INVESTING: Look to the big stocks for the biggest gains in 2007

Not to beat a dead horse, but I’ve been saying for months that smaller stocks will underperform the big boys. Now that the facts have backed up my prediction (always nice when that happens), let’s look at a few big fish that have the potential to get fatter this year.

The second-largest company in the world by market value is General Electric. Since Jack Welch shook the foundations of this firm in 1981, GE has been a true wealth generator. The stock went right along for the ride after the general market bottomed in early 2003, but then stumbled at the end of 2004.

Until last month, it was pretty easy for the rest of the stock market to beat big, old GE. On Dec. 15, the company got an early Christmas present in the form of a solid breakout on huge volume, and the consolidation pattern since then may lead to higher prices soon. Check out a chart of Las Vegas Sands for a real-life example. The casino operator rewarded investors with a juicy 15-percent return in only eight weeks.

Another well-known behemoth with a similar chart pattern is Citigroup. Citi will most likely need a little more time than GE to come to fruition, but big financial stocks have been doing well lately. Like GE, Citigroup has spent that past twoplus years forming a solid base and, as they say, the longer the base the deeper in space. I get the feeling Citi could hit $61 a share this year, which is a generous amount away from its current $54 price.

I’ve been fully behind this market rally since late September, and despite the fact that this bull market is more than 4 years old, I believe it can continue for a while.

The action in the market since July until now means the life expectancy of this uptrend should be measured in months, not days or weeks. I am sticking with the same message I began trumpeting in September, and that is that the market remains a buyon-the-dips environment.

Speaking of dips, bonds have taken a decent hit over the last month as the yield on the 10-year has moved up from 4.45 percent to almost 4.8 percent. I believe yields are going to be in this range for the rest of this year.

The economy is growing, but interest rates are of a mind not to do much this year. That creates opportunity if bonds move temporarily to one side of the range or another. They look as if they are heading toward the low end soon, so a good risk-reward set-up could occur in bond land in a few weeks or less. This is somewhat of a short-term trade. If the 10-year falls too much under 4.5, profit-taking would be in order.