Best Stocks To Buy In 2012

Best Stocks To Buy In 2012#1: Diamond Foods (DMND)

“Diamond Foods (NASDAQ: DMND), a player in nuts and pop corn, is our top pick for 2012,” says Sy Harding. In his The Long & Short Stock Advisor, he explains, “The company seems to have had no problems with the recession or slow economy.

“The firm processes and markets culinary, snack, and in-shell walnuts, pine nuts, pecans, peanuts, macadamia nuts, hazel nuts, cashews, Brazil nuts, and almonds. It sells snack packages under its Diamond, Emerald, and Pop Secret brand names.

“The company seems to have had no problems with the recession or slow economy. Its sales and earnings remain on a fast growth track.

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“In fact, it may well be that the slow economy and high unemployment are a plus for this company, with more people eating at home, watching home movies – and eating snacks.

“The company’s growth is also supported by the growing interest in healthy eating, which includes recommendations from the healthcare industry to include nuts in our daily menus, and to snack on nuts rather than unhealthy fatty-food items.

“In any event, the trend of Diamond’s top and bottom lines are impressive, with gains each of the last four years, in spite of the recession. Value Line estimates earnings in 2012 will be rise another 24% over 2010’s earnings.

“Always positioning for continued growth, the company is working on expanding its distribution network of grocery stores, food processing companies, restaurants, bakeries, and food service companies in over 100 countries. Foreign sales currently account for only 20% of total sales.

“Diamond also continues to introduce add new products to its snack lines, like Cocoa Roasted Almonds, and Sea Salt Cashews, which were added recently.

“At the current price the shares are selling at 18 times estimated 2012 earnings, a relatively low P/E ratio for what appears to be a solid, if small, growth company. Our upside target is $41. We suggest a ‘mental’ protective stop at $25.80.”

Best Stocks To Buy In 2012#2: Dollar Tree (DLTR)

“Discount retailers are in high fashion right now, and 2012 could be a good time to capitalize on the macro-level trend toward value-driven consumption as consumers battle too much debt and a weak labor market,” says Michael Vodicka.

To benefit from this trend, the momentum stock strategist for Zacks.com looks to Dollar Tree(NASDAQ: DLTR) as his top pick for the coming year.

“2010 was a year of surprises. Stocks ended up logging a monumental rally that kicked o? in March, most of the major domestic banks have freed themselves from TARP restrictions and the housing market has shown signs of stability.

“But in spite of all these incredible gains, consumers are still struggling with too much debt and high unemployment. This is the ideal consumer environment for an extreme discounter like Dollar Tree.

“Dollar Tree isn’t a new name, the company’s been around since 1986, has a market cap of $4.26 billion and operates more than 3,600 stores in 48 states.

“It carries a wide range of consumer and household products like paper towels, cleaning goods and beauty supplies, all for less than $1.

“The company’s strategic advantage was on full display in 2010, beating the consensus estimate in each quarter by an average of 11%. Its Q4 results from late November, heading into the holiday season included sales growth of 12% from last year.

“The top line growth goes well with gross and operational margin expansion, both on the upswing due to lower commodity costs and process evaluation.

“Dollar Tree bought back 3.5 million shares in 2010, with $300 million remaining from a $500 million Board approval. The company has been committed to taking advantage of the value-driven consumer environment, opening 94 new stores this year and expanding or relocating another 74.

“But in spite of these moves, Dollar Tree balance sheet still looks strong, with cash and equivalents totaling $342 million against a debt load of $267.5 million, with just $17.6 million current.

“Looking forward, analysts are optimistic about the company’s prospects in 2012, targeting full-year earnings of $3.84 per share. With shares trading at $48, this stock has a forward P/E of just 12.5, a nice discount to the overall market.”

Best Stocks To Buy In 2012#3: Affymetrix

by Nate Pile, editor Nate’s Notes

For a number of reasons, my top stock pick for 2012 is Affymetrix (AFFX). This small company based in Santa Clara, CA, develops, manufactures, sells, and services equipment and consumables used in the life sciences industry to do what is know as “high throughput genetic screening.”

Customers range from academic and research facilities to clinical laboratories to other biotech and pharmaceutical companies doing work that requires them to analyze and manage large amounts of genomic and genetic information. Though A”ymetrix was one of the first companies to get into this business back in 1991, the industry has attracted a number of competitors along the way.

And, while A”ymetrix was once a leader in the industry, it has unfortunately found itself playing catch up to others in the sector for the past several years now. In response to the increased competition, A”ymetrix has seen its stock tumble from $60 back in 2005 (and $160 at the peak of the dot-com bubble in 2000) to its current price of roughly $5 today.

Naturally, this has been frustrating for shareholders and management alike, but the good news is that management seems to be getting the train back on the track. management is making changes that will allow the company to more e”ectively compete in what has become a much tougher operating environment.

Also working in favor of investors buying the stock today is the fact that the company’ s current market cap is $400 million; this compares to $9 billion-plus for Illumina, one of A “ymetrix’s most direct competitors. This suggests that just about all the bad news that can be anticipated for the company has already been factored into the share price.

In fact, from current levels, I believe if the company is merely able to “tread water” for the next twelve months, the stock could still trade back up to the $8-range by the end of the year.

And, if even just a few pieces of the puzzle fall back into place for the company, it would not surprise me at all to see the share price trade up into the low- to mid-teens over the course of 2012. Yes, there is still work to be done before the company will once again be considered a ”best of breed” stock.

Nevertheless on a valuation basis, I consider A”ymetrix to be one of the most attractive opportunities available to investors in the the life sciences arena as we head into the new year. AFFX is a strong buy under $4 and a buy under $6.

Best Stocks To Buy In 2012#4: 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.

Best Stocks To Buy In 2012#5: Computer Sciences

by Sy Harding, editor Street Smart Report

Computer Sciences (CSC) — our top pick for 2012 — is a global leader in providing information technology and related services to commercial accounts and government agencies.

In our view, the wind is likely to be at the company’s back as the economic recovery continues to strengthen over the next two years.

The company specializes in complex IT applications, and its services include operating all or portions of a customer’s technology infrastructure, including systems analysis, applications development, network operations, and data center management. The company weathered the 2007-2009 recession with ease, but experienced sluggish growth in 2010.

However, the future looks brighter again as the company’s ‘qualified new-business folder’ has grown 20% from a year ago, with potential for new government contracts particularly promising.

For example, CSC announced a number of deals in December, including a seven-year agreement with a major insurance company for the use of Computer Sciences’ Wealth Management Accelerator software.

The company also announced a $33 million contract with the Department of Veteran A “airs, and four application management contracts with the Environmental Protection Agency.

Computers Sciences was also honored in December as ’2010 Enterprise Cloud Leader’ at the 2010 Cloud Expo in California for its leadership in guiding customers in the implementation of ‘cloud-computing’. The shares are selling at just 8.6 times estimated 2012 earnings, and at about one times book value. We have a 12-month upside target of 60.

Best Stocks To Buy In 2012#6: CPFL Energia

by Neil George, editor The Pay Me Strategy

To find strong dividend paying stocks, we apply two primary tests. One stock that passes both of these tests — and ranks our as top investment idea for the coming year — is CPFL Energia (CPL), one of Brazil’s major power utilities. I focus on stocks that will grow your retirement wealth during good times and bad. And one of the crucial means of making this happen is to adhere to a few major tenets when it comes to picking stocks for your own retirement portfolio.

This includes focusing on stocks oering solid, high-paying dividends. And if they can be found in rising markets with rising currencies – so much the better for the long haul. I look to find stocks that are in sustainable industries and then put them through our stress tests. Stress test number one is to focus on a company’s income statement and look at what happens when the worst hits its market. If the cash keeps coming to service its dividends – then it’s passed the first test.

Second, we focus on the balance sheet. This is where you look at the debt and what needs to happen to keep that debt serviced and rolled over.

The interesting thing about many stocks in emerging markets is that they tend to have less debt than their peers in the so-called major markets.

CPFL Energia, which is based in the financial capital city of San Paulo, keeps pumping out the cash..

The stock pays a dividend of over 8 percent – which has been climbing by over 27 percent over the past five years alone. And for those same past five years – just as markets in the US, Europe and Japan have imploded – CPFL Energia has delivered returns each and every year averaging over 27 percent.

Best Stocks To Buy In 2012#7: Keegan Resources (KGN): Brien Lundin

“Gold will be the primary beneficiary of the massive bailout and stimulus plans enacted by not only the United States, but every industrialized nation across the globe,” forecasts Brien Lundin.

The mining stock specialist and editor of The Gold Newsletter looks to a small gold exploration and development company as his top pick for 2012: Keegan Resources (ASE: KGN).

“Because of the deflationary influences of higher productivity, moribund economic growth and cheap labor in developing nations, we won’t see the kind of price inflation that characterized the 1970s.

“But we will see galloping monetary inflation — or much more currency in circulation — and the result will be higher prices for assets such as commodities and equities.

“So if gold is going to lead the pack, what’s the best gold investment? In my opinion, smaller gold exploration and development companies will o?er valuable leverage to gold, and one of the best is Keegan Resources.

“Keegan controls the Esaase gold project, a major mine-in-the-making located in the investor-friendly nation of Ghana, in west Africa.

“The company has made quick work of the project, going from field exploration to drilling to resource definition and pre-feasibility studies in a span of just three years.

“Now, Keegan finds itself sitting on top of a near-surface, open-pittable deposit that contains 3.47 million ounces of gold according to the most recent resource estimate.

“As impressive as that total is, it has the potential to grow significantly larger. The outlined resource remains open both along trend and at depth, and it lies within a country that hosts some of the world’s largest gold deposits.

“Whether Keegan can unearth a resource of similar size at Esaase remains to be seen, but most analysts feel the next resource estimate will show the total gold holdings to have increased to at least five million ounces.

“And with the company tying up new ground along trend, there’s literally no telling how large this find could grow.

“Frankly, I don’t expect Keegan to develop Esaase into a mine — that job will likely devolve to the major mining company that buys Esaase, or Keegan itself.

“The company’s management team knows this as well, and they are guaranteeing the best price by advancing steadily toward production.

“Keegan was among the highest of the high flyers during gold’s fall rally. Although the share price has therefore come back fairly hard during the subsequent correction, the closing of a recent financing essentially opened a door to potential take-out o?ers for the company.

“While I know of no indications that any o?ers are forthcoming, there is the possibility that a bid, or a bidding war, could emerge at any time. In light of this, and considering the dip in its share price, Keegan is one of my top gold stock recommendations.”

Best Stocks To Buy In 2012#8: Kinder Morgan (KMP): Daily Paycheck

For her top pick for 2012, income specialist Amy Calistri looks to Kinder Morgan Energy Partners L.P. (NYSE: KMP).

The editor of The Daily Paycheck explains, “I always look for the gift that keeps on giving; that’s how I view this master limited partnership, which produces a steady stream of income each and every quarter.

“Kinder Morgan Energy Partners is one of the largest owners and operators of energy- product pipelines and storage facilities in the United States.

“Formed in 1992, KMP is structured as a publicly-traded master limited partnership (MLP). MLPs are an important asset class for income investors because they are legally required to distribute most of their taxable income and cash flow to shareholders (known as ‘unitholders’).

“KMP’s extensive pipeline systems carry products such as gasoline and heating oil from the Gulf Coast to the East and West Coasts.

“KMP also owns and operates a network of carbon-dioxide (CO2) pipelines, which are used in a process known as enhanced oil recovery. These pipes carry CO2 to old oil fields where it is injected into the fields to increase productivity. These enhanced recovery techniques become more popular as oil prices rise.

“And KMP is continuing to grow its pipeline revenues through expansion. This past November , the Rockies Express Pipeline became fully operational.

“KMP owns a 50% stake in the 1,679-mile project, which carries natural gas from the Rocky Mountains to the Pennsylvania/Ohio border.

“Although KMP is an energy-related company, its revenues are relatively insensitive to energy prices. The partnership earns fees based on the amount — not the price — of gas, oil or refined products it processes and transports.

“Many of its interstate pipelines charge rates that are regulated by the Federal Energy Regulatory Commission. These regulated rates are set to allow Kinder Morgan a steady, reliable return on invested capital.

“Further, the partnership has already locked in guaranteed capacity from a few shippers on its pipes. KMP appears to be on track to not only deliver, but also continue to grow, its distributions.

“And when it comes to distributions, KMP has a stellar track record, having made quarterly payments like clockwork since October 1992.

“KMP also has a very consistent record of dividend growth, boosting distributions nearly every year since its inception. The partnership has increased its distributions at an annualized rate of +7.5% in the last five years alone.

“KMP currently pays a quarterly dividend of $1.05 per unit, equivalent to $4.20 per year for a yield of approximately 7% at current prices. It should be noted that MLPs are best held in taxable accounts as most of their distributions are classified as ‘return of capital’.”

Best Stocks To Buy In 2012#9: Flagstar Bancorp

by Mark Skousen, editor The Hedge Fund Trader

My favorite speculative stock idea for 2012 is Flagstar Bancorp (FBC), the Troy, Michigan-based bank with 165 branches in Michigan, Indiana, and Georgia.

The stock was trading for over $140 a share before the financial crisis; the stock fell to $5 a share last May, and it is now under $1.50.

Earnings are way down, and the stock has su”ered from heavy tax loss selling in November and December. In fact, it’s selling for a fraction of its book value ($5.30). But there is some good news coming out. Quarterly revenues tripled to $459 million, and the bank is expected to be marginally profitable next year. They are growing rapidly again by using a little-known but powerful technique called ”EVA momentum.”

Economic Value Added (EVA) — a powerful new metric in finance — was co-invented by Joel Stern and Bennett Stewart as a performance measure in excess of the opportunity cost of capital.

Joel Stern is a genius who teaches finance at six graduate schools, including Chicago, Carnegie-Mellon, and Cape Town, and speaks each year at FreedomFest.) Flagstar broke positive this year with an EVA momentum of 11.5%, one of the highest rankings of all thrift and mortgage finance companies.

In short, Flagstar is creating value for its shareholders at a rapid pace, and that fact will re?ect itself in a higher stock price.

Currently it has nearly $3 billion in cash to deal with its $3.65 billion in debt. It might be a good takeover candidate by one of the regional banks.

The tax selling is probably over by now, and FBR Capital just upgraded its rating of the stock to “outperform.”

Moreover, company o#cers and directors are buying stock, 2.2 million shares worth since November 1 at between $1 and $1.35. In every way, this small bank stock is a super bargain. It could double in value and still sell below book.

Best Stocks To Buy In 2012#10: Goldcorp

by Curtis Hesler, editor Professional Timing Service

Gold was the hot topic in 2010. Since the underlying factors that pushed prices to new highs have not changed, I expect my long held target of $1,600 gold will be realized in 2012.

In fact, I expect that upside target of $1,600 will be woefully short of the mark. And my favorite gold stock for 2012 is Goldcorp (GG).

Gold belongs in everyone’s portfolio, and there are many ways to invest in precious metals. You can buy bullion in several forms, you can buy ETFs, or you can invest in mining companies.

Despite my long-term bullishness on gold, I would advise that spates of profit-taking set in from time to time. I caution against chasing strength.

Gold is going to have a di#cult time getting through $1,420 April 2012 basis without some further consolidation. There should be some support at $1,330, but there is still a good possibility that we might see gold correct to $1,250.

Nevertheless, that would be an excellent time to climb on and add to positions. The forces that put gold at $1,400 will still be in force, and the next leg should take gold to our long-held target of $1,600.

Meanwhile, mining shares o”er you the best leverage, but not all miners are created equal. At this point in the gold bull market with gold already having appreciated by 450%, it would be wise to stick with the best of the best.

Goldcorp, in my estimation, is the very best gold mining operation on the planet. Their revenues are expanding, they are the best managed and are among the most ecient of the major producers, and they just doubled their dividend. Goldcorp belongs at the core of your precious metals portfolio.

Best Stocks To Buy In 2012#11: Google

by Timothy Lutts’, editor Cabot Stock of the Month

As publisher of the Cabot advisories, I see the inner workings of a variety of successful investing systems, from pure momentum-driven systems to pure value-driven systems. And it’s interesting when they overlap For example, Google (GOOG) is currently recommended by both Cabot Market Letter and Cabot Benjamin Graham Value Letter. Google’s growth attraction is clear. Even with $28 billion in annual revenues, it’s still growing at a 23% rate.

Profit margins are a plump 33.8%. And the firm’s very bright employees are working diligently to expand outside its core advertising search business into businesses as di”erent as computer-guided cars and o”shore electric grids to connect wind farms.

As to value, GOOG has been treading water for the past three years, even while earnings ratcheted higher every month.

In fact, the stock is now 21% below its old 2007 high, even though revenues at the company are roughly 72% higher now and earnings are roughly 95% higher. Still, some people will argue the stock—currently trading near $600—is too expensive. To which we say, “It’s not how many shares you buy that counts; it’s how much money you invest.”

Best Stocks To Buy In 2012#12: Medifast (MED)

“My number one stock pick to start 2012 is Medifast Inc. (NYSE: MED), a weight and disease management company,” says Mike Turner.

The editor of Mastering the Markets explains, “The stock has skyrocketed from the $5 area to over $30 in just the last nine months.” Despite the gains, the advisor remains bullish on the stock’s prospects.

“My proprietary analysis software rates this stock as a fundamental ‘Strong Buy,’ with an overall score of 145 out of 200 — one of the highest rated stocks in my database.

“With regard to Medifast’s fundamentals, I like the following:

1 * The quarter-over-year-ago-quarter revenue growth rate of 45%. This is nearly twice the peer group average for MED.

2 * Quarter-over-year-ago-Quarter Earnings Growth Rate of 14%, which is above the average of its peer group.

3 * Its 5-year average annual sales growth is nearly 33%, almost 3 times the average of its peer group.

4 * Its 5-year average annual net income is over 18%, compared with 14.41% for its peer group.

5 * I consider any return on equity (ROE) of more than 15% as excellent. MED’s ROE is over 23%, more than twice its peer-group average.

“From a technical analysis perspective, my program gives Medifast a score of 75 out of a maximum of 100. This places MED in the top 10% of the stocks I watch, and very near the top of that group. Specifically, I like the following:

1 * The price trend for shares of MED has been moving higher for better than nine months. This trend is well above my system’s trend-line and well above MED’s 200-day moving average. This is indicative of a strong technical trend that shows no signs of abatement.

2 * Institutional ownership is at 30% — a large-enough chunk to convince me that the big traders believe this stock is heading higher.

3 * The average share price of all the stocks in Medifast’s Industry (Medical Equipment and Supplies) and sector (Healthcare) is moving higher. This is an indication that more money is likely moving in than moving out, helping to put upward pressure on MED.

“Disclosure: Mike Turner owns shares of MED either personally or via his managed account portfolio.”

Best Stocks To Buy In 2012#13: Mindray (MR): Alan Newman

“Mindray Medical International Limited (NYSE: MR), a China-based medical devices firm, is our top investment idea for the coming year,” says Alan Newman.

In his CrossCurrents newsletter, he notes, “The company is headquartered in Shenzhen, China and is one of many Chinese companies now specializing in the development, manufacture and marketing of medical devices worldwide.

“Its products range from patient monitoring units to in vitro diagnostics for bodily fluids, analyzers for same, ultrasound systems and digital radiography systems.

“The company has been around less than 20 years. It has operations in North America, Europe, China, and other Asian countries. Growth has been excellent. Revenues increased 57.5% in 2007 and 79% in 2008.In the same span, net income rose 74.9% and 34% respectively.

“The forward P/E is estimated to be 23.8. An $0.18 dividend was paid in March 2008 and a $0.20 dividend was paid in March 2010.

“Like most companies, the shares were crushed in the autumn swoon of 2008 that gripped world markets, but bottomed in late November 2008 and remained on a steady incline until mid-August 2010, rising roughly two-and-a-half fold.

“The shares have since consolidated quite well, trading in a narrow range while our charts suggest accumulation by smart money.

“We believe the stock is a buy at current levels and would not at all be surprised to see the October 2007 peak of $45.19 challenged and exceeded in 2012.”

Best Stocks To Buy In 2012#14: MDU Resources

by Roger Conrad, editor The Utility Forecaster

Even among great companies, one year’s leader is often the next’s laggard and vice versa; MDU Resources (MDU) is one under-performer that looks increasingly likely to get it’s legs back in 2012.

The company is best thought of as a financially conservative resource company, whose cash ?ows are anchored by solid regulated energy assets.

Management has systematically grown both sides of its business year after year, even while holding debt to 40 percent or less of capital and increasing its dividend 20 consecutive years.

The latest–a 3.2 percent boost e”ective with the quarterly payment in January–is remarkable for two reasons.

First, it comes at the end of a tough year for several operations and at the same time management has continued aggressive spending in several areas. Second, despite earnings that are likely to prove a nadir for the company, dividend coverage was still nearly 2-to-1.

That suggests immense staying power, even if the US economy remains sluggish. And the more growth picks up, the greater the potential for MDU’s profits to rise. As an oil and gas producer, the company has an increasingly lucrative position in the Bakken trend producing light oil.

Utility construction is in good shape to benefit from the buildout of transmission infrastructure to bring renewable energy from the upper Midwest to Chicago and other major cities.

And the company’s position as a top 10 producer of construction materials and aggregates is well placed to profit from government-sponsored infrastructure projects, such as road building and maintenance.

Finally, the company’s Montana, Dakotas and Pacific Northwest gas and electric utilities and pipeline unit enjoy some of the most supportive regulation in the country, ensuring planned investment will ?ow to rate base and earnings. That adds up to double-digit earnings growth in coming years, though a”ected by economic ups and downs.

Over the past 20 years, MDU has thrown o” a nearly 1,000 percent return–rising a combination of rising dividends and capital growth to annual returns approaching 13 percent. Buy up to 24.

Best Stocks To Buy In 2012#15: Medtronic

by Jim Stack, editor InvesTech Market Analyst

For over 50 years, Medtronic (MDT) has been the premier medical device manufacturer in the marketplace.

With the invention of the battery-powered pacemaker in the mid 1950s, Medtronic began a long string of technological innovations. Over time, that one breakthrough was transformed into a company that now holds over 21,000 filed patents and employs over 9,000 scientists and engineers.

Success has allowed Medtronic to develop a very healthy financial position. Without jumping into too many details, the company’s Free Cash Flow Margin – the percentage of sales that end up as actual “free cash” – has averaged a remarkably consistent 22% over the past 10 years.

Not only is this an impressive amount of cash generation, but the consistency with which the firm generates cash is even more amazing – it hardly deviates more than a percent or two from the mean.

There are very few businesses that have such a strong track record. To put this cash back in shareholder’s hands, management pays out a healthy 2.5% dividend. Even better, they have been aggressively increasing the dividend an average 20% per year for the past 5 years.

Today, Medtronic is bringing its knowledge of treating chronic ailments to a rapidly expanding worldwide middle-class.

Currently, international sales account for 41% of total revenue. In the most recent quarter, sales in China increased 24% year-over-year, while Latin America sales and Middle East & Africa sales each grew 19%.

Market share potential in emerging markets has many analysts forecasting double-digit earnings growth well into the future. For investors, Medtronic is being o”ered at valuation levels rarely seen and, in our opinion, levels that won’t last long.

This “discount” valuation is being driven by concerns over long-term growth potential in key areas – including the core cardiac rhythm segment. For reasons noted above, we think these concerns are overdone. Instead, we feel the current market gives us an opportunity to buy shares of a world class company at 11X earnings.

Compare the current valuation to Medtronic’s 10 year median P/E ratio of 27.8X and you get a sense of the value we see in this company.

As an added bonus, shares have come under pressure in recent weeks from year-end tax loss sellers. For new buyers, this provides a terrific entry point. Bottom line, Medtronic certainly fits our mold of finding good companies at attractive prices. It has the technical expertise, financial strength, growth potential, and valuation of a great investment.

Best Stocks To Buy In 2012#16: PepsiCo (PEP)

“PepsiCo (NYSE: PEP), my top pick for 2012, remains underrated by the market,” says Jim Stack.

The money manager and editor of InvesTech Market Analyst suggests, ”All too often, it’s viewed as a stodgy soft drink company, fully reliant on its namesake soda line. That’s a misconception.” Here, the sets the record straight.

“In reality, PepsiCo owns some of the most sought after brands in the world, including Gatorade, Tropicana, Frito-Lay, and Doritos. It does business in more than 200 countries worldwide, including key emerging market economies like China and India.

“Perhaps most important of all, it’s a growth company with analysts expecting long-term future earnings growth of 10-12% per year.

“In recent months, PepsiCo has taken another major step forward with the pending acquisition of its two primary bottlers – Pepsi Bottling Group and PepsiAmericas.

“The acquisition provides the potential to eliminate an estimated $500 million to $1 billion in redundant costs. If those cost savings are transferred directly to the bottom line, shareholders could see a significant increase in net income of 10% to 20%.

“Of perhaps even greater benefit, the purchase brings 80% of North American beverage distribution ‘in-house.’ This move will bring management one step closer to its final customers – injecting a level of flexibility into operations not often seen with a company of PepsiCo’s size.

“The acquisition further ties together the Pepsi story – a well run company with market leading growth positions and an attractive valuation.

“The executive suite neatly combines the beverage ‘megabrands’ such as Pepsi, Gatorade, Tropicana, and Mountain Dew with the world’s largest snack food company, Frito-Lay.

“Management then leverages these brands into international growth markets such as Latin America and Asia where sales volume increased more than 20% in 2008, and despite the most challenging world economy in decades, has seen high single-digit growth so far in 2010.

” On top of all this, Pepsi is currently trading at valuation levels not seen in 15 years. And although it’s a growth company, Pepsi still o?ers the dividend yield (3.0%) of a stalwart.

“Bottom line, Pepsi remains underrated by the market in general, and the bottler acquisition only enhances the company’s outlook.”

Best Stocks To Buy In 2012#17: Perfect World (PWRD)

“Perfect World Company Ltd. (NASDAQ: PWRD), an online game developer and operator, is my top investment idea for 2012,” says Alex Kolb.

The growth & income analyst for Zacks.com explains, “Chinese stocks have been on fire lately and Perfect World Co., Ltd. is no exception. And the company’s fundamentals point to even stronger momentum in 2012.

“The company develops online games based on its game engines and game development platforms. Perfect World’s games include massively multiplayer online role playing games (‘MMORPGs’) such asPerfect World, Legend of Martial Arts, Perfect World II, Battle of the Immortals and Fantasy Zhu Xian to name a few.

“Perfect World says that a substantial portion of the revenues are generated in China. However, its games have been licensed to leading game operators in a number of countries and regions in Asia, Europe and South America.

“The company also generates revenues from game operation in North America and plans to continue to explore new and innovative business models.

“Competitors like Shanda are also performing extremely well, an indicator that online role playing games are very popular and should continue attracting more players in 2012.

“PWRD shares have soared by more than 120% so far in 2010, surpassing the major averages by more than 100%. Despite the significant surge, the stock is attractively price with a forward P/E of 14.

“Perfect World’s fundamentals point to even stronger momentum in 2012. Analysts polled by Zacks currently have 2012 earnings pegged at $3.66 per share. The forecast is up from $3.45 over the past 2 months and compares favorably to the current 2010 Zacks Consensus estimate of $2.90.

“If history is any indication, earnings will exceed forecasts. Since 2007, Perfect World has consistently topped earnings expectations. Earnings surpassed estimates by an average of 31% over the past 4 consecutive quarters.

“The company is expected to see 33% earnings growth over the next 3 – 5 years, well above the industry’s expectation of 18% growth. Other strong industry comparisons include Perfect World’s return on equity (ROE) of 55.5%, versus the industry average of 2.5%.

“The company boasts a net profit margin of 47%, while the industry average is in the negative. It is also worth noting that Perfect World sports a solid balance sheet, showing no debt.

“The company saw robust results in the third quarter. Earnings per share of 81 cents came in 8% ahead of the Zacks Consensus Estimate. Total revenues jumped 13% year-over-year.

“Management mentioned that third-quarter results exceeded the company’s expectations, adding that Perfect World continues to strengthen its competitive advantages in the industry by strategically crafting a highly diversified portfolio of truly di?erentiated games.

“Recently, the company introduced a new 3D fantasy MMORPG, Forsaken World. Management explained that this game breaks new ground in terms of overall planning, programming and graphical designs.”

Best Stocks To Buy In 2012#18: 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.

Best Stocks To Buy In 2012#19: 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 2012. 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.

Best Stocks To Buy In 2012#20: Verenium (VRNM): Andy Obermueller

“The Energy Security Act of 2007 has received little investor attention; however, it contains provisions that are likely to lead to significant returns for investors,” suggests Andy Obermueller.

In his Government-Driven Investing, he notes, “The law codifies the federal production targets for biofuel, which we believe presents a real opportunity for Vernenium (NASDAQ: VRNM).

“‘Biofuel’ has, for decades, been code for ‘corn-based ethanol.’ But this law also contains provisions for a new, advanced biofuel derived from cellulose, an organic compound found in all plant matter.

“Instead of using corn — which uses valuable farmland and can drive up the price of a staple food — cellulose can be derived from any plant, wheat or rice straw, corn stalks, scrap wood or even grass.

“The law calls for hundreds of millions of gallons of cellulose ethanol. There’s just one problem: Very little of cellulosic ethanol is being produced. By 2022, however, the nation will need, by virtue of federal law, 16 billion gallons.

“All problems, of course, are really opportunities in disguise. Especially for one company: Verenium. This is a biotech company that has mastered the enzymes required to unlock the energy in cellulose.

“It has built two demonstration-scale plants, one in Jennings, La., and another in Japan, and has announced it will build the nation’s first commercial-scale ethanol plant.

“It has two partners in this endeavor: Petroleum giant BP and the U.S. federal government, which has begun its due diligence on a federal loan guarantee for the project.

“The demand for cellulosic ethanol will rise many-fold in coming years, and Verenium, the leader in this field, will likely see similar gains as it puts this ground-breaking technology to work in the new plant and licenses the technology to hundreds of others.

“The loan guarantee for the plant will likely be a significant catalyst for these shares, and the continued demand for cellulosic ethanol will fill its co?ers — and reward shareholders — for years to come.”

Best Stocks To Buy In 2012#21: Virginia Mines (VGQ)

“Virginia Mines (Toronto: VGQ) remains my favorite gold exploration company,” says resource expert Adrian Day.

In choosing the stock as his top pick for 2012, the editor of The Global Analyst explains, “The company has a successful track record, top management and a super-strong balance.

“Virginia Mines has a successful track record, having discovered and subsequently sold to Goldcorp, the rich Eleonore deposit in northern Quebec. This discovery saw the stock go from the $2 range to the mid-teens. Following the sale (which saw a spin out to shareholders), the stock is in the low $5s, ready to try again.

“Exploration by its nature is very high risk, with very long odds of discovery. Most companies finance their exploration by continual equity o?erings, which mean dilution for shareholders even if they are successful.

“Virginia has a di?erent way: it is a prospect generating, looking for prospects, often by staking the ground, doing some exploration, and then looking for a joint venture partner.

“The partner spends the high-risk exploration dollars in return for a majority ownership in the property. This results in a low-risk business model.

“Even though the company gives up most of the property, it holds on to its balance sheet and by doing this over and over, can build a portfolio of properties in which it owns minority interests with someone else spending the money.

“As Virginia has grown and built a strong bank account (it has has $44 million on its balance sheet), it is now in a position to do a little more exploration than in the past. This enables it to sift through its projects, and by advancing them more, obtain better deal terms.

“Virginia has build a broad portfolio of projects, all in mining-friendly Quebec, in a range of metals and minerals, but emphasizing gold.

“Right now, it has six properties ready to drill over the winter season, all in the prospective but under-explored James Bay area. Some of these are very close to the Eleonore discovery, on ground not included in the sale to Goldcorp.

“Virginia is spending the money on four of these properties, with two being funded by partners. Some have brand new targets being drilled, others following up on previous drilling.

“While exploration remains long odds, Virginia has as good a shot as any, and at minimum, we expect the next six months or so to generate a lot of news on these properties that should see the stock buoyant.

“Any positive exploration results will see it move much higher. In the meantime, you can buy a fine company at less than NAV. Just the value of the royalty it retained on Eleonore and its cash in the bank are worth more than the entire market cap. All the exploration comes free.

“So you can buy a great company at below NAV. Despite the move up in the stock price in recent months, this is an excellent time to buy, ahead of this aggressive drilling campaign. We expect 2012 to be very good for Virginia and its shareholders.”

Best Stocks To Buy In 2012#22: 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 2012.

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.