The chairman of Merrill Lynch Co.,. the nation's largest securities firm, said today that now is the time to jump back into the stock market.

"The case for buying common stock is better today than it has been for this entire decade," Donald T. Regan declared. "A prolonged bull market should begin some time in the next year. As a result, we think stocks could out-perform other alternative forms of investment over the next several years."

Regan's view contrasts with that of many investors who, anticipating a recession later this year, are shying away from the stock market until the economy bottoms out.

"We think individuals may now have an opportunity to outperform market professionals," Regan told about 400 Merrill Lynch shareholders here for na annual meeting. "We expect a careful investor who goes against the conventional wisdom now may be making one of his or her better investments."

Though agreeing that a recession is likely this year, Regan predicted a "lengthy upturn in securities markets" soon after. He counseled investors to shop for "underlying asset values" and he said it is "probably a good idea to look for stocks that can be held for a one to three year period."

It wouldn't have been a complete Merrill Lynch annual meeting without the customary bull, and sure enough, shareholders were introduced today to their company's newest star-a moody, musclar Texas Longhorn who will soon appear on TV sets across America as part of a beefed-up corporate ad campaign.

Shareholders were shown a short film on the behind the scenes making of several corporate commercials created by Merrill Lynch's new ad agency Young and Rubicame. The falling snow, rain and setting in the ads were all contrived, but the bull was real-selected from a screening of 1,000, shareholders were told.

The ad campaign signals a steppedup effort by Merrill Lynch to extend its already extensive network of securities sales offices into all 50 states and to branch as well into other financial services including insurance and real estate.

The company's new theme, "A Breed Apart," was trumpeted here by Regan as representative of the firm's singular aggressiveness. A number of Wall Street firms, however, have also been expanding in the four year wake of a change in industry rules intended to foster competition. And, more generally, Merrill Lynch's venture into other areas of consumer finance reflects an increasing trend among brokearage houses, banks, insurance firms and lending companies to spread into one another's traditionally separate businesses.

Despite strong first quarter results this year and optimistic outlook for the stock market as a whole, Regan predicted Merrill Lynch's securities business would "not do as well this year" as it did in 1978 when the market scored a record number of trades. But he said the company's non-securities businesses should do better than last year, thus balancing things out.

Recently, Merrill Lynch became a residential real estate broker, seeking two additions to its real estate financing division. It bought Paula Stringer realtors of Dallas in March and, last week, announced a proposed merger with Van Schaack and Co. of Denver.

Expanding its insurance business, Merrill Lynch also started covering residential home mortgages through the acquisition of the AMIC Corp. of Raleigh. It provides mortgage protection life insurance as well through Family Life Insurance of Seattle.

"What we're trying to do here," said Regan, "is take some of the cycle out of the securities business."

But Regan stressed that securities and financing still provide the major share of Merrill Lynch's business, accounting last year for 89 percent of the company's $1.5 billion in revenues and 79 percent of its $71.3 million in earnings.

The company opened 66 security sales offices last year - including those acquired through the acquistion of White Weld - bringing its office total to 395. CAPTION: Picture, Merrill Lynch Chairman Donald T. Regan at stockholder meeting. AP