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7 UBS Stock Picks for 2012

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( InsiderMonkey) -- UBS Investment Research's recently published report, "US Morning Meeting Highlights," discusses how several different companies are likely to be affected this year. The report was published Jan. 13 and we will summarize its main points.

UBS analysts are of the opinion that Obama's victory would have a positive impact on the "tech and industrial companies," but the "healthcare, financial, energy and consumer" companies will be negatively affected due to the tougher regulations imposed. A Republican victory, on the other hand could be beneficial for "universal banks, managed care, coal, defense, and high-end consumer stocks". In this article, we will discuss the buy-rated stocks mentioned in UBS's report.

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CSX (CSX - Get Report) engages in the provision of rail-based transportation services. It has been given a buy rating by UBS. Currently, CSX is the market leader in freight transportation services in the U.S. Despite an adverse macro environment and a volatile market, CSX is expected to generate significant profits and strong returns in 2012. Shares of the company are currently trading at $23 per share and are expected to reach a target price of $31, based on the earnings per share estimate of $2.34, for the year 2013.

We are bullish about CSX. CSX reported gross and operating margins of 38% and 29.5%, respectively, higher than its competitor, Norfolk Southern Corporation (NSC). Also, it has a price-to-equity ratio of 14 times vs. the industry average of 18 times. As the company is likely to invest in its infrastructure program, margins are expected to improve this year. We believe that CSX shares are a good purchase for the longer term since the company is usually more vulnerable to headwinds, such as a decrease in soft-coal demand, during the short term. Jeffrey Vinik had the largest stake in CSX among the 350-plus hedge fund managers we are tracking. Jim Simons' Renaissance Technologies initiated a brand new position in CSX during the third quarter.

KBR (KBR - Get Report) is an engineering and construction company that operates on a global scale. It has been given a buy rating by UBS. The current joint venture of JGC, Chiyoda and KBR is expected to reward investors as soon as the final investment decision is made. The completion of the contract is likely to add around $5 billion to the company's backlog. Shares of the company are currently trading at $32 per share and are expected to go north of $42. Also, earnings per share are expected to reach a target of $2.65.
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KBR $15.02 0.00%


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