NEW YORK (Real Money) -- The market has caught a selloff, so what do you buy? I like to go back to what had been working just a week ago and -- I hope -- pick up a couple of discounts on some very winning names.
Where does this winning list come from? How about the companies that performed best in the quarter that just ended? They are the logical places to go, especially because nothing has happened to change their fortunes and they are all still in favor.
First is Williams Companies (WMB), which is always a competitor in the shipment of oil and gas, and is now a powerhouse after its purchase of Access Midstream Partners. Sure, Williams paid a 50% premium to pick it up. But, when it comes to shipping all of the oil and gas we are finding in the U.S., few companies are in the driver's seat as much as Williams is. The deal was incredibly accretive, which means that the stock's rally turned out to be justified despite what had looked like an overpayment. Williams can drop down pipelines into instantly wealth-creating master limited partnerships.
It's hard to imagine this stock getting hammered from the current level, unless oil prices break down hard and natural gas goes back to $3 per MMBtu from more than $4 now. I don't think that will happen.
Second is Newfield Exploration (NFX). This long-out-of-favor oil-and-gas play has been shrinking itself and becoming much more liquids-oriented. What many don't realize is that these oil-and-gas companies are actual growth names, with increases that far outstrip all but the highest-growth tech stocks. Newfield has 28% production growth. It also has assets in the just-now-being-rediscovered Woodford and SCOOP Oklahoma shales. I think this one has got further to run, and it has to be added to the list of fast growers along with EOG (EOG), Pioneer Natural Resources (PXD), Noble (NBL) and Anadarko (APC).
Third is Micron (MU). What can I say about a stock that has quintupled in 18 months? How about this? This stock can keep going higher as long as no new capacity is added to dynamic random-access memory (DRAM) -- and it looks like this won't happen. I think Micron can earn $5 per share next year, and while the stock is never going to get a premium multiple, it is difficult to figure out why shares should stay down at current levels, especially because so many wise guys are betting against it.
Why are they doing that? Well, historically, there have been 10 or so producers of DRAM, but many have fallen by the wayside, and not that long ago Micron bought a failed conglomerate of Japanese producers called Elpida -- and it's been nothing but net ever since, as there's now a slap-happy oligopoly with Korean manufacturers Hynix and Samsung. The other part of Micron's business, flash, remains in tight supply as well, as the producers haven't seen fit to add capacity here either.
Now, we know that, for the first time in ages, demand has picked up for personal computers. Typically, then, one of the players in this universe should blink. But when you have so few players you tend to get a lot of forbearance, as there is enough market share for all to go around. The pie is growing anyway, so no one needs to take any more or to truly try capturing more volume by taking it from others.
Fourth, not surprisingly, is Allergan (AGN). This company has been in play ever since Valeant (VRX) decided that Allergan's franchise dovetailed nicely with its ophthalmological unit, and that Allergan's gigantic mid-teens commitment to research and development could be radically scaled back to bring far more money to the bottom line. Now, we don't know what's going to happen here, as Allergan is fighting it tooth and nail. Also, Valeant -- which is being aided by Bill Ackman, the man who would destroy Herbalife (HLF) to save its employees from exploitation -- could raise its bid again.