StockSmarts: Buy or Beware the Market?
There’s a saying that goes: “Once bitten, twice shy.” That goes for losing money in the stock market as well. But if your fear is keeping you out of the market right now, could it also be costing you money?
Ned Riley of State Street Global Advisors says you will be sorry if you don’t get in now. But this time around, make sure to do it the right way and don’t buy on rumor and speculation. He says investors really need to learn the rules: asset allocation, not trying to time the markets, and patience. And he points out that while the Dow and S&P 500 have been coming down since March of 2000, if you were in the smaller stocks, you would have made money.
Dagen McDowell of FOX Business News says patience means setting a price when you want to buy a stock and not buying it above that level. She also thinks investors should look to the small caps, as they have great growth potential and many are much cheaper than the larger names right now.
Hilary Kramer of the Cisneros Group says she sees some buying opportunities in the cyclicals (she specifically mentioned chemical and media companies). And she notes that the U.S. still has the strongest economy in the world, and that we will see the economic recovery continue, helping to boost the markets.
Jonathan Hoenig of Capitalistpig Asset Management says the next bull markets will occur overseas, and that’s where you should think about putting some new money. As far as investments in the U.S. markets, he still likes gold stocks, the REITs and selected small cap stocks. One example of his dislike for big domestic companies right now is that he continues to "short" General Electric (GE) stock which he believes could fall as low as $20-$25.
Jonas Max Ferris of Maxfunds.com is also looking overseas. He says that an investor can’t get burned for not being in the market, so you can't be losing out by sitting on the sidelines. And he points out that high-priced stocks are dangerous, which is what we learned in March 2000.
“Get Even” Stocks!
If you lost money in the market, don't get mad get even! Our group picks stocks they say could help you even the score.
Jonathan: Templeton Global Government Fund (TGG)
Hilary thinks it is a risky play.
Hilary: Sicor (SCRI)
Jonathan thinks the stock is building a good base, but it’s not a buy yet; Ned thinks it’s a good play. (Hilary has a position in SCRI.)
Ned: Nasdaq 100 Trust (QQQ).
Jonathan does not like the play; Hilary thinks QQQ should be a core holding for everyone. (Ned has a position in QQQ.)
Mutual Fund Face-Off
Panel: Dagen and Jonas
Topic: The Best “Undiscovered” Fund.
Dagen: Forward Hoover Small Cap Equity Fund (FFSCX)
2001 performance: UP 4.3%
Minimum investment: $100
Expenses: $18.40 for every $1,000 invested
Jonas: Kayne Anderson Rudnick Small-Mid Cap Fund (KASMX)
2001 performance: UP 6.4%
Minimum investment: $2,000
Expenses: $12.90 for every $1,000 invested
Dagen and Jonathan wrapped up the show by answering some email questions from viewers:
Question: “I’ve lost 50% of my initial investment in the T. Rowe Price Science & Tech Fund (PRSCX). How long will it take to recoup the loss? Should I sell?”
Dagen: If you can wait a couple of years, the tech sector should turn around. But not necessarily this fund! It's a two-time loser: it got beat by its peers during the bull market and then failed to hold up when the market turned south. Sell, take your losses and buy another tech fund, maybe even the QQQ
Jonathan: Not a huge tech fan.
Question: “I’ve got three core holdings: Deluxe (DLX), Hudson City Bancorp (HCBK) and Petsmart (PETM). Is it time to sell?”
Jonathan: All three stocks are doing phenomenal. It all comes down to asset allocation, and if you have all your money in these three, you might want to diversify a bit by trimming your positions and buying some other stocks. But these are three stocks you still want to own.
Dagen: It is still important to diversify, even though these stocks have performed so well. When they do this well they can become too big a part of your portfolio and that's risky.
Question: “I’m new to investing, but I put some money into Kmart (KM) when it was under $0.90. Is it worth holding onto?”
Jonathan: For a beginning investor, the place to start is not with a penny stock, but you could hold onto Kmart and see where it goes. Put a stop-loss order on it though.
Dagen: Count your blessing and get out now.
Question: “What is your outlook for semiconductor stocks?”
Jonathan: Not my favorite sector. Not buying yet.
Dagen: These stocks are in no man’s land. Business is rebounding, but the stocks are not.
If you have a question you would like answered on the air, please email us at firstname.lastname@example.org.
If you are interested in receiving a transcript of the show, please call 888-443-6988.