Stock Smarts: Losing the Little Guy?
A new year, but will we see a new direction for the stock market?
In 2002 the market lost around $5 trillion in value – but small investors only sold about 1 percent of their mutual funds. Could more “red” in this year finally have them throwing in the towel?
Jason Trennert of ISI Group says he thinks small investors have already thrown in the towel and he points to five consecutive months of equity fund redemptions from July through November to support his belief. His concern is now not individuals throwing in the towel, but the fact that they seem to be chasing performance in bonds and throwing money at those funds, which he says is the wrong approach right now. He thinks now is the right time to buy stocks.
Hilary Kramer of Montgomery Asset Management says most individuals are in the market for the long term and she’s not concerned they will abandon stocks now.
Wayne Rogers of Wayne Rogers & Co. says the little guy is still in mutual funds for the most part despite an average 20 percent decline and he doesn’t expect them to abandon the market this year.
Jonathan Hoenig of Capitalistpig Asset Management does not see wholesale capitulation by small investors no matter what the new year brings.
Jonas Max Ferris of Maxfunds.com says he thinks individual investors are not only skeptical of the bad stock market but are tired of corporate scandals and more scandals could cause them to get out of the market this year.
Double Digit Winners!
After a year of double-digit losses, how about some double-digit returns? Some members of the panel offered up some potential winners.
Jason's Double-Digit Pick: Best Buy (BBY)
52-week high: $53.75
52-week low: $16.99
Friday's close (1-3-03): $28.36
Jonathan’s not a buyer. Wayne says he doesn’t see any retailer’s stock returning that quickly, Best Buy included. Hilary says Best Buy is the “best buy” in the sector.
Wayne's Double-Digit Pick: Nortel Networks (NT)
52-week high: $8.77
52-week low: $0.43
Friday's close (1-3-03): $1.85
Jason says Nortel’s probably not a bad bet for extremely speculative investors looking for a spike because it’s been so beaten down, but he says you have to be careful because the company could have a tough time. Hilary says Nortel’s a good choice because it doesn’t take much of a spike to get a double digit return on a stock that trades under $2. Jonathan is playing the telecom sector but not here.
Hilary's Double-Digit Pick: JP Morgan Chase (JPM)
52-week high: $39.68
52-week low: $15.26
Friday's close (1-3-03): $25.94