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For better or for worse, as investors we are generally suckers for a good stock recommendation. Trouble is, we frequently end up getting suckered by that very same “sure thing.” Well, doing one’s own due diligence is a reasonable antidote for bad counsel. On the other hand, what about those rare cases when the due diligence behind the proffered equities has effectively been done? And taking it all a step further, what if there happens to be a track record to support the recommended stocks?

Well, you just might find yourself with some “portfolio-worthy” stock picks. And, in the case of Sabrient Systems Baker’s Dozen, you’d end up with a basket of stocks that have managed to outperform the benchmark S&P 500 (SPX) to the tune of 36%, 21% and 7.3%, respectively, over the last three years.

Not bad for a baker, a banker, a candlestick maker or just about anyone else, for that matter.

Sabrient, a Santa Barbara-based boutique research firm that is about as far away from Wall Street as you can get while still being within the continental United States, released its 2012 stock picks in a live webcast back on January 5th. The picks, chosen by Sabrient’s founder and Chief Market Strategist David Brown, were gleaned from the firm’s quantitative models, with an assist from Gradient Analytics, the firm’s qualitative division.

So now the question is, can the company extend its streak of profitable prognostications? Well, if the horse out of the gate serves as any sort of accurate indicator, you might want to hold tight to that chit. As of Friday’s market close, the Baker’s Dozen was up a sweet 8.6%, substantially better than the SPY’s 3.1%.

Of course, the whole idea of the Baker’s Dozen is that it is 13 stocks designed for a “buy and hold” strategy for the 2012 calendar year, so it is obviously way too early to gauge the ultimate fate of the picks.

What it is not too early to do is to take a look under the hood of the 13 stocks, and see why they earned the right to be counted among the chosen few. It is worth noting that one primary consideration common to all of the picks was that they offered outstanding “growth at a reasonable price.” The “GARP” factor was a key element in Sabrient’s quant considerations for the Baker’s Dozen.

In a series of articles over the next few weeks, I’ll review one or two of the picks per article, sharing some of the analytics that made these companies such compelling choices.

Here is a complete list of the Baker’s Dozen.

Sabrient Baker’s Dozen for 2012






Seagate Technology


Technology: Data Storage Devices


Western Refining


Energy: Oil Refining & Marketing


Ocwen Financial Corp


Financials: Banking Services & Mortgages


Cloud Peak Energy


Energy: Coal


Watson Pharmaceuticals


Health Care: Biotech Pharmaceuticals


United Therapeutics Corp


Health Care: Biotech Pharmaceuticals


Globe Specialty Metals


Basic Materials: Mineral Resources


Dana Holding Corp


Consumer Cyclicals: Auto & Truck Parts




Industrials: Equipment Manufacturing


DXP Enterprises


Industrials: Equipment Service & Distribution


Kronos Worldwide


Basic Materials: Chemical Manufacturing


United Rentals


Industrials: Equipment Leasing


Ameristar Casinos


Consumer Cyclicals: Casinos & Gaming

Today I’ll start by reviewing #13, Ameristar Casinos.

Ameristar is an innovative casino gaming company that develops, owns and operates casino hotel properties across the Western United States, including Colorado, Idaho and Nevada. Its properties feature the usual mix of table games and slots. A small-cap stock, Ameristar generates over $1 billion in net revenues annually.

Ameristar is actually somewhat of a “misfit” among the Baker’s Dozen, as it has a high debt ratio, something that would normally exclude most stocks from the list. But Ameristar is growing at twice the rate of its competitors, with a projected 5-year growth rate of nearly 50% and the expectation of nearly 150% earnings growth this year. These numbers managed to offset the debt concerns, at least in the binary eyes of the quant model. Finally, Ameristar pays a solid dividend yield of 2.4% and has free cash flow of $4/share.

Also of note, though not a factor in selecting the stock as a constituent of the Baker’s Dozen, regional gaming companies like Ameristar could stand to benefit if Congress enacts laws that legalize online gaming, particularly if regulated by individual states. The urgent need that states have to increase tax revenue makes enactment of some version of such a law a real possibility in 2012.

Take all these elements together, and you come up with a recipe for the first of the Baker’s Dozen goodies. Keep your eyes glued to the pastry case for more tasty treats to follow.

Continue to Part II >>

Source: A Baker's Dozen Of Top Value Stocks For 2012: Part I