Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist, Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, portfolio manager of ChangeWave Capital Partners; and Scott Bleier, chief investment strategist at Prime Charter.
The war continues to drive the news and our emotions. Right now the focus is getting bin Laden once and for all. It looks like that may happen sooner than later.
But then what? If Wall Street doesn't have victory after victory in the war, what does it trade on? Back to profits and prices?
Both the Dow and the Nasdaq were down for the week. The Dow fell 238 points, and the Nasdaq lost 68 points.
Tobin said that the markets' current rally can continue, but it's been running so hard lately that it needs to stop and take a deep breath. He also believes that investors will soon need to see some good news from companies because the good news from the war will not help the markets make gains much longer.
Scott thinks that the markets will spike up when bin Laden is caught or killed, and you should sell into that spike. He believes after that, you'll be set up for a market recovery in 2002.
Gary B. charted the NYSE 40 day moving average and deducted that the market usually tops when over 65% of the NYSE stocks are above their 40 day moving averages. And since it is at that point, he doesn't see the market going much higher at this point.
Pat stated that the gains in the market have been over euphoria from victories in the war and not from a recovery in earnings. He thinks that until those earnings can show a recovery, the market cannot make a sustainable rally.
Scott said that a whole "new world" of tech stocks, like InVision Technologies (INVN) have only begun to benefit from the war effort.
Pat warned that InVision will soon be facing huge competition from companies like L-3 (LLL) and PerkinElmer (PKI). He thinks InVision is not a stock to invest in.
Tobin agreed with Pat that this is not a stock to buy as a long-term hold, but that you could make a ton of money trading it.
Everyone returned with a stock pick that will do well with or without a war.
Pat started off things by picking White Mountains Insurance Group (WTM). He likes the company because Jack Byrne, who runs the company, is a legend in the insurance business, and he turned around Geico in the 1970's and Fireman's Fund in the 1980's. Also, Warren Buffet's Berkshire Hathaway owns 15% of the stock. Tobin and Scott both thought the stock was too expensive at $351 a share.
Tobin likes Ralcorp (RAH), a maker of private label ready-to-eat foods, because it is taking market share away from bigger companies that spend a lot of money in advertising, and it makes money in good and bad times. Scott and Gary B. both agreed with Tobin's pick.
Gary B. selected Calpine (CPN) because he thinks energy stocks have been unjustifiably beaten down due to Enron's (ENE) collapse. He especially likes this company because it fell to the low teens due to a "blow-off" low. Tobin and Scott both disagreed with Gary's pick.
Scott then picked Lands' End (LE) because people are buying a lot of merchandise on the internet, and Lands' End is the 'net's number one apparel retailer. Pat didn't like Scott's pick, but Gary B. agreed with it.
Time to face the music! Both Gary B. and Pat stayed on to discuss the one stock that each wished he never liked.
The Chartman started off with his November 24th pick of Halliburton (HAL). Back then it was at $21.35, but as of Friday's close it was down 39%, and trading at $12.99. He reviewed this chart and said that it's always risky to buy stocks that are in a downtrend. The stop he advised to use under $20 would have helped, but he wouldn't buy this stock now. Pat looked over his fundamentals and found out that the company is not in danger of filing for Chapter 11, but it does have about 150,000 pending asbestos cases, and quite simply, the risk doesn't equal the reward.
Pat then reviewed his June 9th bullish call on JDS Uniphase (JDSU). Back then it was priced at $16.05, but it fell 47%, and was trading at $8.53 at the end of Friday's trading day. Pat doesn't like this stock anymore because the worst is not over on its sales front, the company's massive inventories are not moving fast, and even at $6 or $7 it is a gamble. The Chartman also doesn't like this stock because JDSU was never able to take out its downtrend line; and he advised to avoid it until it does.
Tobin: PerkinElmer's (PKI) x-ray machine helps stock
Scott: Optical stocks like Juniper (JNPR) disappoint
Gary B: Enron, Schmenron! Energy companies keep rallying
Pat: L-3 (LLL) good way to bet on defense