Stock Smarts: Whom do you trust?
Liar, cheaters and bears! With Wall Street awash in business and accounting scandals, and analysts coming under fire for not picking up the warning signals at Enron, whom can you trust when picking stocks?
Brian Finnerty of C.E. Unterberg, Towbin says that this business is totally based on trust, and there will be problems if investors continue to lose faith. For traders, their word should be their bond. And while there will be those who will abuse that trust, most do not.
Jonas Max Ferris of Maxfunds.com thinks that the Enron mess is the "scam of the century." However, he does say that every company is not like Enron. Even though companies do misstate earnings, most do not reach the level Enron has.
Dagen McDowell of Fox Business News says that investors just don’t trust the market right now, and that they are going to stay on the sidelines, keeping their investment dollars tied up in money markets and bonds. And that’s not such a bad thing – cash is king!
Jonathan Hoenig of Capitalistpig Asset Management says that you can trust the charts. Now more than ever is the time to recognize the importance of technical analysis. "Even though companies might not always tell the truth, the stock never lies. Enron didn't go from $80 to $0.80 overnight." He points out that anyone following the charts would have seen the trouble and gotten out before losing everything.
Hilary Kramer of the Cisneros Group has this little mantra for us: "In God we trust. All others we monitor."
Members of the panel offered up some stocks that have made strong moves lately, and will continue to climb in 2002.
Hilary: Northrop Grumman (NOC). Jonathan and Brian both like the stock, but Brain is a little concerned that it has gone as high as it will go.
Jonathan: Buenaventura (BVN). Hilary and Brian do not like this pick.
Brian: Applied Materials (AMAT). Hilary says yes, this should be a core holding for all investors (she has a position in AMAT).
Mutual Fund Face-Off
Panel: Dagen and Jonas
Topic: Win Win Funds! Does it make sense to put your money into a mutual fund that rode a hot streak in 2001? Our fund experts say: "It depends on the fund." They picked two winning funds from last year that they say will enjoy another win in 2002.
Jonas: Thompson Plumb Growth Fund (THPGX)
2001 return: up 19.1%
Minimum Investment: $1,000
Dagen: Oakmark Fund (OAKMX)
2001 return: up 18.3%
Minimum Investment: $1,000
Dagen and Jonathan wrapped up the show by answering some email questions from viewers:
Question: "How do you get the SEC to investigate a company that you think may be misrepresenting its earnings?"
Dagen: You can’t really do it. You can send an online complaint at the SEC website (www.sec.gov) Make sure you include any evidence you might have. But don’t hold your breath for any action.
Question: "In 2000, I purchased many large cap tech stocks, and I have lost a lot. Should I sell now or wait? Help me!"
Jonathan: Find a happy medium. Take some losses, but keep some of the stocks that might have a chance for a rebound.
Dagen: Dump your telecom stocks.
Question: "I lost big on tech stocks from very bad advice from my broker. Do all brokers really have no better clue than a chimp on what stocks to pick?"
Dagen: There are some good stock pickers out there. But a broker’s job is designed to push stocks that his or her company has a stake in. Either teach yourself or get a mutual fund.
Jonathan: No one really knows!
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