Good Stocks to Buy When Stock Market Correction is Over

Sam Subramanian PhD, MBA

The New Year has started on a less than stellar note. With January complete, markets around the world are in negative territory.

Investor's willingness to take risks has diminished. Riskier assets like stocks have fared poorly while less risky ones like government bonds have won favor.

In the U. S., popular exchange-traded funds (ETFs) like SPDR S&P 500 (SPY) and iShares Russell 2000 Index Fund (IWM) designed to track the large-cap S&P 500 and the small-cap Russell 2000 benchmarks are down 3.6% and 3.7%, respectively.

Overseas stock investments have not been spared during this pullback. In fact, they have declined more. Popular mutual funds and ETFs like Fidelity Spartan International Index Fund (FSIIX) and iShares MSCI Emerging Markets Index Fund (EEM) designed to track developed and emerging markets indexes are down 5.1% and 7.8% respectively.

In the bond market, higher quality corporate debt and Treasury securities have gained ground while lower quality debt has sagged.

While the markets have been rattled by President Obama's proposals, uncertainty on Bernanke's confirmation, as well as financial travails of Greece and United Kingdom, news on the earnings front and economic data have actually been quite good.

You have the opportunity to make some cool money if you are prepared to get into the right stocks when this sell-off runs its course. With this thought in mind, I have put together 3 large-cap companies from 3 sectors that are executing well and have a fair shot at delivering outsized returns.

3 Good Stocks to Buy When Stock Market Correction Runs its Course

Intel (INTC): Unlike PC-maker Dell (DELL) that has off-late had trouble living up to earnings forecast, the #1 PC chipmaker Intel is connecting well with investors. During the fourth quarter, Intel earned 40 cents a share, 10 cents or 33% above analysts' view. Sales rose a whopping 28% to $10.6 billion, marking their largest increase in more than 10 years. The outlook for Intel's server segment looks particularly encouraging and the company has upped its first quarter revenue forecast to the $9.3 billion to $10.1 billion range, exceeding analysts' forecast. This bright picture has not prevented Intel shares from falling victim to weakness in technology shares in general. Intel shares lost 5% in January.

PNC Financial's (PNC) shares have led the pack of three strong buy stocks gaining 52% over the past six months. They have also bucked the recent stock market correction.

PNC Financial (PNC): At a time when Bank of America (BAC) lost money and JPMorgan Chase (JPM) reported higher loan losses, Pittsburgh-based PNC Financial Services is doing something right. Excluding $687 million gain from the sale of Barclays Global Advisors to BlackRock (BLK), PNC earned 90 cents a share in the fourth quarter, beating analysts' forecast by over 15%. The deterioration in credit quality slowed from the third quarter to the fourth. PNC is reported to be in talks to sell its Global Investment Servicing to Bank of New York Mellon (BK) for nearly $2.5 billion. This sale can help PNC pay back nearly $8 billion in bailout funds received during the financial crisis. A solid earnings report and speculation of an upcoming business unit sale have helped PNC shares buck the broad market and gain 5% in January.

Starbucks (SBUX): The turnaround effort at Starbucks is working. To counter intense competition from McDonald's (MCD), Starbucks is marketing better and operating more efficiently. Starbucks' single-serve instant coffee is a hit. The coffee shop chain's customers have begun to return and are buying more lattes. During the quarter ended in December, Starbucks earned 33 cents a share beating analysts' estimate by 28%. Same-store-sales increased 4% after two years of decline. An upbeat fiscal EPS forecast that exceeded analysts' expectations have not prevented Starbuck's shares from losing 6% in January.

Read previous article in this series: Strong Buy Stocks for Today’s Stock Market.

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