Investing

Merrill Lynch Lists Six Stocks Poised to Break Out

While the current stock market rally has been impressive since the lows last November, many investors, analysts and equity strategists are casting a wary eye at the looming May 1 date. In a new report, the Merrill Lynch technical research team has spotted six stocks with positive fundamentals, and technically attractive stock charts, that may be able to buck a sell-off if the “sell in May” pattern once again rears its head. Screening for fundamental strengths such as earnings and dividends, and combining solid technical chart patterns can generate a win-win combination for investors. The Merrill Lynch team has put together a solid list for investors looking to put capital to work now.

Altria Group Inc. (NYSE: MO) leads off the Merrill Lynch list. With the Marlboro brand still dominating world markets, Altria’s stock is expected to grow earnings and its dividend. The Merrill Lynch price target is $42. The Thomson/First Call estimate is $36. Altria pays shareholders a strong 4.90% dividend.

E. I. du Pont de Nemours & Co. (NYSE: DD), better known as DuPont, has been one of the dogs of the Dow this year. With an improving domestic and global economy helping earnings, a two-year chart breakout is a very positive sign. The Merrill Lynch target is $68, which would represent a 30% gain. The Wall St. consensus is $55. The stock pays a solid 3.40% dividend.

Macy’s Inc. (NYSE: M) is a leading retailer that makes the grade. It is also benefitting from an improving economy and a consumer that may be back on track, and the stock might be poised to break through 2006-2007 highs. Merrill Lynch has a price objective of $55. The consensus estimate is $46.50. Shareholders are paid a 1.80% dividend.

Merck & Co. Inc. (NYSE: MRK) is another of the dogs of the Dow to make the list. The drug giant announced today a worldwide collaboration on a diabetes drug with rival Pfizer Inc. (NYSE: PFE). The Merrill Lynch price objective on Merck is a move back to 2007 highs at $62. The consensus is $51. Merck pays investors a 3.60% dividend.

Microsoft Corp. (NASDAQ: MSFT) is another mega-cap stock to hit the Merrill Lynch radar. Like most large tech stocks, Microsoft has underperformed the overall market in the past year. Merrill Lynch’s price objective is $37.50, which would represent a breakout from a large 14-year base. The consensus estimate for the stock is $32.20. Shareholders receive a 3.90% dividend.

Monsanto Co. (NYSE: MON) rounds out the Merrill Lynch top names to buy. The company benefits from huge demand for agricultural products, and the stock may be ready for a price breakout back to 2008 levels. Merrill Lynch’s target is $125. The consensus is close at $120. Investors are paid a 1.40% dividend.

Combining solid technical charts with fundamentally strong business models is a great way for investors to hedge their downside risk. Each of the Merrill Lynch stocks is large cap company with a proven track record of success. Companies that will continue to survive even if the market hits a temporary wall.