01-06-12 05:30 PM - Post#6043
The year 2011 turned out to an extremely volatile one for equity markets. While the Dow Jones managed to post gains of 5.50%, the S&P 500 ended flat for the year.
The Dow Jones and the S&P 500 began the year on a strong note, extending their gains from 2010. But, as the year progressed global equity markets came under pressure. The ongoing sovereign debt crisis in the euro zone, the debt ceiling stalemate in the U.S. and worries about global economic growth dragged down investorsâ€™ sentiment in the second half of 2011, pushing all three major indexes in the U.S. down sharply. It was a struggle for equity investors for the rest of the year.
Although recent economic data in the U.S. has been encouraging, there is still a long way before the debt crisis in the euro zone gets solved. This is likely to keep equity markets under pressure in 2012. Despite the uncertainty, there are some blue chip stocks that you can invest in 2012. Today, we will take a look at the Top 3 Blue Chip stocks you can invest in 2012.
Our top 3 blue chip stocks to invest in 2012 are Google Inc. (NASDAQ: GOOG), Apple Inc. (NASDAQ: AAPL), and International Business Machines Corp. (NYSE: IBM).
All three stocks outperformed the broad market and the Technology sector in 2011. While Google rose 8.74% for 2011, Apple rose 25.56%. IBM, meanwhile, rose 25.29%. This compares with a decline of more than 11% for the Technology sector.
We now look what will drive these 3 Blue Chip stocks in 2012.
First up is Google. The Mountain View, California-based search engine giant posted impressive year-over-year revenue and earnings growth in its most recent quarter (Q3). As the company enters into 2012 under Larry Page, who took over from Eric Schmidt in April 2011, it is more focused on a few core services. Under Page, Google has scaled down its experimental side slightly by removing Google Labs and cutting some non-core services.
Google continues to dominate the search and advertising businesses. The companyâ€™s smartphone business has also grown exponentially. Googleâ€™s Android platform now currently has 700,000 new activations on a daily basis.
Although Google faces increasing competition from Facebook Inc., the company continues to be the undisputed king of the Internet. In search advertising, Google has more than 65% of the U.S. market and more than 50% of the global market.
Despite increasing competition from Facebook, Google is not likely to lose hold in its search business anytime soon.
In the smartphone market, Google continues to win market share. According to recent data from market research firm comScore Inc., the Android operating system accounted for 46.9% of the U.S. smartphone market in November. Meanwhile, data from market research firm Gartner shows that Android devices command over half of the global smartphone market share.
Technology analysts at Robert Baird believe that Google is the dominant leader in online advertising and is set to benefit from ongoing secular growth tailwinds in search and display advertising. Overall Robert Baird analysts believe that Google is set to benefit even further from secular growth tailwinds, a healthy display ad platform and leading market share in mobile devices.
The next stock in our list of Top 3 Blue Chips for 2012 is Apple, which is hardly surprising. After a solid performance in 2010, Apple extended its gains in 2011 despite the volatility in the market. The death of Steve Jobs, Appleâ€™s iconic CEO, has been a major setback for the company. However, the Cupertino, California-based company remains a favorite among investors and Wall Street analysts.
Tim Cook, who took over as CEO after Jobsâ€™ death, has a tough act to follow. But, his performance as Apple COO does inspire a great deal of confidence. Since Cook became Appleâ€™s COO, the companyâ€™s shares have risen more than 375%.
In its annual report, Apple said that it expects to spend $8 billion in capital investment over the next year, representing an increase of 73% over fiscal 2011. If capital spending accounts for only 5% of Appleâ€™s fiscal 2012 revenue, the company is betting on 2012 sales to grow nearly 48% to $160 billion. Wall Street analysts currently expect Apple to post fiscal 2012 sales of $139 billion.
Over the years, innovative products have driven Apple shares higher and that will be the case in 2012. According to Gene Munster, analyst at Piper Jaffray and a well-known Apple bull, shares will be driven by new product roll outs. Munster says that in 2012 there will be new hardware on iPads and iPhones. Munster believes a new Apple TV is coming late in the year. All these mean that Apple still has a $200 upside, according to Munster.
The final stock on the list of Top 3 Blue Chips for 2012 is IBM. IBM was among the best performing large cap tech stocks in 2011, gaining more than 25%. IBM even impressed billionaire investor Warren Buffett disclosed a 5.4% stake in the company in 2011. Buffett is known to avoid technology stocks and therefore his purchase of IBM shares is surprising.
However, Buffett was attracted to IBM because of the companyâ€™s ability in finding and keeping clients.
IBMâ€™s earnings, over the past 10 years, have grown by 21% a year. Given IBMâ€™s positioning, the Armonk, New York-based technology giant is expected to maintain the 20% earnings growth rate.
IBMâ€™s growth markets are expected to continue to deliver outstanding revenue performance. In IBMâ€™s most recently reported quarterly results (Q3), growth markets accounted for 23% of the companyâ€™s total geographic revenue. IBM is well on its way to achieving its target of receiving 30% of total revenue from emerging markets by 2015.
IBM has also managed to boost dividends every year for 16 years in a row.
So here it is then. Our Top 3 Blue Chip stocks to invest in 2012. All three stocks we have picked are well positioned to growth in 2012.
Edited by dailystock_admin on 04-12-12 06:49 PM. Reason for edit: No reason given.