Stock Smarts: A "Bear" Bottom?
It takes a lot of bears to make a new bull market. Why? When even the most bullish market watchers turn sour on stocks that can signal a bottom.
So are we there yet?
Wayne Rogers, founder of investment strategy firm Wayne Rogers & Company, says he doesn’t see a bottom yet. He says bottoms are more climactic like in 1987 and again last September when we saw panic selling. Those were clear bottoms. “You need to see people get crazy and bail out of the market.” He doesn’t see that yet.
Jonathan Hoenig, portfolio manager at Capitalistpig Asset Management, says what has brought this market down is not so much the presence of selling that you see when you hit bottom, but it’s really the absence of buying. He agrees with Wayne that we are not near a bottom at all.
Dagen McDowell, Fox Business News contributor, says she doesn’t see a bottom yet because people are still buying stock funds and not selling the funds they own. In fact, eople have put more money into stock funds in 2002 than they did in 2001. Once they start selling that will be a sign that a bottom is near. No bottom yet.
Hilary Kramer, senior advisor and strategist at Montgomery Asset Management, agrees there’s no bottom in this market yet. She says investors aren’t ready to throw in the towel and we have not seen the kind of “capitulation” that is normally associated with a bottom. And she says stocks are still overvalued, too expensive for the market to have bottomed.
Jonas Max Ferris, founder of Maxfunds.com, agrees. He says we won’t see a bear market bottom until we start to see mutual funds going out of business and investors turning their backs even on cheap stocks. Right now, he says stocks are still expensive and there are still buyers around.
The silver-lining in a bear market? Bargains galore! So which stocks have bottomed and on their way back up? A few members of the panel offered their picks.
Jonathan’s Pick: U.S. Steel (X)
Hilary has concerns about this stock because its profits would fluctuate with international trade and tariff policies. Wayne prefers steel girders to steel stocks. He calls it a dangerous play especially with the U.S. dollar’s direction in question.
Hilary’s Pick: Wal-Mart (WMT)
Jonathan doesn’t’ like Wal-Mart’s chart. Wayne’s not a fan either.
Wayne’s Pick: Volvo (VOLVY)
Hilary likes this stock because of its dividend yield. Jonathan likes Volvo. He sees it staying strong over the next eighteen months.
Mutual Fund Face-Off : Trust Me Funds
For the second time in two weeks, a former CEO was arrested in Manhattan. This past week it was former ImClone head-honcho Sam Waksal, busted for alleged insider trading. It’s just another example of investors feeling that those they trusted have burned them. Now more than ever you need to know whom you can trust with your money.
Dagen and Jonas picked out a couple of funds they say you can trust.
Dagen: Vanguard Windsor II Fund (VWNFX)
Minimum Investment: $3,000
Expenses: for every $4.00 for every $1,000 invested
Year-to-date (through 6-14-02): DOWN 3.7%
Jonas: Dodge & Cox International Stock Fund (DODFX)
Minimum Investment: $2,500
Expenses: $9.00 for every $1,000 invested
Year-to-date (through 6-14-02): UP 4.7%
Dagen and Jonathan wrapped up the show by answering some email questions
Question: “Lots of analysts say eBay's (EBAY) a strong buy, but lots of insiders are selling. What should we believe? Is it a buy or a sell?”
Dagen: eBay’s too expensive; not a buy.
Jonathan: Love the service, wouldn’t buy the stock here.
Question: “I'm a Ruby Tuesday (RI) employee. I've heard a lot of positive buzz around on the stock. Has it peaked, or is it still a buy right now?”
Jonathan: If you want to be in a restaurant stock, there are better buys than Ruby Tuesday at these levels. I own Sonic (SONC).
Dagen: I agree, and since you work for this company too you might want to check the company’s 401(k) plan, you may already own a lot of this stock.
Question: “Should I buy a fund that has held up this year, like Olstein Financial Alert, or one that's not doing so well, like Smith Barney Aggressive Growth?”
Dagen: It’s often better to buy a good fund that’s down rather than a hot fund that may have taken in too much money, but in this case Smith Barney Aggressive Growth has hit the skids helped along by a big bet on Tyco while Olstein has proved he can perform in good times and bad, so, I’d go with the Olstein fund.
Jonathan: There’s ten thousand mutual funds out there, why these two? Right now I’d buy a bond fund.
Question: “Is Tyco (TYC) stock a good buy at its current level?”
Jonathan: This is a stock that’s going to frustrate investors with its fluctuations. Stay away.
Dagen: There plenty of other beaten down stocks that don’t have scandals swirling around them. This could go on for years and keep the stock down. I agree. Stay away!
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