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Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, editor ChangeWave Investing; Scott Bleier, president of HybridInvestors.com; Gary Kaltbaum, president of Kaltbaum & Associates; and Chris Russo, former "Apprentice" contestant and senior vice president of investments for GunnAllen Financial.
Trading Pit: Summer Rally?
Memorial Day kicks off the "official" start of summer. Will there be a summer stock rally?
Tobin Smith: Yes, we will get a summer rally and I think the Dow could hit 11,500. People sold out too early because they were afraid that earnings would be horrible. And earnings haven’t been horrible. The only thing that could really stop the market now is if the Federal Reserve says they will raise rates until 2006. But that won’t happen because the Fed will telegraph its interest rate moves. And when they’re done, stocks will explode.
Chris Russo: We are in a summer rally. I think the Dow will top out around 10,800, but then will fall to 9500 by the end of the summer. Right now we are in a no news environment--earnings season is over and there's no news in the summer to push the market higher. Big institutional investors are buying stocks and "suckering" people in. This inflates the price of stocks and causes investors to get in because they're afraid they'll miss the rally.
Gary B. Smith: I agree with Chris. The summer rally has already started. The Nasdaq has gone almost straight up, gaining about 8 percent in the last month or so. And it has a ton of resistance at 2100. That's where I think we may see some real selling, causing stocks to stall out. This is where the big institutions will start taking profits and lock in their gains before the inevitable summer meltdown. But if we can break through 2100 with no problem, the Nasdaq should hit 2200.
Scott Bleier: We are currently in the summer rally. Intel (INTC) has been up twenty days in a row. When was the last time a big cap Nasdaq stock was up that many days in a row? During the summer, we will hit the resistance that Gary B. mentioned, and then go nowhere for a while. But at the end of the summer, when earnings come out, stocks will break out.
Pat Dorsey: Stocks don't have much left for a summer rally. Nasdaq stocks are already up a bit from their lows. Earnings growth is solid, but it has slowed down from last year. The economic environment is good, but not fabulous. There are a few good stocks out there, but I don’t see us powering up through the summer. The bargains I’ve found are Fifth Third Bancorp (FITB), Novartis (NVS) and Diageo (DEO).
There’s a new "American Idol." But who will be the “Stock Idol?” Tobin, Gary K, and Scott faced off. Pat, our own Simon Cowell, played the part of the judge.
Gary Kaltbaum: I’m rocking with petroleum company, Tesoro (TSO). It’s a strong stock that didn’t pull back when oil got hit. Plus, insiders are buying it right now. (Tesoro closed on Friday at $44.09.)
Pat: Oil refining is a very cyclical industry. It’s too risky. Don’t buy.
Tobin: I’m hitting all the right notes with Cree (CREE), which is transforming the world with light. The company owns the technology for white light. If all the incandescent bulbs in the U.S. were replaced, our energy bill would be lowered by 29 percent. This stock could go to $60 when the LED wave hits. (Cree closed on Friday at $29.64.)
Pat: Toby’s not totally off-key, just a little flat. The demand for LED is increasing, especially since the technology is used in cell phones. The problem is that Cree has a lot of competition. And this is cutting into Cree’s bottom line.
Scott: My stock, Solectron (SLR), will outperform all the others. This company makes electronic storage equipment. The company’s balance sheet is better than last year. I think the stock will hit $5 in the next 6 months. I own and recommend it. (Solectron closed on Friday at $3.49.)
Pat: Finally someone with talent on this show! Scott has hit all the right notes. The company has restructured very well under a new management team and the demand is improving. I really like that the stock is cheap and think it has a 30-40 percent upside. But this is not a long-term hold; so if it gets above $5, get out.
Get ready for summer! Gary B. and Chris picked the stocks they say are ready to heat up as the temperatures head higher.