Barclays' 7 Stocks With Great Upside For 2012

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Includes: AET, BA, HON, MCK, NBL, NKE, TSO
by: Hawkinvest

The start of a new year brings optimism and an opportunity to set goals and make changes in everything from your personal life to your portfolio. With almost all of 2012 still ahead of us, it makes sense to position your portfolio for success. Now is the time to generate and consider new investment ideas, so it makes sense to consider stock picks from a top investment banking firm.

Barclays (NYSE:BCS) is based in London and offers a wide range of banking products, as well as services such as wealth management and investment management. Barclays has compiled some of its top stock picks that it expects to rise by at least 30% in the coming year (see the entire list here). Here is a closer look at a number of Barclays favorite stocks for 2012:

Honeywell International, Inc. (NYSE:HON) is a highly diversified maker of aircraft lighting, turbine engines, aircraft parts, automation devices, security products, specialty chemicals, auto filters and spark plugs, car care products, and many others. Honeywell stock dropped to about $52 recently, but has been trending higher. The dividend is higher than average and the shares have a reasonable price to earnings ratio. Barclays believes the specialty materials business will allow Honeywell shares to rise about 30% in 2012.

Here are some key points for HON:

  • Current share price: $56.70
  • The 52 week range is $41.22 to $62.28
  • Earnings estimates for 2011: $4.04 per share
  • Earnings estimates for 2012: $4.45 per share
  • Annual dividend: $1.49 per share, which yields 2.6%

Nike, Inc. (NYSE:NKE) is a leading maker of athletic sportswear and footwear and is based in Oregon. Nike has a strong balance sheet and the company has been posting solid revenue growth. The Nike brand has great global recognition and the company has plenty of growth potential in emerging market countries. This stock was trading for about $90 just a few weeks ago, but has been on the rise. The stock looks too expensive at about 20 times earnings. I think investors are paying too much for the Nike brand name with the stock, so I see no reason to buy unless a major drop occurs. Barclays believes margin expansion and other factors can push the stock up about 31%.

Here are some key points for NKE:

  • Current share price: $98.30
  • The 52 week range is $69.43 to $99.14
  • Earnings estimates for 2011: $4.93 per share
  • Earnings estimates for 2012: $5.80 per share
  • Annual dividend: $1.44 per share, which yields about 1.5%

McKesson Corporation (NYSE:MCK) distributes medicines, medical supplies, beauty products, and also provides information technology solutions to the healthcare industry that relate to patients, medical supply chains, billing, etc. McKesson shares have a book value of $28.98. The stock has been a little weak lately, and it could be poised to trend lower, so it makes sense to buy only on dips. Overall, the valuation is reasonable and exposure to the healthcare sector makes sense for most investors. Barclays believes growth will accelerate for McKesson's IT division and sees about 32% upside for the stock.

Here are some key points for MCK:

  • Current share price: $77.24
  • The 52 week range is $66.61 to $87.32
  • Earnings estimates for 2011: $6.33 per share
  • Earnings estimates for 2012: $7.09 per share
  • Annual dividend: 80 cents per share, which yields 1%

Tesoro Corporation (NYSE:TSO) operates about 800 retail gas stations and is also a major refiner of oil. Tesoro recently announced that quarterly financial results would be disappointing due to margin pressures. This news confirmed general concerns about margins for all refining companies which is one of the reasons this sector is cheap. Tesoro shares have a book value of $26.64 and a forward price to earnings ratio of about 6. Refiners can be somewhat seasonal and margins often improve just before the summer driving season begins as demand surges, so it might be a good time to start accumulating. At $23 or less, it looks like a great buying opportunity for long-term investors. Barclays see potential upside of about 112% for Tesoro shares.

Here are some key points for TSO:

  • Current share price: $23.04
  • The 52 week range is $17.43 to $29.61
  • Earnings estimates for 2011: $4.49 per share
  • Earnings estimates for 2012: $3.77 per share
  • Annual dividend: none

Noble Energy (NYSE:NBL) is an oil and gas company based in Texas. This company has oil projects in the Gulf of Mexico and Africa, as well as high-potential plays in the Marcellus and Niobrara shale areas. Barclays believes that Noble will be able to increase production by about 15% and increase revenues by about 25%. The dividend yield is not very generous; however, the earnings are enough to cover a much higher payout, so the dividend could rise in the future. Barclays see 32% upside in Noble shares.

Here are some key points for NBL:

  • Current share price: $95.91
  • The 52 week range is $65.91 to $101.27
  • Earnings estimates for 2011: $5.13 per share
  • Earnings estimates for 2012: $6.84 per share
  • Annual dividend: about 88 cents per share, which yields about 0.9%

Boeing (NYSE:BA) is a leading aerospace and defense company. Boeing makes the world-famous 747 and has recently introduced the 787 Dreamliner. The 787 offers more speed and fuel efficiency when compared to older models. New models like the Dreamliner could see increasing demand from airlines looking to upgrade to more fuel efficient aircraft as oil prices continue to rise. Boeing shares have been trending higher lately, so it makes sense to buy on dips only. Barclays believes an up-cycle is just starting for commercial aircraft and sees about 37% upside for Boeing shares.

Here are some key points for BA:

  • Current share price: $74.60
  • The 52 week range is $56.01 to $80.65
  • Earnings estimates for 2011: $4.47 per share
  • Earnings estimates for 2012: $4.95 per share
  • Annual dividend: $1.76 per share, which yields 2.4%

Aetna, Inc. (NYSE:AET) is a leading provider of health benefits plans such as medical and dental, and also offers other types of insurance. This company has members nationwide and is based in Connecticut. Aetna shares look like a solid investment and currently trade for just over 8 times earnings. The book value is $29.06 per share. This company has a strong balance sheet with about $4 billion in cash and about $4.4 billion in debt. This stock recently traded down to about $38, and any dips close to that level would be an attractive buying opportunity. Barclays sees about 34% upside in Aetna shares.

Here are some key points for AET:

  • Current share price: $43.70
  • The 52 week range is $32.53 to $46.01
  • Earnings estimates for 2011: $5.15 per share
  • Earnings estimates for 2012: $5.09 per share
  • Annual dividend: 70 cents per share which yields 1.6%

Data is sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.