Stock Smarts: $addam Sell-Off?

So far, the war and the market have moved in lockstep, with stocks rallying right along with our troops.  Now, U.S. Special Forces are in the Philippines helping that country root out a terrorist organization linked to al-Qaeda.  And just last week Arizona senator John McCain suggested an all out assault on Iraq could be next.

What can we expect from the market as we move into this next phase in the War on Terror?

Gregg Hymowitz of Entrust Capital thinks the move to the Philippines is good, because there is a terrorist threat in that country. However, he cautions against a cavalier attitude towards a total expansion of the war. He doesn’t necessarily think that a successful, large-scale war is good for the market.

Hilary Kramer of the Cisneros Group believes the market has faith in the Bush administration and that we will have the international support we need for an invasion of Iraq.  She thinks expanding the war and taking out big threats like Iraq is a good move both for the military and the markets.

Jonas Max Ferris of Maxfunds.com feels that we as a nation really don’t care about what happens outside of our borders; it’s all about the United States and our security. He thinks one car bomb in America will do more damage to the markets than any other war-related story.

Jonathan Hoenig of Capitalist Pig Asset Management says that no matter what anyone says, war is bad for the economy and bad for the stock market. Portfolios should be underweight in equities, and maybe look towards gold.

The discussion moved to some quick thoughts on the Enron debacle:

Greg says that the accounting profession is under a lot of heat and that Arthur Andersen, the firm that served as Enron’s auditor, might not survive. He thinks we need regulatory reform for 401k plans.

Jonas notes a lot of companies have been "fluffing" earnings like Enron, and to him, that is more of a concern (in terms of stocks) than the war.

Jonathan says that Enron is a special situation, and he would even take $100 and buy some shares.

Hilary says no way! It’s over!

Plane$, Train$, Auto$

War and recession wreaked havoc on transportation stocks but our group sees some compelling buys among the battle scarred sector.  Here are their picks:

Hilary's Pick: UAL Corporation (UAL) 
Neither Jonathan nor Gregg like this stock

Gregg's Pick: Embraer (ERJ)
Jonathan like Emraer, Hilary does not. (Gregg does have a position in ERJ.)

Jonathan's Pick: Guangshen Railway (GSH)
Gregg does not like the stock, Hilary says it’s a “genius” pick.

Mutual Fund Face-Off

Panel: Dagen McDowell, Fox Business News Contributor and Jonas Max Ferris

Topic: Low Risk, High Reward. On October 6, 2001, Dagen and Jonas picked two low-risk funds to invest in during the post-attack period of uncertainty.

Dagen: The Clipper Fund (CFIMX)

Jonas: Royce Total Return Fund (RYTRX)

We revisited these funds to see how they have been doing:

Clipper: up 7.3% since Dagen picked it.
Royce: up 16.0% since Jonas picked it.

Jonas stands by his low-risk pick. Dagen says now is the time to up the "risk ante" a bit from the conservative Clipper fund she picked back in October and offered another low-risk fund to check out: Needham Growth Fund (NEEGX)

Money Mail

Dagen and Jonathan wrapped up the show by answering some of your investment questions.

Question: “ I’d like to know your thoughts on Network Associates (NETA) for 2002?”

Jonathan: If I were going to buy a technology stock for a long-term play, I would think about NETA.

Dagen: No way; too expensive.

Question: “How do I make a play on natural gas through either a mutual fund or an ETF?”

Dagen: Take a look at the Vanguard Energy Fund

Jonathan: The problem with using a fund for an energy play is that they are overweight in the big companies.

Question: “NASCAR seems to be very popular. What do you think of International Speedway?”

Jonathan: I like the stock; also take a look at Oshkosh Trucks (OTRKB)

Dagen: Being from the south, I know NASCAR, and I like this stock.

Transcripts

If you are interested in receiving a transcript of the show, please call 888-443-6988.