The stock market could reach new lows in the new year, but there are some stocks where investors can weather market volatility, according to MKM Partners. That doesn't bode well for stocks and means there's a high risk that the equity market will see a new low next year, he said. In that market environment, MKM recommends focusing on stocks that are defensive and avoiding sectors trading at high-cyclical adjusted valuations. MKM sees investors overlooking the amount of leverage that Arch has as a positive going into the current cycle. The pick with the largest potential upside is Talos Energy , which MKM sees surging 47% to its target price.

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