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10 Top S&P 500 Stocks for 2012

MILLBURN, N.J. ( Stockpickr) -- After a year that was accentuated -- or shall I say pockmarked -- by a continual flow of exogenous events such as natural disasters, sovereign debt and budgetary crises and political changes in the Arab world, resulting in a flat S&P 500 index, we head into a fresh new year with a clean slate. 2012 will bring with it a whole new set of economic data points, political dynamics and earnings reports.

In this article, I want to focus on a portfolio of stock picks from the S&P 500. Rather than picking a top 10 for the entire index, I want to pick a top stock from each of the 10 S&P 500 sectors. This will provide sector diversity while still allowing me to cherry pick the best for 2012.

>>5 Rocket Stocks to Buy for 2012

Consumer Discretionary

At the end of September, the Economic Cycle Research Institute, in a well-coordinated and splashy media blitz, declared that the U.S. was tipping back into a recession. As economic data points proved to the contrary, the ECRI quietly did a double take and qualified its call for a recession.

I am sorry to say that the ECRI for the first time in its history will have gone down looking at a third strike and will have mistakenly called for a recession. The economy is improving in the U.S., albeit slowly. It also appears that the impact of the European financial crisis will be minimal upon the U.S.

One theme that I believe will come back to life in the U.S. is household creation and housing. There is evidence that demand for multifamily and single homes has begun to rebound. While I would not be a buyer of the housing stocks, I am looking at the consumer discretionary stocks that rely on housing. (For another take on housing stocks, see today's " 3 Housing Stocks for a 2012 Rebound.")

The stock that best fits this thesis is Bed Bath & Beyond (BBBY - Get Report). After the housing-led recession resulted in earnings declines for the company in fiscal 2008 and 2009 (the company's fiscal year ends in April), the company came roaring back in fiscal 2010 and 2011. Earnings are expected to rise 27% for fiscal 2012 and 14% in fiscal 2013.

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I believe that the 2013 estimates are too low because of comments made by management in its recent conference call. Bed Bath & Beyond is a company that could rise 15% to 20% in 2012.

Bed Bath & Beyond, which showed up on a December list from Jim Cramer of 7 Stocks for Your Buy List, was also featured recently in " 7 Hot Stocks on Traders' Radars."
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WPI $85.73 0.00%
BBBY $45.37 -0.90%
BTU $1.67 -1.76%
CMI $113.89 -0.48%
LNC $40.87 -4.15%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

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