My regular readers and subscribers know that I am not sanguine about the prospects for the New Year. I believe the same factors that caused profits in the S&P 500 to fall year-over-year in will still be firmly in place in 2016. This includes anemic global growth. Worldwide demand is at its lowest levels since 2009, and I don’t see much on the horizon that will change that in the upcoming year. Japan is back in an official recession, Europe is barely bumping, China’s growth is decelerating sharply, and the United States remains stuck in the weakest post-war recovery on record. In addition, if the collapse in energy and commodities continues in 2016, many emerging markets could find themselves under extreme credit distress. These markets include Argentina, Brazil, and Russia.

In addition, with the Federal Reserve about to raise interest rates for first time since 2006 and both Japanese and European central banks continuing to flood their markets with liquidity the only way for the greenback to go against major currencies is up in 2016. This trend is already beginning with the Euro posting its worst month against the dollar in November since March. The euro is now down 12% against our currency over the last year and King Dollar will continue to cut into the profits of the American multinationals that make up most of the S&P 500 in 2016.

On a somewhat brighter note, profits might be able to increase in the low to mid-single digits next year. Energy and commodity earnings should be easier in 2016 than they were this year since they already fell some 60% and cannot go much lower. In addition, companies are projected to buy a record amount of their own stock back in 2016 which will help boost earnings per share.

I think the way to play the market as we open 2016 is to have a higher than usual allocation to cash in one’s portfolio than normal as I believe there will be better buying opportunities as the year progresses. I am also allocating more of my portfolio to what I call cheap value stocks that should be able to navigate 2016 okay and do not have much downside should 2016 turn out even weaker than I expect. These stocks are already selling for significantly less than their intrinsic value and also pay a generous dividend yield of at or above four percent. Here are four of these type of equities I have recently initiated a position in or adding to an existing stake.

I recently picked up a stake in venerable department store Macy’s (NYSE: M) which has dropped some $30.00 a share from recent highs and goes for $40.00 a share. The trigger for the decline was disappointing third quarter sales and light guidance. Macy’s is one of many retailers suffering from weak consumer demand and a poor back to school season despite what should be a substantial gasoline “tax cut” flowing into improved consumer spending. In addition, the strong dollar is cutting down on Macy’s visitors from outside the country which took 1.5% off third quarter sales according to the company.

However, at these levels Macy’s is dirt cheap. Macy’s consists of some 900 stores and has a market capitalization of $12.5 billion and an enterprise value of some $20 billion. A couple of activist funds tried to push Macy’s to embrace a real estate investment trust structure for its real estate holdings earlier this year valuing the company’s real estate alone at $40.00 to $60.00 a share. Macy’s famous Herald Square location in New York City takes up a full city block and is probably worth $3 billion to $4 billion by itself. Earnings should be flat next year, but growth should return in the future as the company makes operational changes. The stock sells at nine times earnings and yields 3.7%.

I also continue to like both Ford (NYSE: F) and General Motors (NYSE: GM). Both are benefiting from a robust domestic market and seeing higher-margin trucks and SUVs make up more of both of their overall sales mix thanks to low gasoline prices. China is profitable and should do better after its get by its recent bout of weakness. Both companies’ European operations should improve in 2016 as the continent’s vehicle sales continue to rebound off recessionary levels. 

Ford and General Motors should see nice earnings gains in 2016 and both go for under eight times forward earnings, less than half the overall market multiple. Finally, both stocks yield over four percent so one gets paid to wait for the market to come around and reward the true value of these manufacturers.

Finally, giant drug-maker AbbVie (NYSE: ABBV) looks like a steal here. The company recently easily beat third quarter earnings estimates and raised its dividend 12% and now yields 3.7%. As importantly, management laid out a credible plan on how it expects to deliver annual average revenue gains of 10% over the next five years while boosting its margins from a current 36% to 50%. Earnings are tracking to better than 25% growth in FY2015 and the company should deliver a 15% to 20% increase in FY2016 according to the current consensus. The stock is too cheap given all this at less than 12 times forward earnings.

Given my outlook for the overall market in 2016, I would not be shocked if just the dividends from these four companies provide a better average return than the equity market does in the New Year. They are also undervalued given their capital appreciation potential. As importantly, I think they will do fine and be able to navigate whatever turmoil comes their way in the upcoming year.