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 Ned Riley, chief investment Strategist at State Street Global Advisors.

Trading Pit

Are investors losing faith?  We've got Enron (ENE). It's a scandal. People have lost jobs, life savings, and many small investors got badly burned.

Plus the reality of a long war against terror is setting in. It's necessary, but expensive.  Questions are starting to arise about how we are going to pay for the costs of fighting our enemies both here and abroad.

And of course there is the stock market. After a promising start to the year, the Dow has now lost 250 points since January first.  It first traded at the 9,700 level back in beginning of March 1999.
 
The small investor has kept the bottom from falling out of this market, and Pat Dorsey thinks that the market is in no danger of them losing faith.  He said that if anything, investors have just noticed that stock prices have moved up more quickly than their earnings have.
 
Tobin disagreed and thinks that we are now in a transition period.  When the Dow was going up before, investors were putting their money in the market based on faith, but now they are transitioning to investing on earnings. 

Ned warned investors not to put too much of their own company’s stock into their 401k plan.  He said a lot of investors will run into a trap of thinking that their companies are better than Enron, so that a situation like Enron’s will never happen to them.  But he feels this is a good way to get burned.

Gary B. charted the Nasdaq since September 2001 and said that if we are to have any chance of moving up, we have to keep moving sideways between support and resistance.  And so far, this looks good.

Scott said we’re in earnings season, and earnings seasons bring out fear.  He thinks that the market will give back some of its gains and investors should get out their shopping lists.

Tobin revealed that he is not buying right now, but is taking profits.  Ned observed that companies are setting low expectations for their earnings, to lay the groundwork for earnings surprises.  Gary B. thinks most investors are hoping that 2002 will be good enough to finally get them to the break even point. And Pat concluded the segment by saying that some tech stocks have run up enough to take profits from, but there are still a lot of bargains out there.  He noted, he has seen a lot of bargains in health care and financials, more specifically Humana (HUM) and Washington Mutual (WM).

Stock X-Change
 
When a stock like Enron goes from $90 to pennies, it makes everyone a little skittish about investing. With that in mind, Tobin, Scott, and Ned each picked a stock that they felt had nowhere to go but down.

Ned said to steer clear of Krispy Kreme (KKD) because it is going through a transition period of being a very small company to a large distributor. And Ned really doesn't like the fact that Krispy Kreme only has one product - its doughnuts!  Toby agreed and added that when a company is small, it is easier to double its business.  However, this becomes much harder as it grows larger and larger.  Scott was also in agreement, and thinks that doughnut maker is fully valued.
 
Scott picked NVIDIA (NVDA) as his stock that is set up for a big fall.  He said that the stock is extremely overpriced and very expensive.  However, if it can get into Intel's business, he thinks the stock can go up.  But Scott does not think they will be successful in that attempt.  He sees the stock at $50 in the near term, and a $30 stock in a year.  Tobin and Ned both agreed with Scott.
 
Toby believes that QUALCOMM (QCOM) is headed lower due to the overestimation of the amount of money it will get from its royalties.  Ned disagreed, and thinks that the future holds potential for the stock.  But Scott broke the tie and agreed with Toby.  Scott thinks that QUALCOMM is just too expensive.
 
Chartman
 
Gary B. and Pat came back and took a look at Yahoo! (YHOO) and eBay (EBAY).  They've doubled from their 52-week lows, but both are still a long way from their all-time highs.  So will either of them keep running up? 
 
The Chartman says Yahoo! will make investors say, "Boo hoo."  Although the stock hasn't broken its uptrend yet, he advises to stay out of Yahoo! until it is able to break through the $20 price it reached back on January 10th.  Pat agrees with the Chartman, and pointed out that Yahoo! overpaid when it bought HotJobs and the Internet Bubble is not coming back.

Both had the same opinion for eBay.  The Chartman had liked the stock around Thanksgiving, but since then the online auctioneer never eclipsed its 2001 high and it also recently gapped down on high volume.  For those reasons, he says its time to get out of eBay.  Again Pat and Gary B's were in agreement (quite an unprecedented move.)  Pat said that the company has a great business, but its stock price is just too high.  Additionally, even the company's targets don't justify the price.  He thinks the stock is worth $45.
 
Predictions

Scott: Tyco (TYC) books okay; stock now a bargain
 
Pat: IBM (IBM) falls 20% by July 1
 
Gary B: Kmart (KM) demise boosts Wal-Mart (WM) to $80
 
Tobin: Dow Chemical (DOW) climbs back to $35