10 Stocks JPMorgan Says May Rise Up to 58%

(Adds that Hess shares erased a loss for the year.)

BOSTON ( TheStreet) -- Now is a good time to pick up undervalued cyclical stocks as they are poised for double-digit gains this year, according to JPMorgan Chase ( JPM) investment analysts.

The stock market has rallied 20% in the past four months and, historically, after a run like that, it takes a breather and remains in a trading range, as it has over the past five days, said the Feb. 2 research note from the investment bank.

"While we see a pause in the short term, followed by further gains, we believe this pause will be a time to add cyclical (stocks) exposure," it said.

The firm's stock selections will likely soon be picking up a tailwind as the government said today that the U.S. labor market grew by 243,000 jobs in January, the most since last spring, and the jobless rate fell to 8.3% from 8.5%, the lowest since February 2009.

That caught Wall Street flat-footed as the consensus was for a slowdown in job growth since the start the year and that unemployment would remain at 8.5%.

JPMorgan's 10 top picks have potential upside of 22% to 58%, according to its estimates. They include a range of companies, from trash collectors to insurance sellers.

JPMorgan said it remains optimistic for the market this year, giving a year-end target of 1,430 for the S&P 500, which represents an 8% upside to the current level. "We see many signs of a healthy market and likely further gains six and 12 months out."

The criteria used to select these stocks is that they should be in one of four sectors: energy, financials, industrials or materials; have a free cash flow yield of greater than 5%; be rated "overweight" by the firm; have a market value of at least $2 billion; and, finally, have at least a 15% potential upside to the firm's 12-month price target.

Here are JPMorgan's top 10 picks in inverse order of potential price upside based on the firm's 12-month price targets:

10. Waste Connections ( WCN)

Company profile: Waste Connections provides collection, transfer, disposal, and recycling services in 27 states. In addition to 45 landfills, 140 collection operations, and 57 transfer stations, it owns two intermodal facilities that operate waste-by-rail fleets. It is expected to earn $1.61 per share in 2012.

Investor takeaway: The $39.50 price target is a 22% premium to its current price. S&P likes it too, giving it a "buy" recommendation and a four out of a five-star rating.

9. Fluor ( FLR)

Company profile: Fluor is a global provider of engineering, procurement, construction, and maintenance services to a wide range of big customers, including oil and gas firms, manufacturers, power companies, and governments. It is expected to earn $3.77 per share in 2012.

Investor takeaway: It has a $70 price target on it, which is a 24% premium. S&P gives it a "buy" recommendation with a four-star rating.

8. MetLife ( MET)

Company profile: MetLife offers insurance and financial services to individual and institutional customers. Its products include life insurance, annuities, and individual automobile and homeowners insurance, as well as group insurance, reinsurance, and retirement and savings products. Its 2012 earnings are estimated at $5.07 per share.

Investor takeaway: Its $45 price target is a 27% premium. S&P gives it a "buy" recommendation and a four-star rating.

7. Alcoa ( AA)

Company profile: Alcoa is the largest producer, worldwide, of aluminum products. Its 2012 earnings are estimated at 53 cents per share.

Investor takeaway: It gets a $13 price target, a 28% premium. S&P gives it a "buy" recommendation and a four-star rating and has a $13 price target on it.

6. National Oilwell Varco ( NOV)

Company profile: National Oilwell Varco is one of the largest equipment suppliers in the drilling industry. It provides equipment for rigs and service products used in oil and gas production. Its 2012 earnings are estimated at $5.90 per share.

Investor takeaway: Its $100 price target is a 35% premium to its current price. S&P gives it a "buy" recommendation and a four-star rating and has a $99 price target on it.

5. Arch Coal ( ACI)

Company profile: Arch Coal is the second-largest coal producer in the U.S., providing coal for 6% of the nation's electricity generation. It's projected to earn $1.97 per share in 2012.

Investor takeaway: It gets a $20 price target, a 39% premium. S&P gives it a "buy" recommendation and a four-star rating and has a $25 price target on it.

4. Allstate ( ALL)

Company profile: Allstate is the second-largest U.S. personal lines, property-casualty insurer. It is expected to earn $3.65 per share in 2012.

Investor takeaway: It gets a $40 price target, a 39% premium. S&P has a "hold" recommendation on its shares and gives the company a three-star rating.

3. Freeport-McMoRan Copper & Gold ( FCX)

Company profile: Freeport-McMoRan's mines produce more copper and molybdenum than any other publicly traded company in the world. It also has sizeable gold-mining operations. It is expected to earn $4.28 per share in 2012.

Freeport McMoRan Copper & Gold will look to refinance some of its debt as well as pay down its borrowings as it looks for opportunities to cut costs. It had $3.5 billion in debt as year-end 2011. The company has repaid $3.8 billion in debt since January 2009, resulting in estimated savings of around $260 million, it said.

Investor takeaway: It has a $65 price target, a 41% premium. S&P has a "hold" recommendation on its shares and gives the company a three-star rating and a $46 price target.

2. Embraer S/A ( ERJ)

Company profile: Embraer, based in Brazil, makes small commercial aircraft, including jets. It also produces aircraft for military and corporate aviation, as well as aircraft systems and structural components. It is expected to earn $2.44 per share in 2012.

Investor takeaway: It gets a $42 price target, a 53% premium. S&P has a "hold" recommendation on its shares and gives the company a three-star rating and a $30 price target.

1. Hess ( HES)

Company profile: Hess is an integrated oil and gas company involved in exploration and production on several continents and refining and marketing primarily on the U.S. East Coast, where it has substantial retail operations. It is expected to earn $6.59 per share in 2012.

Investor takeaway: The price target of $89 is a 58% upside. S&P gives it a "buy" recommendation and a four-star rating and has a $76 price target on it.

Hess' shares today rose almost 5%, erasing a decline for the year.

>>To see these stocks in action, visit the 10 Stocks JPMorgan Says May Rise portfolio on Stockpickr.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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