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Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Charles Payne, CEO of Wall Street Strategies; and Bob Olstein, president of The Olstein Funds.
Trading Pit: Market Bomb
North Korea and its very volatile dictator, Kim Jong Il, have a nuclear bomb. That alone is disturbing enough, but, what's more, the country says it’s not afraid to use these weapons.
But is Wall Street worried? At the end of last week, when North Korea threatened the world with its nuclear might, the Dow was up triple digits!
What does an investor do if they act?
Pat Dorsey: Strictly from an investment point of view, any use of nuclear weapons by North Korea, is a fabulous buying opportunity. You buy stocks when it looks the world is going to end. Again, from an investment point of view, should you have bought stocks after 9/11, USS Cole, Desert Storm? Yes. Now I admit Wall Street is watching this situation, but it is a short-term issue. If North Korea were to fire their nuclear weapons at Tokyo for example, the market would fall considerably. But in the long term, it is not a big deal.
Bob Olstein: I will say it again. Earnings and interest rates are all that matter. The market is 5 percent undervalued. Wall Street will always find something to worry about. North Korea is a problem for traders, and traders only.
Tobin Smith: If North Korea drops the bomb on China, China retaliate and bomb North Korea into oblivion. Wall Street is looking at Iraq. The market has taken off since their elections. Earnings are slowing down and money will not keep going into momentum stocks. Instead, stocks with real earnings and real growth will be rewarded. Right now we have a great economy to buy stocks.
Gary B. Smith: This situation is a concern, but before you rush in and buy stocks, see the damage. I think it would be better to wait for the market to settle. The Dow is coming off of a terrible January. But it’s now closing in on the 2004 high, and once that is cleared, we should be headed to the all-time high. The bears are on the run!
Charles Payne: Let's face it, North Korea is using nuclear weapons as their economic plan. They decided long ago that it would be easier to build nukes than build an infrastructure that created prosperity, and now they are using these nukes to blackmail the rest of the world. As for the market, buy stocks because they are getting ready to explode higher. Almost everyday in January, the market plummeted in the last half hour of trading. It’s done the exact opposite in February. Large caps are doing well and will continue to do so, but I think small caps will do even better. Look for the Nasdaq to make a big move led by the semiconductors.
Tobin, Pat, and Bob each picked the best stocks under $10.
Pat: I like the waste management company, Allied Waste (AW). It’s cheap and has tons of cash flow. This is a risky stock, but I think it’s going to $16. (Allied Waste closed on Friday at $8.52.)
Bob: We owned Allied 3-4 years ago in our fund and are still waiting for it to play out. It’s not growing as fast as we had hoped.
Tobin: This has zero earnings and revenue growth. I don’t have the patience to wait.
Bob: My bargain pick is Quanta Services (PWR), which is a play on the electric system in America. The transmission system is about to keel over and Quanta should play a big part in getting it going again. The company’s had a terrible past, but is turning things around. I think it will hit $12-13 in the next two years. We own it. (Quanta Services closed on Friday at $7.74.)
Tobin: I see a lot of growth in this. Plus, it’s not only involved in electric utilities, but also cable. I love it.