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Bulls & Bears
This past week’s Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Charles Payne , Wall Street Strategies CEO
President Bush overseas trying to get historic deals done in the Mideast. But here at home, he’s suffering his worst approval ratings ever. Can stocks hit an all-time high if the president is at an all-time low?
Charles Payne: The market will be able to breakout without good approval ratings for the president because the factors weighing down Bush aren't economic. His low numbers are due mostly to his mishandling of the ports deal, the Cheney incident, Katrina and the war.
All of these things are hurting President Bush, but they have nothing to do with economics. We have a 4.7 percent unemployment rate and the economy looks great. Every economic data point that came out this past week was strong and non-inflationary. In addition, the War on Terror is probably taking a backseat to the situations with the oil market. I think it’s a little bit more important right now than the so-called war with Al Qaeda.
Gary B. Smith: All that matters to Wall Street are that stock prices keep going up, which sucks more people into the market. I agree with Charles. The background looks fantastic. I would also like to point out that in October of last year, President Bush’s ratings were pretty dismal, and yet the market has made nice gains. I don’t see any correlation.
Pat Dorsey: The market usually influences approval ratings, not the other way around. In this case, as Gary pointed out, there is no correlation. The reasons for poor approval ratings are completely non-economic. The economy’s doing fine, earnings are doing well, so it just doesn’t matter at whole lot. The bigger issue right now is with Al Qaeda. As we saw a couple of weeks ago, it’s this campaign they may be waging against oil facilities worldwide. That’s probably going to increase the fear premium on oil prices. That’s the aspect of the War on Terror that’s going to affect the market more than any other.
Tobin Smith: The bigger issue, however, could be if we are unable to extend the Capital Gains Act. If these get knocked out, we will see people selling stock to get the capital gain treatment. Then there will be a sell off. That’s the one issue I’m scared about.
Scott Bleier: The president’s approval rating doesn’t have an impact on the market at all. There’s only two poll numbers that are important: job creation and your monthly statement from your broker. When the stock market does well, like it has been doing, it trumps every other poll number out there. The president can have these miserable numbers now, but if the stock market and the economy hold up well, he’s remembered for that, not his low poll numbers.
Down, but not out. Stocks the Bulls & Bears say are ready to make a huge comeback.
Charles: Intuitive Surgical (ISRG) is one that is really ready to come back. It designs and makes systems for robotic-assisted surgery. This is a high flyer that came down hard in the last couple of months. Now is the time to buy because this one is ready to rise again. I own it and think it’s oversold. (Intuitive Surgical closed on Friday at $90.37.)
Pat: It did come down really hard, but the expectations are still really high. It makes a great product and is selling well, but it’s just way too expensive.
Tobin: I really like Merge Healthcare (MRGE), which develops medical imaging and software for MRIs, ultrasounds, and digital X-rays. The stock just got hammered, but now’s the time to buy. Because of strong sales, the company had to re-state some of its earnings. I do own and recommend it. (Merge Healthcare closed on Friday at $17.56.)
Scott: This is an interesting company, but the management really messed up. This gives it a problem going forward.
Scott: I’m racing ahead with International Speedway (ISCA). A lot of the company is owned by the France family, which has really built NASCAR. The sport is really growing fast. I love this company and own the stock, which I think is going to $60. (International Speedway closed on Friday at $47.92.)
Tobin: Scott, this stock hits $60 when you win the Daytona 500! NASCAR’s television ratings are down and television revenue is down. Not a good one.
Pat: Dell (DELL) has really been crushed over the past year, cut in half from its high. However, it’s still taking market share. Plus, it’s a low cost player on a commodity market, which is what you want to be. I really like that its server and storage business is growing 20-50 percent. The stock is cheap and I see a 50 percent upside in the next couple of years. (Dell closed on Friday at $29.13.)
Charles: Where’s the second act? This looks like Intel (INTC) did two years ago. Dell better come up with something new. It can’t make it on reputation alone.