Correction protection. 3 best Street ideas on week

Published Sat, Apr 25 20157:00 AM EDT

CNBC Pro highlights below the three best strategy or economic notes that came across our desk this week. The excerpts are from the strategists whose work we find to be particularly insightful. Robert Buckland, Citi Research, (April 23): Global equities' "correction protection" "Despite global equities moving through previous highs, our checklist suggests that it is still too early to call the end of this six-year bull market. But, of course, that doesn't mean we are not going to see corrections along the way. One of the characteristics of 'Phase 3' in the credit/equity cycle is rising volatility. In fact, we are probably due a 5-10 percent correction soon.... While we would see these setbacks as the price of investing in an aging bull market we recognize that some investors have less strong stomachs. The appetite for losses is especially low among the bond refugees–income-hungry investors who love the dividend yields on offer in equities but hate the frequent corrections that occur even in a bull market. We have previously considered a global equity strategy that might satisfy these demanding investors: Provide them what they love, i.e. yield, but minimize what they hate, i.e. drawdowns. We screen for shares with premium dividend yields, but low average drawdowns in the past three years. We cross-check against share buybacks to find companies best placed to support their stock prices when sell-offs occur." Among the names that make Citi's "correction protection" screen are Pepsi , General Mills , Lockheed Martin , Kimberly Clark and Pfizer . Venu Krishna, Barclays (April 22): "Yes. As expected, small caps that engaged in high buybacks have not only continued to outperform the Russell 2000 but also small caps that engaged in no buybacks (plus 3.5 percent over Russell 2000 since 12/31/2013 and plus 2.7 percent vs. no buyback stocks). Nominal levels of buybacks amongst small caps have remained robust (up 17 percent since 1Q14) and yet buyback yields remain relatively low (1.48 percent vs. pre-crisis highs of 2.7 percent), suggesting there is still capacity for more buybacks.... We don't think the small-cap buyback rally is running out of steam: With domestic economic growth on a strong footing, small cap fundamentals improving (we expect EBITDA growth of 10 percent in 2015), and stable buyback allocation, buybacks have incremental room to rise. Thus, small caps engaging in higher level of buybacks should continue to benefit." Among the names on Barclays' buyback screen are Avery Dennison , KBR Inc, Terex , Wendys and Visteon. Russ Koesterich, BlackRock's global chief investment strategist (April 20): "The comfort of quantitative easing" "In the case of China, however, lower growth has a silver lining: greater monetary and fiscal stimulus. To be sure, investors there are hoping slower growth will lead to stimulus by the government. And we see investors being similarly consoled in Europe. Last week, European Central Bank (ECB) President Mario Draghi reiterated his commitment to Europe's quantitative easing program. The 60-billion-euro-a-month bond-buying spree has pushed 10-year German Bund yields down to nearly 0 percent. Even in the United States, the weak pace of global growth has reassured investors that a potential interest rate hike by the Federal Reserve does not represent a near-term threat. Last week, U.S. rates fell toward their April lows. At the same time, interest rate volatility has also dropped, with the MOVE Index, which measures volatility in the U.S. Treasury market, recently hitting its lowest level in months. Among the beneficiaries of this environment are many, although not all, financial companies. With interest rates low and most central banks stuck in a position of near-permanent easing, it should come as little surprise that many large financial firms are seeing a benefit. It is true that traditional banks are struggling with low rates and declining net interest margins. Wells Fargo reported that its net interest margin fell below 3 percent for the first time in at least a decade. However, financial firms with large capital market operations and merger-and-acquisition desks are thriving. Low rates have translated into a surge in mergers and an increase in currency trading, both big moneymakers for investment banks. Last week, JP Morgan and Goldman Sachs reported strong numbers, with Goldman's profits at a five-year high. We see the favorable environment for this sector continuing, and accordingly, we would remain overweight large, global financial firms." Read More Forget Nasdaq. These stocks are just as hot

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CNBC Pro highlights below the three best strategy or economic notes that came across our desk this week. The excerpts are from the strategists whose work we find to be particularly insightful.