Barron's Gives Top 10 Picks for 2012, But Don't Rush In Yet...

December 12, 2011 1:35 PM EST
Barron's issued it's top 10 stock picks for 2012 over the weekend, all not unfamiliar to the armchair investor. Notably, all but one pay a dividend to investors, making them even more attractive heading into next year.

But investor beware: Barron's picks for 2011 lost an average of 6.9 percent, compared with a 1.9 percent drop in the S&P 500. Those picks and performance to-date included:
  • ExxonMobil (NYSE: XOM), up 8.9 percent;
  • United Continental (NYSE: UAL), down 17.9 percent;
  • JPMorgan (NYSE: JPM), down 23.7 percent;
  • Barrick Gold (NYSE: ABX), down 5.7 percent;
  • Wal-Mart (NYSE: WMT), up 7.2 percent;
  • Cisco Systems (Nasdaq: CSCO), down 8.2 percent;
  • Pfizer (NYSE: PFE), up 15.4 percent;
  • General Motors (NYSE: GM), down 43.0 percent;
  • Entergy (NYSE: ETR), down just 0.3 percent; and
  • PepsiCo (NYSE: PEP), off about 1.2 percent.
While Barron's said JPMorgan, GM, and United were the largest components for the decline, the publication only picked three stocks out of 10 which had a positive year.

Here's the 2012 list from Barron's:
  • Berkshire Hathaway Inc. (NYSE: BRK-A)(NYSE: BRK-B) - Cites exposure to an improving economy. With an estimate for the Class A shares to trade for a modest 1.2x earnings, the stock should move to $135,000. The chief negative here is CEO Warren Buffett's age -- 81 years old -- but Buffett has stated he will run the company until he is literally unable. Barron's gives that about five years.

  • MetLife (NYSE: MET) - Cites earnings and book value on the pick. Shares are going for just 7x next year's earnings, and is only at 66 percent of book value estimates calling for $49 per share at the end of 2011. A recent analyst meeting affirmed expectations, with management saying it had excess capital and is looking to build more next year.

  • Sanofi-Aventis (NYSE: SNY) - This company should survive better than peers in 2012. Here's the quote du jour: "It could generate some of the best growth among its peers starting in 2013." So 2012 is the new 2013.

  • Seagate Technology (Nasdaq: STX) - Likes prospects following Thai floods which are wiping out hard disk drive suppliers. Additionally, Barron's is predicting the event will whittle players in the HDD market to just 3: Seagate, Western Digital (NYSE: WDX), and Toshiba. The lower number will provide better pricing power. Bears on the stock say solid state drives will continue to replace HDDs, but Barron's thinks rapidly expanding Internet and cost will play in HDDs favor.

  • Vodafone (NYSE: VOD) - The company is a discount to U.S. rivals at just 10x expected earnings for its current fiscal year, compared with 15x for Verizon (NYSE: VZ). Barron's also thinks investors haven't given Vodafone credit for its 45 percent stake in Verizon Wireless worth about $75 billion.

  • Royal Dutch Shell (NYSE: RDS-A) - Liked Exxxon again, but Royal Dutch has a decent 4.7 percent dividend yield. All else being equal, Barron's is opting for Royal Dutch Shell heading into 2012.

  • Freeport McMoRan (NYSE: FCX) - Recent copper prices suggest Freeport is undervalued, and a 36 percent dip in the stock might make it an acquisition target by BHP Billiton (NYSE: BHP) or a larger Chinese company.

  • Comcast (Nasdaq: CMCSA) - Likes Comcast's prospects in the Internet arena, and NBC-Universal is an appealing turn-around story.

  • Proctor & Gamble (NYSE: PG). It's multiple brands make it a low-risk play to capture growth in developing countries. Dividends and buybacks automatically return about 7 percent to shareholders, and should to the same in 2012.

  • Daimler (OTCBB: DDAIF) - Despite shares dipping from a high of $79 in the spring to $45 now, Barron's says Daimler has a strong balance sheet and demand for Mercedes-Benz is returning, particularly in China.

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