For Singular Research’s 2012 outlook, we see the broader market in a seemingly eternal tug – of war between countervailing forces, the fear of Euro contagion and decelerating EPS growth, starting with Q4 negative Q/Q EPS comparisons with a backend of the year pickup vs. attractive valuations & corporate buy backs & mergers and acquisitions. Tomorrow, we’ll be highlighting some of the top names we like for 2012.
In the small cap realm, at present, the market appears fairly valued, as our longtime market proxy- New Horizons funds trades at 1.5x S&P 500 levels. Thus, selectivity will be rewarded and will favor growth over value in a slow growth environment with an eye on strategic takeover candidates. We are still finding growth at a discount as our median stock under coverage trades 11x our 2012 EPS estimate with a 7.6 EV/EBITDA and 22% expected EPS growth.
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