With three months of 2012 under our belts, it's time to take a look back at my top 10 stocks for 2012. I have been writing articles for Seeking Alpha since May of 2008. In that time I have published four top 10 stock lists including this year's. For 2012, I broke the 10 picks down into three articles to provide more information about each of the picks. Here are the links to the previous articles:
- Part I - Activision Blizzard, Dreamworks Animation, Exact Science
- Part II - Ford, Hexcel, Imax
- Part III - Local.com, NCR Corporation, Seadrill, Vertex
For the first quarter the picks are up 19.55% with nine of the picks in the green and the sole loser less than a percent off. In the original articles, I gave price targets for 2012 and offered three reasons to buy each stock. Here is a breakdown of how each pick has performed so far and some added commentary.
Activision Blizzard (ATVI)
Q1 End: $12.82 + $0.18 dividend = $13.00
Start Price Target: $20.00
New Price Target: $20.00
- Diablo 3 release date announced as May 15th. See my article on the release of the game and its impact on shares here.
- Added Battleship and Transformers video games to Activision's lineup.
- Paid out annual dividend in March of $0.18. The $0.18 per share represents a 9% increase over last year's payout. The annual yield is 1.4% with this year's payout rate. The dividend has plenty of room to grow as it currently is less than 25% of earnings.
- New Spyro Skylanders Giants - Eight new collectible Skylanders characters have been in high demand and show the strength of this rebuilt and refocused Activision brand.
- Blizzard signs a new deal with Netease (NTES) for the rights to World of Warcraft and other Blizzard games in China.
- On March 27th, Stifel Nicholaus began coverage on the stock with a buy rating.
- Company is in talks to bring World of Warcraft to phones in a playable mobile version.
Recommendation: Shares are only up slightly from the beginning of the year and offer plenty of value at these levels. My target is $20 for 2012, while analysts are a little less bullish and fall in the $15 range. Either way look for shares to turn up the heat as the May 15th arrival of Diablo 3 approaches.
Dreamworks Animation (DWA)
Q1 End: $18.45
Start Price Target: $30.00
New Price Target: $30.00
- Had two of the top four television shows for kids ages 2-11 during the fourth quarter.
- Entered an agreement with Netflix (NFLX) for the rights to stream four television specials.
- Announced that How to Train Your Dragon will be launched as a television show in the second half of fiscal 2012, airing on Cartoon Network.
- Signed a joint venture with three Chinese media groups. The deal will not bring a movie until 2015 but helps Dreamworks gain entry into the Chinese movie market.
- Piper Jaffray upgrades shares to overweight with a price target of $23. This $3 increase in the price target was fueled by potential savings the analyst sees from the Dreamworks new distribution deal.
- Signed a video game deal with D3 Publisher for its three upcoming movies.
Recommendation: Fourth quarter earnings did not meet analyst's targets and shares were punished as a result. I wrote that the earnings didn't necessarily signal a poor 2012 in a recent article. The first quarter earnings will have no box office numbers and will rely on DVD sales of Puss in Boots. I think the first quarter earnings will fail to impress Wall Street and shares could fall again. I think under $15 is a gift and could produce a double by the end of 2012.
Exact Science (EXAS)
Q1 End: $11.16
Start Price Target: $10.50
New Price Target: $16.00
- Great interview with the CEO and the impact the Colorguard will have can be found here.
- Reported a net loss of $28.7 million for fiscal 2011.
- Participated in several leading investor conferences including Cowen Healthcare (March 5) and Roth Conference (March 12).
Recommendation: After passing by my first price target of $10.50, it is time to raise the 2012 targeted share price. Shares are now approaching a new 52-week high and appear headed to the $16 level not seen since 2003. I will set the new targeted price up to $16 and think shares can reach that with a FDA submittal for Colorguard during the calendar year.
Q1 End: $12.47 + $0.05 dividend = $12.52
Start Price Target: $15.00
New Price Target: $15.00
- Raised 2012 forecast to 14.5-15.0 million vehicles, compared to earlier guidance of 13.5-14.5 million.
- Posted strongest March sales in five years. (223,418 vehicles sold)
- The Ford Fusion had its strongest month ever during March. (28,562 vehicles sold)
Recommendation: Cramer keeps backing away from Ford because of its ties to Europe, but I won't back down. I bought shares of Ford for the long term prospects but think that 2012 is a great time to buy in and see a small gain by the end of the year. I am keeping a $15 price target on the shares.
Q1 End: $24.01
Start Price Target: $30.00
New Price Target: $30.00
- Reported fourth quarter revenue of $351.8 million.
- Fourth quarter earnings per share of $0.34, significantly beat analysts forecasts of $0.27.
- Gross margins rose to 24.1% in the fourth quarter, an increase of 2.4%.
- Commercial aerospace unit sales rise 21% in fourth quarter.
Recommendation: I recommended Hexcel shares back in December in an article inspired by Cramer's recommendation of the stock. Shares appear to be trading cheap compared to where the Boeing 787 deal could take them. The company has forecast earnings of $1.33 to $1.45 per share for 2012. Hexcel has beat analysts' earnings estimates each of the last four quarters. Now is the time to buy into this company before it continues to shatter earnings.
Q1 End: $24.44
Start Price Target: $35.00
New Price Target: $38.00
- Added Titanic 3D to Lineup.
- Signed a new deal with Empire Theaters for up to three joint revenue Imax theaters.
- Added Battleship to Lineup for select theaters.
- The Hunger Games makes $10.2 million on Imax screens in the United States across 268 theaters.
- Signed first agreement for an Imax theater in Pakistan.
- Added Prometheus to Lineup (June 8).
- Added Frankenweenie to Lineup (October 5).
- First Imax theater in an airport will open in second quarter of 2012 (Hong Kong International Airport). The theater will seat 358 people and host the largest Imax screen in Hong Kong.
- First James Bond movie to come to Imax will be Skyfall, which was added to the lineup.
- Signed four more Imax theater deals in India.
- Flying Swords of Dragon Gate passed $10 million in China. The movie showed on 61 theaters and took a mere 40 days to pass the milestone.
Recommendation: Imax is on fire when it comes to adding theaters and movies to its 2012 lineup. I have raised my price target to $38, which would match the company's 52-week high share price. I recently discussed Imax in an article that pointed out companies that could benefit from The Hunger games success. The Hunger Games showed that a limited one week run on Imax screens can still bring in over $10 million for a company like Imax. I expect a similar result when The Avengers comes to the over-sized screens for a limited one week engagement. Imax's recent earnings were discussed in an article I wrote here.
Q1 End: $2.58
Start Price Target: $3.50
New Price Target: $3.50
- Spreebird unit names "Best Shopping Mobile App" by Web Marketing Association
- Served a new record of one billion ad impressions in December 2011. This marks a 300% increase from the beginning of the year (January 2011).
- Recognized record traffic in the fourth quarter of 93.7 million monthly unique visitors. This is an increase from the previous year (80.1 million) and the third quarter of 2011 (91.9 million).
- Growing mobile presence as demonstrated by fourth quarter results. Forty percent of Spreebird.com's traffic is mobile along with 10% of local.com's traffic.
Recommendation: With its large 1,000 website portfolio and several key patents, local.com is positioned well for the growing mobile and Internet advertising markets. Several key acquisitions have taken local.com past local searches online and onto people's smart phones. I value the company high as an acquisition target and on their own merits. I think the company will report a profit for 2012 and surprise analysts several of the quarters to help propel the stock higher.
NCR Corporation (NCR)
Q1 End: $21.71
Start Price Target: $21.80
New Price Target: $30.00
- Launched smallest ATM in company history at the end of February. The initial contract with Cardtronics calls for 14 of the ATMs to be installed.
- Sold off entertainment division to Verizon (VZ) and Coinstart (CSTR) new combined unit.
- Continues to beat analyst earnings estimates.
- Fourth quarter earnings per share came in at $0.65, versus analysts' targeted $0.56.
Recommendation: NCR Corporation shares are up over 30% on the year so I am raising my price target on the shares since they are close to my target after only three months. My February article about NCR Corporation discussed fourth quarter earnings and how the Coinstar/Verizon deal might impact earnings. April 19th marks the day the company reports first quarter earnings and we will check back in on the company then.
Q1 End: $37.51 + $0.80 dividend = $38.31
Start Price Target: $40.00
New Price Target: $40.00
- In March, the company paid a $0.80 dividend. The payment is an increase from the previous three quarters but represents a slight decrease from the $0.875 paid out in March 2011. The $0.80 quarterly payment represents a yield of over 8%.
- Raising daily rig rates to $600,000 due to increased demand. Some rigs have been priced at $750,000 per day.
- Now has a fleet of 62 units under company ownership.
- Spinning off assets like Seabras and North Atlantic Drilling to help fund new operations and create shareholder value.
Recommendation: Seadrill continues to offer value for shareholders looking for income. The 8% dividend is nice for investors who are waiting for daily rig rates to increase or valuable assets spun off. I hold my price target of $40.00 and the company should reach that mark by the middle of 2012.
Q1 End: $41.01
Start Price Target: $55.00
New Price Target: $55.00
- Approval of Kalydeco to treat Cystic Fibrosis three months after new drug application submission.
- Has begun enrolling patients for Phase III of Incivek to treat those affected by both HIV and HCV after positive Phase II results. Seventy four percent of patients had undetectable HCV after twelve weeks.
- Vertex traded higher after disappointing results from Gilead's (GILD) Hepatitis C drug.
- Reported fourth quarter earnings of $0.72, which was an increase from last year's loss of $0.85.
- Fourth quarter revenue reported as $563.3 million.
- The majority of the fourth quarter revenue was from Incivek sales ($456.8 million).
- Other revenue sources were royalty revenue ($25.4 million) and collaborative revenue ($81.2 million).
- Expects Incivek sales of $1.5 to $1.7 billion in 2012.
Recommendation: When I recommended the stock, I discussed that it was highly likely that Kalydeco would be approved and provide a short term lift to the stock which proved to be true. I continue to think that the stock is undervalued and investors are failing to see the potential of Vertex's approved drugs and pipeline and focusing too much on competition in the Hepatitis C market. I continue to think Vertex is one of the most undervalued drug stocks and am looking at buying shares under $40.
All quarter end prices are from March 30th. Analysts' estimates are taken from Yahoo Finance.