With 2014 on the horizon, the ongoing revival in the manufacturing sector, a moderating recovery in the housing sector and continued expansion in the energy sector are the primary organic driving forces behind U.S. growth. The equity strategists at Jefferies caution that sentiment indicators are very buoyant, margin debt is close to historic levels and indices are trading close to their 2 standard deviation. Investors need to be mindful that a correction can easily unfold. They do not expect 2014 to be a smooth ride.

They also do not see a market crash. They foresee a slow and maybe difficult grind to 1,950 on the S&P 500. That would still represent a solid year for investors, with the index currently trading at 1808. They caution that a large corrective sell-off may be included. Especially if the Federal Reserve starts to taper the quantitative easing (QE) bond purchases. Here are some of the top theme sector stock picks from Jefferies for 2014.

Analog Devices Inc. (NASDAQ: ADI) is one of two top chip sector picks at Jefferies. Innovation, performance and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industry-wide as the world leader in data conversion and signal conditioning technology, Analog Devices serves more than 60,000 customers, representing virtually all types of electronic equipment. Jefferies thinks the stock is a perfect growth and income plat as investors are paid a 2.7% dividend. The Thomson/First Call price objective for the stock is $49.60, though Analog Devices closed Monday at $49.66.

Intel Corp. (NASDAQ: INTC) is the second total return chip play to buy at Jefferies. Intel has articulated that it intends to sell 40 million tablet chips next year, fueled primarily by Bay Trail. It is clear that having 64-bit ahead of its rivals will be a major competitive advantage. Many of the Android vendors will be looking for ways to differentiate in an already crowded Android space, and what better marketing feature is there than saying you have 64-bit support just like Apple does? This should prove to be a huge advantage for the company next year. Investors are paid a very handsome 3.8% dividend. The consensus price objective for the venerable chip stock is $24. Intel closed Monday at $23.75.

Regions Financial Corp. (NYSE: RF) is a top super-regional bank stock to buy at Jefferies. Based in Alabama, Regions is the 15th largest bank in the United States. Regions Financial has seen its net interest margin move up over the past five quarters, while all the other domestic banks have watched their net interest margins fall. Investors in the stock are paid a 1.2% dividend. The consensus price target is posted at $10.76, and Regions closed Monday at $9.82.

Owens Corning Inc. (NYSE: OC) is expected to continue earnings growth as the housing market stays on a solid but slower growth path. The company offers an attractive entry point with a 13% to 30% stock price upside in 2014 and a potential to outperform the broad indexes on the back of the rebounding sales, improving operating margins reverting back toward long-term normals and large U.S. net operating loss carryforwards that will hold cash tax rate at roughly 10% to 12% in the next few years. Trading at just 1.2 times its book value, Owens Corning also offers an attractive risk-to-reward setup with low downside risk. The consensus price target for the stock is $45. Owens Corning closed Monday at $37.91.

Ingersoll-Rand PLC (NYSE: IR) is a top pick in the machinery sector. This is another stock that is expected to receive considerable tailwinds from U.S. commercial and residential construction spending. With its wide range of products, including the well-known Thermo King and Trane brands, 2014 is expected to be solid. Investors are paid a 1.2% dividend. The consensus price target is posted at $71.50. Ingersoll-Rand closed Monday at $69.99.

Scorpio Tankers Inc. (NYSE: STNG) is a top maritime shipping stock to buy at Jefferies. Crude oil production in the United States has continued to rise since the end of 2011, rising from 5.5 million barrels a day of production to 7.85 million barrels a day during the final week of October. This directly benefits companies shipping oil products from the United States. As restrictions are loosened, these top stocks may benefit even more. Investors are paid a 2.4% dividend. The consensus price target for the stock was not available. Scorpio closed Monday at $11.38.

GrafTech International Ltd. (NYSE: GTI) is a stock that may be leading a rebound in the steel sector. GrafTech is one of the world’s largest manufacturers and providers of high-quality natural and synthetic-graphite products used in our latest technologies, such as lithium-ion batteries in smartphones and laptops. The Industrial Materials segment manufactures and delivers graphite electrodes, which are used to produce steel and other nonferrous metals; carbon, semi-graphitic and graphite refractory hearth linings for blast and submerged arc furnaces that are used to produce iron and ferro alloys; and petroleum needle coke, a crystalline form of carbon used in the production of graphite electrodes. The consensus price target for this very interesting name is $12. GrafTech closed Monday at $11.29.

Graphic Packaging Holding Co. (NYSE: GPK) recently announced a plan to repurchase $200 million in stock. The company provides packaging solutions in the United States, Canada, Central/South America, Europe and the Asia-Pacific. The company operates in two segments, Paperboard Packaging and Flexible Packaging. The consensus price target for the stock is $10, and the company closed Monday at $8.79.

High-flying momentum stocks and sectors are conspicuously absent from the Jefferies target sector themes for 2014. While the analysts acknowledge there is an upward bias for next year, they think that a major correction is not out of the question. In the long run, a big correction would be good for the market as the secular bull market grows.

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