There is a market rally going on and most of us haven’t bought into it for one reason or another.

This lethargic attitude has actually been the frustration of many analysts and money managers.

Last week, I was lucky enough to listen to former Merrill Lynch Chief Investment Strategist Richard Bernstein who gave some interesting tidbits on the current market scenario:

1. Overall, U.S. stocks have outperformed emerging markets since the lows of 2009, with the S&P 500 returning an average of 39% annually in comparison to the MSCI Emerging Markets Index, which has returned 16% annually.

2. The European Central Bank’s balance sheet is much larger than the U.S. Federal Reserve — $3.9 trillion vs. $2.8 trillion.

3. The People’s Bank of China’s (the Chinese Central Bank) balance sheet is 50% larger than the Fed’s.

4. The Russell 2000 Index of small-cap stocks, perhaps the strongest of the U.S. equity indexes, has the fastest projected growth rate of any equity index in the world. This year alone, earnings per share for the index are expected to grow by 36%.

In a nutshell, things just aren’t that bad in the United States.

A diamond in the rough?
Since the panic of a 13-year low of 676 in March 2009, the S&P 500 has surged nearly 114%. That’s a three-year average annual nominal return of 38%.

So why the long faces?

It’s simple… the flow of news. Each time an investor turns on the TV or reads something on the Internet, they are faced with constant fear concerning the fate of the euro zone, they hear about a particularly contentious U.S. election cycle, they see a stubborn unemployment rate that remains in the 8-10% range, and they’re uncertain about the fiscal cliff and its outcomes.

But no matter which way you look at it, the market has risen considerably during the past three years. Take a look at the chart below:

But is it too late to get in?
The short answer is “no.” The market is cyclical, so while some stocks have already ridden the wave, others have lagged. So the best way to manage cyclical risk is to focus on big-name stocks with market caps greater than $10 billion and with good market liquidity.

I’ve found three stocks that have just that. Best yet, they are currently trading at double-digit discounts and offer investors a respectable dividend income.

1. Intel Corp. (Nasdaq: INTC): The world’s largest manufacturer of computer microprocessors is quietly positioning itself to become the world’s primary supplier for anything that requires a computer chip…including smartphones and tablets, two of the fastest-growing electronic devices in the United States.

The cyclical weakness of the semiconductor industry this year has pushed the stock down 9.3% to roughly $21. Mind you, Intel has only been cheaper 5% of the time during the past decade. The stock currently pays a high 4% dividend yield.

2. McDonald’s Corp. (NYSE: MCD): Whether you like the food or not, the Golden Arches is a virtual ATM machine. Due to some overblown concerns regarding sales and foreign exchange rates, the stock is off 13% from its 52-week high and trades around $88 a share. The stock yields about 3.5%.

3. Dow Chemical (NYSE: DOW): Shares of the chemical giant currently trade just under $30, which is a 17% discount to its 52-week high of $36. This also includes a healthy 4% dividend yield. As the manufacturer of everything from bathroom cleaner to agricultural chemicals, this is a solid U.S. brand with a product portfolio diverse enough to weather many different economic environments.

Risks to consider: All three stocks are subject to economic cycles.

Action to Take –> Whether we want to admit it or not, U.S. equity markets have performed well since the market lows of 2008-2009. And these three stocks still offer value and a combined dividend yield of nearly 4%. This isn’t bad considering the dismally low interest rate environment we’ll be in for at least the next two to three years, according to Federal Reserve Chairman Ben Bernake.

– Adam Fischbaum

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Source: StreetAuthority

Adam Fischbaum does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of INTC in one or more if its “real money” portfolios.