5 Great Stocks For March 2012

Ten stocks that combine high growth potential, healthy profit margins and low price-to-earnings multiples

The change in sentiment is palpable on Dalal Street. Just two months ago, stock market pundits were vying with each other to assign aggressive hair value?targets to BSE Sensex and NSE Nifty. The projected earnings of Sensex stocks in 2012-12, in the range of Rs. 1,250-1,275 were quickly discounted into the price and people started talking about profitability expectations for the following year, 2012-13.

But the warning signs were all there. Companies had failed to sizzle the markets with their second quarter (July-September 2012) results and the interest rate cycle had turned upwards. Not a day passed without the news of yet another scam breaking out. For a while, the market seemed to ignore these details. Everybody seemed to take comfort from the fact that Indian markets had proved to be one of the year's best performing in the world, attracting half of all portfolio fund flows to Asia.

The rude awakening came in the form of the housing scam. We got into the mood for a bloodbath almost immediately,?recalls the research head of a Mumbai brokerage. Suddenly, corruption and political troubles came to the fore. The market hasn't been the same since.  Investors and brokers have turned very cautious and have become ready to penalise any stock they think is low-quality. This anger was seen even in some IPOs that failed to garner enough money even while the issues of public sector companies couldn't handle the subscriptions they received.

In this unforgiving environment in which both fundamentals and sentiment are wounded, what kind of companies should an investor choose?

First of all, at 23 times trailing earnings and 16 times the earnings of 2012-12, the market is fully valued. There is absolutely no margin for error. The investor has to be obsessed with buying cheap and compare individual P/E ratios with industry averages before taking a decision to buy. At the sight of any more danger or earnings disappointment, the market will flee to safety, abandoning highly priced midcaps and multi-bagger?stocks. This is not the time for adventure.

Indian companies will have to contend with high interest rates in 2012. This means any company exposed to high debt or planning to borrow more will be penalised. Also, firms depending on borrowing-led consumption, like home builders and car makers, will hurt. Companies with strong cash flows will benefit.

There are several companies that smartly invested in capacity expansion when cost of funds were low and are ready to start production from the new capacity just as demand picks up. These firms will be able to benefit from the economic growth without having to incur a heavy cost.

Our recommendations comprise a set of 10 companies that will not only thrive in a high interest rate regime, but also find themselves the beneficiary of the strongest growth impulses in the economy. These are the themes that will drive the economy forward despite the turbulence in macro indicators.

5 Great Stocks For March 2012:Advanced Micro Devices Inc. (AMD)

 Advanced Micro Devices, Inc. operates as a semiconductor company in the United States, Japan, China, and Europe. Its microprocessors for server platforms include multi-core AMD Opteron processors; notebook PC platforms consist of the AMD Dual-Core Accelerated Processor E-350, AMD Dual-Core Accelerated Processor C-50, AMD Phenom II Dual-Core Mobile Processor, AMD Phenom II Quad-Core Mobile Processor, AMD Turion X2 Mobile Processor, AMD Turion II Mobile Processor, AMD Turion II Ultra Mobile Processor, AMD Turion Neo X2 Mobile Processor, AMD Athlon II processor, AMD Athlon Neo processor, AMD Athlon Neo X2 Dual-Core processor, and the Mobile AMD Sempron processor products; and desktop PC platforms comprise AMD Phenom II, AMD Phenom, AMD Athlon II, AMD Athlon X2, AMD Athlon, and AMD Sempron processors. It also provides embedded processor products for vendors in industrial controls, digital signage, point of sale/self-service kiosks, medical imaging, set-top box, and casino gaming machines, as well as enterprise class telecommunications, networking, security, storage systems and thin-clients, or computers. In addition, the company offers chipset products, including integrated graphics processor chipsets and discrete chipsets for desktop and notebook PCs, professional workstations, and servers. Further, it provides graphic products consisting of 3D graphics, and video and multimedia products for use in desktop and notebook computers, such as home media PCs, professional workstations, and servers, as well as technology for game consoles. The company's graphics products comprise discrete desktop graphics, discrete notebook graphics, professional graphics, FireStream processors, and game consoles. It serves original equipment manufacturers, original design manufacturers, system builders, and independent distributors through direct sales force, independent distributors, and sales representatives. The company was founded in 1969 and is based in Sunnyvale, California.

5 Great Stocks For March 2012:Cogdell Spencer Inc. (CSA)

 Cogdell Spencer Inc. is a privately owned real estate investment trust. The firm engages in investment and management of properties. It invests in the real estate markets of United States. The firm?s portfolio comprises of office buildings for the medical profession, including medical offices, ambulatory surgery and diagnostic centers. Cogdell Spencer was formed in 2005 and is based in Charlotte, North Carolina.

5 Great Stocks For March 2012:California Water Service Group Holding (CWT)

 California Water Service Group, through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, and Hawaii. It engages in the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, as well as for fire protection. The company also provides non-regulated water-related services, including the operation of water and recycled water systems; leasing communication antenna sites on its properties; meter reading and billing services; sewer and refuse billing services; lab services for water quality testing; selling surplus property; and the marketing and billing of third party insurance programs to residential customers. As of December 31, 2009, it served approximately 467,100 customers in 83 communities in California; 15,600 customers in the Tacoma and Olympia areas in Washington; 7,800 water and wastewater customers in the Belen, Los Lunas, and Elephant Butte areas in New Mexico; and 4,200 water and wastewater customers on the islands of Maui and Hawaii. The company was founded in 1926 and is headquartered in San Jose, California.

5 Great Stocks For March 2012:Dollar Tree Inc. (DLTR)

 Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

5 Great Stocks For March 2012:Monarch Financial Holdings Inc. (MNRK)

 Monarch Financial Holdings, Inc. operates as the bank holding company for Monarch Bank that provides various banking products and services for businesses, professionals, corporate executives, and individuals. Its deposit products include checking and savings accounts, as well as daily money market accounts and longer-term certificates of deposit. The company?s loan portfolio comprises consumer loans, including home equity lines of credit; professional lines of credit; and secured and unsecured loans for financing automobiles, home improvements, education, and personal investments, as well as residential and commercial real estate construction, acquisition, and development loans for 1-4 family residential markets. Its loan portfolio also consists of secured and unsecured commercial loans for working capital, including inventory and receivables; business expansion, such as acquisition of real estate and improvements; and the purchase of equipment and machinery, as well as loans secured by commercial real estate. The company also offers investment advisory services, insurance sales, safe deposit boxes, cash management services, check and bankcard services, direct deposit of payroll and social security checks, automatic drafts for various accounts, telephone banking services, Internet banking services, Internet cash management services, and automated teller machines (ATMs) services. In addition, it provides commercial mortgage brokerage services in the placement of primarily long-term fixed-rate debt for the commercial, hospitality, and multi-family housing markets. Monarch Financial Holdings operates seven offices in the Great Bridge area in Chesapeake; the Lynnhaven area, the Town Center area, the Oceanfront area, and the Kempsville area in Virginia Beach; and the Ghent area and in downtown Norfolk, as well as operates approximately 50 ATMs in South Hampton Roads and northeastern North Carolina. The company is headquartered in Chesapeake, Virginia.