We have been making the worst of a bad situation. We are presuming that everything is too high until proven innocent. We have decided that whatever can go wrong will go wrong. And at one point, because of those entirely and decidedly too gloomy views, we saw panic, sheer raw panic, the kind you get when investors really give up and capitulate because they can't take the pain any longer.
You know what I say, nobody ever made a dime by panicking, and plenty of people have made a dime taking the other side of the panic. A panic occurs when those with weak hands throw out their stocks all at once in a violent fashion -- all of their stocks good and bad -- and you get to pull some babies out of the bathwater.
So I am taking the other side of the panic trade and giving you some babies to save from the drain. I think I have earned the right to tell you that some sectors are now buyable. You know I have been no bull during this period. I have openly castigated the industrials and I have felt that any of the commodities as well as any commodity producers would get crushed. Commodities are in a vicious bear market.
Companies that sell into Europe, Latin America and Asia have gotten hammered and I have said, let them be hammered. They are down for political and medical reasons and I don't see those reasons resolving themselves any time soon. The Russia-Ukraine situation is still casting its dark pall over all of Europe, including Germany, which is the biggest economy on the continent. Maybe I should say especially Germany because it had been the lone bright spot on the continent. If Germany would open its purse strings and do more to help the cause of the rest of Europe and shut its mouth about Ukraine and negotiate in private, then the markets would be dramatically higher right now. One of the reasons you don't want to be too negative is because it certainly could happen.
ISIS is still winning, spreading instability all over the newspapers and eroding confidence nationally. Ebola is still raging and I don't expect good news on that front any time soon. Bad news is more like it and the entrance of the disease to our borders has sapped whatever confidence hasn't been destroyed by ISIS.
In addition, the central bankers aren't doing us any favors -- ours or theirs. We are almost done with easy money here now that the Fed has declared a subtle victory over the business cycle. Say what you want, that easy-to-tougher switch simply isn't good for stocks, at least in the short term. The normally reliably pro-growth Mario Draghi, the head of the European Central Bank (ECB), who was talking about getting the European economy moving by any means necessary, today announced half-measures that weren't nearly as bold as those from the much-missed Ben Bernanke -- even though Europe's circumstances are far worse than ours. The European stock markets were quickly upended and -- rightly or wrongly -- the spillover colored the whole darned morning, just as a matter of course.
I have been waiting for moment when I thought the reward was better than the risk for some stocks. And I think that we may have at last arrived there. I reiterate, for some stocks, perhaps the third that I said have overshot where they should have gone in a garden variety pullback.
So you know the negatives. Now you have to ask, why bother to defy them?
The answer? We at last have some bargains, in the form of some stocks whose bad news is more than priced in. We want to make our money work for us and we want to do it by identifying and buying those bargains.
First, do you mind if I indulge in some Warren Buffett adulation, given that it is much deserved? He made many solid points this morning on "Squawk Box," but the most important one to me is that our nation is pretty darned strong. Short term, that has been, weirdly, a negative. Big hedge funds that need to raise money sell what they can, not what they have to. They sell our markets to raise money because the rest of the world is so pathetic it can't even get out of a lot of those markets without killing themselves on the trade. We are not only the only good economy in the world, but we are also getting better. This means more liquidity that will allow these loser funds to bow out at decent prices.
So our relative and absolute strength vs. the rest of the world counts right now a negative because we are being used as a source of funds by wounded hedge funds. This happens all of the time because that's who does the panicking. I know, you only hear all day about how smart they are and how legendary and how brilliant. But I know tons of hedge fund managers and, believe me, they were crawling under their desks or hitting the rest rooms regularly (so to speak) for the last few days, plus a real Depends moment this morning -- and I don't mean depends like it depends if we rally.
This won't last. If we are the only strong nation in the world, eventually we will be a magnet for the world's capital. That's closer to happening now that we have gotten to this point of panic.
So what is the description of a company that you can now start buying its stock with a greater degree of confidence with an emphasis on "start" and "greater confidence" as opposed to jumping in with both feet and being over confident?
First, its primary market has to be domestic, so you don't get entangled in foreign wars, diseases or tensions.
Second, it has to be a commodities buyer because commodities are sinking like a stone and many are in bear markets.
Third, you have to have a degree of conviction that its earnings are good or getting better.
Fourth, it can't need interest rates to go higher because they just might not be able to do so.
Fifth, it can't be hurt too much by a strong dollar because too many countries want their currencies to be weak so we buy their goods and not ours or they get a bad translation when they cash in.
Sixth, it has to have strong growth, even without a robust economy.
So, here we go. Let's start with some obvious ones. How about Darden Restaurants (DRI), the owner of Olive Garden? The company posted great numbers today. It has been a big beneficiary of lower gasoline and it buys tons of commodities. This name could be a big winner, especially with that dividend. How about Jack in the Box (JACK), Domino's Pizza (DPZ), and Buffalo Wild Wings (BWLD)? They all make sense. So does a rejuvenated Panera Bread (PNRA), which is turning its operations around. Or Chipotle Mexican Grill (CMG), which is down 30 points from its high.
Why not Tyson Foods (TSN)? It's a huge buyer of chicken and pork as part of that Hillshire Brands acquisition. Or how about Macy's (M), Kohl's (KSS) or Costco (COST)? They all work. So does Walgreen (WAG), now that the worst is over. So do VF Corp. (VFC) and PVH Corp. (PVH). They are all takers of commodities, especially cotton. That's exactly what we want. Kroger's (KR) is a good bet with lower commodity prices.
Then there are the rapid growers. I have three: Google (GOOGL, GOOG), Facebook (FB) and Under Armour (UA). They can outrun slow growth. Finally, I like beverages, the beers in particular.
Now I don't want to get carried away. But I do think that if you haven't committed any capital yet, the time is at hand. And there are plenty of babies I have just given you to save from that nasty drain that has sucked down so many good stocks -- as well as bad ones -- in the panic that we saw today.