JonathanBurton

SAN FRANCISCO (MarketWatch) — An old Wall Street adage says that time in the stock market beats timing the market. But in 2012, both of those strategies worked.

Many stock investors believe that 2013 will be their lucky number. They point to a menu of research reports lauding corporate America’s relatively strong financial shape and the prospects for the U.S. economy’s steady, however slow, growth. By this logic, even holders of low-yielding bonds can expect a steady road for non-government debt, as long as the Federal Reserve holds the line on short-term interest rates.

Outlook 2013: Predictions for the Tech World

How important will mobile be in 2013 and how will struggling tech companies try to compete? MarketWatchs Therese Poletti and Dan Gallagher discuss predictions for the tech industry in 2013. (Photo: Getty Images)

That said, this bull market turns four years old in March — well-past the two-and-a-half year historical average for U.S. bull runs. Accordingly, next year the major market action may be outside of the U.S. Heading into 2013, the euro zone seems to have priced in its economic troubles for now, and Asia appears to be the growth engine of a global economy that is still debt-laden and disturbingly weak.

Some strategists in fact see non-U.S. stock markets, including the austere euro zone, besting U.S. equities in 2013. That’s saying a lot, given predictions for the benchmark Standard & Poor’s 500-stock index SPX, -0.61%   to hit 1550 or perhaps 1600 (a record high) a year from now — an advance that would range between 7% and 11%, respectively, from the Dec. 20 close.

“Corporations have delivered the goods,” says Bob Turner, a veteran growth-stock investor and chief investment officer of mutual-fund firm Turner Investments. “Economic growth continues, moving forward, and corporations in the U.S. and globally are managing effectively.”

Yet looking ahead, investors would do well to remember the words of legendary American sports columnist William “Blackie” Sherrod, who said that “History must repeat itself because we pay such little attention to it the first time.” The coming year surely will be much like any other, with geopolitical conflicts and conflicted outlooks that will challenge investors’ resolve.

Before getting to 2013’s recommendations, let’s see how MarketWatch’s 10 investment ideas for 2012 fared: Pretty well, actually, given the surging S&P 500.

Many of the picks MarketWatch made in January, based on recommendations and research from investment professionals, turned in solid double-digit and high-single-digit gains.

For example, high-quality dividend-paying stocks and corporate bonds, along with real-estate investment trusts, European stocks and small-cap stocks, all delivered positive performances. While several recommendations — notably gold — lagged the S&P 500’s 17.4% gain for the year through Dec. 20, they did a good job diversifying portfolios. Read more about our 2012 investment ideas.

Which investments are poised for a strong 2013 showing? Here are 10 portfolio moves to consider:

1. Mega-cap stocks go big

“The new leadership within the equity market is mega caps,” Mary Ann Bartels, technical research analyst at Bank of America Merrill Lynch, wrote in a recent research report.

Mega caps — the top 50 U.S. companies by market value — are “reversing a bear trend that had been in place since 2000,” Bartels adds. “This reversal signals a new secular bull market is underway for the top 50, or mega caps.”

The U.S. market’s giants also have considerable foreign sales exposure, which favors them should non-U.S. economies shine brightest. Exchange-traded proxies for the group include Guggenheim Russell Top 50 Mega Cap ETF XLG, -0.53%  and iShares S&P 100 Index Fund OEF, -0.61%  . Both portfolios’ top-three holdings are Apple Inc. AAPL, -0.69% Exxon Mobil Corp. XOM, -0.42%  and General Electric Co. GE, -1.42%  , but the iShares fund, with 100 issues, is less concentrated.

“The bigger, the better,” says Paul Nolte, managing director at investment manager Dearborn Partners. “If we do wind up with a slowdown, a lot of these companies can withstand that.”

2. High-quality companies stay qualified

The definition of “quality” in this bull market is a large company with strong finances, visible earnings growth and a global footprint. A dividend makes the stock even more attractive.

High-quality stocks are “quite inexpensive,” Savita Subramanian, Bank of America Merrill Lynch equity and quantitative strategist, noted in a recent research report. Plus, she adds, “industry leaders with clean balance sheets in a wide variety of sectors rank well on the quality scale.” Top-flight firms on Merrill’s list include PepsiCo Inc. PEP, -1.45%  , IBM Corp. IBM, -2.34%  and Caterpillar Inc. CAT, -1.20%

Quality plus growth equals stability, adds Brian Belski, chief investment strategist at BMO Capital Markets. “When things become more uncertain, investors tend to place a higher premium on areas of the market delivering consistent results,” he noted in a recent research report. Stocks rated “outperform” on BMO’s quality screen include Google Inc. GOOG, -1.47%  , Starbucks Inc. SBUX, -0.10%  and Gap Inc. GPS, -0.70%  Read more about Belski’s money moves.

3. Dividend growth pays off

“Dividends still matter,” Nolte says. “There remains a lack of good choices for income investors,” he adds. Ultimately this quest for yield leads to stocks. Moreover, investors have no dearth of dividend-payers: 80% of the S&P 500 constituents now pay a dividend. Nolte’s favorites include multinational leaders Caterpillar Inc. Novartis AG NVS, +0.00%  , IBM and McDonald’s Corp. MCD, +0.10%

That said, investors should focus on the business, not the yield. A high yield can reflect a poor-quality company, a troubled stock, and a dividend that could be in jeopardy.

Look instead for companies with a record of dividend growth, suggesting they are generating ever-larger amounts of cash to hand to shareholders. A broad proxy for the strategy is the exchange-traded SPDR S&P Dividend ETF SDY, -0.70%  , which tracks an index based on the S&P Dividend Aristocrats — companies hiking dividends for at least 25 consecutive years.

Be mindful of valuation, too. Dividend-growth stocks aren’t undiscovered, and many have been bid up. Says Wally Weitz, a longtime value-stock investor and co-manager of the Weitz Value Fund WVALX, -0.62%  : “If you pay too much for a stock just because it pays a dividend, you’ve still paid too much for a stock.”

4. Europe goes up

Euro zone worries for now seem priced into market valuations and expectations. The MSCI Europe ex-U.K. Index, a proxy for the euro zone, rose 19% for the year through Dec. 20.

Moreover, two-thirds of managers responding to the Russell survey, for example, do not see a euro-zone nation exiting the monetary union, and better than half are maintaining current exposure to the continent.