The firm calls its positioned for double-digit earnings growth that is unparalleled in its ability to solve customer problems with its deep industry expertise, broad set of offerings, and global presence.  The $230 target is based solely on a 13.5x multiple on its 2013 earnings estimate of$17.00 in earnings per share (versus $16.42 EPS consensus from Thomson Reuters).

It noted, “We believe the company deserves to trade at a modest premium given its relative predictability and stability, and EPS growth profile of 10%-15%. We believe IBM’s goal of $20.00 in EPS in 2015 is achievable. In our view, the beauty of the IBM story is that double-digit EPS growth is not dependent on the top line, but rather a growing mix of higher-margin software (23% of revenue) through organic means and acquisitions.”

Additional notes are as follows:

• IBM is Arguably the Model Enterprise Company.
• Strategic Advisor of Choice.
• Broad International Exposure.

After closing down 0.4% at $192.82, the 52-week range is $151.71 to $194.90.  IBM’s market value is $223.6 billion and the consensus price target is only $199.33.  Stern Agee’s price target is 15% higher than the rest of Wall Street and it also appears to be the new “street-high” price target if Thomson Reuters is accurate.

This call matters to the DJIA because IBM is the largest component by far as the DJIA index is price-weighted rather than market cap-weighted.  If Stern Agee is correct, IBM’s implied upside is about 19.3%.

JON C. OGG

Bank of America is trading at a healthy discount to its book value.  The stated book value is $20.09 per share and the tangible book value is now up to $12.95.  Even with a $6.80 pric after a 20% gain in two weeks, this is a steep discount.  The Warren Buffett investment from Berkshire Hathaway Inc. (NYSE: BRK-A) looks like it may pay off now.

Bank of America was the last of the money-center outfits to report and shares are indicated up about 5.5% at $7.17 in active pre-market trading.  The move is also good for other banks which have reported:

Wells Fargo & Co. (NYSE: WFC) is indicated up 0.6% at $30.42 and it trades above book value.

J.P. Morgan Chase & Co. (NYSE: JPM) is up 1.2% at $37.00 and Citigroup Inc. (NYSE: C) is up 1.6% at $29.50.

JON C. OGG

Most of the largest companies in the U.S. will not have large earnings swings from last year, with the notable exception of financial firms. The majority of banks and investment houses will suffer earnings declines because of poor trading results and bad loans, notwithstanding the fact that JPMorgan Chase (NYSE: JPM), arguably the best-run bank in America, is on this list, as is Wells Fargo (NYSE: WFC) . Corporations like IBM (NYSE: IBM) and Procter & Gamble (NYSE: PG) have such huge customer bases worldwide that they can hardly outperform the global economy. What differentiates them is their ability to manage their operations better than peers as they keep expenses low and take all the advantages they can of their significant market shares.

24/7 Wall St. looked at the top 200 companies in the Fortune 500 based on the revenue in the past reported year. We then reviewed earnings and earnings forecast from Thomson/First Call. There were some cases in which earnings appeared to be too low or too high because of events in the past month. We took those into account when we produced the final numbers.

This is 24/7 Wall St.’s 10 Most Profitable Companies for 2012.

It turns out that many stocks with high dividend yields are now more attractive than sovereign debt in the U.S. and abroad. Part of the allure, besides income or reinvestment, is that dividend stocks often hold up better than other investments during jittery markets. It is hard to imagine, but the high-yield utility sector was one of the top performers of the S&P in 2011. In some cases, half of an investor’s total return through time may come from dividends. Warren Buffett generally picks dividend-paying companies for Berkshire Hathaway Inc. (NYSE: BRK-A) after following some of the principles of Benjamin Graham.

The 24/7 Wall St. 2012 Model Dividend Portfolio includes the following stocks: American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

While exchange-traded products have been avoided in the past, recent trends merit a look at the open-end or closed-end mutual funds and ETF products as follows: SPDR Barclays Capital High Yield Bond (NYSE: JNK); JPMorgan Alerian MLP Index ETN (NYSE: AMJ); ALPS Alerian MLP ETF (NYSE: AMLP); and PowerShares Financial Preferred (NYSE: PGF).

Lastly, there have been some exits due to upside price performance: Altria Group Inc. (NYSE: MO); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD); and Kinder Morgan Energy Partners LP (NYSE: KMP).

We have described the features and outlook for each component of our Model Dividend Portfolio.

Don’t bother telling the solar woes to Google Inc. (NASDAQ: GOOG) and to KKR & Co. L.P. (NYSE: KKR).  The two companies announced that they would invest a total of $189 million on a combined basis domestically in solar facilities.  Some $94 million will be invested by Google to fund four California solar farms which are being constructed near Sacramento.  KKR’s $95 million investment is said to include new unannounced projects as well as the  Sacramento projects.  Sharp Corporation’s Recurrent Energy is selling the existing projects.

It is easy to bash solar stocks right now because their losses have been beyond what most could conceive.  Still, Warren Buffet’s MidAmerican Energy under Berkshire Hathaway Inc. (NYSE: BRK-A), NRG Energy Inc. (NYSE: NRG), and others have continued to invest.  What is interesting is that it is currently one of the best times to invest in solar projects, as long as your financial lifeline is not dependent upon the margins of manufacturing the solar panels.

First Solar Inc. (NASDAQ: FSLR) might be building a large Arizona desert solar farm but the company has proven that it is far from immune to the woes of the sector.  Whether or not the mandated California utility one-third renewable goal by 2020 can help is so far not helping these companies out.

The good news for solar power buyers is that there are still some financial incentives and panel prices have tanked.  Europe is in austerity-hell that is keeping its solar ambitions lower and China has been flooding the market with cheap solar panels (are those knock-off solar panels?).

Google’s side-bar projects do not have to have the same return as its search business, but the Internet search giant has now committed close to $1 billion into various forms of clean energy investing.  Roughly half appears to be in solar of some sort.

To show just how brutal the solar investing has been, take a look at the two key solar ETF products.  The TAN Guggenheim Solar ETF (NYSE: TAN) trades at $2.71 and the 52-week trading range is $2.54 to $9.16; and the Market Vectors Solar Energy ETF (NYSE: KWT) trades at $3.89 versus a 52-week range is $3.64 to $14.33.

JON C. OGG

24/7 Wall St. refers to Digital Realty as “The Landlord of the Cloud and Technology.”  For months and months this was our top dividend pick for anything tied to technology.  While it is a real estate investment trust, or a REIT, the company houses many datacenters, storage farms, and technology outfits as its key tenants.  The problem is that this upside and valuation has currently diminished to the point where our internal risk-reward metrics.  We have now removed it from our top dividends portfolio and it is not a part of the 24/7 Wall St. 2012 Model Dividend portfolio.

While this may sound like a bash, it is far from it.  The company is very well-run and the only reason we are cautious is just tied to price and valuation.  If this REIT was to come under some price pressure and go back into the mid-to-high $50 handles, we would become very interested in adding the REIT back into the model dividend portfolio.

Now that Intel Corporation (NASDAQ: INTC) has pulled back close to 10% from its recent highs and with its dividend at 3.6% or so, we are currently more interested in it even though the recent warning which were expecting probably takes away any sense of urgency.  Still, Intel was good enough and attractive enough that Warren Buffett violated his long-term stance at Berkshire Hathaway Inc. (NYSE: BRK-A) of not investing in technology for Intel.

The high dividend at Digital Realty is now a yield of about 4.3%.  At $64.10, this went above our $62.00 max-threshold and the 52-week trading range is $47.42 to $65.57 aqnd the consensus Thomson Reuters price target is $66.60.  It was trading at $55.80 when we first targeted the REIT for the model portfolio.  With less than 5% implied upside, our inclination would be to tell readers that patience may actually be a virtue here.

There is some other good news that could be an ace in the hole that could change our outlook as well.  Digital Realty may again hike its dividend.  The company has now recently gone ex-dividend (December 13) and it has now had four straight quarters of a $0.68 per share payout.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio, it is being offered in full to those who sign up for our free daily email subscriber list below. Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events, and many other aspects governing your finances.

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Barron’s listed  Berkshire Hathaway Inc. (NYSE: BRK-A), Comcast Corporation (NASDAQ: CMCSA), Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Metlife, Inc. (NYSE: MET), and Procter & Gamble (NYSE: PG).  The list also includes some ADRs via Seagate Technology PLC (NASDAQ: STX), Royal Dutch Shell (NYSE: RDS.A), Vodafone Group PLC (NYSE: VOD), Sanofi (NYSE: SNY), and Daimler (DDAIF).

The aim was companies with low P/E ratios, somewhat high dividends, and companies with an expected upside of potentially 15% to 20%.  This won’t excite many investors.  Apple Inc. (NASDAQ: AAPL) was not in the list nor was Google Inc. (NASDAQ: GOOG).  Neither pays a dividend, but both have relatively low P/E ratios considering the recent growth (14 for Apple and about 17 for Google).  If you use the Thomson Reuters consensus analyst price target, Apple has 29% upside and Google has 16% upside.

Berkshire Hathaway Inc. (NYSE: BRK-A) is interesting now that it has added International Business Machines Corporation (NYSE: IBM) and Intel Corporation (NASDAQ: INTC) to its portfolio.  IBM yields a low 1.5% today and is buying back stock despite trading at all-times highs.  The company’s goal is $20.00 in earnings per share by 2015.  Intel just warned about a large revenue shortfall but its dividend yield is now about 3.5%.

Comcast Corporation (NYSE: CMCSA) is actually still interesting because of its growth and value and because it is changing its mix to include content.  The 2% yield is one which has room for further dividend growth and the cable giant’s share price actually offers almost 30% to the Thomson Reuters consensus price target.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) and Seagate Technology PLC (NASDAQ: STX) are both very opportunistic calls.  Hard disk drive troubles around the globe, a prior discount to highs, and a dividend north of 4% helped Seagate.  Freeport-McMorRan is an opportunistic call now that global growth has brought down shares of metals companies drastically.  It has a 2.5% yield, which is not bad for a metals company, and at $39.00 the Thomson Reuters consensus price target is actually 30% higher than the current share price.

Perhaps the ADRs and European plays of Daimler (DDAIF), Royal Dutch Shell (NYSE: RDS.A), Sanofi (NYSE: SNY) and Vodafone Group PLC (NYSE: VOD) are opportunistic around the weakness of Europe today.  After all, if the Euro Zone continues its downward trajectory and with the Euro currency at an 11-month low it would seem that the article could blame a worsening effect if these positions do not work out.

24/7 Wall St. has recently announced a couple of key lists with predictions and expected upside.  Our DJIA Stocks Soon To Raise Dividends has already seen some come to fruition even sooner than expected, and we have released to our free email subscribers the 24/7 Wall St. 2012 Model Dividend Portfolio.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio you can sign up in the email submission below.  Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events, and many other aspects governing your finances.

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Barron’s noted a 6.9% drop so far in 2011 for its Favorite Stocks for 2011 versus a 1.9% drop in the S&P 500 Index.

JON C. OGG

Uncertainty in Europe

The sovereign debt crisis in Europe, which appeared to be largely solved last week, apparently is not. Moody’s reported today that it may still downgrade the debts of some major nations in the region. The grand plan set by EU leaders is still short on details. The money added to a new fund will be inadequate to cover a default of Italy’s national obligations. Yields on Italian and Spanish paper are still near historic highs. Stock markets across the globe likely will tick down this week unless there is more evidence that the EU has its financial house in order.

The New Warren Buffett

A new mystery surrounds who will take Warren Buffett’s  job as head of Berkshire Hathaway (NYSE: BRK-A, BRK-B) if he dies or retires. It has been widely believed that the company would add a CEO to run operations and one or more investment professionals to oversee the huge investment portfolio. A profile of Buffett on “60 Minutes” showed that the “Oracle of Omaha” plans to replace himself as chairman with his son Howard Buffett, who is a farmer on a nearly full-time basis. Buffett commented, “You worry that somebody will be in charge of Berkshire that uses it as their own sandbox in some way; that changes the way that decisions are made in reference to the shareholders. The odds of that happening are very, very low. Having Howie there adds just one extra layer of protection.” Investors who do not want a farmer to play a key role in the conglomerate may not take the news well.

No Jobless Benefits Extension

Congress may not pass a bill to extend jobless benefits into 2012. The first effect will be that 1.7 million Americans completely lose their financial safety nets. The figure would rise to 6 million by the end of 2012. The debate about the extension revolves around several issues. The first is whether, in a time of austerity, the federal government can afford the tens of billions of dollars it would have to pay to extend payments. The second is whether people who receive benefits are less likely to seek jobs because they have little economic incentive to do so. And another is how much the effect would be on the consumer economy, and thus GDP, if 6 million consumers drop out the number of Americans who currently can afford to buy goods and services.

Douglas A. McIntyre

The report cited a recent gain of 36% in earnings, with higher operating income across all the business segments except in the finance and financial products operations. The sectors which were noted as performing well were Insurance, Railroad, Utilities and Energy, Manufacturing, Service and Retail.

The growth engine was labeled as the property and casualty insurance businesses with a contribution of approximately 40% of its 2010 operating income.  Another favorable note for the segment was that it maintains capital strength at exceptionally high levels.

So, what is worth?  Apparently it is worth $91.00 per share and Zacks has an “Outperform” rating on Mr. Buffett’s company.  What is interesting is that this $91.00 figure is a 6-month target rather than a one-year price target.  What does this translate to for valuation? The projection is roughly 13.2-times Zacks’ earnings estimate for 2011 and it implies a total return of about 17% in that period.

We would note that there may be one issue with this report, and that is that Warren Buffett himself has always said to watch the firm’s stated book value per share.  The reason behind that is that he admitted that Team Buffett & Munger could effectively make earnings almost anything they wanted to in any single quarter because of its ability to lock-in gains or losses from its vast investment portfolio or by incurring or pushing out charges on assets. Merger expenses could also alter those quarterly figures.

Mr. Buffett made some significant changes to his investment holdings this last quarter, and here were his full equity holdings.

Shares closed Thursday at $77.81 and the 52-week range is $65.35 to $87.65, so if Zacks is right then Berkshire Hathaway is heading for a new year high.

JON C. OGG

LinkedIn executives to sell shares. LinkedIn (NYSE: LNKD) executives want to sell a relatively large portion of their shares. This adds to the pressure on the stock . The company has already said it will offer more shares to the public. It also is clear that venture capitalists who invested in the LinkedIn over the years would like to make money on their positions too. Bain says it plans to sell a portion of its position along with LinkedIn executives. It is only natural that management would act similarly in its self-interest. That will not keep other investors from concern about dilution. And, why would executives sell shares now, if LinkedIn’s prospects are so bright? Expect LinkedIn’s stock to suffer because of the announcement.

The headline news about Warren Buffett was that he bought $10.6 billion in IBM (NYSE: IBM) shares. Just as important were other additions and dilutions he made to his portfolio. These became public as Berkshire Hathaway (NYSE: BRK.A, BRK.B), the company Buffett runs, released at list of its third-quarter holdings. Buffett increased his holdings in Wells Fargo (NYSE: WFC), a sign he is not as concerned about a new banking crisis as many bank analysts are. He moved even further into the financial sector with a new investment in Visa (NYSE: V). He also took new positions in military hardware provider General Dynamics (NYSE: GD), DirecTV (NYSE: DTV) and Intel (NYSE: INTC). All of these seem very conservative. Yet, Buffett has usually invested that way.

Occupy Wall Street forced out. For some reason, the financial headlines were dominated by the decision of New York City to use police to remove Occupy Wall Street protestors from the city’s Zuccotti Park. The story was the top headline in the Wall Street Journal and the New York Times. There is a great deal of evidence that the mass of people in their tents had disrupted that sales of businesses in the area. The large number of people in the park presented a public health hazard. Perhaps most important, the protestors were not successful enough for their removal by police to cause a ground swell of support. “Occupy” protestors are being moved out of their quarters by police in other cities. The movement ended almost before it began.

Douglas A. McIntyre