Top 6 Stocks to Buy for January

by Sam Collins | January 2, 2013 5:17 pm

With the fiscal cliff behind it, the stock market has confirmed that the recovery attempt of December is still intact. January has begun with a strong rally taking the S&P 500 through a resistance line at 1,445. Its new objective is the Sept. 14 high of 1,475.

The last peak for the Dow was at 13,366. That, too, has been shattered by the recent rally, but the index should encounter considerable resistance at the September/October band of resistance at 13,400 to 13,600.

The Nasdaq has blasted north of 3,100, and the Oct.17 high of 3,112. Above that there is a band of resistance with a top at 3,197, its September high.

With the market overcoming some major resistance zones following the recent crisis, the pressure is on the bulls to support the current rally with higher volume and breadth. If they are able to rise to the challenge, last year’s highs could be overcome in the first two weeks of January, setting the stage for a bright new year.

Here are your top stocks to buy for January: 

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Top Stock to Buy #1 – Amgen (AMGN)

Biotech company Amgen (NASDAQ:AMGN[2]) has been a leader in the development of genetically based research and treatment for cancer, anemia, rheumatoid arthritis and a host of other major illnesses. It markets five of the world’s best-selling biotech drugs.

Earnings estimates for 2012 have been raised to $6.59, and $6.99 for 2013. AMGN has a dividend yield of 2.2% and is recognized as a company with a very high cash position, giving it the flexibility for acquisition and further drug developments.

The stock is trading in a bullish consolidation channel with resistance at $92 and support at $84.The trading target for AMGN is $94, but it is also recommended as a long-term investment.

AMGN Chart
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Top Stock to Buy #2 – Apple (AAPL)

Apple’s (NASDAQ:AAPL[3]) growth has been spectacular with earnings increases of over 80% in each of the past five years. The stock had a spectacular run this year, up 70% to a high of over $700 from $405 at the beginning of this year. But when it became overbought on Sept. 12[4], at $662, we began a series of sell recommendations ending on Nov. 7[5] with a suggestion to “cover shorts,” which would have been executed on the opening at $574.

Now, with four “buy” signals from our proprietary Collins-Bollinger Reversal (CBR) indicator, the stock appears to have formed a solid base at just above $500. Buy AAPL at $532 with a trading objective of $555. A stop-loss should be entered at $500. Long-term investors are encouraged to buy Apple at the market for a target of $700.

AAPL Chart
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Top Stock to Buy #3 – Bank of America Corp. (BAC)

Bank of America Corp. (NYSE:BAC[6]) is the second largest U.S.-based financial holding company with global assets of $2.13 trillion. Earnings for 2011 were just $0.01, but estimates for 2012 range from $0.34 to $0.49, and the average estimate for 2013 is $0.96.

BAC, along with other bank stocks, was upgraded in December by the well-known bank analyst Meredith Whitney, who said, “The banks right now are more adequately capitalized,” and she took special note of BAC as undervalued.

Technically, BAC broke from a 10-month cup-and-handle formation in early December, and confirmed the break by rising to a new high at $11.69. The trading target for BAC is $14. Longer term the stock could trade in the low $20s.

BAC Chart
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Top Stock to Buy #4 – DaVita HealthCare Partners (DVA)

DaVita HealthCare Partners (NYSE:DVA[7]) is a provider of dialysis services for patients suffering from chronic kidney failure. It serves 142,000 people through a network of 1,809 dialysis centers.

On Dec. 20, JPMorgan Chase (NYSE:JPM[8]) initiated coverage of DVA with an “overweight” rating and target of $125. Analysts have estimated earnings of $6.17 in 2012 and $7.38 in 2013.

The stock is in a bull market with support at its advancing bullish support line at just under $100. The stock advanced last year on a series of “step-ups” — a pattern associated with powerful long-term bullish trends. Traders could expect a quick run to $120, but long-term investors could see much higher prices. Buy DVA at the market.

DVA Chart
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Top Stock to Buy #5 – IBM (IBM)

IBM (NYSE:IBM[9]), nicknamed “Big Blue,” is the bluest of the blue-chip technology giants. Its global capabilities in information technology, software, computer hardware and related financing make it a household name. It is a company in full maturity, so future growth is expected to result from strong trends in emerging markets and improved profitability in its more developed markets. It is also uniquely qualified among the larger technology companies to benefit from “the cloud.”

Earnings estimates for 2012 have been revised upward to $15.13 from $14.93, versus $13.44 in 2011. And the company is expected to earn $16.66 in 2013.

Technically, IBM has been advancing in a bull channel, but upside breaks have been followed by sharp corrections. The stock is now completing one of those corrections, so traders and long-term buyers should at least take a partial position since both the fundamental and technical outlook are sound.

The fundamental target for the stock has been revised upward to $222 from $205, and technically, a quick run to $210 is likely, but a stop-loss order should be entered at $179. Investors are encouraged to take long-term positions now in this blue-chip performer as a cornerstone investment.

IBM Chart
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Top Stock to Buy #6 – Trinity Industries (TRN)

Trinity Industries (NYSE:TRN[10]), a manufacturer of rail cars, metal containers, highway construction products, barges, and concrete and aggregates, is well-positioned to benefit from a cyclical recovery.

Revenues are expected to have risen 31% in 2012 and jump another 20% in 2013. Earnings are estimated to rise to $3.13 in 2012 versus $1.65 in 2011. And S&P looks for a 20% rise in earnings in 2013 to $3.76.

After a breakout at $33 the stock ran to $36.25. The MACD indicator has flashed a short-term sell signal, which, if executed, could give investors an opportunity to buy TRN at our buy point of $32.50. The trading target is $42, but longer-term investors could see the high $40s.

TRN Chart
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  1. Compare Brokers:
  2. AMGN:
  3. AAPL:
  4. Sept. 12:
  5. Nov. 7:
  6. BAC:
  7. DVA:
  8. JPM:
  9. IBM:
  10. TRN:

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