Here’s why stocks could be selling off. What to buy

Published Thu, Mar 26 201511:23 AM EDTUpdated Thu, Mar 26 201511:36 AM EDT

Market watchers are pointing to a buyback strike as one of the reasons the market is selling off, but they expect stocks to rebound as companies resume repurchases and dividend increases in the month following earnings. CNBC Pro highlights some of the top picks to ride this trend. The majority of companies in the S & P 500 just entered a buyback blackout period ahead of the first-quarter earnings season, a lapse of time that prevents firms from repurchasing shares prior to releasing earnings. The absence of corporate demand along with high valuations may put a lid on stocks in the near term, according to a recent report by Goldman Sachs, which recommends buying shares on a pullback. "We expect S & P 500 firms will boost repurchases by 18 percent to $604 billion in 2015. While roughly 70 percent of share repurchases are implemented via 10b5-1 programs, firms refrain from discretionary buybacks during the blackout periods that extend from roughly five weeks prior to earnings reports through 24-48 hours post-announcement. As volumes decline, market performance appears more vulnerable to the seasonality of buyback activity." In the past three days, the S & P 500 fell 2 percent for its worst three-day losing streak in nearly three months, while volume this week at the NYSE remains 10 percent below this year's average of 3.6 billion shares. In the past eight quarters, the S & P 500 was flat in the month leading to earnings season, compared to an increase of 1.6 percent both during earnings season and in the month following, Goldman Sachs noted. Read More Biotech outlook dire as bull market loses leader Corporate action in the form of buybacks and dividends has been the engine behind this six-year bull market. Last year, for example, the combined tab of buybacks and dividends by S & P 500 companies reached $900 billion , surpassing the previous record of $846 billion in 2007, according to Standard & Poor's. The money play: Below are some of the best-performing stocks in Goldman Sachs' list of recommendations. These companies are focused on returning cash to investors via buybacks and dividends. —CNBC's Michael Bloom contributed to this story.

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