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To pick value names, investors have specific criteria and ratios that they employ in their stock screeners. Some lay emphasis on price-to-book valuation, return on assets and annual sales growth, while others may place more weight on EPS growth, PEG ratio, historical price performance, etc.

I wanted to share the ten stocks that will definitely stay on my watch list in year 2012, especially with the elections around the corner. While my "fundamental filter" has more than a dozen ratios and would be rather lengthy for this article, I decided to dissect it into six basic categories that should spark interest in an average long term investor.

#1. Apple (NASDAQ:AAPL)

  • Projected operating EPS for 2012 vs. 2011: $33.24 vs. $27.64,
  • Debt-to-capital ratio: 0%
  • PEG ratio: 0.7
  • 5 year dividend growth: N/A
  • Earnings surprise type: 12 consecutive positive quarters
  • Quantitative valuation vs. actual price: $426.70 vs. $379.74 / undervalued

Potential Risks / Overview

There are challenges ahead with Steve Jobs's resignation, constantly evolving consumer technology products, as well as the rising expectation of analysts covering the stock. Despite the constant need for the company to deliver products that go above and beyond investor expectations, Apple has a strong balance sheet and enough cash on books to meet any unforeseen hurdles with flexibility in the years to come. Recently, for a short period, Apple captured the #1 spot as the largest company in terms of market capitalization, but was quickly booted off by Exxon Mobil (NYSE:XOM).

#2. Northrop Grumman Corp. (NYSE:NOC)

  • Projected operating EPS for 2012 vs. 2011: $7.30 vs. $6.86
  • Debt-to-capital ratio: 24.67%
  • PEG ratio: 1.0
  • 5 year dividend growth: 12.75%
  • Earnings surprise type: 10 positive quarters, 1 negative quarter, 1 in-line quarter
  • Quantitative valuation vs. actual price: $60.60 vs. $51.66 / undervalued

Potential Risks / Overview

Northrop Grumman currently has a short term bearish outlook as the expectations for the U.S. defense budget for R&D and weapons procurement is to stay flat, after rising 7.6% and 9.0% in compounded consecutive annual rates. No matter the outcome for next year’s election results, our enormous budget deficit is unequivocally placing a strain on defense spending. The President’s request for $400 billion military budget cuts and the withdrawal from Iraq and Afghanistan is expected to negatively impact the company’s bottom line.

Nevertheless, there is a substantial need for military equipment replacement, repairs of planes and ships, which will sustain the company’s strong free cash flow. Still NOC remains to be a value play due to its relatively low level of debt compared to its peers, balance sheet strength, and dividend yield of 3.86%. Northrop Grumman should have no problem in its ability to win new contracts going forward, as it is the only company that is able to design, build, and refuel nuclear powered aircraft carriers as well as nuclear powered submarines with the partnership of General Dynamics (NYSE:GD).

#3. Chevron Corp. (NYSE:CVX)

  • Projected operating EPS for 2012 vs. 2011: $15.70 vs. $14.20
  • Debt-to-capital ratio: 9.0%
  • PEG ratio: 1.2
  • 5 year dividend growth: 10.17%
  • Earnings surprise type: 7 positive quarters, 4 negative quarters, 1 in-line quarter
  • Quantitative valuation vs. actual price: $102.00 vs. $95.61 / undervalued

Potential Risks / Overview

Crude prices have shown an impressive resilience overtime even during periods when the economy was contracting. As oil was soaring in better economic conditions, concerns also rose about the risk of declining oil output in the years ahead. Chevron is one of the few integrated oil companies to benefit from this by increasing production due to heavy spending on new oil and gas projects worldwide.

While its rivals often fail to replace via development of new reserves what they extract from the ground each year, Chevron is ramping up production of its several projects in Kazakhstan, Brazil, Angola, Gulf of Mexico and Nigeria from its existing reserves. The company is also expecting a significant growth in profits from liquid natural gas, heavy oil and tar sands.

Chevron has a very strong balance sheet, low debt, plenty of cash flow to fund its growth without having to turn to capital markets.

#4. Ralph Lauren (NYSE:RL)

  • Projected operating EPS for 2012 vs. 2011: $8.03 vs. $6.91
  • Debt-to-capital ratio: 8.68%
  • PEG ratio: 1.5
  • 5 year dividend growth: 20.11%
  • Earnings surprise type: 11 positive quarters, 1 negative quarter
  • Quantitative valuation vs. actual price: $104.40 vs. $131.04 / overvalued

Potential Risks / Overview

Polo Ralph Lauren brand generates roughly $12 billion worldwide at its approximately 10,000 retail locations. The company continues to retain its loyal investors by beating earnings estimates, increasing same store sales, increasing dividends and repurchasing shares. It is currently strengthening its brand recognition in Southeast Asia and is awaiting a strong year in 2012. Ralph Lauren’s primary wholesale channels are JC Penney (NYSE:JCP), Sears (NASDAQ:SHLD) and Macy’s (NYSE:M). It also earns royalties from international licensing products that manufacture and sell at wholesale specific products under its trademarks.

Ralph Lauren’s current primary risk is the declining discretionary income that has stemmed from the global economic slowdown, which could potentially threaten its execution plans in Asia. The company’s direct competitors are Jones Apparel Group (NYSE:JNY) and Liz Claiborne (LIZ).

#5. Panera Bread (NASDAQ:PNRA)

  • Projected operating EPS for 2012 vs. 2011: $5.31 vs. $4.56
  • Debt-to-capital ratio: 0%
  • PEG ratio: 1.5
  • 5 year dividend growth: N/A
  • Earnings surprise type: 3 positive quarters, 9 in-line quarters
  • Quantitative valuation vs. actual price: $93.50 vs. 111.28 / overvalued

Potential Risks / Overview

This is a company that implemented a new atmosphere by mixing bakery/café patrons with college students who needed a quiet place to study to get away from all that Starbucks (NASDAQ:SBUX) ruckus. Panera locations offer quality soups, sandwiches, pastries, free Wi-Fi, smooth jazz music, cushioned seats, and a quiet atmosphere to unwind in. It also rewards its loyal repeat customers with free goodies on their Panera Rewards Cards.

The company grew its average weekly sales from $39,926 in 2009 to $42,852 in 2010. It maintains a strong balance sheet, low debt, and has done a phenomenal job in keeping tight control on its costs by raising prices very modestly. Consumers are willing to pay the extra premium for quality despite being frugal during these tough economic times. In 2012 Panera Bread is planning to open a minimum of 120 additional stores nationwide.

#6. eBay Inc. (NASDAQ:EBAY)

  • Projected Operational EPS for 2012 vs. 2011: $2.15 vs. $1.70
  • Debt-to-capital ratio: 13.57%
  • PEG ratio: 2.0
  • 5 year dividend growth: N/A
  • Earnings surprise type: 11 positive quarters, 1 in-line quarter
  • Quantitative valuation vs. actual price: $32.90 vs. $29.27 / undervalued

Potential Risks / Overview

Online retail sales continue to steadily grow in double digits, and I cannot think of a better company to benefit from this growth than EBAY. Out of the estimated $210 billion forecasted retail sales in 2012, U.S should capture 7% of that. In June, EBAY acquired GSI Commerce in a $2.4 billion deal and later sold its 30% minority stake in Skype to Microsoft (NASDAQ:MSFT) in an $8.5 billion deal. One notable risk that the company currently faces is the increasing state taxes on internet sales that should pose a threat to its margins.

Despite the short term bearish outlook by analysts, the company should see some stability from its 2011 acquisitions before full improvement in 2012. Still, eBay continues to sustain its strong growth and presence in international markets. Its convenient method of providing store access to online shoppers 24/7/365 through bidding in comfort of their homes, attracts even the most skeptical of the consumers, who once thought that online purchases were not safe. eBay is truly changing the level field by simultaneously creating jobs worldwide.

#7. Netflix (NASDAQ:NFLX)

  • Projected operating EPS for 2012 vs. 2011: $6.32 vs. $4.59
  • Debt-to-capital ratio: 41.32%
  • PEG ratio: 1.7
  • 5 year dividend growth: N/A
  • Earnings surprise type: 11 positive quarter, 1 in-line quarter
  • Quantitative valuation vs. actual price: $207.60 vs. $218.77 / overvalued

Potential Risks / Overview

Netflix is a high growth = high risk company. Taking into consideration the constantly evolving online rental business and entertainment industry, it would be absolutely imprudent for anyone attempting to predict the company’s cash flow beyond 2012. Through continuous transformation, Netflix will have to constantly change its business model, and this simply translates into higher risk. Facebook is already making deals with Miramax, Warner Brothers, Paramount and Universal to increase its movie titles to digitally stream via TV, computers, smart phones, Google TV and iPads with its credit point system.

What the future holds is unknown, but currently the stock remains to be a value play of mine as it is able to grow its subscriber base with ease (despite the recent price hike that dissatisfied many of its subscribers). Presently there is no other site that offers more content through online streaming with HD quality, and Hulu.com does not even scratch the surface.

In 2010, more subscribers of Netflix were watching streaming titles on its website than renting titles by mail. This significant milestone allowed the company to improve its inventory, maintain its margins and place more emphasis on the churn rate.

#8. Potash Corp. of Saskatchewan (NYSE:POT)

  • Projected operating EPS for 2012 vs. 2011: $4.00 vs. $3.60
  • Debt-to-capital ratio: 38.03%
  • PEG ratio: 1.6
  • 5 year dividend growth: 14.29%
  • Earnings surprise type: 10 positive quarters, 1 negative quarter, 1 in-line quarter
  • Quantitative valuation vs. actual price: $55.20 vs. $59.05 / overvalued

Potential Risks / Overview

Growing potash and phosphate demand in India and China throughout year 2012 will favor the growth prospects of the world’s largest diversified fertilizer company. Potash produces three primary crop nutrients – potash (K), phosphate (P) and nitrogen (N), and is responsible for 20% of global capacity today. Potash is mined from natural mineral deposits and is mainly used as a crop nutrient. Its potassium helps strengthen plant stalks and roots by helping crops fight disease and injury, resulting in crop yield increases of up to 400%. Phosphate fertilizers and nitrogen are also important components that are used to speed up crop maturity, aid in photosynthesis and cell division.

With the global population expected to reach 9 billion by 2050, Potash, with its strong valuations should be a stock to consider for someone with a longer term investment outlook. Some noteworthy challenges and risks that the company is faced with are transportation costs, unexpected mining outages, supply disruptions, and even volatile currency exchange rates.

#9. Google (NASDAQ:GOOG)

  • Projected operating EPS for 2012 vs. 2011: $38.41 vs. $31.28
  • Debt-to-capital ratio: 7.48%
  • PEG ratio: 1.0
  • 5 year dividend growth: N/A
  • Earnings surprise type: 10 positive quarters, 2 in-line quarters
  • Quantitative valuation vs. actual price: $617.60 vs. $522.18 / undervalued

Potential Risks / Overview

I remain to be a bull on Google despite the decrease in ad revenues, as well as the prevalent criticism of recent Motorola purchase for $12.5 billion. The risk notion is that considerable ongoing legal and regulatory matters of Motorola will affect Google in the long run. Google’s advertising accounted for 97% of its total revenues in the 2nd quarter of 2011. The company’s expecting a gross revenue increase of 23% in 2012 and a robust international expansion. Analysts believe that the magnitude of expense growth will stay moderate and contribute overall to the margin improvement next year.

In April, Larry Page replaced Eric Shmidt as the CEO of the company and quickly restructured the management team to have more control of the company by having the business leaders report directly to him.

#10. Priceline.com Inc. (NASDAQ:PCLN)

  • Projected operating EPS for 2012 vs. 2011: $21.25 vs. $16.50
  • Debt-to-capital ratio: 21.84%
  • PEG ratio: 1.5
  • 5 year dividend growth: N/A
  • Earnings surprise type: 12 positive quarters
  • Quantitative valuation vs. actual price: $559.70 vs. $533.70 / undervalued

Potential Risks / Overview

This leading provider of online travel services does not pay any cash dividends, but has managed to beat earnings estimates by more than 2% in the past 12 consecutive quarters. PCLN offers its customers to make hotel reservations through priceline.com, agoda.com and bookings.com with a unique business consisting of “Name Your Own Price” offerings.

After a series of acquisitions, the company dominated the discount hotel bookings business in Asia through Agoda and later the rental car offerings in Europe by TravelJigsaw. Priceline continues to gain market share through acquisitions, steadily growing its revenues and free cash flow. In 2010 it issued $575 million of convertible debt, but still had a flexible, financially sound balance sheet. By June of this year, the company boasted $2.0 billion in cash and investments.

Source: 10 Value Stocks To Own In 2012