Grading the Graders: Analyst Stock Picks for 2012

BOSTON ( TheStreet) -- The all-star stock portfolio put together by S&P Capital IQ analysts for 2012 is outperforming this year's unpredictable market.

The research firm says its PowerPicks Portfolio, chosen by its analysts' at year-end 2011, "represent(s) the collective best ideas of its U.S. equity research staff" with the goal of "superior total return" for the coming year.

So far, so good.

Given that each of the firm's industry analysts make picks, the resulting portfolio of 20 stocks are from all 10 economic sectors comprising the benchmark S&P 500 Index.

This year the PowerPicks rose an average of 14% at the end of the first quarter, versus the S&P 500's 12% gain.

But they've done even better since, as they're up an average 14.2% through Monday, versus the S&P's 9.6% gain, and have outperformed the 12.8% return of the average large-cap growth mutual fund tracked by Morningstar.

Each of the stocks in the portfolio carries at least a four-star ("buy") S&P rating and the majority a five ("strong buy"), under the firm's Stock Appreciation Ranking System (STARS), a qualitative stock-selection methodology based on fundamental research by S&P's equity analysts.

Given that pedigree, the 20 stocks are all large-caps and leaders within their industry, and they tend to be dividend-paying multinationals.

Seven of the companies have better than 20% gains this year, led by IT database systems conglomerate EMC ( EMC), with a 34% jump.

There were two stocks in the group with declines this year, although they're not worth fretting about. One is the second-largest oil company in the U.S., Chevron ( CVX), down 3.8% this year on volatile oil prices, but with a 10-year average annual return of 11%; and the other is cereal and packaged foods behemoth General Mills ( GIS), the owner of the Pillsbury and Cheerios brands, which is off 2.6%, but has a 10-year average annual return of 6.4%.

Here are the 20 stocks that make up S&P Capital IQ's PowerPicks Portfolio for 2012 and their year-end target prices as set by the firm's analysts:

20. Chevron ( CVX)

Company profile: Chevron is the second-largest oil company in the U.S. and one of the biggest integrated energy companies in the world with exploration, production and refining operations worldwide.

Investor takeaway: Its shares are down 3.8% this year to $103.68, and have a three-year, average annual return of 19%. They carry a 3.19% dividend yield. S&P's year-end price target is $132.

S&P analysts say: "We view positively its aim to develop (liquefied natural gas) projects and build a top gas supply position in emerging Asia-Pacific markets."

19. General Mills ( GIS)

Company profile: General Mills is a leading global manufacturer and marketer of branded consumer foods, such as ready-to-eat breakfast cereals, refrigerated dough and other baking items, snack foods, ice cream, and yogurt. It is the second-biggest producer of ready-to-eat cereals in the U.S. and has recently partnered with Nestle ( NSRGY) to distribute cereal products in more than 130 countries. Last July it bought a controlling interest in the maker of Yoplait yogurt.

Investor takeaway: General Mills' shares are down 2.6% this year to $38.87, but have a three-year, average annual return of 19%. They carry a 3.15% dividend yield. S&P's year-end price target is $44.

S&P analysts say: "We believe that (it) has opportunities to bolster long-term profit margins through a focus on areas such as manufacturing and spending efficiency, global sourcing, and sales mix."

18. Apache ( APA)

Company profile: Apache is an independent energy company that explores for, develops and produces natural gas, crude oil, and natural gas liquids. Its portfolio is highly diverse and includes oil and gas, offshore and onshore, domestic and international, and near-term and longer-dated assets.

S&P analysts say: "Apache has a proven track record of unlocking value from acquired assets, and it has focused on integrating and exploiting mature reserves and directing capital to large projects."

Investor takeaway: Its shares are up 2% this year to $94.52, and have a three-year, average annual return of 11%. S&P's year-end price target is $145.

17. Coca-Cola ( KO)

Company profile: Coca-Cola is one of the world's largest beverage companies selling a variety of sparkling and still beverages under the Coca-Cola, Sprite, Dasani, Powerade and Minute Maid brands. It generates 70% of its revenue and about 80% of its operating profit from outside the U.S.

Investor takeaway: Its shares are up 4.3% this year and have a three-year, average annual return of 20%. S&P's year-end price target is $78. S&P analysts say they like the company's "capability to generate strong free cash flow, which we believe will be returned to shareholders through dividends and stock repurchases."

16. Atwood Oceanics ( ATW)

Company profile: Atwood is an offshore-drilling contractor that engages in the drilling and completion of exploratory and developmental oil and gas wells worldwide.

Investor takeaway: Its shares are up 4.4% this year to $42.89 and have a three-year, average annual return of 24%. S&P's year-end price target is $53.

15. American Tower ( AMT)

Company profile: American Tower is the largest independent operators of wireless and broadcast communication sites with more than 45,000 tower sites worldwide.

Investor takeaway: Its shares are up 6.5% this year to $63.92, and have a three-year, average annual return of 25%. S&P's year-end price target is $77.

S&P analysts say the company is "the market leader in the wireless tower industry, and we think further tower purchases will enable it to continue to achieve greater economies of scale."

14. Home Properties ( HME)

Company profile: Home Properties is a real estate investment trust that specializes in low-rise, garden-style apartments in suburban locations, mostly near Northeastern cities.

Investor takeaway: Its shares are up 6.8% this year to $61, and have a three-year, average annual return of 22%. S&P's year-end price target is $72. Its shares carry a 4.34% dividend yield.

13. CVS Caremark ( CVS)

Company profile: CVS is one of the nation's largest retail pharmacy chains now coupled with one of its biggest pharmacy-benefit managers after its merger with Caremark.

Investor takeaway: Its shares are up 7.3% this year to $44, and have a three-year, average annual return of 14%. S&P's year-end price target is $54.

12. Dell ( DELL)

Company profile: Dell sells notebook computers, desktops, software and networking equipment directly and through some retail stores.

Investor takeaway: Its shares are up 10% this year to $16.26, and have a three-year, average annual return of 14%. S&P's year-end price target is $19.

11. Avnet ( AVT)

Company profile: Avnet is one of the world's biggest distributors of semiconductors, embedded systems, computer products, software and electrical connectors.

Investor takeaway: Its shares are up 11% this year to $35.45 and have a three-year, average annual return of 19%. S&P's year-end price target is $39.

10. Lam Research ( LRCX)

Company profile: Lam makes semiconductor-processing equipment used in the fabrication of integrated circuits.

Investor takeaway: Its shares are up 14% this year to $42.89 and have a three-year, average annual return of 16%. S&P's year-end price target is $52.

9. Celgene ( CELG)

Company profile: Celgene is a biopharmaceutical company that develops therapies to treat cancer and immune-inflammatory-related diseases.

Investor takeaway: Its shares are up 16% this year to $78.78 and have a three-year, average annual return of 27%. S&P's year-end price target is $93.

8. Earthlink ( ELNK)

Company profile: Earthlink is a major provider of dialup Internet services and also offers broadband Internet. In addition, the firm provides value-added services such as web hosting, advertising, voice over Internet protocol telephone services.

Investor takeaway: Its shares are up 21% this year to $7.86, and have a three-year, average annual return of 7%. S&P's year-end price target is $10. S&P analysts say: "Acquisitions in the business-services area have significantly bolstered sales. We see revenue growth of around 7% to 8% in 2012 and 2013, driven by gains in business services."

7. Coach ( COH)

Company profile: Coach designs and markets high-end accessories and gifts such as handbags, business cases, footwear, jewelry, sun-wear, travel bags, watches and fragrances.

Investor takeaway: Its shares are up 21% this year to $74.50 and have a three-year, average annual return of 59%. S&P's year-end price target is $80. S&P analysts say: "We see a growing retail business in Asia and further development of Coach Men's expanding its global market opportunity."

6. American Express ( AXP)

Company profile: American Express provides charge and credit payment card products, and travel-related services worldwide.

Investor takeaway: Its shares are up 23% this year to $57.88, and have a three-year, average annual return of 43%. S&P's year-end price target is $70.

S&P analysts say: "The company will benefit as consumers and businesses increase their spending in an improving economy. With 56% of revenues from card spending, (it) is positioned well."

5. Harris ( HRS)

Company profile: Harris is a communications and information technology company that serves government and commercial markets worldwide.

Investor takeaway: Its shares are up 23% this year to $44.35, and have a three-year, average annual return of 21%. S&P's year-end price target is $48.

S&P analysts say: "We see Harris benefiting as local and federal government agencies focus on improving the technological capabilities of their communications systems, and we see recent acquisitions supporting modest growth" this year and next.

4. Express Scripts ( ESRX)

Company profile: Express Scripts is the biggest pharmacy-benefit manager in the U.S.

Investor takeaway: Its shares are up 27% this year to $57.63, and have a three-year, average annual return of 24%. S&P's year-end price target is $67.

After its April 2 merger with Medco Health Solutions, S&P analysts say "Medco offers significant opportunities to enhance (this company's) market position, yields more than $1 billion in operating synergies, and enables ESRX to generate over $4 billion in cash flow."

3. Advance Auto Parts ( AAP)

Company profile: Advanced Auto is a retailer of automotive aftermarket parts, accessories, batteries and maintenance items. It owns over 3,000 retail parts stores.

Investor takeaway: Its shares are up 29% this year, to $90.23, and have a three-year, average annual return of 28%. S&P's year-end price target is $100.

S&P analysts say: "The shares are attractive despite a recent run-up in price, now trading at around 14 times our 2012 earnings per share estimate, a modest discount to its peers and the S&P MidCap 400 (index)."

2. Cummins ( CMI)

Company profile: Cummins makes and services diesel and natural gas engines, and engine-related component products worldwide.

Investor takeaway: Its shares are up 30% this year to $115.19, and have a three-year, average annual return of 57%. S&P's year-end price target is $152.

S&P analysts say: "Cummins will continue to use technology and its strong balance sheet to increase market share" especially in emerging markets, which make up a growing part of its total sales.

1. EMC ( EMC)

Company profile: EMC is a leading provider of hardware, software and services for enterprise network storage, and now, through its VMware unit, software and services. The company is well-positioned to become a major player in cloud computing and virtualization software.

Investor takeaway: Its shares are up 34% this year to $29.12, and have a three-year, average annual return of 31%. S&P's year-end price target is $36.

S&P analysts say they rate EMC highly because "demand for data storage will remain strong, driven by higher usage of video and electronic record keeping. We see growing interest in cloud computing and virtualization software, which should benefit EMC."
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