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Given the strong market advance off of the March 9th lows, it would seem the easy money via indexing has been made. At this point in the cycle it would appear investors should be a little more selective in their stock purchases. Over 85% of the stocks in the S&P 500 Index are trading above their 50-day and 200-day moving averages.

(Click to enlarge)

Many analysts, for varying reasons, believe the market is due for some type of pull back (maybe a reason it won't occur). If this pull back scenario materializes, investors will want to be in stocks that may be more insulated from a decline. Stocks that might fit this category are ones that have not participated in the rally or at least have lagged the market.

Below is a list of stocks comprised of the following:

  • payout ratio less than 50% based on trailing 12-month earnings.

  • 1-year and 5-year dividend growth rate greater than 5%.

  • year to date total return below -10%.

This is simply a list investors can use as a starting point for further analysis. Some of the stocks in the above list have had strong returns since March, but simply lag the market. Additionally, a few of the stocks on the list are trading above their 200-day moving average.

Disclosure: I have a long interest in AFL, ABT, LLY, WMT, COP

Source: 14 Stocks to Help Defend Against a Pullback