Stock Smarts: Good News: No War Rally?
Saddam is out – and stocks are up. But they didn’t spike on the victory. Is that a bullish sign?
Gary Kaltbaum of Kaltbaum & Associates says yes. He points out that for the last three years we have had spikes off the lows that were not sustained, and he wants to see more “backing and filling” to create a base, and he believes we are starting to see that now. He says, “For the first time in 2-and-a-half years, I am planning to buy stocks on the next normal pullback.” The stocks he says he’s looking at right now are those that “acted well upon their earnings reports -- the ones that beat Wall Street expectations and are growing earnings.” He adds that even though a lot of people think stocks like eBay (EBAY) and Amgen (AMGN) are overvalued, he says the market loves them because they are growing earnings faster than everything else, and he’s looking to buy both on a pullback.
Wayne Rogers of Wayne Rogers & Co. agrees with Gary. He says, “a bottom is a process, not an isolated event,” and he believes we are in that process. He is cautiously optimistic on the market right now, but he’d like to see a breakout on greater volume before he’s convinced all’s well.
Hilary Kramer of A&G Capital says she’s bullish because earnings are coming out stronger than expected and the market is building a base as Gary points out. She says she owns Cedar Fair (FUN) and that’s been doing well. “Also doing well -- American Express (AXP), Merck (MRK) and even Bristol Myers (BMY) is finally get back up there.”
Jonathan Hoenig of Capitalistpig Asset Management says he agrees with Gary that the stock market is building a base and looking more attractive, but he isn’t shopping in U.S. stocks yet. He is bullish on Latin America right now, and he’s putting money to work in stocks there.
Dagen McDowell of Fox Business News says you have to own U.S. stocks now because the overseas economies, particularly Europe and Japan, “stink.” She agrees with Hilary that earnings are looking up. She says the first quarter looked great, but she’s concerned about earnings in the second half of the year, and she thinks that since the market has rallied off lows, investors will be taking a breather over the next few months.
Be$t Bets: Post-War Buys
The crew thinks that there are some real post-war “buy” signs out there. So what stocks are on their radar?
Hilary's Post-War Buy: McDonald's (MCD)
52-week high: $30.72
52-week low: $12.12
Friday's close (4-25-03): $15.81
Hilary calls this a great turnaround story. Gary says the only good thing going for McDonald’s is that the stock is trading at a low multiple. He says the company has not grown sales and earnings, and there are too many companies taking away market share.
Jonathan says he views the restaurant business more as a real estate business, and he’d rather buy a solid Real Estate Investment Trust that owns restaurant properties than an actual food service stock right now.
Jon's Post-War Buy: Banco De Chile (BCH)
52-week high: $19.62
52-week low: $14.39
Friday's close (4-25-03): $19.36
Jonathan says Chile’s stock market is extraordinarily strong right now, and he says this is a strong stock in a strong market. Gary agrees this is a strong stock, but he thinks it might be a little overextended at these levels, and he would probably only buy on a pullback, but he is also a little concerned about liquidity in this thinly traded stock. Hilary loves the pick. She says Chile is a great place to buy now.
Gary's Post-War Buy: Nextel (NXTL)
52-week high: $14.67
52-week low: $2.50
Friday's close (4-25-03): $13.92