Ticonderoga’s top pick for 2012 is its top pick for 2011: Apple

January 3, 2012, 1:18 PM UTC

Prospered in last year’s economic storms, prepared for even rougher weather ahead

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“During 2011,” writes Ticonderoga’s Brian White in a note to clients Tuesday, “Apple was the best performer in our universe of twenty companies, rising by 26%.”

Yet despite Apple’s (AAPL) recent gains — and what he expects will be “rougher” waters head — White is again recommending the stock as his top pick for 2012. Among his reasons:

  • His expectation that Apple will unveil what he’s calling iTV
  • An iPad 3 and an iPad “mini” (possibly an iPad 2 with a lower price point)
  • A “major upgrade” with the iPhone 5
  • And that thing the sell-side analysts seem care more about than any Apple product: a dividend

White believes that 2012 is the year Apple “will finally come to grips” with its surging cash balance …

In 2012, we believe Apple’s growing cash balance will remain a hot topic of discussion among investors, and we are projecting net cash to grow from $81.6 billion at the end of FY11 to $106.4 billion by the end of FY12 and eventually reach $142.2 billion by the end of FY13…

In light of this mounting cash balance and Tim Cook’s openness to returning cash to shareholders, we expect the company to finally come to grips with its surging cash balance and issue its first cash dividend. In our view, this will not only please existing investors but also tap into a new type of investor, expanding the stock’s P/E multiple in the process.

Assuming a conservative 2.5% cash dividend, this equates to $10.12 per share at the current stock price or about $9.5 billion in annual cash outflow versus the $33.3 billion in free cash flow generated by Apple in FY11.