Stock Smarts: Usama End Game?
There is no doubt that the war against terrorism has caused a bull-run in the stock market. Since the first bombs were dropped on Afghanistan on October 7, stocks have soared:
Dow: UP 10%
Nasdaq: UP 26%
So what will happen if and when we catch Usama bin Laden? What will happen if the war on terror expands to other nations? Will the markets continue to boom?
Gregg Hymowitz of Entrust Capital says that the current bombing campaign and efforts to get bin Laden will be much better for the markets than the expected end result: the capture of bin Laden. He thinks we could see a short rally after the capture, but if the war moves on to an attack of Iraq, it will be negative for both stocks and oil prices.
Dagen McDowell of SmartMoney magazine feels that this rally could stall and reminds everyone that President Bush warned us that this conflict could last a very long time. If that is the case, investors really need to exercise some caution.
Jonathan Hoenig of Capitalistpig Asset Management thinks that if we can conclude our business in Afghanistan and get bin Laden, then the rally could continue. But he does fear that if this become a long-term, expanded conflict, there will be worries in the markets ending the rally. He still stresses that we are in a “stock picker’s market” and there are some good buys out there, but you have to be very selective.
Hilary Kramer of the Cisneros Group continues to believe in the rally. She does not think that we are going to expand the war to an attack on Iraq, and she think the key factor that we are winning in this war is that the fear of terrorism is beginning to wane.
Jonas Max Ferris of Maxfunds.com stresses corporate earnings for any kind of sustained rally. There are plays for some conservative stocks, but he still thinks that this is a rally built on war momentum and good news from Afghanistan and not good news from corporate America.
Some members of the panel offered up some war time picks:
Jonathan: Cedar Fair (FUN) – Hilary likes the stock; Gregg does not.
Hilary: Tyson Foods (TSN) – Jonathan and Gregg do not like the stock
Gregg: Vodafone Group (VOD) – Gregg has a position in this stock; Jonathan and Hilary do not like the stock.
Mutual Fund Face-Off
Panel: Dagen McDowell and Jonas Max Ferris
Topic: The best healthcare fund
Dagen: T. Rowe Price Health Sciences Fund (PRHSX)
Jonas: ICON Healthcare Fund (ICHCX)
Dagen and Jonathan wrapped up the show by answering some email question from viewers:
Question: I have 137 shares of Enron (ENE) stock. What happens to them
now that Enron's filed for Chapter 11?
Dagen: In situations like this, stockholders are at the bottom of the food chain. But you can sell your stock and cut whatever losses you may have incurred.
Question: How am I supposed to know what to believe from the financial reports put out by a company?
Jonathan: If you look at the charts of a company’s stock, sometimes you can get a picture of bad things to come, without hearing anything in terms of “bad news” from a company.
Dagen: Look closely at a company when they tell you everything is picture perfect.
Question: Are any of the class action lawsuits filed against companies by
stock purchasers ever resolved?
Dagen: These suits are resolved all the time, but don’t expect to see much money from a settlement.
Jonathan: The lawyers will do well.
Question: I bought Amgen (AMGN) at $58. It was a home run pick of
Gary B. Smith's from Bulls & Bears. When should I sell?
Jonathan: Never let a win turn into a loss.
Dagen: Amgen is a big, solid company that is a good investment for the long term.
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