The bear market rally off the lows printed in October (which matched the June lows) has been a boon for beleaguered investors as the stock market has had one of the worst years since the turn of the century. While a Santa Claus rally could resume after the Federal Reserve meets next week, there is a very good chance that the selling we have seen this week will return in January, and it may not be pretty for investors.
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In a recent Bank of America Securities report, the economics team sees the potential for a collapsing labor market next year that could trigger a big rise in unemployment. In a somewhat chilling warning, the BofA team also recommended selling any stock rally in front of the potential torrent of job losses.

BofA Securities Chief Investment Strategist Michael Hartnett is one of the most respected voices on Wall Street. While not a perma-bear, his preference for the first half of next year is bonds and decidedly not stocks. We decided to screen the BofA Securities stocks research universe for companies that serve as bond market proxies. These include utilities, energy midstream companies, telecommunication companies, consumer staples and net lease real estate investment trusts (REITs), where the tenant assumes all the property costs.

These seven top companies are all rated Buy at BofA Securities and look like solid and safe ideas as we finish the year and head into 2023. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AT&T

The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.

Its Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.

AT&T also provides data, voice, security, cloud solutions, outsourcing and managed and professional services, as well as customer premises equipment for multinational corporations, small and midsized businesses, and governmental and wholesale customers. In addition, it offers broadband fiber and legacy telephony voice communication services to residential customers.

The company markets its communications services and products under the AT&T, Cricket, AT&T Prepaid and AT&T Fiber brand names. The company’s Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brand names.

AT&T stock investors receive a 5.85% dividend. BofA Securities has a $25 price objective. The consensus target is $22.28, and the stock closed on Wednesday at $19.30.

This remains a top Buffet holding, as he owns 400 million shares. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. It has an incredibly strong worldwide brand, with 40% overseas sales.
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The company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one 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 Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Shareholders receive a 2.77% dividend. The BofA Securities target price on Coca-Cola stock is $65. The consensus is $66.67, and the final trade on Wednesday came in at $63.54.

DTE Energy

With the potential for extremely cold winter weather, this company may look to extend gains into next year. DTE Energy Co. (NYSE: DTE) is the largest utility in Michigan. Its largest operating units are DTE Electric, an electric utility serving 2.2 million customers in southeastern Michigan, and DTE Gas, a natural gas utility serving 1.3 million customers in the state. DTE Energy also has non-utility energy businesses that focus on power and industrial projects, natural gas midstream and energy trading.

The company’s Gas segment purchases, stores, transports, distributes and sells natural gas to residential, commercial and industrial customers throughout Michigan, and it sells storage and transportation capacity. This segment has approximately 19,800 miles of distribution mains, 1,305,000 service pipelines and 1,273,000 active meters, as well as approximately 2,000 miles of transmission pipelines.

Its Gas Storage and Pipelines segment owns natural gas storage fields, lateral and gathering pipeline systems and compression and surface facilities. It also has ownership interests in interstate pipelines serving the Midwest, Ontario and northeast markets.

The Power and Industrial Projects segment offers metallurgical coke; pulverized coal and petroleum coke to the steel, pulp and paper, and other industries; and power, steam and chilled water production, and wastewater treatment services, as well as supplies compressed air to industrial customers.

The dividend yield here is 3.31%. The BofA Securities price objective of $120 is less than the $125.57 consensus target for DTE Energy stock. Wednesday’s closing price was $114.41.

This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.
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One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the master limited partnerships.

Enterprise Products Partners stock comes with a 7.84% distribution. The analysts at BofA Securities have set a $30 price target. The consensus target is $31.55, and shares closed on Wednesday at $23.86.

Kraft Heinz

Even in bad times, everybody has to eat, and this company always stands to benefit. Kraft Heinz Co. (NASDAQ: KHC) was formed via the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $29 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. Legendary investor Warren Buffett holds a big position in the stock at Berkshire Hathaway.

It is the third-largest food and beverage manufacturer in North America, deriving 76% of revenues from that market and 24% internationally. Additional brands include Oscar Meyer, Maxwell House, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.

Shareholders receive a 4.04% dividend. Kraft Heinz stock is on the BofA Securities US 1 list of top picks. The firm’s $48 price target is well above the $42.10 consensus target and Wednesday’s close at $39.89.

Realty Income

This is an ideal stock for growth and income investors looking for a safer bear market busting net lease REIT. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.

The company is structured as a REIT, and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 109 times since its public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Investors receive a 4.78% distribution. The BofA Securities price target is $72, while the consensus figure is $68.97. Realty Income stock closed at $63.57 on Wednesday.

This is a top pick across Wall Street in the net lease group, and it is an ideal pick for investors who are more conservative and looking for gaming exposure. VICI Properties Inc. (NYSE: VICI) is a triple net lease REIT that was spun out of Caesars Entertainment post-bankruptcy.
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VICI Properties has 23 mixed-use gaming, lodging and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. The company also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.

Much of the focus has been on VICI’s recent deal to acquire the real estate of the Venetian Resort in Las Vegas, with Apollo as a new tenant. Looking ahead, many on Wall Street are very positive on VICI’s embedded growth pipeline with Caesars Entertainment, including a put/call on the Centaur properties in Indiana (starting in January) and a right of first refusal on a strip asset sale for Caesars, which could occur soon after a full earnings before interest, taxes, depreciation, amortization and restructuring or rent costs recovery.

In addition, the company closed a $17.2 billion deal in April to buy out rival gaming REIT MGM Growth Properties, which owns the real estate of 15 casinos and resorts in eight states, including seven properties on the Las Vegas Strip. All of MGM Growth’s properties are operated by MGM Resorts International.

Holders of VICI Properties stock receive a 4.68% distribution. BofA Securities has a $36 target price, but the consensus target is just higher at $37.51. The shares closed on Wednesday at $33.73.

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If the stock market takes a huge beating in 2023, these stocks will not be as safe as government bonds, and that is a certainty in terms of price performance. However, given their solid dividends and very defensive posture, they will hold up far better than aggressive growth stocks or high-yield junk debt. Plus, to enhance income, covered call options can be sold on all the stocks at strikes above where investors own them.

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