Tuesday, January 22, 2013

5 Value Picks for 2012: CSCO, DIS, WFC, JPM, MSFT

These companies have a strong earnings record, moderate debt levels and are considered industry leaders in the products and services they offer. While some of them have high-dividend yields, a few have good returns on equity and are trading at safe beta value.

Based on average estimates of analysts polled by Bloomberg, these five stocks have potential upsides ranging from 12% to 36%, buy recommendation of 69% and hold rating of 30%. The beta value for these stocks ranges between 0.9 and 1.2. Meanwhile, they also record significant cash flow per share and attractive P/E ratios below the industry averages.

See if (CSCO) is in our portfolio

The stocks are listed in ascending order of upside potential.5. Cisco Systems(CSCO) is a global leader in networking solutions. It designs, manufactures and sells Internet protocol-based networking and related products to the communications and information technology industry. The company has 52,000 partners globally endorsing its offerings. Of the 46 analysts covering the stock, 59% recommend a buy and 39% suggest a hold. Analysts' average 12-month price target for the stock is $21.28, about 12.1% higher than the current price, according to Bloomberg.For the first quarter of fiscal 2012, Cisco reported net sales of $11.3 billion, net income of $1.8 billion, or 33 cents per share, and non-GAAP net income of $2.3 billion, or 43 cents per share. The company's chairman and CEO recently said that the majority of restructuring has been completed and Cisco is now organized to successfully execute the strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems.Cisco recently announced that it has completed the acquisition of privately held BNI Video, which supplies two video products that offer video back-office and content delivery network analytic capabilities. The acquisition will augment the capabilities of Cisco's Videoscape TV platform, which allows service providers to deliver compelling video experiences to any device over any Internet protocol network.For the 2012 second quarter, the company affirms revenue to be in the 7% to 8% range year-over-year, and GAAP earnings per share guidance of 8 cents to 11 cents from the previous view of $6.80 to $6.85 per diluted share, and diluted net income of $3.00 and $3.05 per share.

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4. The Walt Disney (DIS) is a diversified entertainment company operating through five divisions: Media Networks, Studio Entertainment, Parks and Resorts, Consumer Products, and Interactive Media.

Of the 33 analysts covering the stock, 55% recommend a buy and 45% rate a hold. The stock's average 12-month price target is $42, about 13.2% higher than the current price, according to a Bloomberg consensus.For the 2011 fourth quarter, the company's flagship channel reported a 37% increase in profits to $201 million, while revenue grew 4%, attributable to higher network advertisement revenue and lower production and programming costs. Furthermore, the theme park division posted an unexpected profit of $421 million, up 33% year-over-year. Disney attributes these strong results to increased ticket prices and higher room rates.For fiscal 2011, the company reported revenue of $40.9 billion, an increase of 7% in the previous year. Net income attributable to Disney improved 21%, or $844 million, to $4.8 billion, while diluted earnings per share attributable to Disney improved 24% to $2.52. The company has announced an annual cash dividend of 40 cents per share, up 5-cents from the prior year.Fitch Ratings has assigned an 'A' to the company's proposed offering of benchmark 3- and 30-year senior unsecured notes with a stable outlook.

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3. Wells Fargo(WFC) is a diversified financial services company with an asset value of more than $1.3 trillion.

Of the 35 analysts covering the stock, 74% recommend a buy and 23% suggest a hold. The stock's average 12-month price target is $32.83, or 21.4% above the current price, as per a Bloomberg consensus.The company recorded net income of $4.1 billion, rising 21% year-over-year and 3% sequentially. Diluted earnings per share came in at 72 cents, an increase of 20% from the previous year and 3% from the prior quarter. Total loans increased by $8.2 billion sequentially to $760.1 billion, while average core checking and savings deposits rose $33.8 billion to $769.2 billion from the earlier quarter.Mid-November, Wells Fargo announced dividends on two series of preferred stock, $20 per share on Series J and $18.75 per share on Series L, payable Dec. 15. Also, it has declared regular quarterly dividend of 45.31 cents on its Series A 7.25% preferred securities payable Dec. 30 to shareholders of record Dec. 15. According to an estimate by International Strategy & Investment, Wells Fargo will likely increase its annualized dividend by 67% to 80 cents next year. The company's CEO said, "We want to return more capital to our shareholders."Recently, the company upgraded all of its deposit-taking ATMs in its network of more than 12,000 machines across the country to Envelope-Free. Cash or checks once inserted into the ATM machine are converted into digital images that are displayed on the screen and the receipt. Wells Fargo is said to be the first company to convert paper checks deposited at the ATM into digital images and transmit them electronically under a Federal Law.

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2. Microsoft(MSFT) develops, licenses and supports a suite of software products and services. It also designs and sells hardware, and delivers online advertising services to customers.

Of the 40 analysts covering the stock, 65% recommend a buy and 33% suggest a hold. The stock's average 12-month price target is $31.08, or 21.4% above the current price, as per a Bloomberg consensus.For the first quarter of fiscal 2012, the company recorded revenue of $17.37 billion, an increase of 7% from the same period the prior year. Operating income for the quarter increased 1% to $7.20 billion, whereas net income stood at $5.74 billion. Earnings per share came in at 68 cents. The Bing organic U.S. market share grew 14.7% during the first quarter, whereas the Windows 7 impetus continued with over 450 million licenses sold since launch.The company has announced the acquisition of VideoSurf Inc., a video discovery technology company based in California. Furthermore, MSFT has announced a protocol licensing agreement with AgreeYa Mobility that would enable AgreeYa Mobility solutions to interoperate with select Microsoft enterprise applications and services.

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1. JPMorgan Chase(JPM) is a financial services company. Its principal bank subsidiaries are JPMorgan Chase Bank and National Association, a nationalized bank operating in 23 states. The company's principal nonbank subsidiary is J.P. Morgan Securities LLC, the firm's investment banking firm in the U.S.

Of the 38 analysts covering the stock, 92% recommend buying and 8% suggest holding. The stock' average 12-month price target is $46.39, about 36.4% higher than the current price, a Bloomberg consensus shows.For 2011 third quarter, JPM recorded revenue of $24.37 billion and net income of $4.3 billion. For the quarter, return on equity stood at an attractive 16% on average allocated capital. Return on common equity is 9.8.Earnings per share were $1.02, in comparison with $1.01 in the same quarter last year. Meanwhile, credit card sales volume during the quarter grew 10%, while the commercial banking segment reported strong loan growth of 9%; deposit balances increased by 31%. For the quarter, return on equity stood at an attractive 16% on average allocated capital. Recently, the company and British Airways launched the first airline co-brand card with EMV Chip with Signature Technology. Cardholders can use the British Airways Card at any chip-enabled, point-of-sale device such as a restaurant, gas station and a train ticket kiosk. The company is planning to buy MF Global Holdings' 4.7% stake in the London Metal Exchange, in addition to the 6.2% interest it holds in the LME.>>To see these stocks in action, visit the 5 Value Picks for 2012 portfolio on Stockpickr.

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