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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president, and Danielle Hughes, Divine Capital Markets president.
Trading Pit: $3 Gas: Time to Cut Ties With OPEC and Mideast?
Gas prices soaring! Coming in at about $3 a gallon. Oil now gushing to record highs. If we're going to pay this much anyway, is it time to cut ties with OPEC and the Mideast and make the move to ethanol, or some other type of fuel that we can make right here at home?
Gary B. Smith: It's definitely time for us to make some type of alternative fuel here at home. Some entrepreneur will start searching for alternatives because it is not the government's job to do it. The government didn't decide when it was time for us to move from the horse and buggy to the car. It will be one of the auto companies or an entrepreneur. As the prices get higher, there will be an opportunity for alternative energy, and it will come from private industry.
Pat Dorsey: The basic problem is that there isn't enough consumer demand for alternative fuel cars. Toyota's hybrid gas-electric car, Prius, is selling well, but consumer view it as niche product and Detroit isn't committing the resources to develop these types of cars. If we did move to ethanol, the whole energy infrastructure of the U.S. would need to be overhauled. This could happen, but it would take a lot of time and money, and oil could be back down to $40 or $50 a barrel by then. Also, we don't have enough corn to both feed people and produce ethanol. We just don't have enough acreage.
Tobin Smith: The only way we'll get over our oil addiction is if there is a $3 per gallon tax on gasoline. This will curtail driving and will get us the $10 trillion to build the infrastructure needed for an alternative fuel. We need something like the Marshall Plan that was used in World War II. No one is going to change their behavior until gas goes to $6 a gallon.
Danielle Hughes: Big oil will never allow Toby's idea to happen. We are the problem and the reason OPEC is so powerful. We have spent no money on infrastructure and haven't done so in many, many years. Now that oil and gas have gone up so much, these alternative fuels have become more viable because they will become less expensive.
Scott Bleier: Most of the American people would love to tell OPEC to stick it! We're on our way, but it must be the number one priority of the government. The government has to lead the way. We don't need a huge tax; we get enough in taxes already. If Brazil can make ethanol fuel work using sugar, then we can do it with our corn. It will take 5 years and billions of dollars but we have to do it now.
Who has made the best and worst stock picks on Bulls & Bears?
Scott started things off with the good calls. Last October, he picked Monsanto (MON), which among other things makes corn seed, an essential for ethanol. It's doing great and has gained 48 percent since Scott picked it. He thinks the stock could go higher, but it is now expensive. (Monsanto closed at $88.49 on Friday.)
Dani was next. In August of last year, she really liked Corning (GLW). It was just starting to move up then, and has really taken off since, gaining 54 percent. And Dani thinks Corning still has more to go and thinks the stock could go to $40 in the next year or so. (Corning closed at $29.09 on Friday.)
Gary B's turn for glory! Just five months ago, he loved NVIDIA (NVDA) and said it was going to keep running higher. It certainly has—to the tune of 48 percent! But has it come too far too fast? Gary doesn't think so. He admits it is fading a bit but he wouldn't sell the stock unless it falls below the uptrend it has been in all year. (NVIDIA closed at $28.07 on Friday.)
Last summer, in another edition of the Scoreboard, Pat's loser was Steel Dynamics (STLD). But he stuck with the stock and said he still liked it. Good thing he stuck to his guns! Steel Dynamics has more than doubled, gaining 140 percent! Pat advised to sell now and put your money into another stock because this one is too pricey. (Steel Dynamics closed at $63.36 on Friday.)
Toby first recommended Allegheny Technologies (ATI) about a year ago. And it's really paying off. Up 200 percent! He recommended this stock again in January, and it's up huge since then too! And he thinks the stock is still going to go higher! He said he'd buy it on any pullback because it still can go up another 50 percent! (Allegheny Technologies closed at $72.27 on Friday.)
Now onto the not so good calls:
Dani had a pretty big miss in July when she picked Nordic American Tanker (NAT). This ship's sinking, falling steadily, losing 25 percent. But Dani doesn't think it's time to abandon ship because there is still a tanker shortage worldwide. Also she said the stock did come down, but it pays a 25 percent dividend, so if you stick with it for 6 months, you'll still beat the market's average. (Nordic American Tanker closed at $31.20 on Friday.)