Sometimes you have to force yourself to like something. That's how I felt this weekend after last Friday's miserable performance when it looked like the world was going to end. We all want to be contrarians. I know my friend Alex Berenson at The New York Times, wanted to be contrarian when he said it was "time to get greedy," when it most assuredly wasn't. I know that the folks at Barron's have a wide contrarian streak -- or at least some of them do, and it always comes off as rigorous, if pedantic and petty.
I have it in me, too. When the bear seemed to be everywhere this weekend I wanted to don the bull costume. And why not? I said the Nazz could trade to the 1860s, and we got there. I had said when we got there that I would go more positive and, hey, we were there and, therefore, it was time to go more positive.
Yet, to be positive right now means that you must buy merchandise that is bad right now. You know that virtually anything you buy in the Nazz or the New York Stock Exchange has severe problems. You are simply trying to thread the needle, which you must do at times, if you are going to make good money. You are betting, as my colleague Bob Olstein so eloquently puts it, "that pessimism has created good prices."
That means identifying stocks that everybody knows have problems, that are down a great deal and that can still recover if certain circumstances occur. Lets talk about two trashed groups so you can understand the need to "force yourself to like something." Let's talk about tech and the financials.
First, tech. As
my series on the SOX
has shown, this group is not cheap. Last night KLA-Tencor
(KLAC:Nasdaq - news - boards) blew up and, if I hadn't done
the matrix
that showed me how KLAC was not cheap, I would have recommended that excellent company to you a few days ago, as part of the process of finding something down that I like. Much of tech is like that. In my chat last night with Bill Fleckenstein, we pretty much all agreed that the fundamentals in tech are poor and getting worse not better. Where we disagreed is the notion that the stocks are pricing that decline in right now. I said that some of the stocks are pricing in a further decline in fundamentals. Others aren't. KLAC wasn't. Maybe Nortel
(NT:NYSE - news - boards) is. Intel
(INTC:Nasdaq - news - boards) hasn't. Maybe AMD
(AMD:NYSE - news - boards) has. Cisco
(CSCO:Nasdaq - news - boards) could be; Redback
(RBAK:Nasdaq - news - boards) and Vignette
(VIGN:Nasdaq - news - boards) aren't. PSINet
(PSIX:Nasdaq - news - boards) will never price it in because it is paying the ultimate price.
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