5 Stocks to Buy in 2012

There's something wrong with each of the five stocks I'm going to present to you today.

But that's a good thing. If there weren't, we'd have to pay full price for these stocks. Instead, we get a cheap crack at five companies that the market is seriously underestimating.

Without further ado, here are five stocks to buy in 2012. In the last section, I'll also tell you exactly when to buy them.

Stock #1: Corning (NYSE: GLW  )
Corning is in the seemingly unsexy glass industry. However, its bread and butter is supporting the tech industry. It had a roller-coaster ride during the dot-com bubble because of its optical fiber business. Today, it's the go-to screen provider to the LCD TV market. Tomorrow's most promising opportunity is its scratch-resistant Gorilla Glass seen in so many of today's smartphones and tablets (although unofficial, Gorilla Glass is widely reported to be the screen glass in Apple's iPhones and iPads). The big opportunity there is moving up form factors and becoming prevalent in big-screen televisions.

However, a few weeks after it raised its dividend, there was the scary news that a Korean customer pulled out of a contract with its Samsung Corning joint venture. The result was Corning reducing its earnings guidance significantly for the fourth quarter.

More than even demand in end markets, I believe the biggest threat to Corning is its customers refusing to pay premiums for Corning's products. The latest news certainly bears that out. However, at current single-digit price multiples, I think a bet on Corning's ability to monetize its current lineup and innovate into the future is justified.

Stock #2: Ford (NYSE: F  )
It's hard to be unbiased about Ford and General Motors (NYSE: GM  ) . People have very strong, polarizing feelings about the companies themselves and the cars they make.

Here's my best shot at reality.

GM went bankrupt during the financial crisis and Ford was battered but survived without emergency government aid. The past was ugly for both carmakers, but both are making huge strides in shoring up their balance sheets, lowering their cost structures, and producing cars people actually want.

Both have trailing and forward P/E ratios well below 10. And GM is actually a bit cheaper on both than Ford. But given the choice between the two today, Ford is the safer bet. It's further along in its renaissance and I love the bold moves CEO Alan Mulally has made in his five years there. He's most likely retiring in the next couple years, but I believe it's his goal to leave Ford a winner.

So far, so good. In fact, last week, it showed its strength by bringing back its dividend.

Stock #3: Wells Fargo (NYSE: WFC  )
Since the banking sector is my specialty, there is a danger of Stockholm Syndrome here. That said, I think there many bargain opportunities in the space. Today, I'll highlight the safest of the American megabanks. Of the biggest six (JPMorgan, Bank of America (NYSE: BAC  ) , Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley), Wells Fargo is the most Main Street. In other words, it's the least Wall Street. It mostly sticks to its basic banking knitting: taking in customer deposits and making loans.

And unlike Bank of America's ill-fated Countrywide purchase, Wells Fargo's purchase of Wachovia during the financial crisis will likely prove an opportunistic masterstroke.

All this is why Warren Buffett has been buying the regular old stock of Wells Fargo but requires special preferred stock and warrants to invest money in Bank of America.   

Stock #4: Radio Shack (NYSE: RSH  )
People openly laugh at me when I suggest Radio Shack is a good buy at today's prices. I'm quite aware of the Shack's shortcomings. I get that the proverbial man on the street thinks of it as a clubhouse for electronics geeks. 

But someone's shopping there. It's been consistently profitable even through the financial crisis.

Of course, that string was almost broken last quarter when Radio Shack took a hit in severing its relationship with T-Mobile. But don't worry, it's upgrading to Verizon. It now offers mobile phones for the Big Three: Verizon, AT&T, and Sprint. And remember that AT&T may be swallowing up T-Mobile anyway.

That triple-threat combination is a powerful draw as Radio Shack is now more a mobile retailer than anything else. Despite its one-time earnings hit last quarter, it trades for just 10 times earnings (and throws in a tasty 4.5% dividend yield to boot).

Stock #5: National Presto (NYSE: NPK  )
One of my favorite small-cap plays is an eclectic company called National Presto. It sells kitchen appliances, adult diapers, and ammunition. Yes, that's a goofy mix, but here are three reasons why I love this company:

  1. It's gotten in the habit of paying out a massive special dividend each year that you don't see reflected on Yahoo! Finance. The 1.1% reported dividend yield jumps to eight times that size (8.8%) once you factor in the special dividend.
  2. Its balance sheet has no debt and cash equal to almost 20% of its market capitalization.
  3. Its CEO, Maryjo Cohen, owns 28% of the company, so she's very aligned with shareholder interests.

When to buy these five stocks
I believe each of these five stocks is a good buy today. In other words, I think they'll collectively beat the Dow (INDEX: ^DJI  ) and the S&P 500 (INDEX: ^GSPC  ) from here. But patience in the market is rewarded. Here are the prices that make these good buys absolutely great buys:

  • Corning below $12 a share.
  • Ford below $10 a share.
  • Wells Fargo below $25 a share.
  • Radio Shack below $12 a share (it's below that now!).  
  • National Presto below $90 a share.

I personally love the opportunity in each of these stocks, but our chief investment officer selected a different stock as the No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2012." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this legendary company.

Anand Chokkavelu owns shares of Apple, National Presto Industries, RadioShack, Bank of America, General Motors, JPMorgan Chase, Wells Fargo, and Citigroup, but he holds no other position in any company mentioned. The Motley Fool owns shares of Apple, Citigroup, Bank of America, National Presto Industries, RadioShack, JPMorgan Chase, and Ford Motor. The Fool also owns shares of and has created a covered strangle position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of Goldman Sachs, Corning, Ford Motor, General Motors, and Apple, as well as creating a bull call spread position in Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (35) | Recommend This Article (164)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 11, 2011, at 2:18 PM, rhealth wrote:

    Lately I've seen a lot of folks touting Radioshack, people love to vote for the underdog. Sometimes they are down for a good reason though.

    Radioshack used to be a place for geeks to get electronic supplies for their killer robots, but that market has faded and Radioshack has managed to keep from closing down by having small stores where you can get simple elctronic devices quickly. This allows them to survive, but thrive? I think not.

  • Report this Comment On December 11, 2011, at 2:23 PM, TMFBomb wrote:

    @rhealth,

    The thesis is predicated on RadioShack trading for a low price. I wouldn't pay a premium for it.

    Fool on,

    Anand

  • Report this Comment On December 12, 2011, at 9:51 AM, Karin123 wrote:

    European stocks lower after Moody’s warning; DAX down 1.99%

    Forexpros - European stock markets were sharply lower on Monday, after Moody’s Investors Service said it will review the credit ratings of all European Union countries following last week’s economic summit.

    During European afternoon trade, the EURO STOXX 50 tumbled 1.88%, France’s CAC 40 dropped 1.42%, while Germany’s DAX 30 declined 1.99%.

    Moody’s said it will review the ratings of all EU countries in the first quarter, saying Friday’s summit failed to deliver “decisive policy measures” to end the region’s debt crisis.

    European Union leaders agreed to implement stricter budgetary rules across the euro zone and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.

  • Report this Comment On December 12, 2011, at 3:33 PM, Mega wrote:

    "And remember that AT&T may be swallowing up T-Mobile anyway."

    That deal is dead.

  • Report this Comment On December 12, 2011, at 6:45 PM, jrj90620 wrote:

    Ford recommendation is good.I don't agree with Radio Shack.The only hope there is that someone buys it.

  • Report this Comment On December 12, 2011, at 6:48 PM, rstorm1 wrote:

    Please review the following and then decide if Ford "Ford was battered but survived without emergency government aid." I have heard this type of information several times and it seems to be completely misleading.

    http://www.dailyreckoning.com.au/the-half-truth-and-nothing-...

  • Report this Comment On December 12, 2011, at 9:06 PM, elixandre wrote:

    I have NPK and was considering selling it for no gain, just to raise cash, but this article has rekindled my faith. Insider ownership is a powerful factor in my opinion.

  • Report this Comment On December 13, 2011, at 1:21 AM, mikecart1 wrote:

    Radioshack is soon going to be following Circuit City. Yes they offer those hard-to-find electronic items not found elsewhere. However, if you have any patience at all you can find the same things online for 1/10th the price. Radioshack jacks up all the prices so everything they sell has huge margins. Radioshack is by far the worst stock recommendation of this article. Nearly everyone of them I see have empty parking lots.

  • Report this Comment On December 13, 2011, at 1:32 AM, dividendgrowth wrote:

    Gasp!

    Unless Apple and Google usher a new era in TV, GLW is lost!

    NPK is mostly a defense contractor which sells a special type of ammo to DoD. As with all DoD contracts, they can be cancelled anytime the government sees fit. Given the winding down of war in Iraq and Afghanistan and the enormous budget pressure, what does that tell you about NPK's future prospect?

  • Report this Comment On December 13, 2011, at 11:02 AM, bhill1964 wrote:

    I'm getting killed at Raymond James AT&T has been my only winner. How do I proceed in 2012 and am I making the righ chioce to fire them? I want to take complet control of my financial future but I am a little unsure any advice would be appreciated.

  • Report this Comment On December 13, 2011, at 11:04 AM, lud6 wrote:

    Regarding NPK, what good is a stock that pays out 8.8% in special dividends but loses 30% of its stock value the past year? Am I missing something?

  • Report this Comment On December 13, 2011, at 11:15 AM, Gator626 wrote:

    Yahoo Finance lists NPK's 1 year target estimate at $11.56. That's an 88% decrease in share price. I am really hoping that this is some kind of reporting error on Yahoo's part. Or are they suggesting the decrease in defense spending is going to practically wipe out NPK? Either way, I would like some kind of answer on that before I ever touch NPK.

  • Report this Comment On December 13, 2011, at 10:17 PM, G880nions wrote:

    Yep. Watch the next 90 days.

  • Report this Comment On December 14, 2011, at 1:55 AM, MichaelDSimms wrote:

    These aren't the droids (or stocks) your looking for.

  • Report this Comment On December 14, 2011, at 2:32 AM, Ironbob wrote:

    I've listened to well going on 20 years about how Radio Shack is done and it hasn't happened yet. However, I'm really interested in how the author got that Radio Shack pays over a 4% dividend.

    Never been a real big Radio Shack fan but I have to say they're numbers and market absorption are hard to argue with.

  • Report this Comment On December 14, 2011, at 8:36 AM, TMFBomb wrote:

    @dividendgrowth,

    It's a fair point on National Presto...in the last 12 months, 60% of its earnings have come from the ammo sales. Absolutely a consideration given any decrease in military action (or budget whammies).

    I'm curious why you're down on Corning. I'd love to hear the rest of your bear thesis.

    @lud6,

    I prefer stocks at lower prices.

    @Gator626,

    I think that price target is erroneous. I bet it's that one analyst's earnings estimate, not price target.

    Yahoo! Finance also shows an estimate of a 9.9% increase in sales next year.

    @Ironbob,

    The dividend yield for Radio Shack is straight from Yahoo! Finance:

    http://finance.yahoo.com/q?s=rsh&ql=1

    Fool on,

    Anand

  • Report this Comment On December 14, 2011, at 4:35 PM, MUDFLAP514 wrote:

    Is it just my imagination or what??? The stocks recommended by my fool I have already!!. Is this by design???

  • Report this Comment On December 15, 2011, at 11:07 PM, gc8awd wrote:

    Geeks do not hang out at RadioShack, they go to Fry's. Radioshack is a dinosaur mall relic for grandma and grampa. I wouldn't touch it with a 10 foot pole. Maybe it can tread water as strictly a mobile phone reseller, but what makes them any more enticing than any other store (or kiosk) that sells mobile phones? Absolutely nothing. Completely saturated market. I wouldn't invest a cent in them.

    Also, who the hell wants Gorilla Glass in a TV? It's completely unnecessary, TVs don't need to be rugged like mobile touch devices. Hell, laptops don't even use/need them. You should also take note that Apple submitted patents for it's own proprietary tough glass, it would not be totally surprising for them to drop Corning entirely in a few years.

  • Report this Comment On December 16, 2011, at 9:33 AM, techpatriot wrote:

    1) Corning - not sure what to think, this stock could go either way. I'd view this issue as somewhat speculative and buy long term LEAPS if anything, keeping my investment at risk low. Too much of the upside is tied up in it's research labs and the as yet unrealized demand curve for gorilla glass....

    2) I think you are spot on with Ford, and GM may not be such a bad deal either, but I will buy Ford since GM took a huge chunk of our (taxpayer) cash and never paid back a cent (this BEFORE the vaunted "bailout" they received that they shout about paying back to anyone that doesn't know the entire story......)

    3) WellsFargo...I agree with your premise it is the best of a bad lot, but I also don't trust ANY company in this segment, at the risk of losing some upside I'll stay away from Banks for now, and maybe for a long time to come. Everytime I follow a major banking company for a few months I collect more reasons to keep my distance than to make a purchase. I'd rather put my money into REITs than banking stocks right now.

    4) Radio Shack...The stand alone stores are ghost towns (except for the ones in small towns).

    The mall stores always seem packed, and I assume quite profitable. Big destination for cell phone buyers. the 0.50 dividend might tempt me at these prices, if I was convinced it was safe. I am not yet 100% convinced...but I might rank this as the second best pick here behind Ford, although considerably riskier.

    5) I don't know what to make of NPK right now. I invite comments. This could be the star of the bunch, or the biggest loser on here. The risk model for this company has changed dramatically in the last 12 months imho, and I'm evidently not the only one that thinks so.

    http://seekingalpha.com/article/308868-national-presto-indus...

    This is an SA article talking about what I fear most with this stock,namely a large reduction in revenue due to the end of the war.

    Also, the other divisions, while they sound promising, are not really contributing much to profitability.

    I like this company, but I am worried this might be a one trick pony with the war in Iraq ending.

    The US does not have the desire, nor the treasury to get into another war of that magnitude at this time. And the DOD contract evidently includes some favorable clauses (for the DoD) that may seriously curtail revenue for NPK in more of a peacetime environment...

    Again, comments are most welcome.

  • Report this Comment On December 16, 2011, at 9:52 AM, DCUDFlyer wrote:

    NPK's risk doesn't bother me all that much. I fully believe that while it derives an enormous portion of its value from the war, I think the downside risk is being overhyped. I'd be interested in a drop, but right now I'm fairly neutral on it.

    I like the F pick as well. I'm looking for some exposure to the auto market and I do think F fits the bill. My only issue is, when to initiate a buy?

    Radio shack really surprised me, haven't been in one in years. However, I may keep an eye on it for PURELY contrarian view.

  • Report this Comment On December 16, 2011, at 12:32 PM, 100tradejack wrote:

    There's a reason that GLW gapped down on 72,000,000 shares on November 28. GLW may do well in the long term, but I wouldn't touch it now.

    Jack

    100 TRADE JACK

  • Report this Comment On December 16, 2011, at 1:13 PM, redbonesrock wrote:

    The only reason Ford didn't file bankruptcy is that they took their money upfront.....do your research before you write an article that points out that GM took bailout money while Ford didn't..Both organizations were in need of a major financial overhaul including their ridiculous payscale from bottom up. Both companies will succeed in the long term becasue American consumers will continue to support them but I wouldn't be looking at either of these companies for quick money. I would bet on GM long-term as they are the larger of the two companies and continue to outsell Ford on their number one seller the pickup truck.....also do the math here.....GM sells GMC and Chevy pickups and easily outsells their competitor in this category regardless of what Ford claims in their commercials.

  • Report this Comment On December 16, 2011, at 3:36 PM, DCUDFlyer wrote:

    @redbone - why GM over F? Purely because they are "larger?" No mention of valuations, earnings, financials, etc. Just curious why you're so down on F.

    I'd like to hear your argument other than GM is "larger of the two companies and continue to outsell F on their pickup truck." For the record, I don't necessarily prefer one to the other.

  • Report this Comment On December 17, 2011, at 4:16 AM, techpatriot wrote:

    @redbone - Also on GM / Ford, can you clarify your remark about Ford taking money? Do you have a link? as far as I know (not saying I'm always right) they did participate in a Government credit program that was a line of credit that was open to a number of companies, but it was a loan through the Federal Reserve's Commercial Paper Funding Facility and was paid back. Bloomberg reported this back in October 08.

    Ford also participated in the Federal Reserve's Term Asset-Backed Security Loan Facility. Both those programs addressed systematic failure in the credit markets, and that neither program was designed for a particular company, or even a particular industry, unlike the billions that were poured into GM and the union, that were never paid back before the "official" government GM bailout (which was actually paid back.) Those programs were set up because the financial markets were frozen. (And yes, I am aware that all auto companies took government (our) money in the past in order to retool to meet the previous round of government CAFE standards, well before the great recession.

    Here is a good article on the subject in question:

    http://everydayecon.wordpress.com/2010/04/23/more-on-gm/

    Another:

    http://topics.nytimes.com/top/reference/timestopics/subjects...

    And you and I continue to fund GM and the UAW jobs program....

    http://money.cnn.com/2011/02/23/news/companies/gm_bailout/in...

    Also, before you go buying up GM stock, you had better remember who owns most of the stock:

    http://abcnews.go.com/blogs/politics/2011/06/how-much-did-th...

    Are you referring to some other type of "secret" government money I may have missed ? I'd be curious as to what it is if so, to better make my investment decisions...

  • Report this Comment On December 17, 2011, at 11:16 AM, SkepikI wrote:

    I continue to be glad I picked up some F the last time it was under 10/share. Sales are up, cashflow is up and its the LAST AMERICAN CAR COMPANY LEFT! I predict that will count for more with US buyers than anyone is anticipating as yet.

    And any way you slice the great gobs of $ poured down various ratholes in the past 5 years, Ford has consumed less than any other car company still alive. NO AMOUNT OF JUSTIFICATION will hide GM's great disappearing act with your billions, so no amount of gain potential will get my $ in their stock..... if you play 3 card monty with a pro, there's always another round that looks profitable....

  • Report this Comment On December 17, 2011, at 1:06 PM, TMFBomb wrote:

    @techpatriot,

    Enjoyed your thoughtful comments.

    Fool on,

    Anand

  • Report this Comment On December 17, 2011, at 4:35 PM, nancydog wrote:

    You may be down on most banks, but there are bargains to be found in their bonds. For Instance BAC-PRL is the BOFA convertible bond which will give you over 8 percent, and will get you over two hundred dollars in Long term gains in 2013. That's not a bad conservative-spec investment isn't it? I just bought some, and am awaiting the first interest payment in January. Hi-Ho.

  • Report this Comment On December 17, 2011, at 8:22 PM, techpatriot wrote:

    @nancydog, Interesting, I have not researched this category. Can you buy them from a discount broker?

    What is your risk (assuming you hold to maturity.)

    Got any good links to research this?

    What else is good besides BAC - I just hate to support such an anti consumer company.

    (What's wrong with me, I am starting to sound like a OWS supporter these days?...)

  • Report this Comment On December 18, 2011, at 6:46 PM, Morgan378 wrote:

    Corning - No. Another from Japan.

    Ford - No. Labor issues in the future.

    Presto - No. Receivables slow. Cash flow - titrating off DoD teat - not adequately addressed.

    Radio Shack - No. Up and comers eat share. Phones, service and contracts - no difference in market.

    Wells Fargo - No. Accumulating cash - still has gabage left on books. No where to put it. Paid back Government too quick. Liquidity and loans safer - but still "An elephant eating with a mouse's ass." Hasn't come up with formula to lend that's satisfactory.

  • Report this Comment On December 18, 2011, at 7:24 PM, madav1138 wrote:

    RSH is a profitable company and not as downtrodden as you all seem to believe. I go by my personal experience when judging a retail company not only by the numbers but I visit them, see what they can offer. RSH has a very knowledgeable and friendly staff and I have used them to upgrade my last two phones, and will go back to them again next year. I have gotten a Palm Centro, and an Evo Shift from them, and the whole process took a while but that was because the sales associate was busy explaining to me all the capabilities and recommendations for apps for the phone. This happened at different stores, not just one. In fact, one was in Georgia and the other Arizona, and before that where I got my Samsung, was in Florida. They also have all high quality accessories right there on the wall, and are usually much higher quality than the crap on Amazon or at Best Buy. So before you go knocking RSH because its an old fashioned name, go upgrade your phone there and see where the difference is. I upgraded my wife's phone at Best buy and I regretted it because the idiot insisted on us subscribing to the 4G service when its not even available in our area. That has been my experience.

  • Report this Comment On December 19, 2011, at 7:29 AM, afamiii wrote:

    Radio Shack, Ford, no competitive advantage, limited growth prospects. Price is where it should be

  • Report this Comment On December 20, 2011, at 6:23 AM, DPWDirector wrote:

    I think that the Fool is ok with Ford and Wells Fargo, but the other choices worry me. I intend to sell puts "Out of the money" in these two a dollar lower than the Fool recommends buying. Small premium to take in, but anytime you can ring the register is better than the pitful interest rates you get paid nowadays for the Banks to hold your money.

  • Report this Comment On December 28, 2011, at 11:10 AM, rubenawena wrote:

    how do you buy these shares-the top 5 ones?

  • Report this Comment On December 28, 2011, at 11:34 AM, sakajote wrote:

    I had pose a longer question to customer service who directecd me to post to the board. The gist of it is this. I am a first year subscriber. I started tracking a number of MF recommeded stocks. I waited until the market was back above 12000 and then tookl my final year assessment. It is as follows: You can see that the tracking results are poor. I realize there are no guarantees but I am seeking member opinion and insight on how to better use this service--clearly it requires significant additional study. Thanks!

    AMZN

    -8.76%

    ES

    ENERGYSOLUTIONS INC COM

    -15.53%

    F

    FORD MTR CO DEL COM

    -19.81%

    GHL

    GREENHILL & CO INC

    -3.63%

    GLW

    CORNING INC

    -15.60%

    JNJ

    JOHNSON & JOHNSON

    1.39%

    LH

    LABORATORY CORP AMER HLDGS COM NEW

    -3.29%

    NXPI

    NXP SEMICONDUCTORS N V

    -12.56%

    OMI

    OWENS & MINOR INC HOLDING COMPANY

    -6.77%

    PWER

    POWER ONE INC NEW COM

    -51.88%

    WFC

    WELLS FARGO & CO NEW

    9.32%

    WFM

    WHOLE FOODS MKT INC

    30.05%

    YRCWD

    YRC WORLDWIDE INC COM PAR $.01

    -44.09%

  • Report this Comment On March 05, 2012, at 8:42 PM, ingenuitieswest wrote:

    On Dec. 11, 2011, MF said, "I suggest Radio Shack is a good buy at today's prices." Since then the stock has plummeted like a rock. Might a Best Buy take-over bid boost the price and give it renewed life? Would be interested in knowing MF's position on RSH now.

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