Back in December, InvestorPlace launched a feature in called 10 Best Stocks for 2012, in which experts picked a buy-and-hold investment they thought would deliver market-beating returns over the next 12 months.
After three months, things are looking pretty good. Eight of the picks ended the first quarter in the black, six topped the Dow Jones’ 8% returns and half were able to trump the 12% gains enjoyed by the S&P’s 500 — the index’s best performance since 1998!
Still, while most of the list is coming up roses, one stock that enjoyed modest gains midway through the first quarter has slipped to last place with double-digit losses.
With that in mind, let’s take a look at how these 10 stocks have held up at the quarter-way point. Here’s a recap of InvestorPlace‘s 10 Best Stocks for 2012:
No. 10: Arcos Dorados
Return as of 3/30: -11.9%
Investor: Josh Brown
As Josh Brown wrote in his original ARCO stock recommendation, Arcos Dorados is a play on four key themes:
- Expanding consumer spending in Latin America
- The ferocity of McDonald’s as a global brand
- Growth within a defensive sector
- The comeback potential for emerging-market equities in 2012
Arcos Dorados has completely missed the bus on emerging-markets stocks, as seen by the iShares MSCI Emerging Markets Index ETF‘s (NYSE:EEM) 15% year-to-date gains. The company was hurt by a disappointing earnings report in late February. Arcos Dorados’s fourth-quarter earnings of 22 cents per share and full-year earnings of 54 cents per share fell shy of analyst expectations of 26 cents and 58 cents, respectively, though both were improvements year-over-year.
At the March 30 closing of $18.09, ARCO is trading about 15% below its 2011 IPO.
No. 9: Hershey
Return as of 3/30: -0.7%
Investor: Jon Markman
Hershey (NYSE:HSY) managed to climb out of the doghouse but still is slightly down on the year. However, Jon Markman remains confident about the company’s prospects for the rest of the year, especially considering Hershey’s stability.
Ironically, stability was far from the norm for HSY shares during the first quarter, with a great deal of volatility coming in late February and early March.
And Hershey’s perceived stability proved less boon and more blight, as investors actually shunned defensive stocks like utilities and other dividend-payers in search for growth during the quarter.
Still, fourth-quarter earnings were a bright spot, which Markman pointed out early last month:
“The firm went 4-for-4, increasing earnings and revenues, and lifting both the dividend and 2012 guidance. Plus, Hershey’s focus on expanding international sales paid off, as it reported 25% growth in its top targeted markets: Mexico, China, Brazil and India.”
Markman also points out that while Hershey might look like a steady Eddie, it has some growth to brag about: namely, average earnings growth of 26.4% over the past three years!
All in all, Hershey could look plenty attractive to investors should the charging bull market finally lose its legs.
No. 8: Banco Santander
Return as of 3/30: +2%
Investor: Jim Jubak
After running the stock up to double-digit gains in the first couple months of 2012, European bank Banco Santander (NYSE:STD) finally slowed down and finished Q1 with just 2% gains.
While the Greek debt debacle reached at least some sort of resolution, and while European stocks have enjoyed a bit of a rally this year, Spanish stocks of late have taken a drubbing amid that country’s own fiscal difficulties.
Banco Santander in particular could have difficulties this year as the bank continues to shore up property assets and sets aside provisional money to meet regulators’ capital ratio requirements. Still, it has proven able to unload some of its bad assets, reporting recently that it had sold about 1.5 billion euros’ worth of bad loans to a number of American investment companies.
Banco Santander at least could see some interest as a bargain play, with its sub-$8 pricing around three-year lows. And while on a shaky precipice, it has a banner dividend yield of about 11%. But again, if trouble continues to shake Spain or the rest of Europe, STD could have more tough goings ahead.
No. 7: Turkcell
Return as of 3/30: +7%
Investor: Charles Sizemore
Charles Sizemore, editor of the Sizemore Investment Letter, has watched his investment slip to No. 6 since the mid-quarter update, though his Best Stock for 2012 — Turkish telecom company Turkcell (NYSE:TKC) — still is up a respectable 7%.
Sizemore continues to tout Turkcell’s strong positioning to profit from the growth of emerging markets, as well as TKC’s reasonable valuation.
Turkcell had a mixed bag in its most recent earnings report:
“Revenues grew 4% in what was a very difficult year for Turkey and emerging markets in general, and Turkcell’s subscriber base grew by 1.1 million to 34.5 million. The company expects 2012 revenues to grow by more than double 2011’s rate, driven by the increased popularity of data and mobile Internet plans.
Earnings took a hit, however, falling 33% due to a currency crisis in Belarus, where Turkcell has significant assets.”
Another interesting piece of potential for Turkcell is a return to a dividend. The company is embroiled in a power struggle, and through the ordeal, never made its expected payout. However, a settling of this dispute likely would result in the dividend going back to normal — which could feed a renewed gush of investor interest.
No. 5: FedEx
Return as of 3/30: +10%
Investor: Paul R. La Monica
The title of his latest article, “FedEx: Slow and Steady Will Win the Race” says it all. The company’s 10%-plus returns year-to-date have been better than La Monica expected — and that’s despite a quick decline following poor earnings guidance.
His reasons to select FedEx (NYSE:FDX) for our little contest: A low-risk investment with the ability to profit from organic growth if and when a recovery takes shape in 2012. And while things so far have looked good for the economy, La Monica is being a realist.
“… anyone holding onto the naïve hope that we are in for one of those V-shaped, hockey-stick or whatever other kind of shape recovery that involves GDP growing at — to quote Dark Helmet in Spaceballs — ‘ludicrous speed’ is deluding themselves.”
No. 5: Alcoa
Return as of 3/30: +15.8%
Investor: Jeff Reeves
InvestorPlace Editor Jeff Reeves’ pick for the Best Stocks for 2012 contest is Alcoa (NYSE:AA), and it hasn’t disappointed during the first quarter, outpacing the S&P 500 with 18% returns year-to-date.
His original argument for Alcoa was a good valuation — the company already had flopped dramatically from pre-recession levels and streamlined its way back to profitability — and that because aluminum has a certain baseline demand built in, there was no room to go but up.
And up it went. Alcoa’s quarterly earnings report was a bit of a mixed bag, but revenues of $5.99 billion were up from the year-ago period and beat analyst expectations. However, since its breakneck gains in January, Alcoa stock has mostly listed while the markets continued climbing higher.
Fears of a Chinese economic slowdown have at least had some investors slow to fully embrace an Alcoa comeback. Still, Alcoa projects 7% growth in aluminum demand, thanks to cutbacks in production, which should help prices — and ultimately, AA stock.
Disclosure: Jeff Reeves owns a personal position in Alcoa stock.
No. 4: Caterpillar
Return as of 3/30: +17.6%
Investor: Dan Burrows
If you’re looking for a broad-based recovery play, it’s hard to get better than Caterpillar (NYSE:CAT). The world’s largest maker of construction and mining equipment has its fingers in a lot of pies, and will benefit nicely from any sustained economic growth.
Caterpillar’s earnings earlier in the quarter were favorable, with increased global demand bolstering profit up 60% on record sales. The 2011 increases in both sales and revenues were the largest percentage increase in any year since 1947.
The good news continued. In March, Caterpillar said its order backlog hit record levels during the quarter, which bodes well for future performance. It also affirmed its fiscal 2012 outlook for earnings of about $9.25 a share on revenue of $68 billion to $72 billion.
Burrows also sees promise in a note by Zacks Equity Research, which looks for continued expansion of Caterpillar’s mining acquisitions.
No. 3: Microsoft
Return as of 3/30: +24.3%
Investor: James Altucher
Two times might the charm for James Altucher’s pick of Microsoft (NASDAQ:MSFT), which he picked for our 2011 contest, then felt just as confident in 52 weeks later.
If the first quarter is any indication, he’ll have plenty more to celebrate than 2011′s 7% losses for MFST. Microsoft, up 25%, was the third-best-performing Dow Jones stock this year, behind JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).
One of James’ original reasons for liking Microsoft — its valuation — is a bit plumper, thanks to the run-up. But the company’s stock buybacks remain in play, and MSFT still is sitting on a big pile of cash.
Meanwhile, Microsoft is seeing continued success with its Xbox 360 console and the expanding possibilities of its Kinect motion sensor. The company also has plenty of potential in the video conferencing and VoIP company Skype — and it’s now testing Skype Beta on smartphones using the Windows 7.5 operating system, also known as “Mango.”
Microsoft might have difficulties should it and the rest of the tech sector cool off after its red-hot first quarter, but the long-term attractiveness of its 2.5% dividend yield should help keep at least a few investors interested.
No. 2: Capital One
Current Return: +32%
Investor: Philip van Doorn
In his initial article, “Capital One: Top Bank Stock Pick for 2012,” TheStreet.com contributor Philip van Doorn makes the case that financials in general aren’t as bad as you think — and certain smaller banks like Capital One (NYSE:COF) are, in fact, ready to soar.
As we all know, financials did in fact soar. Indeed, they represented the top-performing sector in Q1 2012, up more than 20% — partially helped along by the results of the Fed’s financial “stress tests,” which led a host of banks and other firms to boost their dividends. As mentioned before, JPMorgan and Bank of America led the Dow Jones with 38% and 72% gains. Capital One was no slouch, either, notching 32% gains in the quarter!
Also in past months, Capital One finished its acquisition of ING Groep‘s (NYSE:ING) ING Direct business in the U.S., and it also announced it would make a public offering of $1.25 billion in common stock to help fund its purchase of HSBC’s American credit card business.
The risks to financials remain the same — the sector is beginning to look somewhat overbought, and the crises in Europe and foreclosure issues at home are far from solved. But so far, COF has provided plenty of padding.
No. 1: MAKO Surgical
Current Return: +46%
Investor: David Gardner
Little-known MAKO Surgical (NASDAQ:MAKO) continues to be the darling for our Best Stocks for 2012 buy list. The last time we checked in, in mid-February, MAKO had gained 46%. A few weeks later, and those returns have jumped to an astounding 67.2% — in just three months!
MAKO — a niche medical company banking on a narrow product line — is unlike most of the other stocks in the buy list, which are broad-based plays on an economic recovery. Still, Motley Fool co-founder David Gardner is looking the genius, with his belief in the company’s MAKOplasty procedure which resurfaces joints using custom implants and a surgical robot called the RIO.
Yes, a small-cap medical device company usually makes for a highly speculative play. But MAKO could have a game-changing product in its arsenal — and best of all, it’s playing into the growing group of baby boomers needing increased medical care as they age.
With the stock on pace to more than double, MAKO looks like the right place to be.