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Should You Be Concerned About The Rally? You Might Like These 7 Safety Stocks

Tickers in this article: ANR BTU CLF MCP MVG PPP WLT

With the stock market rallying so strongly as of late — The Dow closed above the 14,000 mark for the first time since 2007 – one party-pooper is unimpressed and foresees a "correction" in market prices in the near future. But is his pessimism justified?

Marc Faber, publisher of the Gloom, Doom and Boom report, lives up to his sobriquet of “Doctor Doom” by predicting a pending decline in the market. Instead of enjoying this refreshing surge of optimism he told CNBC that he is selling some of his shares.

Although there are certainly many positives about the economy at the moment, such as the housing market's continued upward trend, Faber thinks your investments would be much safer if you tied them in gold or other precious metals. (I know another man who will vouch for that… Ron Paul ). He also suggested mining companies. If you don’t mind investing outside of US stocks, he also recommends markets in Ukraine, China and Vietnam.

Perhaps it is useful to heed Faber’s cautionary advice, but consider other factors: the forward P/E ratios for the major market indices are quite average. That's a good thing because a high P/E ratio usually means the market is overheated. The WSJ reports forward P/E estimates of 12.28 For Dow Industrial, 13.27 for S&P 500 and 14.29 for Nasdaq 100. The historic average is about 17. So it seems like there is more than enough room to accommodate a rising market.

If you are into taking risks, then perhaps you will find Faber’s advice boring because he is concerned with long term investing strategies that has to do with “fundamental analysis” (and waiting very patiently for your returns to add up) as opposed to what traders and day traders do, which involves “technical analysis.” If you like trading and taking big risks (that also comes with big rewards) this is your opportunity because the market is definitely in momentum.

Business Section: Investing Ideas

Looking for stock ideas that follow Faber's advice? We screened Gold, Silver, Steel & Iron, Copper, Aluminum and Industrial Metals & Minerals stocks for strong bullish attention from hedge funds.

This starting universe of precious metals and mining stocks fits with Faber's idea of safe alternative investments should the market falter.   We then screened for significant net purchases from institutional investors over the current quarter as a sign that hedge funds, and other big money traders, think these companies have upside to price in.

Do you think these institutional favorites would make a good hedge should Faber's doomsday predictions come to pass? Use this list as a starting point for your own analysis. 

Interactive chart: Compare average analyst ratings for the stocks mentioned below. Press play to see how ratings changed over the past two years. Click through for more free tools.