PULLBACK BUYS

We don't often write about individual stocks to buy especially in this schizophrenic market were many stocks are overvalued, others fair-valued and few, if any, undervalued.

So with this parenthetical warning we will give a couple of examples of stocks we own that we are looking to add to on any pullback. In fact, the bigger the pullback, the more we want to add. We also note, like that Dos Equi guy, we don't often sell. That should give a little insight to our madness.

Companies are like boundaries. They come and go. The components of the DJIA of your great grandfather's day are hardly the same as today. 

Then there are those famous Nifty-Fifty of the 1960s and early 1970s. Though there was never a formal list--in fact two lists were often cited, Morgan Guaranty and Kidder Peabody, a large stock broker firm of the time--more than a few like Polaroid, Burroughs, Eastman Kodak and Kresge went either bankrupt or are forgotten memories buried inside some poor functioning survivor.

History teaches markets go through conglomerating and un-conglomerating. Probably one of the least valid reasons for conglomerating is to add value. We recently witnessed one with Pfizer-Astra-Zenica. Anyone believe, had the deal gone through, the new firm would have been named Pfizer-Astra?

Mergers and acquisitions are again the rage of the day if one can believe what one reads. Cheap money has it's price. Are Spanish bonds really cheaper-safer than U.S. ones? But like everything else this too shall pass until another time arrives, all part of the cycle.

With all due respect to the quantitative grunts if you're locked into numbers you probably won't appreciate our choices. We pay attention to those things too. We just don't consider them as some do the alpha and omega alter. The price of a stock is mostly about what someone will pay. And we think our choices people will pay a lot more for in their future.

Our first one, though hardly a suggestion that it is the best one, comes from the oil patch, Marathon Oil. Recently in the news for selling its Norwegian assets for $2.1 billion net proceeds, according to reports, the move highlights the conclusion of MRO asset sales bringing a total of $6.2 billion since it spun off its refining company, MPC, to concentrate on the E&P side in 2011.

Though we have many reasons for liking the stock, one of them just happened today when Wells Fargo downgraded MRO's status to market perform from outperform at the same time another firm, Jefferies, initiated coverage with a buy rating. We just love the scent of Wall Street confusion.

To put a number on it we think it's worth $45 a share conservatively, will hike its dividend and will develop its higher-margin assets in the U.S. where it intends to concentrate efforts, not a bad strategy if you fear geopolitical friction or supply interruptions. Our pullback number is in the $33-$35 range.

In our view, the market is due for a sharp, short pullback, maybe 4-9%, could be a bit more, before it retraces that loss and moves higher on its way to a much bigger decline down the road. And that's the decline you want to be prepared for.

We'll list another of our pullback picks, one we've mentioned before, in a couple of days.