Brenda Buttner was joined by: Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, CEO of ChangeWave Capital Partners; Scott Bleier, chief investment strategist at Prime Charter; Brian Finnerty, head of trading at C.E. Unterberg, Towbin and Royce Kanofsky, chief market strategist for Investec Ernst & Company.
Trading Pit
Just one day of trading left in 2001, and here is where we stand.
The Dow, Nasdaq and S&P 500 are all underwater for the year. A strong finish had the Dow down only by 6% for 2001. But still this is the second consecutive year stocks have lost ground.
The last time the market lost three straight years was six decades ago: 1939, 40 and 41. That was during World War II, and now there's a global War on Terror. So could we be looking at another down year in 2002?
No way says Royce. The economic environment looks more like 1990, during the Gulf War instead of the 1939-1941 period. He said the market is down because of excesses in the prior year, not because of the terrorist attacks of September 11th.
Tobin agrees that 2002 will be an up year. But he said the big question is when will our economic engine start moving forward. Toby thinks it will start slowly and then get going.
Scott said there are a lot of what ifs. He also thinks that the economy will pick up and earnings will recover next year.
Brian thinks that investors are not pricing in another terrorist attack because people do not think there will be another attack. Like the others, Brian also believes next year will be an up year.
Pat said next year stocks will definitely finish higher, and the economy will recover in 2002. He thinks it will be a buying opportunity if another terrorist attack causes the market to sell off sharply.
Scott advised that Small and Mid cap growth stocks will do well next year. Toby agreed and added that the business cycle has bottomed and is heading up. He advised investors to look for small companies and new leaders, and to stay away from the leaders in the last bull market. Royce said investors have to condition themselves not to expect 25% increases for 4 consecutive years, but to look for stocks to make 8-12% increases. Brian concluded that smaller companies are the ones to buy because they will benefit more quickly from the Fed's rate cuts.
Stock X-Change
The top 3 performers in the Dow this year were Microsoft (MSFT), IBM (IBM), and AT&T (T). But what will the best of the best do in 2002?
First up, Microsoft. It was the best Dow 30 performer, and made a huge gain of 56% in 2001. Pat said he cannot get excited about Microsoft because too much of its business is tied to the slow growth market of PC's, and at it's current price of $67.87, it's fairly priced to expensive. Tobin disagrees stating that the PC demand will be stronger than people think, and that the stock will be at $80-$85 at end of 2002. Royce and Scott agreed with Pat, but Brian agreed with Toby.
The second best Dow stock was IBM. Big blue blew away most of the market, and was up 45% for the year. Scott said IBM is a great stock, and is a buy. It also is the biggest tech company, has weathered the worst storm in tech history, and is ready to break out on its chart. Brian agreed with Scott, but the rest of the Bulls & Bears thought it was best to stay away from Big Blue.
The bronze medal in the Dow was AT&T. Ma Bell had fallen on hard times so that 41% comeback isn't all that stunning, but it still is impressive. The Bulls & Bears were unanimous about this stock: STAY AWAY!
Scoreboard
There's no place to hide when we look at the Bulls & Bears' past predictions in the scoreboard.
On January 13 Scott said:
Cablevision (CVC) would be bought at $150 per share. But since then, the company has not been bought, and is now trading at $47.78. He said still look for the company to be bought.
On October 13 Brian said:
The Dow would be at 10,300 and the Nasdaq would hit 2,000 early in 2002. As of right now, Brian's pretty close because the Dow closed on Friday at 10,137, and the Nasdaq finished at 1987. Brian thinks the Nasdaq is headed for 2,300 where it will meet some resistance, but will climb to 2,800 next year.
On November 24 Pat said:
TriQuint (TQNT) is a buy at its current level ($17.35). But, the stock has lost ground and is now at $12.37. Pat didn't hide or make excuses, but fessed up that this was a bad call, and some things that he didn't foresee took the stock down.
On September 29 Royce said:
Domestic tourism recovers; casino stocks benefit. Bingo! Since his prediction, Morningstar.com's Gambling Index is up 73%! Royce said that these stocks have had a great run and now are fully priced, but are a good long-term hold.
On October 13 Tobin said:
Varian Semiconductor (VSEA) will be up 50% in 90 days. It's getting there for Toby, but he's running out of time, because with just a little more than a week left in his time frame of 90 days, the stock is up 24%. He advised to hold onto the stock because semiconductor equipment will do well into next year.
Predictions
Brian: War helps economy & Small caps beat Large caps
Pat: Abercrombie & Fitch (ANF) up 25% in 2002
Tobin: Nasdaq 2500 one year from now
Scott: Nowhere to go but down for NVIDIA (NVDA)
Royce: U.S. attacks Iraq; oil stocks & prices soar
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