Thursday December 27, 2012
by Richard Moroney, editor Dow Theory Forecasts
Aflac (AFL), a U.S.-based insurer that draws nearly 80% of its sales from Japan, is our top pick for 2013 for yield-oriented investors.
For capital gains, our top idea for the coming year is Thermo Fisher Scientific (TMO), which furnishes research labs with instruments, equipment, flasks, solvents, and analytical software.
Aflac generated record highs for revenue, operating cash flow, and earnings per share in the last 12 months. Growth seems likely to continue in 2013, though at a slower pace.
The stock has returned more than 25% in 2012 but still looks cheap at just nine times trailing earnings, 48% below its 10-year average P/E.
Aflac also looks attractive relative to the 10-year norm based on its 2.6% dividend yield, and the dividend has been raised in 30 consecutive years.
In our Quadrix stock-rating system, all six of Aflac's category scores rank in the top 25% of our research universe, and the Overall score is the maximum of 100. Aflac, yielding 2.6%, is a Focus List Buy and a Long-Term Buy.
For capital gains, our top idea for the coming year is Thermo Fisher Scientific, which furnishes research labs with instruments, equipment, flasks, solvents, and analytical software.
Thermo Fisher Scientific's free cash flow rose 34% over the past year to $1.63 billion, and management seeks to return half of free cash flow to investors through stock buybacks and dividends.
Budget constraints could put pressure on Thermo Fisher's academic and government research clients (25% of sales). However, the stock's valuation -- just 14 times trailing earnings, a 31% discount to its three-year average, discounts those budget worries.
In our Quadrix stock-rating system, all six of the stock's category scores exceed 50, contributing to an Overall rank of 92. Thermo Fisher is a Focus List Buy and a Long-Term Buy.
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