Let’s face it, no one has a crystal ball and can make 100% accurate stock predictions. Predicting stocks is like predicting the weather, what looks certain today may not be true tomorrow. However, there are certain ways to mitigate risk by keeping up with the current trends and making stock picks based on fundamental data (or promising up and coming companies).
It is certain that in 2012 more of the world will be wired, more people will drive cars, and food consumption will increase with the population. Below I have picked 4 stocks that play a major role in the global economy and are bound for growth in 2012 given people will still drive cars, eat and use the internet. I will play these four stocks heavily this year, and plan on posting more articles for my followers to understand my trading patterns:
Google Inc. (GOOG) is focused on improving the ways people connect with information. The company generates revenue primarily by delivering online advertising. The current market price is $641 with a one-year analyst price target of $732.71. This represents a 15% price increase. The company's day sales in receivables have been lower than its industry average for each of the past five years, which is a very good sign of consistent growth. This cash rich behemoth has 42.56B in cash on its books and only 7.26B in short-term debt and zero in long-term debt. Analysts expect profits to rise 20 percent in 2012, to $14.4 billion, but Google has a track record of beating analyst predictions.
If Google was a good buy a year ago, when its stock traded around the high 500s and as high as 24 times estimated earnings, analysts say, “it's a better one at its current multiple of 14,” and I would agree. GOOG's forward PEG of 0.8 represents a 13% discount to its 5-year average of 0.9. Also, GOOG's 20.5 trailing P/E is at the low end of its 5-year range (lowest 16.3 to highest 64.3). Bottom line, internet use continues to grow and analysts find the traffic growth rate of Google is significantly higher than its competitors (MSFT and YHOO), which is expected to positively impact Google’s assets such as content verticals, social networking sites, eCommerce listings, and mobile software. GOOG is a market leader in technology-based innovations and new product launches, and the trend will only continue into 2012 making this a fantastic buy.
Sap AG (SAP) is engaged in enterprise applications in terms of software and software-related service revenue. The company's core business is selling licenses for software solutions and related services to deliver a range of choices fitting the varying functional needs of its customers. The current market price is $52 with a dividend yield of 1.1%. Analyst forecast 11% growth in euro-denominated sales in 2012, versus expected 11% constant currency growth for 2011. Also, licenses are predicted to increase about 10% in 2012, reflecting increased adoption of enterprise software to modernize business processes. Maintenance revenues are expected to grow at a similar level driven by higher maintenance charges.
SAP leads the enterprise resource planning (ERP) application market segment with a market share of 25%, followed by ORCL (15%). Also, SAP arguably leads the market for business intelligence solutions due in part to its acquisition of business objects. SAP currently has around 20% market share of business intelligence ahead of ORCL, IBM, and MSFT. The company currently trades at the lower end of its 52-week range making it a great buy for 2012. EBIT margins improved from 27.4% to 31.0%, and adjusted EBIT grew at a CAGR of 11% from 2005 to 2010 making SAP a solid choice. SAP makes the bulk of its profits from the European markets, therefore the recent turmoil in Europe has pushed the price of this jewel lower, yet sales in all of its geographic regions still posted double-digit year-over-year growth in the most recent quarter. This is a great choice for your portfolio in 2012 while the price is still low.
Potash Corporation of Saskatchewan Inc. (NYSE:POT) is an integrated fertilizer and related industrial and feed products company. The company owns and operates five potash mines in Saskatchewan and one in New Brunswick. It also holds mineral rights in the Esterhazy mine where potash is produced under a mining and processing agreement with a third party. The current market price is $41.14 with a one-year analyst price target of $59.69. This represents a 45.09% upside potential. POT's 13.0 trailing P/E is at the low end of its 5-year range (lowest 6.9 to highest 100.0) which represents a huge growth potential.
Quarterly earnings growth yoy is 140.80% compared to the industry average of 25.70%. Also, the company enjoys a strong competitive position in this concentrated industry: Potash is produced in only 12 countries globally, and a new potash mine costs about $4 billion to build. The population is growing and is expected to be at 10 billion by the year 2100; this means that nearly half of today’s population will be added on within 90 years - that is a lot of people to feed! This company has a great competitive edge, and I feel will have a good rise in the coming years. The low price and 4-star S&P rating offers a huge buy opportunity for investors seeking options for 2012.
AT&T Inc. (T) is a holding company. The company is a provider of telecommunications services in the United States and worldwide. These include wireless communications, local exchange services, long-distance services, data/broadband and internet services, video services, managed networking, wholesale services and directory advertising and publishing. The current market price is $30.11 and offers a dividend yield of 6%. This 5-star S&P stock is a great income idea for 2012 and still holds the largest smartphone market share. The company's day sales in receivables have been higher than its industry average for each of the past five years.
Also, AT&T’s 3G network is the nation’s fastest network. The company’s digital network is one of the most technologically advanced in the industry, with sophisticated and reliable digital transport and access capabilities throughout the world. Another reason this could be a gold mine in 2012 is because the AT&T / T-Mobile merger. The merger would create America’s largest mobile phone company. This would lead to extensive growth in subscribers, revenues, and profits. The merger will also enhance the company’s network and provide competitive advantage over its peers. Overall, I feel 2012 will be a great year for T, especially if the T-Mobile merger is finalized.
Additional disclosure: I also plan to initiate a medium-term trade on SAP & POT.