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Author's Note: This is the second in a series of articles (read part I here) for Seeking Alpha that reviews Sabrient Systems annual 'Baker's Dozen', a list of 13 top-ranked stocks that was presented during a live webcast on January 5th, 2012.

During the first week of the New Year, Sabrient's founder and Chief Market Strategist, David Brown, introduced his choices for what he believes will be the top performing "GARP" (Growth At a Reasonable Price) stocks for 2012.

Sabrient, a Santa Barbara-based boutique research firm, is known for its successful proprietary models of the equity market. Brown set his formidable team of "Quants" loose on the task of creating a short list of high-quality stocks for this year's Baker's Dozen, using Sabrient's unbiased, fundamentals-based, quantitative approach based on various statistical analytics, including current stock valuations and forward earnings outlook.

In an additional effort to improve on the already impressive track record of the Baker's Dozen, which managed to outperform the benchmark S&P 500 (SPX) to the tune of 36%, 21% and 7.3%, respectively, over the last three years, Brown recruited the company's subsidiary, Gradient Analytics, to perform extensive forensic accounting analysis on his selections to eliminate any companies whose earnings "quality" might be in question.

This marriage between the quantitative and qualitative approach appears to be a match made in Wall Street heaven, at least based on results so far. The Baker's Dozen is up 11.6% as of market close Friday. Meanwhile, the SPY, reflecting the benchmark S&P 500 Index, is up 3.4% YTD.

For those who don't have the term GARP in their vocabulary, maybe it's time to add it. And for those who are already familiar with the concept, it could be a good time to take a look at these highly qualified candidates for the "buy and hold" portion of your portfolio.

Here the complete list of the Baker's Dozen.

Sabrient Baker's Dozen for 2012

#

NAME

TICKER

SECTOR: INDUSTRY

1

Seagate Technology

STX

Technology: Data Storage Devices

2

Western Refining

WNR

Energy: Oil Refining & Marketing

3

Ocwen Financial Corp

OCN

Financials: Banking Services & Mortgages

4

Cloud Peak Energy

CLD

Energy: Coal

5

Watson Pharmaceuticals

WPI

Health Care: Biotech Pharmaceuticals

6

United Therapeutics Corp

UTHR

Health Care: Biotech Pharmaceuticals

7

Globe Specialty Metals

GSM

Basic Materials: Mineral Resources

8

Dana Holding Corp

DAN

Consumer Cyclicals: Auto & Truck Parts

9

AGCO Corp

AGCO

Industrials: Equipment Manufacturing

10

DXP Enterprises

DXPE

Industrials: Equipment Service & Distribution

11

Kronos Worldwide

KRO

Basic Materials: Chemical Manufacturing

12

United Rentals

URI

Industrials: Equipment Leasing

13

Ameristar Casinos

ASCA

Consumer Cyclicals: Casinos & Gaming

Let's take a look at two more stocks on the list, United Rental, ranked #12, and Kronos Worldwide, which came in at #11. Ameristar Casinos was reviewed in part I.

United Rentals is the largest equipment rental company in the world, with an integrated network of more than 550 rental locations in 48 states and 10 Canadian provinces. Its customer base includes construction and industrial companies, utilities, municipalities, and homeowners.

Like Ameristar Casinos, United Rental is somewhat of a "misfit" within the Baker's Dozen, meaning it was selected despite the major negative of heavy leverage. However, it also has a one-year earnings growth projection of over 400%, the biggest among the 13 stocks.

United Rental has been a top performer in industrial services, which, in turn, happens to be the top performing industry group during the course of the past year. An additional factor that makes the stock eligible for membership in the elite "BD" club is that the company carries about $200 million in cash.

Next up is Kronos Worldwide, Inc., a global producer and marketer of titanium dioxide pigments (TiO2), providing technical services to over 4,000 customers in North America and Europe. TiO2 is an inorganic pigment used to impart whiteness, brightness and opacity for products, such as coatings, plastics, paper, fibers, food, ceramics and cosmetics. In addition, TiO2 has resistance to interaction with other chemicals, thermal stability and resistance to ultraviolet degradation.

Kronos is hardly a Wall Street darling, but maybe it should be. It trades at a projected P/E of less than 6, and is expected to grow earnings by over 100% this year, and over 20% for the next five years. If you needed a bit more reason to like this stock, consider that it pays a rather nice dividend of 3.3%.

What put this stock over the top in terms of selecting it for the "Baker's" basket was the positive report that was recently published on KRO by Gradient. The report focuses on unusual insider buying behavior that has historically portended strong price performance over the ensuing 12 months.

If you're developing a sweet tooth for these confectionary concoctions, stay tuned to SA for another batch of goodies coming to you hot from the oven.

Continue to Part III >>

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