Top Five Companies Worth a Second Look in 2012

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If you’re feeling more than a little dizzy from the ride through the 2011 market, you’re not alone. It’s been like a ride on a nightmare carousel: The horses go up and down and around and around and never get anywhere. And it just goes on and on and on…

But, while it may seem impossible, some companies actually leapt off the merry-go-round and turned in great performances. There were the champions of course—with Apple, Google and Facebook standing squarely in the winners’ circle—but some notable also-rans deserve a second look as well.

Here are five companies positioned to sprint ahead of the pack in the next year. Take a second look.

1. Solarcity—The Exception

If you’ve been following the death notices of solar power companies, you might think their chances are pretty dim. There was Massachusetts-based Evergreen Solar, which fell into the Chapter 11 pit in August, taking an estimated $58 million in state aid with it. Then, of course, there was Solyndra, which upped the ante, taking $528 million in federal loans with it when it went belly-up the same month.

One exception in the sector is SolarCity, which boasts a client list including Walmart, Intel and eBay, to say nothing of residential customers across the West and Southwest. It’s now working with $200 million in venture funding, with an IPO on its calendar for late 2012 or 2013. Mark your calendar to watch for it. (Can you feel that slight tremor in the once all-powerful Chinese solar industry?)

2. Alexion Pharmaceuticals

The pharmaceutical industry, battered by the economy, foreign entries into the market and the uncertainties of health care reform, could have used some of its own mood-enhancing drugs this year. But some companies rose above the fray, including Alexion (AXLN), which started life with a product to treat a rare—but life-threatening—blood disease and is now working to expand its range, both through organic product development and acquisitions. A three-year average shows revenue growth of 75 percent and profit up 82 percent. It could be just what the doctor ordered in 2012.

3. Pandora

The on-demand media industry just keeps streaming (yes, we meant streaming) ahead, which is music to the ears of companies like Pandora (P), the Web-based radio station that provides listeners with a steady diet of music targeted to their individual tastes. Prior to the company’s IPO in June there was some noise in the technology and financial presses about its lack of profitability (some analysts say it won’t be profitable until 2014), but the potential for good returns is staggering. For starters, it now has 80 million listeners. It’s particularly popular with mobile device users, but is also bringing commuters into the fold; more and more new vehicles will be Pandora-enabled in the coming year.

The company is currently working to get its ad-revenue house in order to cash in on the expected tsunami in mobile advertising sales. According to some estimates, revenue in the sector is expected to surge to more than 10 times last year’s figure to $10.5 billion in 2015. That should usher in a veritable symphony of profits for Pandora.

4. Intuitive Surgical

Unhappy with your doctor’s bedside manner? Perhaps your next surgical procedure will be performed by a surgeon that doesn’t have one—a robotic device. An increasing number of hospitals and medical systems are turning to robotic surgical systems for their cost-effectiveness and precision. One company, Intuitive Surgical (ISRG), has been cashing in on that trend with its da Vinci surgical system, which allows a surgical team to make tiny, precise incisions, thus reducing a patient’s trauma and recovery time. In the second quarter of this year Intuitive revenue rose 21.4 percent (compared to Q2 2010) to $425.7 million from $350.7 million. And the company has enjoyed double-digit year-over-year percentage revenue growth for the past four quarters. Put another way, the company’s da Vinci system is helping it turn revenue growth into an art form.

5. Cirrus Logic

Look around your home or office. How many devices have some technological component? (A dead give-away is an LED screen somewhere on the device.) There are dozens, right? Well every one of them requires integrated circuit products (read: semiconductors) to work. One company that’s helping to make technology even more ubiquitous in our lives is Cirrus Logic (CRUS), which produces semiconductors for products ranging from smart phones to Blu–ray players. Over the last three years the company has seen year-over-year annualized earnings-per-share gains of 340 percent. And, as technology continues its incursion into every corner of our lives, the company’s revenue potential can only increase.

So, while it doesn’t look like that carousel that was the 2011 market is going to become a high-speed raceway anytime soon, there are some brass rings out there. You just have to be willing to reach a little to find them.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Economy , US Markets

Referenced Stocks: ALXN , CRUS , ISRG , P

Sue Mellen

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