Many analysts believe 2007 could be another profitable year for stock investors, provided they know where to put their money.
During the final week of the year, CNBC spoke with analysts to get their top picks for 2007. Large cap names and private equity were winners in 2006, and many analysts are expecting more of the same next year. But look for some picks that may be surprising as well.
If you could only own one stock in 2007, it should be Walt Disney, according to Mike Cuggino, Portfolio Manager at Permanent Portfolio Funds.
"I think it's a company that's hitting on all cylinders right now," Cuggino told CNBC. "The television division is going great at ABC; they've got some hit shows. Also, the cable division has tremendous products like ESPN. A real leverage driver of this company is the movie and film entertainment division. For the first time in several years, it's going to be profitable in '06 and I think that's going to continue in '07."
Intel was the worst Dow performer in 2006, but David Goerz, Highmark Capital Chief Investment Officer, believes this dog of the Dow will bark profits in the future.
"As we look forward two years out, we think that this is a stock that could see earnings double from where they are, about 85 cents for 2006 doubling to $1.50 and possibly $1.60," said Goerz. "This will come from the significant product cycle transition that they're going through. Technology earnings, which are going to be about 20% next year versus 9% this year, are going to be a major tailwind as we think about PCs going into '07."
KKR Private Equity Fund
Private-equity backed deals accounted for more than a fourth of all mergers in the United States in 2006. Jason Trennert, Chief Investment Strategist for Strategas Research Partners, told CNBC he believes there is still more momentum to come from private equity in 2007. One of this top picks is the KKR Private Equity Fund.
"It goes back to this idea that there's been a ton of money that's been raised by private equity funds," said Trennert. "These guys know what they're doing and the stock is trading just below book value. To me, that is one of the best ways to play this private equity merger boom."