Wall Street investment pros' top stock picks for 2012
— -- Last Friday, USA TODAY's Wall Street reporter Adam Shell sat down with six top investment strategists and portfolio managers in New York City for USA TODAY's 16th annual "Investment Roundtable."
In a free-wheeling question-and-answer session lasting more than two hours, the panelists offered their investment outlooks for 2012 and shared their best moneymaking tips.
Here are each of the strategists' top five stock picks or investment themes for 2012:
Richard Bernstein
CEO and Chief Investment Officer,Richard Bernstein Advisors
Buy…
•USA assets. "The U.S., at worst, is going to be the best house on a bad block; people are underestimating risks in other parts of the world."
•U.S. Treasury bonds. Despite low yields, Treasuries offer "diversification," as they've been the only major asset class whose price has been moving in the opposite direction of stocks and most other assets.
•Small U.S. stocks. A play on domestic recovery; buy small-caps, especially financials and industrials, that will benefit from a better U.S. economy and avoid trouble abroad.
•Dividend-paying stocks. "It's not original" and defensive plays are "expensive," but that "doesn't mean they can't get more expensive" given investor "risk aversion."
•Avoid "credit-sensitive" plays. Investments tied to borrowing and leverage, such as housing, commodities, emerging markets, big banks and hedge funds, are likely to underperform.
Dan Chung
CEO and Chief Investment Officer,Fred Alger Management (Alger Funds)
Buy…
•Apple Computer ( aapl, Thursday close: $378.94). "Strategic road map" for iPad and iPhone maker left behind by late CEO Steve Jobs will spur new management to "prove they can continue success."
•Lowe's ( low, $24.66). Home-improvement retailer is "bound to benefit from even a modest uptick" in the large, beaten-down housing market.
•OpenTable ( open, $38.76). Once-high-P-E e-commerce play now "offers striking value," given its 25% growth rate and consumer following; also a possible takeover target.
•Qualcomm ( qcom, $52.55). Leading chipmaker is in "excellent position" to profit from the "next generation of faster-speed wireless mobile networks."
•LifeTechnologies ( life, $38.39). Provider of life sciences equipment and products has global portfolio positioned to profit from growing health care system and to rebound from 30% stock drop off its 52-week high.
Chung owns all via Alger funds; family owns AAPL, LOW, OPEN.
Bob Doll
Chief Equity Strategist,BlackRock
Buy…
•UnitedHealth ( unh, Thursday close: $48.52). USA's largest HMO has 70 million customers and is growing. Stock buybacks using free cash flow to drive 10%-plus profit growth.
•Dell ( dell, $15.05). Offers "good risk/reward" despite challenged PC business. Stock is "cheap and expectations are low," so shares could rise if Dell can "string together two good quarters of earnings back to back."
•HollyFrontier ( hfc, $21.93). Refinery is "cheap and more unloved" than most rivals and, despite narrowing refiner spreads, its better margins make it a good long-term story.
•Philip Morris ( PM, $75.92). Cigarette maker has strong free cash flow, pricing power, a yield of roughly 4% plus dividend growth. Share buybacks a plus.
•Raytheon ( rtn, $45.38). Large defense contractor has "less exposure to big-ticket items in defense budget" and more recurring revenue than competitors.
BlackRock owns all stocks; Doll and family own none.
Tom Lee
Chief U.S. Equity Strategist,JPMorgan Chase
Buy…
•Stocks benefiting from housing recovery. Vacancies and mortgage delinquencies are at levels not seen since 2006 and 2008, respectively, and affordability vs. renting's the best in 20 years. If housing picks up, anything that supplies it will prosper, especially financial and consumer discretionary names.
•Companies buying back shares. Buybacks have gotten so big that the share count in the S&P is shrinking, with the number of shares for sale back to 2000 levels. JPMorgan research shows the top 20 stocks in terms of buybacks beat the market by 20 percentage points since 2006.
•Stocks that were winners in 2009. "Treat 2012 as a post-financial crisis year. The template is 2009." If Europe's crisis stabilizes, financial and consumer discretionary stocks could soar.
•Beaten-down financials. Banks and other financials were the worst performing group in 2011, but "there are reasons to own them today." They are "hugely levered to turns in housing." The No. 1 group since 1970 when housing turns is financials.
Ann Miletti, Senior portfolio manager, core equity, Wells Fargo Advantage Funds
Buy …
•Comcast ( cmcsk, Thursday close: $23.07). Cable provider with "powerful pipe" for media and high-speed data will "pick up some growth" if housing market firms.
•ON Semiconductor ( onnn, $7.18). Selling at roughly 50% of its private market value after being hurt by Japan tsunami and floods in Thailand.
•Hertz ( htz, $10.67). Rental-car company with strong brand is revving up on higher rental volumes compared with air travel and its push into market for longer-term rentals.
•Grand CanyonEducation ( lope, $14.50). For-profit online educator with Arizona campus and strong management is gaining students and credibility.
•Health Management Associates ( hma, $7.12). Concerns about health care reform have pushed stock near historic low multiples. Skilled management adds value by focusing on patient care and innovation. Acquisitions also spurring growth.
Miletti owns the stocks through Wells Fargo funds.
Kate Warne
Chief investment strategist,Edward Jones
Buy …
•PepsiCo ( pep, Thursday close: $64.85). Soft-drink and snack maker is "defensive play" with a plump dividend yield of 3.2% and reasonable valuation. It should sell more snacks if commodity prices remain weak.
•Johnson &Johnson ( jnj, $64). Health care giant has "geographic and product diversity" and is positioned to profit via consumer, pharmaceutical and medical device businesses.
•Intel ( intc, $23.31). Chipmaker moving beyond PCs to "faster-growing mobile phone space" and has sizable 3.6% dividend yield and a below-market P-E ratio of around 10.
•Suncor Energy ( su, $26.61). Largest energy producer in Canada's oil sands has very good cost structure, production upside and is cheap vs. earnings.
•Johnson Controls ( jci, $28.85). Auto parts supplier — one of every three cars uses their components — to benefit from "pent-up demand."
Warne owns none of the stocks; family member owns JNJ, SU.