Merrill Lynch Gets Nervous: Buy Only High-Quality Stocks Now

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Coca-Cola

This is the absolute epitome of high quality, and it is one of the top holdings of Warren Buffett’s Berkshire Hathaway. Coca-Cola Co. (NYSE: KO) is the world’s biggest brand and largest manufacturer of soft-drink concentrate and syrups. It enjoys a 50% share of the world’s carbonated soft drink market and 44% share of the U.S. market.

The company continues to grow its portfolio of brands as consumers’ diets shift. Over 70% of its profits are derived outside of the United States. The iconic beverage company sells many well-known brands, including Coca-Cola, Diet Coke, Fanta, Sprite, Minute Maid, Georgia, PowerAde, Del Valle, Schweppes, Aquarius, Minute Maid Pulpy, Dasani, Simply, Glacéau Vitaminwater, Bonaqua/Bonaqa, Ayataka, Gold Peak and FUZE Tea.

Coca-Cola investors are paid a solid 3.22% dividend. The Merrill Lynch price target is $48, and the consensus target is $44.58. The stock closed Monday at $41.01.

General Electric

This blue chip industrial has lagged the market for years, but Norman Peltz’s Trian Partners fund recently made a huge $2.5 billion investment and that sent shares higher. General Electric Co. (NYSE: GE) is a highly diversified, global industrial corporation. The company’s products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance. The Merrill Lynch analysts also feel that the American giant will be a large player in the efficient energy field.

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The Merrill Lynch team recently pointed to the fact that the industrial giant has moved into the positive earnings and price momentum quadrant, indicating potential outperformance in the quantitative analysis model. While its earnings momentum has been volatile since the GE Capital announcement in April due to accounting adjustments, the analysts say that quant model is starting to capture the positive operating momentum inside GE. Add that to a huge stock buyback program, and things finally may be shaping up for the company.

In addition, with the European Union approving the Alstom plan recently, the stock could be poised for a run.

GE investors are paid a solid 3.43% dividend. The Merrill Lynch Price target is $33, and the consensus target is $30.23. Shares closed Monday at $26.82.

3M

This top industrial could really jump with an economic pickup, and it is also a member of the Merrill Lynch US 1 list. 3M Co. (NYSE: MMM) is closely correlated to U.S. leading economic indicators. The more the indicators continue to improve, the higher the likelihood of strong earnings performance for the company the rest of the year. And with a huge portfolio of products in multiple silos, 3M certainly has staying power.

One issue for 3M is that it has a higher than sector average share of earnings from overseas, so any continued rally of the U.S. dollar against other currencies could lead to a decline in Wall Street earnings estimates and guidance. With that said, any pickup domestically could help to offset currency headwinds.

3M investors are paid a 2.85% dividend. The $181 Merrill Lynch price target is well above the consensus target of $159.07. The stock closed Monday at $146.32.

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These are the kind of quality stocks investors can put into a portfolio and, for the most part, forget about. They have mature and long track records and aren’t going anywhere. While fast money momentum investors may not have any interest, long-term growth investors should be rewarded nicely by owning them.