Where Are the Bargains in This Market? MCD, CAG, PG

The market continues to forge higher, and the Dow finally made a decisive close over the psychologically important 12,000 mark this week. The mini-panic Friday, which was caused by the unrest in Egypt and elsewhere in the Middle East, seems to be a distant memory. But is that all we’re going to see of a “correction”?

It’s possible, but it’s hard to believe that a seven-month, 27% run in the S&P 500 would give back less than 2%, and then only for a single day!

More likely, the market will follow an erratic, see-saw pattern over the next few weeks, lunging higher for a day or two at a time, then quickly selling off. I still think the hedgers among us will get a decent chance to make some money playing the short side. My preferred hedging vehicle is the ProShares UltraShort QQQ Fund (NYSE: QID), below $10.45 with a stop 10% below your entry point.

Is anything worth buying at these rarified levels? Obviously, you’ve got to be extra careful. Ben Bernanke’s ZIRP (zero interest-rate policy) has distorted — that is, inflated — the prices of hundreds of stocks, making it hard to find true bargain stocks.

However, a few blue chips continue to offer good potential for double-digit returns over the next 12 months. I would single out McDonald’s (NYSE: MCD) at $77 or less, ConAgra (NYSE: CAG) at $23 or less, and Procter & Gamble (NYSE: PG) at $63 or less. Buy them in that order.
A Cheap Emerging Market

Overseas, India stands out as one of the world’s best values. The Bombay market has dropped 14% since Nov. 5. During the same period, the S&P gained nearly 7%. Of course, India has its share of economic problems. Inflation is flaring up, food prices in particular, forcing the central bank to raise interest rates six times in 2010 and again last week.

At only 13 times trailing earnings, though, the Indian market now sells at a significant discount to our own — and I don’t have to tell you which country is likely to grow faster over the next five, 10, 20 years. In my judgment, this is a rare opportunity to build a stake in India on the cheap. Buy the PowerShares India Portfolio (NYSE: PIN) at $24.50 or less.