17. Procter & Gamble ( PG)
16. Time Warner ( TWX)
15. PetroHawk Energy ( HK)
14. Robert Half International ( RHI)
13. Health Management Associates ( HMA)
12. Ingersoll-Rand ( IR)
11. Cytec ( CYT)
Now, here is a closer look at Credit Suisse's 10 best stock picks for 2011, based on potential return. Below, they are order by upside, from good to great.
8. Kroger ( KR) beat the quarterly consensus sales and adjusted earnings expectations by 1% and 1.6%, respectively, but the supermarket chain's stock corrected 9.4% on announcement due to a weaker-than-anticipated selling gross margin and a 2.1% net income miss. Credit Suisse believes the market is overlooking quarterly positives, including a 6% pop in EBITDA and ongoing cost-cutting initiatives. It expects management to repurchase $200 million to $300 million of stock in the fourth quarter, helping earnings per share. Shares trades at a forward earnings multiple of 11 and a cash-flow multiple of 4.6, 25% and 50% discounts to food and staples retailing averages.
6. Guess ( GES) designs apparel. Its stock has jumped 17% in the past three months, but Credit Suisse remains optimistic about upside. The researcher expects positive forward earnings revisions going forward and multiple expansion as the market comes to appreciate the company's global brand power. Management has proven its commitment to reward shareholders, boosting the regular dividend 25% and paying a special $2 dividend in December, equivalent to a 4.3% additional yield on the share price. Credit Suisse believes Guess could achieve sales growth in the midteens in the next few years. Its $60 target suggests a one-year gain of 27%.
4. Intel ( INTC) is the world's largest chipmaker. A foray into tablets and smart phones has gotten little recognition from the Street, but Credit Suisse believes that any success outside of Intel's PC business will be "multiple accretive." Investors are concerned that tablets and net books will cannibalize PC sales and that enterprise spending in 2011 could surprise to the downside. Credit Suisse believes that Intel can maintain and perhaps extend its lead market share in PCs, and that opportunity in smartphone and tablet markets is "more tangible than what the market expects, both on share and profitability." At a trailing earnings multiple of 11, Intel is 47% cheaper than its five-year average.
2. Research In Motion ( RIMM) designs and manufactures Blackberry smartphones and recently debuted a tablet computer, PlayBook. Its chief competitor is Apple, maker of the iPhone. The iPhone's expansion to Verizon in 2011 presents a major headwind. Still, Credit Suisse is optimistic about overseas growth and believes that Research In Motion can maintain its 16%-17% market share in 2011, despite weaker North America sales. The market has been overwhelmingly pessimistic about RIM. Its stock trades at just 8.1 times Credit Suisse's 2012 earnings projection, a huge discount to tech peers. That forecast doesn't include potential EPS from tablets.