JBL: Fear Factor

Updated from June 3

"The bomb under the table should never go off," said Alfred Hitchcock, who believed the fear was always worse than the shock. So it is with our market today.

I have a stock pick that is literally bombproof; but first, the metaphorical bombs the market is worried about.

Fundamentals are still strong, and corporate balance sheets are the best they have been in years. The S&P 500 is trading below normal multiple, given the level of Treasury yields. This is not a weak market. What is scaring us is the proverbial bomb; we fear it will go off, and that our portfolio will go boom.

Natural gas inventories are unusually high; prices should be down from these levels. So why aren't they? The answer is the "bomb" again. We are afraid of a predicted strong hurricane season. Of course, last year came with a prediction of very little action. Weatherman has to be a great job -- you are never expected to be right.

If there is a hurricane that disrupts production, then natural gas will be underpriced here; if not, it is overpriced. That's a hard way to invest hard-earned money. The bomb not going off is making investors wary.

The same is true with oil. The bomb is the nut cases who control the majority of oil around the globe: We don't know when or if they will go off.

The final bomb is the Federal Reserve. The market is hoping 1991 is not repeated, and that the Fed doesn't overtighten us into recession. The market is waiting, watching and hoping they don't witness an explosion. If the Fed gets it right, then the bomb the Fed is watching, inflation, will not go off.

So finally, the bombproof stock, literally, is American Science and Engineering (ASEI), a maker of screening devices for border and airport security whose sales are exploding.