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Crystal_ballLast year was a classic example in market psychology.

Never has the wall of worry been higher and yet here we are set to finish the year with stock gains in double-digits for the major market indexes.

How can that be, when things are perceived to be horrible?

Historically, that’s typically how it goes. The more things to worry about and the higher stocks climb. While the sheep are selling the shares, the smart money was long.

Last year, I put together my annual top 10 stocks for 2012 amidst an environment of fear. Buying those 10 stocks and holding them for the last 12 months resulted in a wonderful bounty.

In aggregate, my top stocks for 2012 gained 40% — more than double the return of the market. This was accomplished without taking on extra risk.

Perusing the list, I recommended big name companies and a few small name companies. Industries represented included the oil sector, consumer retail, housing and banking. It was a nice mix to have.

The best performer in the group was KB Home (KBH). The homebuilder advanced 150% in 2012. The housing market finally came out of its long slumber.

The weakest performer was True Religion Apparel  (TRLG). Its shares were down 26% in the year. The high-end blue jean company simply disappointed as the consumer focused on the essentials. It was the only loser in the bunch.

As we roll into 2013, the level of fear is still palpable and yet stocks seem to keep on keeping on. The ingredients are in place for more gains during the year. Helping matters is that 2013 is the first year of the presidential cycle.

I’m a firm believer in finding bargains in the market and I’m seeing plenty of names that are likely to outperform the market in 2013. We might not reach the juicy 40% returns of the past year, but 20% on these 10 names is not out of the question.

With that, here are my top 10 stocks for 2013.

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