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Value, research analyst, author, long only
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In this volatile market there is value everywhere. In just about every industry you will find valuations that misalign with fundamentals, and stock trends that don't reflect future fundamentals. With that being said, I am looking at five of the top stocks presenting both value and significant upside potential. I am looking at stocks presenting the greatest level of value moving into 2013, all of which I believe will double in the year that lies ahead.

In the last three months, Seagate Technology (NASDAQ:STX) has fallen lower regardless of key developments that come from the company. Investors have become worried due to continuous reports of further PC and laptop sales troubles. However, Seagate does not appear worried at all, the company recently increased its market leading yield by 19%, now paying a forward yield of 6%, and continues to buyback shares aggressively.

In this market, a company paying a yield of 6% with 35% top line growth will not stay cheap long. The stock is currently priced at $25.10, if it were to double the stock would be just $15 greater than its current 52-week high. Therefore, Seagate's upside comes as a result of its current value. The company's risks simply aren't as great as some believe, and its upside is far greater.

Contrary to popular belief, the company is much more than just a laptop/PC storage business; its hard disk drives are also used in home entertainment, DVRs, game consoles, and it also provides storage for the cloud. Therefore, the upside is great for this value investment, with a presence in several fast growing segments. I look for Seagate to provide large gains in the coming year, as funds rebalance and retail investors look for safety and security in high yield stocks. Seagate has everything that long-term dividend investors seek, and once it shows a little momentum, expect takeoff.

Arena Pharmaceuticals (NASDAQ:ARNA) has rallied 370% in 2012, yet is more than 30% off its 52 week high. The company's stock has remained volatile due to worse than expected sales of VIVUS' weight loss product and a slower than expected launch. Therefore, the stock has traded in a range between $7.50 and $9.30 since falling back from highs, but has several catalysts in the year ahead.

Looking into 2013 Arena will launch its weight loss drug Belviq. The expectations have fallen due to the struggles of VIVUS, but I expect a far greater commercial response, compared to VIVUS. The reason is because Arena does not face many of the same problems. VIVUS is forced to sell its product via mail order and can not market its product on TV, billboard, etc. Therefore, there are a lot of consumers who don't even know that an FDA approved weight loss product exists. Once Belviq is launched, we will see billboards, commercials, magazine ads, etc. as part of the drug's massive marketing campaign.

Overall, the weight loss market is so large that there is no reason Arena shouldn't be successful. The safety of its product should see much better adoption among physicians and should create optimism among shareholders. Of course this is speculation, but furthermore, the company will be moving forward to commercialize the product in Europe and will be developing another potentially billion dollar product temanogrel. I expect that the success of Belviq combined with the likelihood of European approval and the development of temanogrel will add significant value in 2013, and I wouldn't be surprised to see a price north of $15.

XPO Logistics (NYSE:XPO) is one of the best stories in the market that you most likely don't know. The company's stock has increased in value by 50% over the last year, and nearly 200% since Bradley Jacobs began his term as the company's CEO (following his $150 million equity investment). In 2012 the company has exceeded all of its own goals with three acquisitions that equal $250 million of additional revenue (in 2013) and seven cold starts (two ahead of guidance).

The pure growth of this company is really hard to comprehend, especially in this market. XPO is being built as a company that will grow regardless of market conditions. The company's CEO, Jacobs, is aiming to build his fifth billion dollar company over the course of his career, and so far, he is on the right track.

In the last 12 months, XPO Logistics has posted revenue in the amount of $214.17 million. In 2011 the company posted revenue of $177 million, but in 2013 the company will see revenue in excess of $500 million. This is insane revenue growth and will be a major catalyst that should catch the eyes of Wall Street in the next year. With nearly $300 million in cash, the company continues to be driven by acquisitions (which will continue in 2013). Therefore, with XPO being an aggressive growth company, and trading at just 0.60 times next year's sales, I expect significant gains, and believe $30 is highly likely.

I'll be honest, Alcatel-Lucent (NYSE:ALU) has been on my list before, and looking back, has most likely been my most significant failure. Everytime I give bullish outlooks for this company the stock falls further. Therefore, it's safe to say my track record is not too bright in regards to ALU. However, at $1.10 the value being presented in this stock is unprecedented, and now that the company is operating for efficiency and to become more profitable, I think 2013 might finally be its year.

First, Alcatel-Lucent has rallied more than 12% in the last month following reports that it's in talks with Goldman Sachs about a potential financing deal. The telecom equipment company is looking to sale certain segments of its business, which stretch across 130 countries. If successful, this sale could give the company more than $500 million in cash, it would unload unprofitable segments, and would be a major catalyst moving into 2013.

In addition to the elimination of some of its business and the monetization of its near 30,000 patents, the company also will benefit from AT&T's increased spending over the next three years. Therefore, if Alcatel-Lucent will cut down on its less profitable businesses, monetize its patents, and grow its most profitable business, then it could see market leading gains in 2013. Right now, it finally looks as though the company has light at the end of its long tunnel and is moving in the right direction.

NeoStem (NASDAQ:NBS) as a company is leading the way in an innovating space that is breaking barriers and producing results. In the last year alone, the company has sold its generic pharmacy business in China, announced very strong and encouraging data for its lead product AMR-001, showed clinical data for a study on its very promising VSEL Technology, and has seen a significant rise in the revenue of its manufacturing segment with a growing clientele.

Despite NeoStem's breakthrough year the stock has traded with YTD gains of just 27%. However, NeoStem is a very unique biotechnology business, and presents a rare opportunity to investors with three major catalysts in 2013. The first, as with most biotech companies, is data. The company will be announcing data for its Phase 2 trial. This data should create upside, seeing as how 0% of patients receiving more than 10 million cells saw a deterioration in heart muscle function, compared to 30-40% for those who did not. The potentially $1 billion product is very similar to Baxter's Phase 3 product, which saw incredible results in its Phase 2 study. Therefore, it will be closely monitored and should push the stock higher, both before and after the announcement.

The final two catalysts go hand-in-hand: The growth of its manufacturing business and the absence of additional financing. In 2012 NeoStem added the Phase 3 company SOTIO as a client, and had two companies enter late stage and large trials in its manufacturing business. All of these companies are currently enrolled in late stage trials and NeoStem has more than doubled its revenue in the process. Therefore, as enrollment continues to progress and studies advance, the company's revenue will rise further in 2013. In a recent interview, the company's CEO Dr. Smith used a $5 billion figure when talking about the potential of this space, which means it's a significant portion of the company's long-term plan.

Furthermore, the sale of NeoStem's generic pharmacy provides the cash and leverage needed to avoid financing. Some might not consider this to be a catalyst, however the stock is priced in anticipation of financing, so its absence will prove to be highly encouraging for investors. The company has made an effort in 2012 to strengthen its balance sheet, and with the sale of its generic pharmacy, it received over $12 million in cash and eliminated $30 million in debt. When you incorporate this fact, with the $7.9 million in cash reported at the end of September, the company has enough cash and leverage on its balance sheet to move forward without further dilution or public offerings, if desired. Therefore, with additional revenue, lack of financing, advancing clinical studies, and an underperforming stock, I expect NeoStem to appreciate by more than 100% in the next year. This is a company with revenue potential in the multi-billions due to a combination of several revenue producing segments, and next year could likely be the start of a long rally.

Conclusion:

NeoStem might sound like a strange selection as my stock with the greatest amount of upside, but valuation has to be considered. I view NeoStem as the company with the least amount of downside, the greatest level of unrealized gains, and the most significant catalysts to push it higher. The company has the catalysts present moving into the next year to see record performance.

Looking at my other selections, Alcatel-Lucent is a strong pick but as a European based company its performance is still tied to the European markets and its ability to execute on its efficiency plan. XPO is my pick for the best stock of the next three years (also my largest holding) but I think 2014 will be the year of XPO. Although it will see market leading top line growth, the company might not see profitability until the end of 2013.

With a near $2 billion market cap Arena Pharmaceuticals will need all pieces to fall in place, which I do expect, however a $4 billion market cap will be a tough feat, although I still expect great performance. Finally, Seagate has great promise, and great upside, and will trade higher because of its valuation, but in order to appreciate by 100% we will need to see some improvements in PC/laptop sales. Overall, I think each of these companies present very little risk for loss, and a strong likelihood for gains. I believe the risk is worth the reward for each stock, and that this time next year we will look back and realize that these five stocks were among the top performers in the market.

Source: 5 Stocks With The Catalysts And Opportunity For Large Returns Over The Next Year