Media outlets are espousing a new optimism and a reinvigorated market as the nation moves in to 2012. In particular, unemployment is decreasing and there has been an increase in credit. Likewise, the changing marketplace provides an opportunity for investors to look at businesses that depend upon credit availability. Therefore, we will look to Visa, Bank of America, Ford, and Sears for investment ideas as we progress into the New Year.
Visa Inc. (NYSE:V) -- The well-known payment technology company is currently trading around $100.00, near its 52-week high of 103.45, and up nearly 30% since the time I last recommended it. The company has been buoyed by an increase in consumer confidence and an expansion in business. An analysis of the company's fundamentals reveals several positive indicators, however the value for the price is not great. The price to earnings ratio of 18.95 is comparable to competitor MasterCard Inc. (NYSE:MA) at 19.05, but well above American Express Company (NYSE:AXP) at 12.47 and Discover Financial Services (NYSE:DFS) at 6.53. The company is trading at nearly 7.5 times its sales figures. A look at the cash flows reveals a consistent increase in net income over the past three years. Furthermore, the ROE is 14.17%, offering solid returns to investors. The company has exhibited growth over the past several years and is fundamentally sound. Despite these assuring indicators, the high price and poor dividend yield place lead me against purchasing the stock. Visa's dividend yield is .90%. In comparison, DFS pays a 1.50% dividend at a much cheaper price of $26.51. DFS has also experienced a tremendous 40.30% increase in quarterly revenue growth (yoy) and a price to earnings ratio of only 6.53. Visa may provide consistent long-term growth, but for the money DFS is a better value.
Bank of America Corporation (NYSE:BAC) -- The largest bank in the United States has been beaten down severely over the past two years along with most of the financial stocks. Nearly one year ago the stock was trading at $14.37 (1/19/2011). Today the stock trades around $6.60, which is about $1.70 above the 52 week low of $4.92. An analysis of the company's fundamentals reveals the stock to be trading at a price to book ratio of 0.33. Similarly, the forward price to earnings ratio is 7.43. The company offers a dividend of .60%, which is in the middle 50% of stocks in the industry. Overall, the stock appears to be significantly undervalued based on its fundamentals. Likewise, a technical analysis of the stock reveals some bullish trends. BAC closed above both its 10 and 50-day exponential moving averages. This divergence has bullish indications for the near-term future. While the company has many issues to tackle regarding its brand image, BAC might be one of the most fruitful long plays in 2012, especially if economic conditions improve. Thus, if you are willing to accept the risk I would buy BAC.
Ford Motor Co. (NYSE:F) -- Ford Motor Co., the second largest producer of cars in the United States, currently trades around $12.00. Ford looks to benefit from the credit increase as indicated by the Bloomberg article. An analysis of the company's fundamentals reveals positive signals. The quarterly revenue growth rate of 10.60% is greater than both competitors General Motors (NYSE:GM) and Toyota Motor Corp (NYSE:TM) at 7.80% and -4.80% respectively. Additionally, Ford's operating margin of 6.25% exceeds the industry standard of 5.53%. Likewise, Ford is the industry leader for ROE with a return of 317.13%. At its current price, the company has a price to sales ratio of 0.34.These fundamental characteristics are assuring and reveal a healthy company moving in the right direction. Likewise, an improvement in brand image and increasing sales in China will propel the stock price higher. Similarly, a technical evaluation exposes a bullish trend. Ford closed above both its 10 and 50-day exponential moving averages, which indicates a bullish near term trend. Additionally, the stock has experienced a soft upward trend, which further bolsters my bullish statement. Therefore, I would purchase Ford on the basis of the company's strong fundamentals and bullish technical outlook.
Sears Holdings Corporation (NASDAQ:SHLD) -- Sears is a larger retailer in the United States and Canada. The stock is currently trading around $33.50, near its lowest level in 52 weeks. Although Sears would benefit from the credit expansion, the company has struggled. The EPS over the last twelve months was -3.38 and the company has contracted -1.20% over the past year. In comparison, Target Corp (NYSE:TGT) and Wal-Mart Stores Inc. (NYSE:WMT) have increased 5.10% and 8.10% during the same time. Likewise, an analysis of the company's cash flows shows consistent losses over the past several quarters, as well as an increase in debt. SHLD posted a net income loss of -$363.00 M for the trailing twelve months. Additionally, the company does not offer a dividend. Furthermore, Sears has a negative brand image and it has struggled to satisfy their customers. These issues continue to hamper Sears as the company experienced difficulty competing with industry rivals Target and Wal-Mart. A technical analysis reveals further bearish implications. The stock closed below its 50-day exponential moving average and slightly above its 10-day average. This suggests bearish trends for the near-term future. Although there is an expansion in consumer credit, individuals are turning to other retailers for their goods. While Sears may receive a slight increase in sales during an economic recovery, the company still does not appear to be a viable investment opportunity. Therefore, due to the poor fundamental health of the company and negative technical trends, I would stay away from SHLD.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.