DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
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; and Scott Bleier, president of HybridInvestors.com; Bob Olstein, president of the Olstein Funds, and Bob Froehlich, chairman of investor strategy at Scudder Investments.
Trading Pit: Pain in the Ga$?
It was a tough time for investors last week, especially at the end. Stocks fell hard on Thursday and Friday, and the Dow dropped almost 300 points. Record high oil prices causing the steep fall.
Can the market rebound if oil continues to flirt with $60/barrel?
Gary B. Smith: Yes, stocks can go higher, but, if oil gets to $75 a barrel, that will be a concern. Right now, the market is still in good shape. A look at a chart of the AMEX Oil Index shows that it’s up 60 percent in just 2 years. This is where the bull market is.
Bob Olstein: Earnings aren’t going to be affected unless oil gets to $60 a barrel. The higher oil prices affect consumer spending and eventually corporate earnings. The market will make up 5 percent if oil prices stabilize below $60.
Tobin Smith: The reason oil prices are up is due to demand. Demand for oil in May was up 8 percent from last year. We have to get to $5/gallon at the gas pump to really kill the demand. I think gas prices will go higher and higher, but the good new is that our economy can absorb these rising prices.
Bob Froehlich: Oil prices will come down to $45/barrel. Everything has to do with China. China will have great demand, but this demand will play out over 8-10 years, not 8-10 weeks. Right now in China they are still riding bicycles. But the demand will increase as they move to mopeds, then cars.
Scott Bleier: Yes, these high oil prices are going to hurt the market! Not only have energy prices capped the stock market; it is going to hurt corporate profits. Oil is now making new highs. The China demand is down, but oil prices are still going higher. It’s going to hurt everything.
Pat Dorsey: Oil is not nearly as big a drag on the economy as it was 20 years ago. The skyrocketing oil prices will hurt the economy a little, but not a whole lot. The market has to worry about many other issues, which have much greater impact on stocks.
Tobin, Scott, and Pat each picked a stock that’ll head higher even if oil and gas prices go even higher.
Tobin: I like UnitedHealth Group (UNH). The economy is going to slow down, but the medical economy won’t. UnitedHealth has it all. It’s a low cost health care provider with the best information technology-based business available. I like it so much I own it. (UnitedHealth Group closed on Friday at $51.30.)
Scott: This is a powerhouse stock and a powerhouse company, but it’s priced to perfection.
Pat: This is the best-managed health care company in the country. It is the best operator with the most diverse customer base. I agree with Scott, though, that it’s priced to perfection.
Scott: My pick is National Fuel Gas (NFG), a mid-cap stock. It has strong cash flow and pays almost a 4 percent yield. This is the type of stock that Warren Buffett, the most successful investor ever, likes to buy. (National Fuel Gas closed on Friday at $28.41.)
Tobin: If gas prices go up, this stock will go down because we get less from them.
Pat: This is a fairly valued stock. It has a good dividend, but I don’t see a lot of upside for it.