Stock Smarts: Wartime Buy Signs!
Any doubts about whether this market is trading on war and terror were certainly erased last Tuesday. That's when we heard from Usama bin Laden. Stocks were solidly up in the morning, but headed south on news of another tape from bin Laden supporting Iraq and calling for more terrorism here in America.
Things are tense after Hans Blix's report to the U.N. last Friday. Buying stocks in wartime is clearly a challenge - what do we need to look out for now?
Charles Payne of Wall Street Strategies thinks that the first thing you should look at are the "non-buy signs." He says that a lot of companies are "bailing out" in terms of last quarter's earnings reports, using the possible war as an excuse for not providing specific guidance. And while he concedes there are a lot of unknowns because of the possible war, he wants companies to come out with definitive statements about what will happen either with or a without a war - publicly traded companies owe it to investors. He thinks investors' portfolios should be 50% in cash. And investors should focus on companies that do put out good earnings reports especially if they are showing support for their stock with buybacks.
Dagen McDowell of FOX Business News says there is some legitimacy to companies' uncertainty because of the war scenario. And she cited Alan Greenspan's testimony to the Senate Banking Committee earlier in the Week. Greenspan said businesses would pick up spending once the conflict with Iraq is settled. She says now is the right time to buy some stocks and avoid the herd that is gravitating toward bonds and gold.
Hilary Kramer of FOX Business News says that companies really don't know what is going to happen with their businesses because of the war. Hilary is looking at financial institutions and defense companies for possible buys.
Jonathan Hoenig of Capitalistpig Asset Management says if there are buy signs out there, they aren't really in stocks. He sees buy signs in fixed income, in energy prices and in instruments that aren't correlated with the dollar. He says the trend for equities is still down.
Jonas Max Ferris of Maxfunds.com thinks there is a lot of overreaction to the war news. He says there is a knee jerk reaction to run to the safety of bonds, oil, and gold and he thinks all of those investments will collapse once the war situation is resolved. He says it's time to take some risk with stocks that will bounce back big when the conflict is resolved. He agrees with Dagen that you should not follow the herd - stocks will rally off of the lows.
Be$t Bets: Signs Say Buy...
Which stocks have the "buy signs" pointing in the right direction? Our panel looks to the signs for some potential winners.
Hilary's signs say buy... Heinz (HNZ)
52-week high: $43.48
52-week low: $29.60
Friday's close (2-14-03): $31.28
Hilary says this is an opportunity in uncertain times - consumer staples, especially ones of value, are worth a look. Charles is middle of the road on this one -he doesn't hate it, but he doesn't love it. Jonathan says he's more inclined to bet against this stock with a short play rather than bet on it long.
Jon's signs say buy... Putnam Master Income (PIM)
52-week high: $6.71
52-week low: $5.65
Friday's close (2-14-03): $6.56
Jonathan says income is working. And, he says, this bond fund is a great way to play that action. Charles agrees that bonds are working - but, he says, the long-term chart (over the past five years) on this stock isn't great right now - but over the next month, this might be a good play. He would consider convertible bonds as income plays here instead. Hilary likes this pick for a bond fund. (Jonathan owns this fund.)
Charles' signs say buy... Qualcomm (QCOM)
52-week high: $44.65
52-week low: $23.21
Friday's close (2-14-03): $34.70