Stock Smarts: Scared “Stock-less” ?
We had a big market rally two weeks ago – the biggest week of 2002 thus far:
Dow: Up 4.2%
Nasdaq: Up 8.8%
(Week ending 5/17/02)
But then we were hit with a new batch of terrorist warnings for the holiday weekend, and stocks went south:
Dow: Down 2.4%
Nasdaq: Down 4.6%
(Week ending 5/24/02)
Can we get beyond the fear factor and get back to buying stocks?
Gregg Hymowitz of Entrust Capital says the fear factor was the sole reason for the downturn in stocks, and looks for more buying in the future. But whenever the administration comes out with warnings that essentially say that anything could happen, then the market will dip. He looks for earnings growth to return in 6-12 months, something investors are still waiting for.
Hilary Kramer of A & G Capital says that while we have a market that is sensitive to terrorist threats, do not underestimate the lack of earnings that is contributing to the sell-off.
Dagen McDowell from FOX Business News thinks that the accounting scandals and the analyst scandals are still weighing heavily on investors.
Jonathan Hoenig of Capitalistpig Asset Management says that there is always a bull market. And while terrorist threats might hurt the large cap stocks, you can still find opportunities out there that are pretty immune to the threats. Jonathan is still beating the drum on gold stocks, international stocks and REITs.
Jonas Max Ferris from Maxfunds.com also thinks that the fear factor is going to play a big part in market activity in the U.S for some time. That is why he thinks that investing overseas is a good way to go, as no one is “looking to bomb Japan.”
“Fear Not” $tocks!
Some members of the panel offered up some picks that could fly in the face of fear.
Hilary’s Pick: Citigroup (C). Gregg likes the play, Jonathan does not. (Both Hilary and Gregg have positions in C.)
Gregg’s Pick: Viacom (VIAB). Hilary is concerned about the management team. Jonathan thinks it is a pretty good buy for the long-term. (Gregg has a position in VIAB.)
Jonathan’s Pick: American Century International Bond (BEGBX). Jonathan likes this fund as a play on a weakening U.S. dollar. Gregg says the fund is too expensive. Hilary agrees with Jonathan that it’s a good way to play a weaker dollar.
Mutual Fund Face Off: Low Risk, High Reward!
Last January, Dagen and Jonas picked two mutual funds that they said offered little risk with the potential for big rewards. And both funds have shined so far this year. We took a look back and asked if they would continue to play these as “Low Risk, High Reward” funds.
Dagen: The Clipper Fund (CFIMX)
Minimum Investment: $5,000
Expenses: for every $10.80 for every $1,000 invested
Year-to-date (through 5-24-02): UP 7.1%
Jonas: Royce Total Return Fund (RYTRX)
Minimum Investment: $2,000
Expenses: $12.50 for every $1,000 invested
Year-to-date (through 5-24-02): UP 10.1%
Dagen is sticking with Clipper. Jonas said he thinks an international fund offers a better risk/reward profile right now. While he still likes Royce Total Return, he says he’d put new money into:
UMB Scout World Wide (UMBWX)
Minimum Investment: $1,000
Expenses: $11.20 for every $1,000 invested
Year-to-date (through 5-24-02): DOWN 1.4%
Dagen and Jonathan wrapped up the show by answering some e-mail questions
Question: “What do you think will become of Adelphia Communications (ADLAE)?”
Dagen: The SEC and the Justice Department are investigating this company. Don’t buy it now.
Jonathan: I’m not a fan of the big cable companies. You might want to look at Sinclair Broadcasting (SBGI).
Question: “What do you think about the prospects for international investing, specifically in Japan?”
Jonathan: I love Japan. Several companies are worth buying at current levels:
NTT DoCoMo (DCM)
Japan Smaller Cap Fund (JOF)
Dagen: The economic recovery in Japan is still young. A broad international fund might be a better play.
Question: “DRS Technologies (DRS) was recommended on Bulls & Bears in February. I've done well with it, but it's now showing weakness. Has the story changed?”
Dagen: This is a pretty volatile stock.
Jonathan: Take some profits at these levels.
Question: “Is it time to buy Intel (INTC)?”
Jonathan: No way. The only chips I like are potato chips
Dagen: It’s too expensive. Don’t buy it.