The St. Louis Cardinals went on a magical run that transformed them from wild card also-rans on September 1st to World Series Champions on October 28th. A majority of the stocks discussed in this article were big losers in 2011, nevertheless, are at the top of the leaderboard regarding 2012 performance. These stocks are top performing S&P 500 mid cap or better stocks, trading under for 2012. The stocks are: Netflix, Inc. (NFLX), Micron Technology, Inc. (MU), Denbury Resources, Inc. (DNR), LSI Corporation (LSI), Monsanto Company (MON) and Citigroup, Inc. (C).
Have these stocks turned the corner and transformed into 2012 winners? Don't take my word for it. Read the article, do your own due diligence and decide for yourself.
Most of the stocks on the list were significant underperformers in 2011 with the exception of LSI Corporation and Monsanto, which were up 11.24% and 11.17% in 2011 respectively. Topping this list are Netflix, with a 41.69% gain since the start of the year, and Micron at 15.90%. Both stocks were down significantly in 2011 at 45.24% and 15.72%, respectively. The others were down in 2011 meaningfully as well, and are already up from 10% to 15% for 2012.
This may be due to a phenomenon known as the January effect. The most common theory explaining this phenomenon is that individual investors, who are income tax-sensitive, sell stocks for tax reasons at year end (such as to claim a capital loss) and reinvest after the first of the year. Another cause is the payment of year-end bonuses in January. Some of this bonus money is used to purchase stocks, driving up prices.
I posit the stocks covered are buying opportunities. These stocks have major upside potential based on great stories and fundamentals. Once the geopolitical and macroeconomic issues of the eurozone, U.S. and the world fade from the forefront of investors' minds, and a renewed focus on fundamentals and company specific catalysts emerges, I expect these stocks to provide significant capital gains.
Please review the following macro-economic positive highlights, followed by company specific catalysts and charts detailing current summary, performance and fundamental information regarding these buying opportunities.
2012 Macro-Economic Positive Highlights
2012 began on a strong note by recording its preeminent single-session percentage gain in weeks, closing at a two-month high on the first day of trading. There were a multitude of positives spurring the advance. Please review the following highlights of macro-economic positive indicators.
- The manufacturing reading from China advocated activity expanded after contracting the prior month.
- India reported its best manufacturing reading in six months.
- Manufacturing data from Europe was comparatively inspiring.
- Recent manufacturing activity in the United Kingdom was better than expected.
- Eurozone manufacturing activity was somewhat in-line with outlooks.
- Progress by the euro proved positive for stocks.
- The December ISM Manufacturing Index improved to 53.9 from 52.7 in November, exceeding expectations of 53.4.
- November construction spending increased by 1.2%, besting analyst estimates of 0.5%.
- The FOMC meeting minutes specified that domestic economic activity grew temperately, notwithstanding seeming deceleration in growth of overseas economies and continuing monetary complications in the eurozone. The FOMC largely remains sure that the speed of economic activity will increase in the coming years. Nevertheless, many members specified present and future circumstances may well merit further policy accommodation.
Company-Specific Catalysts and Statistics
Performance Statistics (click to enlarge)
Charts provided by Finviz.com
Citi recently announced that it has been named World's Best Internet Bank for 2011 by Global Finance magazine. Citi was the recipient of over 90 global, regional and country awards.
Naveed Sultan, Global Head of Treasury and Trade Solutions, Citi Global Transaction Services said:
Citi is thrilled to have earned this prestigious recognition by Global Finance. We believe this is a true validation of our industry-leadership position in Internet banking and demonstrates our strength as a global organization. Winning these awards is also a reflection of our steadfast commitment to providing our clients with the best technology platforms enabling them to succeed in today's challenging business environment.
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Whitney Tilson has been bullish on Netflix since the stock traded around $77 late last year. Although the stock has already made a sizeable move, he told CNBC's fast Money Monday, "it's a long way from the point at which I'd sell it. He gave four reasons for his bullish outlook:
1. Street overreacted to the downside and nobody wanted it on the books at year's end
2. Rumors of a buyout are swirling and with less than a $5 billion market cap, Netflix makes an easy acquisition for a number of large players
3. Launched services in UK and Ireland, a real international growth story that nobody has paid attention to.
4. CEO Reed Hastings says U.S. subscriber growth is growing again.
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Lexar, a leading global brand of flash memory products and subsidiary of Micron , recently introduced new Lexar® Professional 600x and 400x Secure Digital High Capacity (SDHC™) and Secure Digital Extended Capacity (SDXC™) Ultra High Speed I (UHS-I) memory cards, including the industry's first 128GB SDXC UHS-I card. The cards offer outstanding performance, reliability, and compatibility for professional and enthusiast photographers and videographers alike, maximizing the digital workflow experience of capturing and managing large volumes of high-quality images and extended lengths of 1080p full-HD video.
Lexar Elite Photographer Chris McLennan, who is world-renowned for his travel and adventure photography said:
The speed of my workflow is a top concern since it can ultimately impact my business. How efficiently I take and edit my images determines how quickly I can deliver them to my clients. Lexar Professional memory solutions have always been a critical part of my workflow, and they enhance my capture and post-production experience while keeping my images safe. If you're a professional looking for the combination of speed, capacity, and reliability in a memory card, the Lexar Professional 600x and 400x SDXC and SDHC UHS-I memory cards are great options.
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Denbury Resources Inc. recently announced that its Board of Directors has approved a common stock repurchase program for up to $500 million of Denbury shares. The Company currently has approximately 402 million common shares outstanding and its total market capitalization is approximately $4.6 billion based on the closing price of the Company's stock on September 30, 2011.
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ChartPulteGroup, Inc. recently announced that it has completed the sale of land approved for approximately 1,500 residences in Broomfield, Colorado to Wheelock Street Capital LLC, a private real estate investment firm. The all-cash transaction is for the remaining developed lots and undeveloped land in Anthem Colorado, a 1,700-acre master planned community in the northwest Denver metro area. The master plan includes the communities of Anthem Ranch and Anthem Highlands. Terms and conditions of the transaction were not disclosed. PulteGroup will not realize a material loss or gain on this land sale.
Patrick Beirne, PulteGroup West Area President said:
We are very proud of the Anthem Highlands and Anthem Ranch communities, which are known for their spectacular array of amenities and for being a great place to call home. This sale is consistent with PulteGroup's capital allocation strategy and overall focus on driving greater returns on invested capital.
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LSI Corporation recently announced the completion of its SandForce Inc. acquisition deal. The intent of this venture is to enhance application performance using SandForce's flash-based storage support features for the advancement of flash storage processors.
LSI has formed a new segment called Flash Components Division following the acquisition, which will be headed by the former CEO of the company, Michael Raam. Around 190 SandForce workers are employed here. The acquisition was previously valued at around $322 million. However, LSI will probably throw more light on the financials in its fourth quarter earnings release.
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Monsanto Company recently delivered above-estimate results for the first quarter of its fiscal year 2012 and pointed to the high end of its previously reported earnings per share guidance for the year on the strength of its seed business. The company also previewed a strong U.S. order book and announced 14 phase advancements across its breeding, biotechnology, and chemistry and agronomic research and development platforms, representing a record number of advancements for its annual pipeline update.
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Conclusion
The constant negative headlines out of the eurozone have ground most of these fundamentally sound U.S. stocks down significantly. Ironically, U.S. economic indicators are actually fairly good right now and many of these stocks have significant projected EPS rates for 2012. I have been around long enough to know macro headline risk provides great opportunities to buy sound companies at discount prices. Market sentiment can and will turn on a dime-- what's more, it seems it has.
As we all know, timing is everything-- and the time is now to buy the following stocks. This could be your last chance to pick up these stocks at this level once the world realizes that things aren't as bad as they seem. Nonetheless, this is only the first step in finding winners for your portfolio. Use this information as a starting point for your own due diligence and research methods before determining whether or not to buy or sell a security.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STI, MU, MON, C, LSI over the next 72 hours.
