• Stock Smarts: Bear Killer?

    More bears are killed in October than any other month – we are talking, of course, about bear markets like the one we’re in right now:

    Since all-time highs:

    Dow DOWN 36%
    Nasdaq DOWN 77%
    S&P 500 DOWN 48%

    (as of 10-5-02)

    This bear has lasted nearly two years and cost investors trillions in stock value. Can this October crush the bear?

    Jonas Max Ferris of Maxfunds.com does think that October will be the end of the bear market. He says that October is traditionally a very volatile month, which makes investing seem somewhat like gambling at a casino. The volatility causes many investors to leave the market and creates greater value in stocks and opportunities for those who can stomach the ride. Lower stock prices eventually draw investors back so that when all is said and done at the end of October the bear is dead.

    Dagen McDowell of Fox Business News says that another reason there is a lot of selling in October is that mutual funds are closing their books for the fiscal year and unloading their losers. Hopefully that will happen this October.

    Jonathan Hoenig of Capitalistpig Asset Management says he believes that mutual funds are already selling losers as he sees huge, big-name stocks getting taken out and shot and he is steering clear of stocks to avoid the carnage.

    Wayne Rogers of Wayne Rogers & Co. says you have to listen to the market – the market will tell you what to do and right now it’s telling us to stay away from stocks. He is not chasing stocks and is still keeping his money is cash and Treasuries. He says the bottom is a process, and the process is not yet complete.

    Hilary Kramer of Montgomery Asset Management says all the selling has already created opportunities in stocks like Clear Channel (CCU), Liberty Media (L) , Bristol Meyers (BMY), and Bank of New York (BK) and she owns them all and is buying more.

    Dead Bear Buys

    So when this bear dies, which stocks will come alive? Some members of the panel offered up names to bet on at the first sign of a turnaround, but not right now!

    Wayne’s “Dead Bear” Buy: Johnson & Johnson (JNJ)
    52-week high: $65.89
    52-week low: $41.40
    Friday’s close (10-4-02): $56.95

    Jonathan says Johnson & Johnson is a great company but he would not be a buyer in the short term even if the market turns around. Hilary loves the company, owns the stock and said she’d buy more right now.

    Hilary’s “Dead Bear” Buy: Intel (INTC)
    52-week high: $36.78
    52-week low: $13.67
    Friday’s close (10-4-02): $13.81

    Jonathan doesn’t think Intel will ever be as strong a stock as it once was and wouldn’t buy it even in a turnaround. Wayne says that even when the market turns it will take tech a lot longer to come back. He doesn’t think Intel is a good buy in a market turnaround.

    Jonathan’s “Dead Bear” Buy: San Juan Royalty Trust (SJT)
    52-week high: $12.28
    52-week low: $8.53
    Friday’s close (10-4-02): $11.70

    Hilary thinks this is a great pick. Wayne thinks this is speculating in oil futures and he says it’s too risky.

    Mutual Fund Face-Off: Best “Safe” Fund

    You want some safety with your investments? Forget about the mattresses or even the bank – there are better places to keep your money. One year ago, Dagen and Jonas picked two “safe” funds they said would help you to beat the bears. We looked back and checked out their performance versus the stock market which is down greater than 20%.

    Jonas – Payden Global Short Bond Fund (PYGSX)
    One-Year Performance: UP 6.1%
    Minimum Investment: $5,000
    Expenses: $5.00 for every $1,000 invested

    Jonas says this is still a good bet for some of your money.

    Dagen – Vanguard Short-Term Federal Fund (VSGBX)
    One-Year Performance: UP 6.8%
    Minimum Investment: $3,000
    Expenses: $3.10 a year

    Dagen would not put new money into this fund right now For an alternative, she says to look at the Vanguard Prime Money Market Fund (this fund does not have a ticker symbol).

    Money Mail

    Wayne, Dagen and Jonathan capped off the show by answering some of your questions.

    Question: “What is your outlook for biotech in general and for Genetech (DNA) specifically?”

    Jonathan: “Not may favorite group; not my favorite stock in the group.” He’d take profits in any positions he had a win in and would not put new money in biotech stocks right now.

    Wayne: Biotech investing is speculating in scientific research that sometimes pans out but is risky.

    Dagen: Short term this group could bounce on upcoming drug conferences.

    Question: “My mother is in her 80s. She owns a lot of Sun Microsystems (SUNW) that was once worth $60 a share but is now trading below $3. Should she sell or wait for a comeback?”

    Dagen: “Sun is not going back to $60 a share in her lifetime or this investor's.” Companies are shifting away from buying Sun’s products.

    Wayne: Sun is a wonderful company, but it’s the wrong time and the wrong stock to be invested in right now.

    Jonathan: A lot of brokers put people in stocks they should not be in. This is an example of that kind of mistake.

    Question: “What is the difference between a stock trader and a stock investor?”

    Wayne: A trader generally relies on technicals (price charts, volume etc.) to decide when to buy and sell stocks and frequently holds stocks short-term. An investor holds stocks longer term – six months or more – and most often relies on a company’s fundamentals (profits and loss, management, cash flow, debt etc) to determine when to buy, sell or hold.

    Jonathan: “I just think a trader needs to be a realist.”

    Transcripts

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