After getting burnt by selling Treasury securities in the early part of 2011, bond investor Bill Gross is placing the asset class at the top of his shopping list for 2012.

In his monthly investment outlook for January, Gross, founder and co-chief investment officer at Pacific Investment Management Co., or Pimco, laid out his investment strategy for the new year, highlighted by his preference for U.S. bonds and an aversion to the euro zone's credit markets.

Among his favorites are Treasury securities due between five and nine years; long-dated Treasury inflation-protected securities, or TIPS; high-quality U.S. corporate bonds; and selective municipal debt.

As long as a euro-zone credit implosion is possible, "investors should gravitate to the 'cleanest dirty shirt' sovereigns with the least encumbered balance sheets," said Gross in his 2012 outlook, which was available on Pimco's website Wednesday.

On the other hand, Gross said he will continue to avoid "Venus fly trap peripheral Euroland paper." Italian bonds offering a 7% yield are enticing but have "trap door possibilities" that could see further "price" defaults in 2012, he said.

Pimco, which is owned by Allianz SE (ALV.XE, ALIZF), is one of the world's biggest asset-management firms with more than $1 trillion in global assets under its management. Gross manages the firm's flagship bond fund, the $244.1 billion Total Return Fund, the largest bond fund in the world.

The fund, which in 2011 suffered the first calendar-year outflow since its inception in 1987, was hurt by Gross's ill-timed bets earlier last year wagering on price decline in Treasurys. Shortly after that, the euro zone's sovereign-debt crisis sparked a global flight into Treasurys as a safe harbor last year with about 10% return, easily beating U.S. stocks.

Gross admitted he made a mistake and has shifted gear to buy long-dated Treasury bonds in recent months.

In the January investment outlook, Gross flagged two main risks confronting investors this year--credit risk linked to the euro zone's debt crisis and zero-bound interest-rate risk driven by ultra-loose monetary policy, "offering the fat left-tailed possibility of unforeseen policy delevering or the fat right-tailed possibility of central bank inflationary expansion."

Until the outcome becomes clear, investors should consider ways to hedge their bets, including buying Treasury bonds, said Gross.

"Both tails are fat," said Gross. "The dollar is king with a left-tailed delevering scenario--pauper in a right-tailed global reflationary expansion."

In other asset classes, Gross said equity allocations should favor higher-yielding companies in sectors with relatively stable cash flows, such as electric utilities, big pharmaceutical and multinational companies.

Commodities could go either way, depending on the same tail risks, but scarcity and geopolitical considerations, such as Iran, favor a positive tilt, said Gross.

"Gold at $1,550 seems pricey but it has upward legs" if quantitative-easing measures from major central banks including the Federal Reserve continue, he said.

-By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com