Hot Stocks For 2012: Alcoa(AA_)
Let's start off with a bang. With just a $14 billion market cap -- and being the leading independent producer of a metal that will be in intense demand in 2012 because of boosted aerospace, autos and power plant production -- Alcoa will be hard-pressed to stay independent. Earnings have been depressed throughout the downturn, but the cash flow has picked up, courtesy the excellent stewardship of CEO Klaus Kleinfeld. If the company stands alone its stock can advance and get a 12 multiple, a slight discount to many of the cyclical stocks in the average, and that would put it at $18. But I think it gets bought out at $22, a fabulous return and perhaps my favorite in the whole average.Hot Stocks For 2012: Bank of America(BAC_)
The bank will settle the mortgage putback claims, put a lot of its bad mortgage loans behind it and have an assertive Merrill Lynch to boost its earnings. I think that this company, which trades basically at its cash value, will have a terrific year, especially because CEO Brian Moynihan should be growing into his role and become more of a spokesperson that can help this riddled brand. The integration of the three companies, original Bank of America - itself a pastiche of many banks including Nations and Fleet, where Moynihan's from -- Countrywide and Merrill Lynch will finally be consummated in 2012. Glorious. Don't forget that despite all of the turmoil, Bank of America now has an unheard-of 20%-plus market share in the nation's mortgage market, and I think that market will come alive as the housing shortage of 2012, another of my predictions, comes about. I see this stock trading at $18, where it stood not that long ago, a terrific gain.
Hot Stocks For 2012: MEMC Electronic Materials(WFR)
MEMC Electronic Materials(WFR) makes polysilicon and wafers for the solar energy and semiconductor industries.Barclays believes that it will gain market share in the semi space in 2012 and its movement to bring wafering in-house will accelerate vertical integration in the solar business and boost margins going forward. With declining average-selling-prices and costs for wafers in 2012, earnings remain variable.
Still, the stock trades at nine-times Barclays' 2012 earnings forecast, a significant historical discount. In years past, its trading range has been 12 to 27 times Barclays' EPS estimate, so major upside is possible.
Hot Stocks For 2012: TCF Financial(TCB)
TCF Financial(TCB) is a Midwest bank with retail and wholesale banking businesses.Barclays notes that its seven-day branch operations and outstanding deposit base afford it a "best-in-class net interest margin." It has a strong leasing and equipment finance lease division, which will grow lending in 2012. Regulatory hurdles, including lower service fees stemming from the Dodd-Frank Act, present a potential headwind, which could damage its debit card fees anywhere from 20% to 80%.
Still, TCF is an exceptionally well-run bank, with 62 quarters of consecutive profitability and higher-than-average capital ratios. Barclays projects a $22 share price, suggesting 51% of upside in 12 months.
Hot Stocks For 2012: JPMorgan Chase(JPM)
The dividend's going to be boosted, the buyback enlarged, the earnings power revealed, the shroud gone. JPM's still the best-run bank in America, if not the world and CEO Jamie Dimon is one of our greatest bankers. The company really did come through this period relatively unscathed and with a better branch network, courtesy the dirt cheap price of Washington Mutual. This company's stock has done nothing, literally nothing, year over year. Unchanged! That won't be the case in 2012. I see it going to $50 propelled by earnings power and the dividend hikes. It will be the preeminent financial to own and become a staple of many a mutual fund's portfolio. Call it $50.Hot Stocks For 2012: 3M(MMM)
The disappointing analyst meeting and the negative previous quarter haunt this stock going into 2012. But if you are like me and believe there will be worldwide growth, you would be nuts not to consider buying this 13% grower for just 15 times earnings. 3M's got so much going for it in Asia and has so many new businesses--it remains the most potent inventor of new products among the major companies I follow--that I think it will drift back up to its 52 week high of $91 if not higher. Perhaps $100, which I think is my stretch goal given its $6.16 in composite EPS estimates. Why $100? I think the dollar gets weaker and this is one of the most sensitive companies to the greenback which means that $6.16 could be too low. Cheap stock that's in the penalty box because of the ever so slight shade down of earnings, a shade down that, when I analyze the company, is something that will be left behind in 2012.Hot Stocks For 2012: Vale(VALE)
Vale(VALE) is a metals and mining company and a producer of iron ore and iron ore pellets.Barclays views the stock as the "best vehicle in Latin America to gain exposure to a potential five-year iron ore super cycle." A favorable iron-ore pricing environment will boost the stock, which is expected as Chinese consumption continues to grow.
Vale is a lowest-cost producer, so growth translates favorably to the bottom-line tally. Further, Barclays believes that Vale offers superior product quality, with a high iron to low gangue proportion, and has outstanding "long-reserve-life assets."
It views the consensus price scenario for iron as too bearish and the supply scenario as too optimistic.
Hot Stocks For 2012: Invesco(IVZ)
Invesco(IVZ) is an asset-management company, which Barclays believes is best positioned to profit from a transition out of fixed-income vehicles and into riskier asset classes in 2012, as Invesco's asset base is nearly 50% in equities or equity-related assets.Barclays sees the operating margin rising from the mid-thirty-percent range to just beneath 40% if it can leverage its retail products into the institutional space and expand its asset base. Barclays' target suggests a potential 35% return in the next 12 months.
Other researchers are also bullish. Of those covering the stock, 65%, comprising Goldman Sachs, Credit Suisse and JPMorgan advise purchasing Invesco
