8 UBS Stock Picks for 2012

UBS Investment Research’s report, “US Morning Meeting Highlights”, from January 13th discusses how stocks will be affected from the elections. The analysts are of the opinion that Obama’s victory would have a positive impact on “tech and industrial companies”, whereas the “healthcare, financial, energy and consumer” companies will be negatively influenced due to tougher regulations. A republican victory, on the other hand, could prove to be beneficial for “universal banks, managed care, coal, defense, and high-end consumer stocks”.

UBS AG (USA) (NYSE:UBS)

In this article, we will discuss the buy-rated stocks mentioned in UBS’s report (read the first part of this article).

Mattress Firm (MFRM) has been given a buy rating by UBS. Due to the economic downturn, the company has not been able to generate adequate sales to meet its previous records. However, it has set a target of around $1 million in sales per store for 2012. The idea of testing mall locations in Oklahoma is currently under consideration as it may help the company in expanding, given favorable results are derived from this activity. UBS does not expect the firm to experience a shift in the product mix to specialty products; thereby it is expected to give a stable outcome for the year 2012. Shares of the company were trading around $26 per share at the time of the publication of this report and are expected to go north of $30 by the end of 2012. Its earnings-per-share estimate has also been revised upward to $1.2 for 2013. UBS seems on target with its predictions as the stock increased to $31.04 on Friday.

CVS Caremark Corporation (CVS) is a pharmaceutical company based in the U.S. It has been given a buy rating by UBS, due to its expected ‘multi-source, generic launches’ in 2013. These launches are likely to have spillover effects which will prove to be beneficial for the Pharmaceutical sector. The expected merger between Express Scripts (ESRX) and MedcoHealth Solutions (MHS) is also expected to have a combined positive impact on the industry. Shares of CVS are currently trading around $42 per share and are expected to reach a price target of $48.

The company has a beta of 0.82 which shows that its shares are not volatile in nature. Also, its operating margin of 6% is greater than the industry average of 3.5%. CVS has a low price-to-equity ratio of 17x and a dividend yield of 1.5%. Billionaire John Paulson and Warren Buffett’s Berkshire Hathaway initiated brand new positions in CVS during the third quarter (see Warren Buffett’s portfolio).

CONSOL Energy (CNX) produces multi-fuel energy in the U.S. The company has been given a buy rating by UBS. With NatGas storage levels at a high and production that is exceeding expectations, UBS has lowered its NatGas forecast. CONSOL currently has low-cost operations in NatGas, making it susceptible to the increased supply. This will most likely affect CONSOL’s performance in the short-term. UBS analysts are of the opinion that CONSOL may now be considering share buybacks. Shares of the company are currently trading around $36 per share and are expected to go north of $73, indicating an upside potential of more than 100%.

CONSOL’s operating margin of 15.6% is significantly higher than the industry average of negative 0.2%. It also has a significantly lower price-to-sales ratio of 1.3x versus the industry average of 8.7x, indicating that it has the potential to turn things around in case of adverse conditions. Sonterra Capital initiated a brand new $154 million position in CNX during the third quarter. Steve Cohen’s SAC Capital boosted its stake in the company by 24% over the third quarter as well (see billionaire Steve Cohen’s top stock picks).

MVC Capital (MVC) engages in private equity investments. It has been given a buy rating by UBS. The company is currently investing its equity in three different companies and two other private equity funds. Around 30% of its portfolio is based in Europe, making it more volatile. Despite that, MVC Capital’s net asset value has increased with the appreciation of Security Holdings. Shares of the company are currently trading at $12.5 per share and are expected to reach a price target of $16. Earnings per share are expected to reach an estimate of $0.34, by the year 2013. Nelson Obus’ Wynnefield Capital had $16 million invested in MVC at the end of September.

AmerisourceBergen (ABC) is a pharmaceutical company that distributes drugs and provides healthcare services. It has been given a buy rating by UBS Investment Research. The likely merger between Express Scripts (ESRX) and MedcoHealth Solutions (MHS) will result in AmerisourceBergen losing the contract with Medco in 2013. This is why UBS is taking a conservative stance with regards to the company. It has also lowered AmerisourceBergen’s earnings per share and price target expectations. Shares of the company are currently trading at $39 per share and are expected to reach a price target of $44. Robert Emil Zoellner’s Alpine Associates is by far the most bullish hedge fund about ABC with a $261 million position at the end of September.

Cardinal Health (CAH) provides pharmaceutical services. It has been given a buy rating by UBS. The new CEO is confident that the company will retain its contract with Express Scripts. Also, UBS does not see any additional risks associated with the precarious relationship between the two companies. UBS has taken a conservative stance on the generics for drug distributors, which has resulted in a review of earnings per share for Cardinal Health. Shares of the company are currently trading at $42.34 per share and are expected to reach a price target of $51, based on a 14.5x price-to-equity ratio. Larry Robbins’ Glenview Capital and Joe Healey’s Healthcor Management are bullish about Cardinal Health.

Express Scripts (ESRX) engages in the provision of pharmacy benefit management services in North America. The potential merger with MedcoHealth Solutions (MHS) has had a positive impact on the company’s valuations. UBS has increased its earnings per share estimates above consensus expectations. Express Scripts has kept more than 95% of its prescription volume, going into 2012, giving UBS enough reason to have a $3.6 estimate for the company’s earnings per share. The company’s shares are currently trading around $51 per share and are expected to go north of $66, indicating a potential upside of 29%. Jim Simons’ Renaissance Technologies had $143 million in ESRX at the end of September (see billionaire Jim Simons’ portfolio).

McKesson Corporation (MCK) engages in the delivery of medicines and pharmaceutical supplies to the Healthcare industry. It has been given a buy rating by UBS Investment Research. UBS believes that McKesson’s management is quite positive about the company’s short term prospects. McKesson is considering shifting its investment towards a lower cost Paragon line. Investors view this shift as a positive change. Shares of the company are currently trading around $79 per share and are expected to reach a price target of $99. Lee Ainslie’s Maverick Capital initiated a $322 million position in MCK during the third quarter.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!