Second half: Let's make some money

List No. 2 is for the second half of 2012, when our goal will be to gain capital appreciation from the decline in macroeconomic uncertainty.

I think this is one is simple -- if the world goes the way I now think it will. The emerging markets of China and Brazil have been in deep bear markets and should lead the turnaround. They will take other emerging markets up with them -- Chile, Colombia, Mexico, Indonesia and Turkey, for instance -- as well as stocks in developed markets that are linked to the fortunes of these emerging markets.

I hope you noticed the big "if" in that paragraph. I think investors will see a big decrease in uncertainty and worry that will flip the switch to "risk on" in a much more lasting way in the second half of the year. I think we'll see an actual interest-rate cut from the People's Bank of China and a bottoming of the economic growth rate in both China and Brazil.

But it doesn't have to work that way. The euro debt crisis is by no means resolved, and I'm worried about the possibility of crises in India and Russia.

I'd play the second-half turn by ear, waiting to see the interest-rate cut from the People's Bank of China and good news on second-quarter growth in the gross domestic product from Brazil and China before moving whole hog from the kind of stocks in my first list to stocks like those in this second list. (Do I make myself clear? Don't buy these picks now. Wait.)

But if the year breaks like I think it will, you will want to make the transition from thinking about safety to thinking about profit around the middle of the year.

6.Freeport-McMoRan Copper & Gold (FCX, news): Copper is my favorite commodity for a second-half turnaround, and Freeport is my favorite copper miner. Not only is copper demand extremely sensitive to upticks in construction in particular and industrial production in general, but attempts to expand copper supply keep running into the constraints of diminishing ore grades and political uncertainty in the countries that hold the most promise for expanding supply. Freeport McMoRan is coming off a strike at its Grasberg, Indonesia mine that cut production in 2011 by about 20%, so 2012 has some pretty easy comparisons to beat. In addition, Freeport is best placed among global copper miners to expand production with relatively lower capital costs because Freeport can expand production at existing mines rather than having to develop greenfield mines. (Freeport McMoRan Copper & Gold is a member of my Jubak's Picks 12- to 18-month portfolio.)

7. Joy Global (JOYG, news): Sales and orders at this global producer of mining equipment haven't yet fallen significantly -- bookings in the fourth quarter of fiscal 2011 were up 33% and sales, minus the effect of acquisitions, climbed 18% -- but the market clearly fears they might. The company issued guidance that talked of a leveling of growth due to sluggish market conditions in the first half of the year and then a return to strong growth in the second half. That has led to a 16% drop in the shares from Dec. 9 through Dec. 16. The downward trend in the share price sure looks like it will set up the second half of the year very nicely. (Joy Global is a member of my long-term Jubak Picks 50 portfolio.)

8. National Oilwell Varco (NOV, news): National Oilwell is in an analogous position to that of Joy Global. Everyone believes the long-term trend for oil drilling rig equipment is up, way up. But in the near term, everyone is worried that uncertainty about growth in the global economy will lead oil companies to cut capital budgets and orders. Look at the potential at National Oilwell once that uncertainty fades. This company is the dominant rig equipment supplier. It controls 40% of the global market for drilling pipe, for example. The average age of the world's offshore drilling fleet is 20 years, which means lots of equipment needs to be upgraded or replaced. Petrobras (PBR, news) alone says it intends to order 60 deep-water rigs in the next decade to develop its offshore oil discoveries. That's $12 billion to $18 billion in orders, Morningstar estimates. Add in an additional $10 billion to $12 billion in that period, Morningstar calculates, for rig upgrades, spare parts, maintenance and drilling consumables. (Drilling consumables were about 33% of revenue in 2010.) That's a big market for National Oilwell to shoot at. Time will also take another uncertainty out of the stock: National oil companies like Petrobras are under severe pressure to award contracts for rigs to national suppliers. It's doubtful that these companies will be able to deliver this complex equipment on time. If, during the next six months, the current trend (which has seen some of this work go to National Oilwell despite political pressure) continues, that will be one less piece of company-specific uncertainty for the second half of 2012.

9. Home Inns & Hotels Management (HMIN, news): The latest five-year plan from the Chinese government backed up talk about the need to shift more of China's economy from exports to domestic consumption with some real money -- annual 15% increases in the minimum wage, for instance. But China's economy is slowing, and that is raising fears that consumer spending on such things as travel will turn downward, too. Home Inns and Hotels Management fed into those fears by cutting revenue guidance for the fourth quarter to between $156 million and $159 million, when the Wall Street consensus was $176 million. But the third quarter shows you what this budget hotel chain is capable of producing. Revenue came in 9% above analyst expectations. The company has just opened its 1,000th hotel and now does business in 174 Chinese cities. In the second half of 2012, investors will again focus on the growth of the consumer economy in China and the growth of such middle-class pursuits as travel. Home Inns and Hotels is one of the best ways to play those trends.

10. Banco Santander (STD, news): I've reserved my last slot for a pick sure to be controversial. After all, aren't all European banks headed for the trash bin? Exactly why I'm picking this Spanish bank. I think that what everyone knows is wrong and that the second half of 2012 will prove it. Banco Santander has been slapped with the biggest amount of new capital to raise -- $20 billion -- of any European bank by the European Banking Authority. But the bank should be able to meet that total without cutting its dividend. In the third quarter, for instance, Banco Santander sold off a piece of its Latin American insurance business and part of its U.S. consumer loan business for a combined $3.5 billion. So far in the fourth quarter, it has sold off pieces of its Chilean subsidiary and all of its Colombian unit for an additional $2.75 billion. The bank has until June 30, 2012, to meet that $20 billion total, and when you add in retained earnings and the capital from turning a convertible bond offering into equity, I think Banco Santander will make the number without much strain. That leaves this stock as pretty much a pure option on Spain. Banco Santander now holds $4.4 billion less of Spanish government debt than it held in July, but it still holds almost $50 billion. If Spain goes the way of Greece, Santander is looking at huge write-downs. But I don't think Spain is Greece. The Spanish economy is globally competitive even though the country buried itself under a pile of bad real-estate loans in its own real-estate bubble. Those bad loans will almost certainly take down other Spanish banks -- leaving the survivors to pick up market share in Spain. I think Banco Santander will be one of those survivors. (Banco Santander is a member of my Dividend Income portfolio.)

During the next weeks, I'll be working to orient my Jubak's Picks portfolio along these lines as I get ready for an initially tough 2012.

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And then, of course, in 2012 the market will pass its usual judgment on these picks.

Before then, though, I wish you and yours the best of the holiday season.

At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this column. The fund did own shares of Abbott Laboratories, Banco Santander, Freeport-McMoRan Copper & Gold, Home Inns and Hotels Management, Joy Global and U.S. Bancorp stock as of the end of September. Find a full list of the stocks in the fund as of the end of September here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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