Recap of December 1

Stock Smarts: Stock raving mad?

With the United States military surging towards a victory in Afghanistan in the war on terrorism, growth stocks are back in vogue. These traditionally risky plays have been outperforming the safer value stock over the past month:

Russell 1000 Growth: up 9.8%

Russell 1000 Value: up 5.9%

Does it make sense to ride the momentum of these stocks?

Mike Holland of Holland & Co. owns a lot of growth stocks, and says that just as these was a downturn in the markets immediately after the September 11th attacks, there is an upturn now that the war is going well. With this upturn he sees potential growth in corporate earnings.

Dagen McDowell of SmartMoney magazine thinks that the same money managers that helped to create the bubble that burst this past spring are the ones pumping up the growth stocks, as they are chasing the momentum. She warns investors to take caution and make sure that they stay diversified.

Jordan Kimmell of states that the fundamentals still count, and you should focus on the companies with the highest growth of revenues. He also says not to overpay for these growth plays.

Jonathan Hoeing of Capitalistpig Asset feels that every portfolio needs a combination of growth and value stocks. He says that the time to be making more value plays was in March of 2000 when the market bubble was bursting. But now you might want to go where the action is, and that is certainly with the growth stocks.

Jonas Max Ferris of thinks that from a momentum point of view, growth stocks are a goo idea right now. However, earnings are still flat at best, and until companies can show that they will be making real profits going forward, he is skeptical of any rally.

Some of the panel offered up some growth picks:

Jordan: THQ Inc. (THQI)

Jonathan: First Tennessee National (FTN)

Mike: American International Group (AIG)

Mutual Fund Face-Off

Topic: The best “gift” fund

Panel: Dagen McDowell and Jonas Max Ferris


Dagen – Excelsior Value and Restructuring Fund (UMBIX)
   Minimum investment: $500

Jonas – Pax World Growth Fund (PXWGX)
  Minimum investment: $250

Money Mail

Dagen and Jonathan wrapped up the show by answering some email question from viewers:

Question #1: I have heard good things about Harley-Davidson (HDI). Should I buy the stock or just the motorcycle?

Jonathan: If I rode a motorcycle, I would buy a Harley (and a helmet), and I really like the stock.

Dagen: Great brand, not a great stock – too pricey at $50 a share.
Question #2: How much of your own company's stock should you keep in your 401 (k)?

Dagen: You should have no more than 10% of your retirement investment in your company stock (or any one investment for that matter).

Jonathan: Diversification is the key for retirement investing.

Question #3: Is K-Mart (KM) poised for a breakout? What's your target price?
Jonathan: Could go up to $8, but there are better places for your investment dollars.
Dagen: Wal-Mart (WMT) and Target (TGT) are much better companies in the retailing sector.


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