Deutsche Bank Picks Winners for the Secular Bull Market (HON, GE, IBM, QCOM, UTX, ITW, EMC, ACN, C, ALL, INTC, APH, ROK, PCP, GOOG, MSFT, WYNN, VIAB, SLB, CTSH)

We have reported recently that despite many calls of an “aging” four-year bull market, what we have experienced since the market lows of March 2009 has been a cyclical bull market within a long-term secular bear market. To truly have a secular bull market, averages have to break out above previous highs and advance significantly higher.

In a new report, one firm on Wall St. is not only forecasting the beginning of a new secular bull market, but it is raising the bar for all-around equity performance in 2013.

The U.S. equity strategy team at Deutsche Bank A.G. (NYSE: DB) has not only raised their target for the S&P 500, but they have substantially raised their first quarter gross domestic product forecast from 1.7% to 2.3%. Stronger U.S. growth, and particularly the upturn in business spending, underlies their boost to 2013 estimated S&P earnings per share to $109 from $108.

In addition, they expect the S&P 500 to make secular bull market advances this spring and boldly go where it has never gone before. Their target for 2013 is now 1,625, almost 70 points higher than Friday’s 1,556.89 close, or an additional 4.5% on top of this years 8.39% gain. They acknowledge their tactical call is difficult, but they think the S&P 500 climbs higher this spring before suffering a 5% or more dip. It could be a “sell in May and go away” (for a while) situation.

This is all great news for stock investors. The question is where to best place the capital in a portfolio to take advantage of a secular bull market? The Deutsche Bank team has a plan. Their advice is to participate in the likely grind higher over the next couple of months with overweights in financials, tech and industrials. They see the best reward/risk at the large enterprise spending exposed tech stocks.

Also Read: Enduring Eight Tech Stocks to Buy.

To play the secular bull market, the Deutsche Bank analysts stress five specific areas to invest in:

1. Global Growth — stocks with high foreign and export sales. The names from their list of stocks to buy that may fit this best are Honeywell International Inc, (NYSE: HON), General Electric Co. (NYSE: GE), International Business Machines Corp. (NYSE: IBM) and Qualcomm Inc. (NASDAQ: QCOM).

2. Capital Expenditure (CAPEX) — stocks with high exposure to investment spending. Investors may want to consider United Technologies Corp. (NYSE: UTX), Illinois Tool Works Inc. (NYSE: ITW), EMC Corp. (NYSE: EMC) and Accenture PLC (NYSE: ACN).

3. Dividend Growth — stocks with ability to raise dividend payout ratios. In this category the Deutsche Bank list of stocks to buy suggests Citigroup Inc (NYSE: C), Allstate Corp. (NYSE: ALL), Intel Corp. (NASDAQ: INTC) and Amphenol Corp. (NYSE: APH).

4. Debt Capacity — stocks that can issue cheap debt for acquisitions or buybacks. Investors should consider Rockwell Automation Inc. (NYSE: ROK), Precision Castparts Corp. (NYSE: PCP), Google Inc. (NASDAQ: GOOG) and Microsoft Corp. (NASDAQ: MSFT).

5. Economic Profit Growth — above average PE stocks justified by value added growth. In this category the Deutsche Bank list of stocks to buy has solid names like Wynn Resorts Ltd. (NASDAQ: WYNN), Viacom Inc. (NASDAQ: VIAB), Schlumberger Ltd. (NYSE: SLB) and Cognizant Technology Solutions Corp. (NASDAQ: CTSH).

The past 13 years have provided investors with gut-wrenching bear market sell offs that have challenged even the staunchest equity advocates to throw in the towel. History tells us that the average length of the three previous secular bear markets was 18 years. Nobody can say for sure if the current secular bear market has come to an end. One thing investors need to keep a very close eye on is a substantial breakout above the old 2007 highs. Even if we do experience an expected 5% decline, that may be the chance to buy the stocks to add for the new secular bull market run.

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