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.