economic growth.
Judging by recent earnings, Caterpillar looks to be on the way up. The company saw increased global demand that boosted profit 60% in the most recent quarter on record sales.
“The 2011 increase in sales and revenues was the largest percentage increase in any year since 1947, and much of it was driven by demand for Caterpillar products and services outside of the United States,” CEO Doug Oberhelman said in a statement. “As a result, 2011 was a record-breaking year for U.S. exports at nearly $20 billion.”
So have you missed your ride on the CAT? Maybe not. Dan recently wrote a Caterpillar stock update that notes, “the stock trades at very compelling valuations, even at current levels.”
In short, there might be continued growth ahead for Caterpillar in 2012 even after these market-beating gains.

the 10 Best Stocks for 2012 No. 1: MAKO Surgical

Current Return: +46%
Investor
: David Gardner
Interestingly enough, though many of the stocks on our Best Stocks for 2012 buy list include broad-based plays on an economic recovery, the top performer on the entire list is a very niche medical company that is seeing strength on a very narrow product line rather than any overall optimism.
MAKO Surgical (NASDAQ:MAKO) was pitched by Motley Fool co-founder David Gardner, and his original write-up had the headline, “This Innovative Joint Replacement Stock Will Thrive in 2012.” MAKO has a cutting-edge joint replacement technology that helps reduce the amount of recovery time and rehab for patients, and its surgery gear is in high demand.
This is a highly speculative play, of course, since it’s a small-cap medical device company. But based on recent stock performance and momentum behind the company, it appears that MAKO could have a blockbuster technology on its hands that is playing right into the demographic trends of aging baby boomers in need of a higher quality of life in retirement.
Is 46% in less than two months too much too soon? Maybe. But if not, David’s pick could easily prove a doubler in 2012.

Apple: How to Play the Best Stock in 2012

If you’re a long-term investor, there’s a lot to look forward to. the Best Stock in 2012 Apple (NASDAQ:AAPL) is much more than a brand; it’s a lifestyle. People tattoo the company’s iconic symbol on their rear ends, for crying out loud!
Always the innovator, Apple has barely scratched the surface with regard to new devices and has hardly tapped into every way in which to use them. People line up thousands-deep to buy newer versions of the company’s most basic products every year, whether they need them or not. That’s something no other tech company has been out able to do. Plus, Apple’s market share is growing overseas, with a particular emphasis on the Pacific Rim.
In China alone, for instance, there’s the potential for an additional 30 million to 50 million iPhone sales in the next 12 months that could add an additional $4 to $6 in EPS to Apple’s bottom line. I remain convinced that Apple could be the world’s first trillion-dollar company, and I’m not alone in my thinking. Since I first voiced that highly controversial opinion a few years ago, many other firms and analysts have joined me.

How to Play the Short-Term Apple(the Best Stock in 2012) Top

However, in the short term, Apple’s chart looks like a classic blow-off top — and technically speaking, it is. Last Wednesday, we saw the stock close near the lows of the day after a quick runup and a high volume, high-speed failure midday.
The chart tells the story:
Like all charts, though, interpreting this is a matter of perspective. Stocks that have run a long way in a short time often require some “digestion,” or to use a market term, “give back.” And Apple is no exception, particularly when you consider the stock has moved up 44.76% in only three months, from $363.57 to $526.29.
If we contrast the prior chart with a longer-term view, we see Apple is simply accelerating ahead of a major trendline (seen below in red). Not only does this speak to a pullback for the company, which traders have simply pushed ahead of itself on nothing more than euphoria, but it also highlights the next logical value buying point, at $463 for aggressive traders — or roughly 6.96% lower than Wednesday’s blow-off-induced close of $497.67.

Of course, if you are more conservative, you could consider buying Apple at roughly $420 to $430, which is where Apple was trading prior to the most recent earnings announcement that fueled this latest run.

Positioning Your Portfolio in Apple(the Best Stock in 2012) Stock

When might we get there?
Blow-offs like this one typically set intermediate-term highs that last, on average, 90 to 145 days. Not always, but often, even if the stock wants to run higher in the days ahead, a period of lower price digestion is likely ahead. So there’s a little time to play.
Aggressive traders wanting to play the downside could consider put options or shorting the stock until it gets down to the $460-ish ranges, where there is likely to be aggressive buying support. More conservative investors who want to add to existing Apple positions or establish new ones may find that waiting until the price drops to the $420 area makes more sense.
Either way, be prepared for some volatility. Stocks like Apple that become media darlings tend to take on a life of their own before they settle down and then head higher.

2012 Best stocks to buy-5 Stocks Saddled With Debt

Using debt to fund a business’ growth is just fine. But taking on too much debt — and not being able to pay interest on that debt — is a recipe for bankruptcy. A lot of companies got caught with their pants down in the financial crisis by being overleveraged. Some of them still are standing today, but they are the equivalent of a two-legged chair.
Here are some companies so loaded with debt that you should consider shorting them, as bankruptcy is a very real possibility.
2012 Best stocks to buy - MGM Resorts International (NYSE:MGM) is the victim of really bad timing. It took down a ton of debt and built the massive City Center in Las Vegas just as the financial crisis hit — thus, MGM had all these units to sell, and nobody with any money to buy them. The company sits on $13 billion of debt and is losing money every year. So far, MGM has kept creditors at bay, but I wonder how long that can last. This is a long-term short, and I’d set a stop-loss in case some white knight comes to MGM’s rescue.
2012 Best stocks to buy - Thomson Reuters (NYSE:TRI) has a dual problem. First, it carries $6.8 billion in debt. Second, it operates in a slowly dying sector. Fewer and fewer people get their news from wire services and newspapers anymore. It’s all Internet now. Thomson is in danger of becoming the horse and buggy to the Internet’s airplane.
2012 Best stocks to buy - Avis Budget Group (NASDAQ:CAR) might be in for a serious crash. Yes, the company has more than $1 billion in cash, but it’s offset by $2.4 billion in debt. That might not be so bad, except Avis is running free cash flow negative to the tune of $6.5 billion in the trailing 12 months. One thing to be careful of — the rental car companies have been bought and sold a zillion times each, so careful with that short.
I’d also take a good, long look at solar energy stocks. After the Solyndra debacle, it’s pretty clear that alternative energy companies have a tough road. The dirty little secret about solar is that it only pays for itself because of government subsidies. Those won’t last forever. One of them, Evergreen Solar, already is operating under bankruptcy. 2012 Best stocks to buy - LDK Solar (NYSE:LDK) has more than $650 million in debt, and the head of its audit committee resigned last summer – the perfect setup for a short.
And no discussion of shortable stocks with loads of debt is complete without mentioning the airlines. I’ll pick 2012 Best stocks to buy - United Continental (NYSE:UAL) as the next airline to go bankrupt — again — with its $11.8 billion in debt. With oil prices headed higher again, it’s only a matter of time.

10 Best Industrial Stocks Poised to Break Out in 2012

As the broader market rally continues to bring individual stocks near their highs of earlier last summer, the list of potential breakout candidates grows. The energy and technology sectors both have been fertile ground in which to find stocks on the verge of breaking out to new high ground, and now the industrial sector is setting up as a source of opportunity — providing, of course, that the broader market can hold up.
One way to play this is simply to use the Select Sector Industrial SPDR (NYSE:XLI) ETF, which closed Wednesday 5.9% short of its 52-week high of $38.98. But for those who prefer the higher-beta potential of individual stocks, here are a number of names to consider:

10 Best Industrial Stocks Poised to Break Out in 2012 - FedEx


NYSE:FDX
Wednesday’s close: $94.15
Breakout level: $98.66
10 Best Industrial Stocks Poised to Break Out in 2012 - Percent move needed for breakout: 4.8%

This is the fourth time in two years that FDX has entered the $95-$100 range. While a break above $98.66 still would leave the stock well short of its all-time high above $120, set in 2007, note that United Parcel Service (NYSE:UPS) already has moved out to a new high off of a similar formation as FDX. This bodes well for FedEx if the broader market holds up.

10 Best Industrial Stocks Poised to Break Out in 2012 - Canadian National Railway


NYSE:CNI
Wednesday’s close: $77.53
Breakout level: $81.26
Percent move needed for breakout: 4.8%
 Similar to FedEx, a number of CNI’s industry peers have broken out to new highs in recent months, among them Union Pacific (NYSE:UNP), Canadian Pacific Railway (NYSE:CP) and Kansas City Southern (NYSE:KSU).

10 Best Industrial Stocks Poised to Break Out in 2012 - Caterpillar


NYSE:CAT
Wednesday’s close: $112.53
Breakout level: $116.55
Percent move needed for breakout: 3.6%

 10 Best Industrial Stocks Poised to Break Out in 2012 - BorgWarner


NYSE:BWA
Wednesday’s close: $80.58
Breakout level: $82.28
Percent move needed for breakout: 2.1%

10 Best Industrial Stocks Poised to Break Out in 2012 -  Fiserv


Click to EnlargeNASDAQ:FISV
Wednesday’s close: $64.65
Breakout level: $66.06
Percent move needed for breakout: 2.2%

10 Best Industrial Stocks Poised to Break Out in 2012 - Praxair


NYSE:PX
Wednesday’s close: $107.66
Breakout level: $111.74
Percent move needed for breakout: 3.8%

10 Best Industrial Stocks Poised to Break Out in 2012 - Heico


NYSE:HEI
Wednesday’s close: $58.43
Breakout level: $61.97
Percent move needed for breakout: 6.1%

Eagle Materials


NYSE:EXP
Wednesday’s close: $33.27
Breakout level: $33.66
Percent move needed for breakout: 1.2%

Acuity Brands


NYSE:AYI
Wednesday’s close: $59.23
Breakout level: $61.45
Percent move needed for breakout: 3.7%
 10 Best Industrial Stocks Poised to Break Out in 2012 - Crane

NYSE:CR
Wednesday’s close: $49.06
Breakout level: $52.38
Percent move needed for breakout: 6.8%
 While these 10 charts look to be the most compelling, four others also have the potential for a breakout to new highs: Honeywell International (NYSE:HON), which is 5.6% away from breaking out; Ball Corp. (NYSE:BLL), 2.3%; Wabtec (NYSE:WAB), 8.2%; and Carlisle Cos. (NYSE:CSL), 8.1%.