Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, CEO of ChangeWave Capital Partners; Scott Bleier, Fox Business News contributor; and Bob Olstein, president of the Olstein funds.
 
Trading Pit

Stocks began this year with a good sign.  In the first 5 days of 2002, the Dow was up 129 points.  Why do we care about that time period?   Well, since 1950, the Dow has been up in that time frame 32 times. In all but four of those years the market finished higher over the next 12 months. But, in three of the four years we didn't climb higher, the United States was involved in a war.

Bob disagreed with that statistic, and believes that the market will finish moderately up for 2002.  He reasons that spending on security and defense will jump-start the economy.  But he thinks earnings will need to catch up to the stock appreciation.

Tobin said the market will put earnings in the forefront, due to the tremendous gains we have made in the war.

Gary B. charted the Dow's performance since 1998, and he observed a sideways and down pattern developing over the past 2 ½ years.  This pattern leads him to think that the Dow could run up to 11,000, but will drop back down again.

Pat believes, like Tobin, that the market has moved past the war and is now looking towards earnings season.  He said the big question is whether corporate executives forecast earnings to recover sooner or later.  So watch to see if there are any patterns in similar industries calling for turnarounds during the same time periods.

Scott thinks that the market's performance in the whole month of January is the important indicator as to where the market will end the year.  He advised investors to go easy on the major indices, and to find buying opportunities in individual stocks.

Toby said that a great case can be made for a recovery in the market by 2003.  With that in mind, find companies that will do well with a 2003 recovery, decide what you want to pay for their stocks, and then buy them in 2002.  Gary B. agreed with Toby's belief that 2003 will be a great year, but the Chartman advised investors that there will be better times than now to buy stocks.  Scott concluded the segment saying the market will have a slight pull back, and when that happens, you should pull out your stock shopping list.  After the pull back, he thinks the Dow is headed for mid ten thousand, and the Nasdaq should get to the mid two thousand level.
 
Stock X-Change

Bob took the top three holdings in his Olstein Financial Alert Fund, and let the Bulls & Bears check them out.

No shocker to his biggest holding: JCPenney (JCP).  Bob has liked this stock since we began the show.  And in 2001, the retailer had a phenomenal 155% gain.  He said that the company is not as valuable or cheap as when he liked it earlier, but he still does like the stock, and values it at $35 a share. (It closed Friday at $25.47.)  Scott thought that JCPenney is fully valued and Tobin thinks that the sale of its drug company, Eckerd, won't help the stock that much.

The second largest holding for Bob's fund is insurance and financial services company, CIGNA (CI).  It was down 29% last year, but it's been making a steady climb since November when it hit a 52-week low.  He likes this stock because it generates over a billion dollars of excess cash flow.  Also, the majority of the company's business comes from its pension indemnity insurance and administrating insurance, which Bob thinks is the future of the industry.  He thinks the stock is worth $125 a share. (CIGNA closed at $93.20 on Friday.)  Tobin agreed with Bob, and added now is the time to buy it because there is a new cycle starting in insurance premiums.  Scott likes Aetna (AET) better because he thinks the stock will turnaround.

The third biggest holding for in the Olstein Financial Alert Fund is International Rectifier (IRF).  The semiconductor manufacturer was higher by 16% in 2001.  Bob likes the company because it is selling proprietary technology, and is getting a lot of royalties.  He sees the stock selling at $50-$60 a share in 2-3 years.  (The stock closed on Friday at $38.53.)  Scott likes the company and said that at $40 there will be a big break out.  Tobin said he likes the stock, but buy when it comes down to $35.

Chartman

Gary B. and Pat came back with a stock each thinks is going to be at the top of the Nasdaq 100 by the end of the year.

The Chartman started things off with by picking satellite TV provider, EchoStar communications (DISH).  Last year it was up 21%.  He demonstrated on his chart that with a close near $30, the stock has broken a downtrend that started in 2000.  With a good year, it will go to $40, and a great year will have it up to $55.  Pat disagreed because the stock is priced too high and is facing a tough anti-trust battle.

Pat then selected biotech company, ICOS (ICOS), which was up 11% in 2001.  Pat thinks that the company is headed even higher because it makes Cialis, which is an even better version of Viagra, it has other promising drugs in pipeline, and if all goes well, the stock can go up 30% this year.  But ICOS didn't excite the Chartman enough to buy it.  This is because since the beginning of 2000, it has an ascending triangle (meaning that the bottom trendline is sloping up) which looks good, but he cautioned to wait until it breaks to a new high above $60.

Predictions

Tobin: Merrill Lynch (MER) layoffs signals bottom

Bob: Time to by insurance and gas drilling stocks 

Pat: AIG (AIG) is a good insurance play

Gary: United Technologies (UTX) dog of Dow; falls over 30%

Scott: Retail stocks tail off; sell now!