3 Stocks to Buy: BP plc (BP), Telefonica S.A. (TEF), AK Steel Holding Corporation (AKS)

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The year started wonderfully well for the average investor in the US equity markets. The S&P 500 is up by over 5% since the start of 2013 and now it stands at around the 1,500 level. Lately, I have been talking with many money managers and a number of them are afraid the market may suffer a strong correction at some point in between the first and the second quarter of the current year. I hate trying to make predictions but I can only say that, even though the market has gone up strongly and despite those correction warnings, I have recently made three equity bets.

BP plc (ADR) (NYSE:BP)

BP plc (ADR) (NYSE:BP)

I have talked a lot about the company and I finally decided to make an investment in it. I bought it at around $43 and I sold Feb calls with a $45 strike. I think the stock has tremendous upside potential and this upside shall materialize whenever the Macondo spill trial sees an end. My long term target for the stock is at $60. BP plc (ADR) (NYSE:BP) trades at a 20% discount to US peers and its 2013 8.2x P/E and 5.1x EV/EBITDA are extremely compelling. This, plus its growing (at a +12% year over year rate) 4.8% cash dividend yield were reasons enough take a long position in the company. I like recovery stories whenever they happen to be a in a cash rich sustainable industry. By now, the market is giving me some credit: BP is up by 6% since the beginning of the year.

Telefonica S.A. (ADR) (NYSE:TEF)

The dividend for this company has been cut to 0% and earnings per share are expected to fall again in 2013 from just over 1 euro in 2012 to 90 cents. That said, Latin American fundamentals are strong and the management is taking the right approach to TEF´s high leverage and competitive problems in Europe. I have been watching the stock for over two years and I have just decided to go long. I bought TEF at $14.50 and I plan to hold it for the long term. The company currently trades at 2013 12x P/E and 5x EV/EBITDA with its net debt standing at 2.7x EBITDA. I expect debt to be reduced to 2x by the end of 2015 and the company to resume its dividend by the end of 2014.

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