This article looks at five cheap S&P 500 stocks as prospective investments in 2012: two to keep a wary eye on and three companies that you can research as candidates to place your bets on.
Tesoro Corporation (TSO) is an independent refiner and marketer of petroleum products in the U.S. The Fortune 150 Company operates seven refineries in the United States with a combined capacity of 665,000 barrels per day. The Tesoro brand is marketed at nearly 1,200 branded retail stations.
Tesoro announced that it would restart units at its oil refinery in Kapolei, Hawaii. The Kapolei refinery, which has a capacity of 94,000 barrels per day, was shut down due to power dips. Tesoro also revealed its plans to sell the Kapolei refinery and its other Hawaii assets, including 32 retail gas stations, in the second half of 2012.
Tesoro reported that it expects a net loss per diluted share for the fourth quarter of 2011 in the range of $0.55 to $0.80. The loss has been attributed to the collapse of the West Texas Intermediate (NYSE:WTI) to Brent crude spread and the weak environmental margin in California, which has been rumored to have improved in the last week of 2011. Despite the company's expected fourth quarter loss, it expects to report an annual EPS of $3.85 to $4.10 for 2012. The company attributes the bright forecast to its higher refinery utilization rates, gross margin improvements and the implementation of business improvement plans. With the sale of the Kapolei refinery, the recent loss in EPS, Tesoro looks like a shaky deal. Shares are currently trading at about $25 at the time of writing, within a 52-week trading range of $17.43 to $29.61.
The Travelers Companies, Inc. (NYSE:TRV) is a provider of personal and commercial property and casualty insurance products and services in the United States. The company has three operating segments, namely: Business Insurance; Financial, Professional, and International Insurance; and Personal Insurance. Its products are distributed primarily through independent agents and some direct marketing.
Travelers met its expectations for the fourth quarter of 2011, but missed on its EPS predictions. Revenues rose and EPS dropped significantly as compared to the prior-year quarter. The company recorded revenues of $5.6 billion, 0.3% lower than 2010's fourth quarter results. The company estimates annual revenues of $23 billion and an average EPS of $5.73 for 2012. Investors and speculators expect the stock to outperform expectations. The company stock is selling at about $58, within a 52-week range of $45.97 to $64.17. In my opinion, there are insufficient reasons to justify the expectation of the stock to outperform. I'd wait to see if there is a change in the company's results for the first quarter of 2012 before investing.
Valero Energy Corporation (NYSE:VLO) is another contender in the petroleum refining and marketing industry. It operates 3 segments, namely: Refining, Retail, and Ethanol. As of December 2010, the company owns and operates 14 petroleum refineries with a combined capacity of 2.6 million barrels per day and 10 ethanol plants with the capacity of 1.1 billion gallons per year.
Valero's main competitors are oil and energy companies. Valero holds a strong position in the market and looks like a good and cheap buy at the current stock price. The company's dividend yield is 2.50% and the firm is expected to payout about 16% of its annual earnings to shareholders as dividends. Valero's stock is trading at about $24 at the time of writing within its 52-week trading range of $16.40 to $31.12.
Archer-Daniels-Midland Company (NYSE:ADM) is one of the largest international food processing firms and works in the procuring, storing, processing, and merchandising of agricultural commodities and products. In recent news, the company has decided to end its joint venture with Metabolix Inc. in the production of biodegradable plastics. The decision came as a result of uncertainty pertaining to the venture's projected capital and production costs. This will affect the company's second quarter results as the company will incur a once-off pre-tax charge of between $300 to 360 million as a result of the concluded collaboration. The company has also begun operations in Slovakia, which marks the beginning of its growth and expansion strategy for Central and Eastern Europe. The newly acquired assets in Slovakia include a storing facility of nearly 149,000 metric tons. The company plans to add the supply of grape and sunflower seeds, and corn and wheat to its resources. The acquisition is a good indicator of the company's expansion and its pulling out of the venture with Metabolix proves that Archer-Daniels-Midland will not place unforeseeable risks to the company's capital reserves. This is good news for investors. The stock sits at a price of about $29 at the time of writing, within a 52-week trading range of $23.69 to $38.02.
Autodesk, Inc. (NASDAQ:ADSK) designs software and service solutions to customers in the architecture, engineering, and construction; manufacturing; and digital media and entertainment industries. It licenses and sells products and services directly and through global distributors and resellers. Autodesk was named among the best places to work in Fortune Magazine's "100 Best Companies to Work For". The company has over 7,000 employees worldwide. Apple's successful earnings are also a good sign for Autodesk. The company has released a new trial version of software called "Inventor" for the Mac PC. The software is used in the mechanical and architectural design. Autodesk also makes four other applications available for sale in Apple's iStore. The skies look clear and blue for this one; therefore it is a good time to buy. Autodesk shares are trading at about $36 at the time of writing, within a 52-week range of $22.99 to $46.15.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.