Back in December,
launched a feature in called
10 Best Stocks for 2012,in which experts picked a buy-and-hold investment they thought would deliver market-beating returns over the next 12 months.
After
three months, things are looking pretty good. Eight of the picks ended
the first quarter in the black, six topped the Dow Jones’ 8% returns and
half were able to trump the 12% gains enjoyed by the S&P’s 500 —
the index’s best performance since 1998!
Still, while most of the
list is coming up roses, one stock that enjoyed modest gains midway
through the first quarter has slipped to last place with double-digit
losses.
With that in mind, let’s take a look at how these 10 stocks have held up at the quarter-way point. Here’s a recap of
10 Best Stocks for 2012:
The 10 Best Stocks for 2012 - No. 10: Arcos Dorados
Return as of 3/30: -11.9%
Investor: Josh Brown
Arcos Dorados (NYSE:ARCO) — as its Spanish-translated “Golden Arches” name would suggest — is the largest
McDonald’s (NYSE:MCD) franchisee in the world and operates primarily in Latin America.
As Josh Brown wrote in his original ARCO stock recommendation, Arcos Dorados is a play on four key themes:
- Expanding consumer spending in Latin America
- The ferocity of McDonald’s as a global brand
- Growth within a defensive sector
- The comeback potential for emerging-market equities in 2012
Arcos Dorados has completely missed the bus on emerging-markets stocks, as seen by the
iShares MSCI Emerging Markets Index ETF‘s
(NYSE:EEM) 15% year-to-date gains. The company was hurt by a
disappointing earnings report in late February. Arcos Dorados’s
fourth-quarter earnings of 22 cents per share and full-year earnings of
54 cents per share fell shy of analyst expectations of 26 cents and 58
cents, respectively, though both were improvements year-over-year.
At the March 30 closing of $18.09, ARCO is trading about 15% below its 2011 IPO.
The 10 Best Stocks for 2012 - No. 9: Hershey
Return as of 3/30: -0.7%
Investor: Jon Markman
Hershey
(NYSE:HSY) managed to climb out of the doghouse but still is slightly
down on the year. However, Jon Markman remains confident about the
company’s prospects for the rest of the year, especially considering
Hershey’s stability.
Ironically, stability was far from the norm
for HSY shares during the first quarter, with a great deal of volatility
coming in late February and early March.
And Hershey’s perceived
stability proved less boon and more blight, as investors actually
shunned defensive stocks like utilities and other dividend-payers in
search for growth during the quarter.
Still, fourth-quarter earnings were a bright spot, which Markman pointed out early last month:
“The
firm went 4-for-4, increasing earnings and revenues, and lifting both
the dividend and 2012 guidance. Plus, Hershey’s focus on expanding
international sales paid off, as it reported 25% growth in its top
targeted markets: Mexico, China, Brazil and India.”
Markman
also points out that while Hershey might look like a steady Eddie, it
has some growth to brag about: namely, average earnings growth of 26.4%
over the past three years!
All in all, Hershey could look plenty attractive to investors should the charging bull market finally lose its legs.
The 10 Best Stocks for 2012 - No. 8: Banco Santander
Return as of 3/30: +2%
Investor: Jim Jubak
After running the stock up to double-digit gains in the first couple months of 2012, European bank
Banco Santander (NYSE:STD) finally slowed down and finished Q1 with just 2% gains.
While
the Greek debt debacle reached at least some sort of resolution, and
while European stocks have enjoyed a bit of a rally this year, Spanish
stocks of late have taken a drubbing amid that country’s own fiscal
difficulties.
Banco Santander in particular could have
difficulties this year as the bank continues to shore up property assets
and sets aside provisional money to meet regulators’ capital ratio
requirements. Still, it has proven able to unload some of its bad
assets, reporting recently that it had sold about 1.5 billion euros’
worth of bad loans to a number of American investment companies.
Banco
Santander at least could see some interest as a bargain play, with its
sub-$8 pricing around three-year lows. And while on a shaky precipice,
it has a banner dividend yield of about 11%. But again, if trouble
continues to shake Spain or the rest of Europe, STD could have more
tough goings ahead.
The 10 Best Stocks for 2012 - No. 7: Turkcell
Return as of 3/30: +7%
Investor: Charles Sizemore
Charles Sizemore, editor of the
Sizemore Investment Letter,
has watched his investment slip to No. 6 since the mid-quarter update,
though his Best Stock for 2012 — Turkish telecom company
Turkcell (NYSE:TKC) — still is up a respectable 7%.
Sizemore
continues to tout Turkcell’s strong positioning to profit from the
growth of emerging markets, as well as TKC’s reasonable valuation.
Turkcell had a mixed bag in its most recent earnings report:
“Revenues
grew 4% in what was a very difficult year for Turkey and emerging
markets in general, and Turkcell’s subscriber base grew by 1.1 million
to 34.5 million. The company expects 2012 revenues to grow by more than
double 2011’s rate, driven by the increased popularity of data and
mobile Internet plans.
Earnings took a hit, however, falling 33% due to a currency crisis in Belarus, where Turkcell has significant assets.”
Another
interesting piece of potential for Turkcell is a return to a dividend.
The company is embroiled in a power struggle, and through the ordeal,
never made its expected payout. However, a settling of this dispute
likely would result in the dividend going back to normal — which could
feed a renewed gush of investor interest.
The 10 Best Stocks for 2012 - No. 5: FedEx
Return as of 3/30: +10%
Investor: Paul R. La Monica
Paul
R. La Monica, who writes CNNMoney’s daily “The Buzz” column, isn’t
letting go of the patient tack he took in picking shipping giant
FedEx (NYSE:FDX).
The
title of his latest article, “FedEx: Slow and Steady Will Win the Race”
says it all. The company’s 10%-plus returns year-to-date have been
better than La Monica expected — and that’s despite a quick decline
following poor earnings guidance.
His reasons to select
FedEx
(NYSE:FDX) for our little contest: A low-risk investment with the
ability to profit from organic growth if and when a recovery takes shape
in 2012. And while things so far have looked good for the economy, La
Monica is being a realist.
“… anyone holding onto the
naïve hope that we are in for one of those V-shaped, hockey-stick or
whatever other kind of shape recovery that involves GDP growing at — to
quote Dark Helmet in Spaceballs — ‘ludicrous speed’ is deluding themselves.”
He still holds that the company is a bargain, and that the
UPS‘s
(NYSE:UPS) acquisition of European carrier TNT Express might actually
be good for FedEx by helping boost the industry’s pricing power.
The 10 Best Stocks for 2012 - No. 5: Alcoa
Return as of 3/30: +15.8%
Investor: Jeff Reeves
InvestorPlace Editor Jeff Reeves’ pick for the Best Stocks for 2012 contest is
Alcoa (NYSE:AA), and it hasn’t disappointed during the first quarter, outpacing the S&P 500 with 18% returns year-to-date.
His
original argument for Alcoa was a good valuation — the company already
had flopped dramatically from pre-recession levels and streamlined its
way back to profitability — and that because aluminum has a certain
baseline demand built in, there was no room to go but up.
And up
it went. Alcoa’s quarterly earnings report was a bit of a mixed bag, but
revenues of $5.99 billion were up from the year-ago period and beat
analyst expectations. However, since its breakneck gains in January,
Alcoa stock has mostly listed while the markets continued climbing
higher.
Fears of a Chinese economic slowdown have at least had
some investors slow to fully embrace an Alcoa comeback. Still, Alcoa
projects 7% growth in aluminum demand, thanks to cutbacks in production,
which should help prices — and ultimately, AA stock.
The 10 Best Stocks for 2012 - No. 4: Caterpillar
Return as of 3/30: +17.6%
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.
Caterpillar’s earnings earlier in the quarter
were favorable, with increased global demand bolstering profit up 60% on
record sales. The 2011 increases in both sales and revenues were the
largest percentage increase in any year since 1947.
The good news
continued. In March, Caterpillar said its order backlog hit record
levels during the quarter, which bodes well for future performance. It
also affirmed its fiscal 2012 outlook for earnings of about $9.25 a
share on revenue of $68 billion to $72 billion.
Burrows also sees
promise in a note by Zacks Equity Research, which looks for continued
expansion of Caterpillar’s mining acquisitions.
The 10 Best Stocks for 2012 - No. 3: Microsoft
Return as of 3/30: +24.3%
Investor: James Altucher
Two times might the charm for James Altucher’s pick of
Microsoft (NASDAQ:MSFT), which he picked for our 2011 contest, then felt just as confident in 52 weeks later.
If
the first quarter is any indication, he’ll have plenty more to
celebrate than 2011′s 7% losses for MFST. Microsoft, up 25%, was the
third-best-performing Dow Jones stock this year, behind
JPMorgan Chase (NYSE:JPM) and
Bank of America (NYSE:BAC).
One
of James’ original reasons for liking Microsoft — its valuation — is a
bit plumper, thanks to the run-up. But the company’s stock buybacks
remain in play, and MSFT still is sitting on a big pile of cash.
Meanwhile,
Microsoft is seeing continued success with its Xbox 360 console and the
expanding possibilities of its Kinect motion sensor. The company also
has plenty of potential in the video conferencing and VoIP company Skype
— and it’s now testing Skype Beta on smartphones using the Windows 7.5
operating system, also known as “Mango.”
Microsoft might have
difficulties should it and the rest of the tech sector cool off after
its red-hot first quarter, but the long-term attractiveness of its 2.5%
dividend yield should help keep at least a few investors interested.
The 10 Best Stocks for 2012 - No. 2: Capital One
Current Return: +32%
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.
As
we all know, financials did in fact soar. Indeed, they represented the
top-performing sector in Q1 2012, up more than 20% — partially helped
along by the results of the Fed’s financial “stress tests,” which led a
host of banks and other firms to boost their dividends. As mentioned
before, JPMorgan and Bank of America led the Dow Jones with 38% and 72%
gains. Capital One was no slouch, either, notching 32% gains in the
quarter!
Also in past months, Capital One finished its acquisition of
ING Groep‘s
(NYSE:ING) ING Direct business in the U.S., and it also announced it
would make a public offering of $1.25 billion in common stock to help
fund its purchase of HSBC’s American credit card business.
The
risks to financials remain the same — the sector is beginning to look
somewhat overbought, and the crises in Europe and foreclosure issues at
home are far from solved. But so far, COF has provided plenty of
padding.
The 10 Best Stocks for 2012 - No. 1: MAKO Surgical
Current Return: +46%
Investor: David Gardner
Little-known
MAKO Surgical
(NASDAQ:MAKO) continues to be the darling for our Best Stocks for 2012
buy list. The last time we checked in, in mid-February, MAKO had gained
46%. A few weeks later, and those returns have jumped to an astounding
67.2% — in just three months!
MAKO — a niche medical company
banking on a narrow product line — is unlike most of the other stocks in
the buy list, which are broad-based plays on an economic recovery.
Still, Motley Fool co-founder David Gardner is looking the genius, with
his belief in the company’s MAKOplasty procedure which resurfaces joints
using custom implants and a surgical robot called the RIO.
Yes, a
small-cap medical device company usually makes for a highly speculative
play. But MAKO could have a game-changing product in its arsenal — and
best of all, it’s playing into the growing group of baby boomers needing
increased medical care as they age.
With the stock on pace to more than double, MAKO looks like the right place to be.
