This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

2 Industries Will Outperform All Others in 2012

Stocks in this article: LYB BRCM GM TKR

(Adds companies for investors to review.)

NEW YORK ( TheStreet) -- Almost three-quarters of S&P 500 companies that have reported third-quarter results have beaten analysts' estimates. Still, Wall Street is trimming forecasts for next year.

S&P 500 companies are now expected to post almost 8% growth in 2012 earnings per share. But material and industrial stocks will be the driving force, generating growth of 12% to 16%, says Morgan Stanley. When the global economy begins to recover, those so-called cyclical stocks will benefit the most. Material and industrial stocks are already showing early signs of growth in the U.S., making it a good time to consider buying their shares.

Health-care and utilities companies beat analysts' third-quarter earnings estimates more than any other sector. That's because defensive industries tend to perform better in a weaker economy, which can also be seen in the stock performance of the groups. Utilities stocks this year have rallied 15%, and health-care shares are up 1%.

In October, the tables turned and cyclical stocks outperformed defensive shares. EPS growth from the cyclical sector is now expected outpace all others in 2012. Materials and industrials stocks will lead the charge as sales growth in the U.S. makes up for the moderation in sales growth in emerging markets.

S&P 500 companies' EPS estimates for 2012 have been declining for some time now, given increasing uncertainty surrounding growth prospects for the global economy. For cyclical sectors, estimates have declined by about 4% over the past three months, better than the 5.1% drop for the entire S&P 500, which was dragged down the most by financial, energy and telecom companies. They have had 2012 earnings estimates revised down by 7% to 11% in the past three months.

Cyclical companies to review include:

LyondellBasell Industries (LYB - Get Report) -- one of the world's largest plastics, chemical and refining companies. The stock is up 2.6% this year and on top of that it has a solid 2.3% projected dividend yield.

Broadcom Corp. (BRCM - Get Report) -- the company designs and develops semiconductors for wired and wireless communications. With a price-to-earnings ratio of 12, it is trading about 40% below its five-year average multiple. Also, it has a net cash cushion of $4.50 per share.

General Motors (GM - Get Report) -- the world's largest auto maker. At $24, this stock has declined 39% from its 52-week high as earnings estimates have fallen. Currently the stock is trading at only five times earnings. The long-term potential for this company, coupled with $20 per share in cash, make this an attractive investment.

The Timken Co. (TKR - Get Report) -- a leading maker of industrial and automotive bearings. The stock has declined 24% from its 52-week high and is trading at a price-to-earnings ratio of 8.5, about half its historical level. Additionally, recent insider buying means management thinks the stock is undervalued.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs