By Scott Rubin
Heading into the New Year, there is considerable apprehension that a market calamity could be around the corner. Top hedge fund managers such as Hayman Capital's Kyle Bass and BlueCrest Capital's Michael Platt are preparing for devastating shocks to the capital markets in the coming year, but many Wall Street forecasters are predicting that 2012 will be a pretty good year for stocks.
Who should investors be listening to? Well, since no one knows for sure what 2012 will bring, the best course of action might be to weigh the advice of both bulls and bears equally, and focus exclusively on high yielding large-cap stocks. Using this strategy, investors will benefit if stocks do trade higher, but will also protect their downside in case things get ugly.
Given current uncertainty, it is probably prudent to give up some potential reward in the coming year in exchange for less risk. Below, Benzinga has compiled a list of 5 large-cap stocks that are yielding over 4%, have been given "Buy" ratings by a majority of Wall Street analysts and trade at P/E ratios below 15. The following stocks may be good candidates for investors looking to create a more risk-averse stock portfolio heading into the New Year.
Exelon (NYSE:EXC) - Exelon is a well known utility company. Amid the choppy and volatile 2011 market environment, the utility sector, as a result of its relative stability and high yields, has been the year's top performer. As a whole, utilities have risen over 7% in 2011 versus a loss of 1% for the S&P 500. Do not be surprised if this trend continues in 2012. Exelon currently has a market cap of $28.82 billion and yields 4.83%. Year-to-date, the stock has risen over 4% and currently trades at $43.47, which is close to its 52-week high of $45.45. EXC has a P/E of 11.97. The mean Wall Street price target on the name is $46.57.
PPL Corporation (NYSE:PPL) - This is another utility company which has had a strong 2011 considering the broader market conditions. PPL shares are up nearly 12% this year and currently offer a very attractive 4.75% dividend yield. The company has a market cap of $17.04 billion and trades at a P/E of 11.15.
Novartis (NYSE:NVS) - This Swiss company is a global healthcare and pharmaceutical giant. Novartis has a market cap of $137.35 billion and is among the world's largest and most established companies. Year-to-date, NVS shares have lost 2.82% and the stock is currently trading at $57.29. At current levels, NVS yields 4.13%. Shares trade at a P/E of 13.45. Wall Street analysts have a mean price target of $66.59 on the name. This is not a stock that is likely to ever provide eye-popping returns due to its size, but it is a name that should hold up better than the broader market during a downturn while also offering a very solid dividend yield.
Total (NYSE:TOT) - Total is a French integrated oil and gas company which operates in over 130 countries. With a giant market cap of $115.44 billion, Total is one of the world's foremost energy companies. The stock is currently offering an extremely attractive 6.31% dividend yield and trades at a P/E of 7.41. The company's cheap valuation can be attributed to low growth rates, but even a small lift in the share price in 2012, combined with the stock's yield, will produce strong returns for investors. Thus far in 2011, TOT shares have lost over 4%. Analysts have a bullish outlook for the name in the coming 12 months, with a mean price target of $63.22 versus TOT's current share price of $51.20.
Vodafone (NASDAQ:VOD) - This U.K. based wireless company is a favorite of value investors. With a market cap of $141.19 billion it is an extremely large global player in communication services. At current levels, VOD is yielding 5.25%. The stock trades at a P/E of 13.20. All things considered, VOD has had a nice year, rising over 6%, which is better than the S&P 500, without taking into consideration the stock's large dividend yield. Wall Street analysts currently have a mean price target on VOD shares of $33.74. At current numbers, the stock is trading at $28.08.
While these stocks are not likely to make investors rich in 2012, their large market caps, strong dividend yields, low valuations, and established business models make them excellent choices for a risk averse portfolio. If 2012 turns out to be another rocky year, there is a very good chance that these names will outperform the S&P 500. While no one knows for sure what the New Year will bring for stock investors, it may be prudent to follow Warren Buffett's strategy of focusing on defense and letting the offense take care of itself - at least until some of the current uncertainty subsides.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.