- Soft goods with good growth overseas. Pepsi's (PEP) now the best. Colgate (CL), after the quarter. I like Clorox (CLX). Kimberly-Clark's (KMB) now good.
- Machinery, metal and mining stocks, the infrastructure you need to take advantage of them -- and what transports them to overseas. I don't include coal because the green movement has stopped it for now and the government has given up supporting coal -- at least, until it realizes it has no choice. Caterpillar's (CAT) right again. Foster Wheeler (FWLT) on a pullback, KBR (KBR) on a pullback, McDermott (MDR) after the quarter, Fluor (FLR), CB&I (CBI), Jacobs (JEC), Manitowoc (MTW), Terex (TEX).
- Oil -- but not gas, unless we get some sort of disruption of supply for the latter. Extracting oil anywhere but North America is the strongest area, followed by the integrated oils. Will natural gas come back? Everything will come back, but this is a checklist of what can be bought now. Transocean (RIG) on a pullback, Halliburton (HAL) on a pullback, Schlumberger (SLB) on a pullback, Conoco (COP) and Chevron (CVX) now. XTO (XTO) for those willing to wait, as this one is the best wildcatters in the world. Apache's (APA) good too.
- Tech that's international that does well as part of the back-to-school and holiday buildup. Dell (DELL), Hewlett-Packard (HPQ), Texas Instruments (TXN), Adobe (ADBE) all good.
- Drugs that do lots of business overseas. Merck (MRK), Schering (SGP) and Lilly (LLY) all good.
- Health care cost containment. Think Medco (MHS) and CVS (CVS).
- Aerospace and defense. Aerospace because demand is international with a new product cycle, and defense because we now know the war drags on, no matter what. Alliant Tech (ATK) is the best there, now that we have seen Lockheed Martin (LMT). I would still buy Lockheed and L-3 (LLL) and Raytheon (RTN). Boeing (BA) works. So does Riverbed (RVBD).
- The Web. Google's (GOOG) been punished long enough. Growth is too great. Omniture (OMTR) and Level 3 (LVLT) are the preferred specs.
- Ag. Be careful about a robust corn crop, but this works into the election. Deere (DE), Bunge (BG), Monsanto (MON).
- Telco infrastructure. They need to build. They can't help it. They have starved their infrastructure -- check
Noah Blackstein's excellent piece from Tuesday. Cisco ( CSCO), Ciena ( CIEN), Juniper ( JNPR) and even Sycamore ( SCMR) (that's how strong this is now).
This column was originally published on RealMoney on July 25 at 10:52 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please
click here. The formula is simple. It's like a checklist for what you can and can't own in a slowing U.S. economy with credit woes throughout the system brought on by what always brings it on: declining underwriting standards. So first, here's the checklist of what must be avoided: 1. Does it need lower rates from the Fed to go up? Countrywide ( CFC) now tops this list. And any housing company -- Lennar ( LEN), Toll ( TOL), Centex ( CTX), Horton ( DHI), Pulte ( PHM). I am really worried about these. Also, all banks, all brokers. 2. Does the consumer need to borrow in order to finance the purchase? That's almost every retailer. Circuit City ( CC) comes most immediately to mind. 3. Does the corporation or the private banker need to borrow in order to make an acquisition (as opposed to using stock or cash on hand)? That takes out all private equity. 4. Does it have mostly domestic business? Does that business get hurt on a further decline in housing or GDP? Can it be offset by international demand? There are tons of companies that fall into this category. It's a four-point program! Now, what can be bought? Action Alerts PLUS, it's not contradictory -- I'm running a long-term, balanced portfolio that can't ignore 50% of the S&P 500, which is pretty much what I am ruling out here. If the average audience of Stockpickr can be the judge, everything I do is contrary and inconsistent, but that's because I am writing about both my time frame, which allows some of the bad, and the current time frame, which doesn't. I find that lack of discernment ridiculous; most of the people who read me act like hedge fund managers and only care about tomorrow or today. That's silly, but it's the audience so I play to it.