Stock Smarts: Think positive!
The record-setting Enron bankruptcy, questions about accounting and a weak economy has covered Wall Street in a cloud of negativity.
Are we focusing too much on the bad and ignoring the good news that is out there?
Hilary Kramer from the Cisneros Group says there are reason to worry. The feeling is that the whole Enron situation is not necessarily an isolated incident. And while the recession might be coming to a close, there are still going to be unemployment issues down the road. That being said, there are some opportunities out there. Look at the cyclicals (energy and media stock specifically) as the recession turns.
Dagen McDowell of Fox Business News doesn’t think there is too much good out there. She is looking for companies to start showing some positive earnings before any kind of market momentum moves to the upside.
Charles Payne of Wall Street Strategies says that we are at the exact opposite of where we were when Alan Greenspan made his “irrational exuberance” comment in that now investors are too pessimistic. There have always been accounting issues on Wall Street, but the situations with companies like Enron and Kmart have just magnified things. The market is also seeing some wild swings due to the fact that many individual investors just aren’t participating now.
Jonas Max Ferris of Maxfunds.com doesn’t think we are seeing any kind of “irrational pessimism” in the markets, and that investors are reacting appropriately to what is happening.
Jonathan Hoenig from Capitalistpig Asset Management expects the markets to tread water for some time, and doesn’t think we are going to see a true “bottom” to the market. He continues to mention is that there are buying opportunities out there, but one must be a real selective stock picker and not just go after the big names.
Some members of the panel offered up some stocks that have been “victims of negativity” and are a better stock that we think.
Jonathan: Harmony Gold (HGMCY)
Hilary and Charles do not like this pick.
Hilary: Citigroup (C)
Hilary does have a position in Citigroup. Charles says it is a good safety net stock; Jonathan does not like it.
Charles: Polycom (PLCM)
Hilary likes the stock; Jonathan would not buy it yet.
Mutual Fund Face-Off
Panel: Dagen and Jonas
Topic: The best “aggressive” funds.
Focused mutual funds take an aggressive approach to investing: pick a few stocks and ride them. Fewer stocks can make for greater risk, but the potential for a better payoff is certainly there. Our panel picked a couple of focused funds worth taking a look at.
Dagen: The Clipper Fund (CFIMX)
Minimum Investment: $5,000
Expenses: $10.90 for every $1,000 invested
Jonas: The Jensen Fund (JENSX)
Minimum Investment: $1,000
Expenses: $9.50 for every $1,000 invested
Dagen and Jonathan wrapped up the show by answering some email questions from viewers:
Question: “What drives a stock to move up and down, especially on a daily basis?”
Dagen: Quite simply, good news moves a stock up, bad news moves a stock down. Although sometimes good news (i.e. – a positive earnings report) will already be built in by the market, which is something an individual investor might not pick up on.
Jonathan: Sometimes it’s a case of supply and demand in terms of a stock moving up or down.
Question: “I own a lot of Calpine in my retirement account. Am I doomed to dog food when I retire?”
Jonathan: It’s still a falling knife.
Dagen: Not an attractive long-term play.
Question: “What is the story on AES? It has really fallen of its 52-week high.”
Dagen: AES has essentially been growing as a company by borrowing money. And now the well is dry.
Jonathan: Take a look at the stock in a couple of week for a possible buy.
Question: “I currently own shares of Triquint, and the stock has decreased in value since I bought it. Can it come back or should I dump it?”
Jonathan: Sell and take the loss for tax purposes, but it might be worth another look down the road.
Dagen: It’s not going to be a buy for a while.
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