While many market participants are thrilled with the action from this week and last, and the short sellers did face some very solid buying pressure, not everybody is feeling relieved, especially after Tuesday’s reversal. With earnings expected to be less than stellar, and the economy stuck in what many feel is a snail-like slow growth mode, one of the biggest and most influential firms on Wall Street is just not buying it.

A recent report from the strategists at Merrill Lynch flat-out says to stay bearish and defensive, and with Treasury bond yields at recent lows, the stock market surprisingly actually remains one of the few good places to reside, other than cash, which earns next to nothing. The Merrill Lynch team recommends staying long consumer staples, utilities and telecommunication companies.

We screened the Merrill Lynch research database and found four stocks rated Buy that fit right into these categories.

PPL

This utility posted inline fourth-quarter earnings but came in a little light on the revenue side. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, and 543,000 customers in 77 Kentucky counties and five counties in Virginia. It also provides electric delivery services to approximately 1.4 million customers in Pennsylvania and operates electricity distribution network for the Midlands, South West and Wales in the United Kingdom.

In addition, it offers a range of customer-care and back-office services to competitive retail energy suppliers, including customer enrollments, contract management, electronic data exchange, simple and complex billing and call center operations, comprising telemarketing, payment processing and collections of overdue accounts.

PPL is one of the leading utility companies in the United States that plans to continue to increase regulated operations and lower earnings volatility attached to competitive operations. It raised cash and lowered debt late last year by selling some hydroelectric assets to NorthWestern energy.

PPL investors receive a generous 4.22% dividend. The Merrill Lynch price target for the stock is $38, and the Thomson/First Call consensus target is $37.78. Shares closed Tuesday at $36.07.

Verizon Communications

This top telecommunications company recently did away with some phone incentives, and it resides on the Merrill Lynch US 1 list. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Wall Street has applauded Frontier’s acquisition of Verizon’s wireline operations in California, Florida and Texas, which is expected to be completed at the end of March 2016. Many feel that focusing on the higher margin segments at the company makes sense, and the sale to Frontier is a huge cash boost to the balance sheet. The company reported solid fourth-quarter numbers with earnings slightly higher than the Merrill Lynch estimates and revenues right in line but above the street consensus.

There was some chatter earlier this month that the company was enlisting the aid of the firm’s AOL unit CEO Tim Armstrong to help with a leading role in exploring a possible bid for Yahoo assets. Verizon has not officially started negotiations, and the rumors are just that, but the company has said in the past it was open to acquiring additional assets.

Investors receive a 4.46% dividend. The $55 Merrill Lynch price target is higher than the consensus price objective of $50.72. Shares closed Tuesday at $50.63.
Coca-Cola

This remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, Vitamin-water, Powerade and Minute Maid. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.

The strong U.S. dollar could continue to be a headwind to the international business, but the company has expanded the product line, and it posted fourth-quarter earnings that Merrill Lynch was very encouraged by.

Coca-Cola investors receive a 3.2% dividend. Merrill Lynch has a $48 price target, while the consensus figure is at $46.48. The stock closed Tuesday at $43.69.

FirstEnergy

This is a higher yielding utility stock for accounts needing income but worried about the current environment. FirstEnergy Corp. (NYSE: FE) is a diversified energy company dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation’s largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. Its subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions.

The company posted mixed fourth-quarter numbers that hit the earnings estimates, but the revenues came in below Wall Street expectations. Merrill Lynch also notes that the company has increasing pension obligations, and the Signal Peak disclosures are also a concern. With those items noted, the firm remains very positive on the company and feels there is a very attractive risk-reward profile for investors.

FirstEnergy investors receive a rich 4.36% dividend. The Merrill Lynch price target is $40. The consensus target is $35.82. Shares closed on Tuesday at $33.04.

For worried investors that need an income stream, all these top stocks make good sense for growth and income portfolios. The total return potential is solid, and the downside risk is far less than with momentum stocks. Plus, add in the still somewhat oversold status of the overall market, and the upside could be stellar for patient investors.

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