Ignore The Critics -- This Well-Known Brand Has 75% Upside Potential

Usually, I stick to recommending little-known "game-changing" companies working on groundbreaking new products or technology that are set to change the way we live our lives. If you allocate, say, 20% of your portfolio to these kinds of stocks (with the other 80% in blue-chip stocks and index funds), and if you're able to reap the triple-digit potential these stocks hold, then it can dramatically alter your portfolio's yearly performance.

I call this strategy my "80/20" solution.

But lately I've been warning my readers that the market is on dicey footing, so I've made it a point to offer up picks suitable for the other 80% of your portfolio.

My reasoning behind my energy-related recommendations are simple: I don't know when the price of oil is going to go up, but it will. Short-term conventional wisdom always yields to the statistical reality of the law of large numbers. Sooner or later, all outcomes regress to the mean. Right now, oil is hovering in the $50 range. But it wasn't too long ago that crude was at $140, and my Spidey sense tells me that the prudent price reference for oil is in the $80-$100 ballpark.

Now, a lot of people would say that I'm nuts. After all, if you look this up for yourself, you'll see Moody's cut its price target for U.S. crude to $48 in 2016 and $55 in 2017.

But who cares what anyone at Moody's thinks? In the first place, this is a short term forecast, and I don't have the requisite myopia to be a good short-term investor. Also, if Moody's was willing to slap a triple-A rating on the collaterized mortgage obligations that brought us to the brink of economic Armageddon, I have a hard time allocating too much blind devotion to their, ahem, questionable analytics.

I'm talking about the long-term reference price of crude. It's low, it will go higher. That's just the way of the world.

So I was actually pleased to see the top story on the front of the Houston Chronicle's business section the other day. Here's the lead: "Oil field services firms agree: The coming months will be lousy. How bad? That's anyone's guess."

I have to like a reporter who leads off with "lousy."

The piece went on to detail some pretty stark comments by Halliburton (NYSE: HAL) CEO Dave Lesar, who said service providers are struggling in this lingering downturn. "In my 22 years in this business, I've never seen a market where we've had less near-term visibility," he said in a conference call with investors. "In reality, we are managing this business on a near real-time basis, customer by customer, district by district, product line by product line, and yes, even crew by crew."

The rub: The major oil companies are being pretty tight-lipped about what their plans are.

In a normal year, this would be when Big Oil sends their exploration and production budgets to the service companies to give them some time to order supplies, move crews and assets around, and just basically get ready for the upcoming year. But since no one has any real sense of when the oil market will reach a bottom, E&P budgets remain opaque and no one has much idea what's going on.

All of this leads us to a philosophical conundrum. The answer is elegantly simple: Who cares?

You buy Halliburton for the brand. You buy because of its reputation. You buy for its core competency, because it is the second-largest player in the market. It has the assets, the strategy, the leadership and the human resources to accomplish its goals. So its (current) ability to forecast those goals is (temporarily) precluded by a lack of visibility in the E&P segment of the petroleum industry. Big deal! It's not always going to be like that. But Halliburton, God bless it, is always going to be Halliburton, certainly as long as a shrewd industry veteran like CEO Dave Lesar is at the helm.

The underlying narrative -- which limns in detail how intelligent and resilient a company HAL is -- has not changed at all. And as my Dad is fond of saying, "If Halliburton goes under, you've got a lot bigger problems than worrying about the balance in your Merrill Lynch account."

Times seem bleak in the oil patch. Fine. You deal with it by reminding yourself that there are a few immutable universal truths, and one of them is math. The laws of calculus have not been suspended, and Halliburton will benefit as prices regress to the mean.

Today, however, that means you can buy an $80 stock for less than half its typical fair value. I like that.

So would Hetty Green, the "Witch of Wall Street." She was a gutsy 19th Century market icon who beat Wall Street's heavy hitters time and time again and made herself the richest woman in the world. She said: "There is no great secret in fortune making. All you do is buy cheap and sell dear, act with thrift and shrewdness and be persistent."

Keep it simple. Buy HAL under $40 and sell over $70. It might take two years. But the market during that time has no chance of doubling, and Halliburton absolutely does. It is a suitable holding for the 80% segment of your portfolio. Just follow Hetty's advice.

P.S. If you are also looking to fill in that aggressive 20% of your portfolio today, I have a major opportunity you need to hear about. You see, Apple's latest media event may have just sparked the beginning of a massive run up for several of the company's under-the-radar suppliers. In fact, my research has led me to believe shares of any of these companies could soar 100% in the next six months alone. To get the names of these little-known Apple suppliers, just click here.

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