Bank of America Merrill Lynch has issued more picks and a macro-investment strategy for 2013, and the message is rather clear: Be selective and position defensively. The firm said that it sees a December rally carrying over into January, but it also said that there is the risk of a deep correction in 2013.
Bank of America’s team sees a rise in 2013 or for a volatility spike in the VIX and the Global Financial Stress Index. Its report said, “As a result, we are becoming more selective and leaning toward attractive yielding equities and defensive sectors.” In short, those defensive stocks and high-paying dividends are where the firm is looking. It also said, “We expect the S&P 500 to reach the 1500 area, which is the range of the 2007- 2008 highs. But as we enter 2013, there is the risk of a 10-15% correction.”
So, here are themes and picks: Water is a new theme (something probably a bit late); health care and consumer staples are favored, along with telecom, utilities, mega-caps and yield.
Ten stock picks for 2013 with an average yield of 3.8%:
- Eli Lilly & Co. (NYSE: LLY)
- Pfizer Inc. (NYSE: PFE)
- Wal-Mart Stores Inc. (NYSE: WMT) at 2.2%
- Kimberly Clark Corp. (NYSE: KMB) at 3.4%
- Altria Group Inc. (NYSE: MO) a 5.3%
- CenturyLink Inc. (NYSE: CTL)
- American Electric Power Co. (NYSE: AEP)
- American Water Works Inc. (NYSE: AWK)
- Ventas Inc. (NYSE: VTR)
- Yamana Gold Inc. (NYSE: AUY)
JON C. OGG