Ranking the 10 Best Stocks for 2012

No. 3: Microsoft

Current Return: +21%
Investor: James Altucher

When making his call for InvestorPlace.com’s 10 Best Stocks for 2011 a year ago, James Altucher picked “A tiny company called Microsoft (NASDAQ:MSFT).” James went back to the well again in 2012 with the same call for this year’s feature.

James picked Microsoft because it has:

• A forward price-to-earnings ratio of less than 8 (less cash), signaling bargain valuation.
• A $40 billion stock buyback plan to boost shareholder value.
• More than $30 billion in cash in the bank at MSFT, and predictable revenue.

That provides great value in the tech stock. But there also was growth potential in the fact that Microsoft could change smartphones forever with Skype. Granted, that’s not something that’s going to happen tomorrow — but if investors get excited about the prospect, it could really prop up this mature technology play.

So far, the value proposition alone has paid off for Microsoft. The stock has rallied nicely with the rest of the tech sector.