This morning my "Squawk on the Street" partner had to straighten me out. We were doing our mad dash segment as we do every day, and I started out by saying, "Boy, do I hate this market." I looked right at the camera when I said it, not at David, and made my antipathy as palpable and clear as possible.
Whoa, David said. That's not the way you really feel. He went on to say that I have been very negative, but there are parts of the market that I am "constructive" on.
He couldn't be more spot on. I am no cheerleader for stocks, despite what a Fed official recently said about me on "Squawk Box." I haven't liked the set-up in ages. I am totally fixated on the fact that this week is, historically, one of the weakest of the year, down 20 out of 25 times. That's horrendous. Nor can I be sanguine that the moment the Fed chooses to do nothing, all the commentators talk about is when will the Fed act next. It's like a continuous loop of ignorance.
More important, there's just too many things going wrong. It's a sick market without any leadership, taking its cue from whatever market is the worst in the world at any moment, and today it's Germany because of the massive and totally understandable rollover of the stock of Volkswagen for this developing scandal about tricking the emissions czars globally. That market is down almost 4% because of the huge weighting Volkswagen has in the index. Germany is a huge car exporter and Volkswagen's woes are, somewhat illogically, bringing down all of the German auto stocks even as the rest are probably beneficiaries of VW's legal problems. Germany is a monster exporter of autos, so this decline is shocking the country to its core.
But if Germany were up and the Chinese market were getting clobbered -- off the usual slowdown concern, of course -- I think we'd be down off of China. Heck, I think we'd be down off of Brazil or even Jakarta at this point it's so bad.
That's a big reason why I have become such a vocal critic of stocks here. I know from a casual glance at my Twitter feed that people want me to be bullish and chide me for not liking stocks. You think I don't want to be more bullish? But many sectors -- like commodities, like industrials, like financials, like drugs -- trade horribly. I will not choose to be oblivious. My goal is first to do no harm, and I see many stocks in harm's way.
Still, though, let's get back to what David said to me. I know this market is gripped by the bear. On any given day it can be totally repulsive. I said that the market had no business being up yesterday given the stronger dollar, higher oil and higher interest rates. That was sure the case. Today, though, while the dollar is still way too powerful, oil and interest rates are down, which is good news despite how stocks acted today.
Nevertheless, I am not going to let the entire market get me down. That's because, while there is much to dislike about the overall state of things, I would be remiss if I didn't acknowledge that some stocks are going down even though they shouldn't be and other stocks are becoming bargains simply because they are part of the maelstrom that's bringing down everything.
So what am I constructive about? Let me give you some examples of individual stocks that are plummeting but that make more sense to buy than sell.
Let's start with the defense stocks. This morning as I read through The New York Times and The Wall Street Journal I was brought low by the sheer amount of conflict around the globe. Just a brief interview with the premier of China who is here visiting serves as a reminder that China has designs on East Asia that simply hadn't been the case for years. Or how about Syria? When was the last time you saw an adventuresome Russia bringing in heavy weaponry. How about when it was the old Soviet Union? We don't even talk about the war between Yemen and Saudi Arabia. There are hot wars all over the place that are barely covered by the press anymore.
Now don't call me a warmonger, but last time we squared off against putative enemies like this was the Cold War, where we projected ourselves everywhere as the world's policeman.
We have walked away from that role, creating an "every country for itself" environment, forcing nations to arm and defend themselves. So how can I not be constructive on the defense stocks as they come down? Sure our country is not re-arming at a rate you would expect, but that's spurring huge sales for companies such as Raytheon (RTN), Northrop Grumman (NOC) and Lockheed Martin (LMT), the latter of which we are building a position for Action Alerts PLUS.
Now, going back to when I told David "I hate the market," nothing I said makes me think that, ah hah, this is the level to buy these defense stocks right here. I am cognizant that this market wants to go down. Yet, these stocks are getting more attractive as they slide lower and I think they will only get more attractive as we go into an election year where all candidates from both parties seem more inclined to spend on defense than our current president.
Or how about some of these food stocks? This morning General Mills (GIS) reported a picture-perfect quarter, with good growth, expanding margins and some obvious success with its expanded version of Annie's, the natural and organic company it is using to storm the aisles of everyone from Whole Foods (WFM) to Kroger (KR). The stock barely rallied, but that's OK -- just think what it would have done if the S&P futures weren't such a gravitational pull. Mills, as it is known, has so many things going for it -- everything from steep declines in commodities to an outsize yield, and one that can grow not because the stock goes down but because the dividend will be raised bid. What a welcome relief!
Let me explain how much I like this stock. Did you know that Campbell Soup (CPB) reported a not-so-hot quarter not that long ago and the stock dropped from $50 to $46 in its wake? Now it is at $51. That's a sector tailwind that you simply must be constructive about, and remember that General Mills is doing much better than Campbell.
Or how about these restaurants? Did you know that Buffalo Wild Wings (BWLD) hit an all-time high yesterday? We had CEO Sally Smith on "Mad Money" after that last quarter, which was so solid, and I marveled that the stock wasn't screaming higher. Here we go, though, with lower commodity costs and cheaper gasoline and it's up almost 20 points since that interview in a really crummy tape.
It's not alone. I like the Darden (DRI) quarter, which runs Olive Garden, Longhorn Steak and Capitol Grill, and it was roaring until management decided to under-promise about margin expansion down the road. I smell good cooking -- that's opportunity if it keeps going lower.
Or let's think about AutoZone (AZO). I said in my Friday game plan that this stock is the one to buy because of its aggressive buyback and consistent earnings thanks to the average car in this country being now a dozen years old. Sure enough, the numbers were blow out, but the stock did nothing when it opened. And then it soared 13 points as investors parsed the quarter and marveled at how strong it was and at how the company bought stock all through what was a very rocky stretch for retail.
There are other stocks I sit and wait for. I went to my Lowe's (LOW) this weekend to pick up some odds and ends, and I am well aware that it, as well as Home Depot (HD), are being brought low by this futures tug. Is there really a chance to get back into Ulta Salon, Cosmetics & Fragrance (ULTA) below where it reported that breakout quarter?
I could go on and on about individual stocks of individual companies that I am constructive about. My point, though, is simple: if you chose to be negative, I get it. The action is horrendous. But if you chose to be judicious, there are options to make money. Just because there's misery on your screen doesn't mean you can't make money. There is plenty of good ideas out there. You just have to work a lot harder to find them.