Stock Smarts: Stocks Battle Back!

The major stock indices hit 52-week lows the week after the September 11 terrorist attacks.

But like the spirit of our nation, stocks have dug in and battled back, rallying from those lows:

Dow Up 17%
Nasdaq Up 28%
S&P 500 Up 16%

So is this a real rally, or just a bear trap?

Charles Payne of wstreet.com says that this rally is the real thing, and that it is individual investors, not Wall Street money managers, who are leading this surge. He notes that there were signs of some economic recovery before 9/11 (Information Technology spending was up over the summer), and that the economy is cyclical, meaning it is bound to turn at some point.

Dagen McDowell from SmartMoney magazine isn’t convinced that the rally is going to last. She sees money managers “chasing” performance right now.  She also points to high consumer debt as one reason the economy might not rebound that quickly.

Hilary Kramer of the Cisneros Group says this looks a lot like the April rally, which of course didn’t last. And like that rally, the current boost is happening due to superficial factors. She feels that the “unknown” factor that comes along with the war against terrorism makes a sustained rally very difficult.

Jonathan Hoenig of Capitalistpig Assest Management thinks that the market could rally, but that you must be very selective in your picks. He also says that too much focus is placed on the large-cap stocks, and that one should really focus on smaller companies for investment opportunities.

Jonas Max Ferris from Maxfunds.com sees a flat market trading in a range for a while. The market tends to overreact to bad news (like the first week of trading after 9/11), then rebound and feed a short-term rally. He says stocks should be lower right now, because of continued weakness in earnings.

Members of our panel offered up some stocks they think still have upside:

Hilary: American International Group (AIG)

Jonathan: Aberdeen Asia-Pacific Income Fund (FAX)

Charles: Broadcom (BRCM)

Mutual Fund Face-Off

Topic: The best biotechnology fund

Panel: Dagen McDowell and Jonas Max Ferris

Picks:

Dagen – Fidelity Select Biotechnology Fund (FBIOX)

Jonas – Marketocracy Medical Specialist Fund (MSFQX)

Money Mail

Dagen and Jonathan wrapped up the show by answering some e-mail question from viewers:

Question #1: I’m wondering if you (Jonathan) decided to stay the course on Sonic (SONC), after it had such a bad week?

Jonathan: He still likes Sonic, but he is not adding to his position.

Dagen asked Jonathan if he had ever eaten at Sonic.  He hasn’t.  She says that's the problem with technical analysis.  It's all about how a stock trades, and is too removed from a company's actual business.

Question #2: What are your thoughts on emerging markets funds?

Dagen: Very risky, even in good times

Jonathan: Take a look at the Templeton Russia Fund (TRF), but get ready for a wild ride.

Transcripts

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