Stock Smarts: Where the Bulls Are!
Stocks are down in 2002, but it's not all bad news out there. While the major averages have taken the brunt of the damage, some sectors are leading a pack of bulls to the money:
Gaming stocks: UP 66.4%
Tobacco stocks: UP 23.5%
HMO stocks: UP 21.8%
(Since 1-1-02; source: Morningstar.com)
So will these sectors continue to move forward?
Wayne Rogers from Wayne Rogers & Co. is not a big believer in the ability of the gaming stocks to maintain this momentum. He thinks a company like Harrah's Entertainment (HET) is pretty well priced right now, with no more room to go up. Dagen McDowell of FOX Business News agrees that the sector can't sustain the growth, and notes that there has been a lot of insider selling of Harrah's, so now might be the time to take some profits. Jonas Max Ferris of Maxfunds.com thinks that gaming is a great business, but the stocks are overvalued.
Jonathan Hoenig of Capitalistpig Asset Management loves the sector, and says that one company worth looking at is British American Tobacco (BTI), makers of Pall Mall cigarettes. Hilary Kramer from A&G Capital also like the tobacco companies, especially Philip Morris (MO). Dagen also likes Philip Morris but as a longer-term play (at least 3 years). Wayne has liked Philip Morris for a while, and paraphrases Warren Buffet by saying the tobacco business is great because cigarettes "cost a dime to make, but you can sell them for a buck and they are addictive."
Hilary doesn't like the sector. She says HMO's have no pricing power. And Jonas makes the point that one of the keys to investing it to get involved in sectors before they become popular and over priced not after like these HMO's. He says stay away. Jonathan and Wayne both believe that the real bull market remains in small cap stocks not these huge HMO's.
Bull Market Stocks
Some members of the panel offered their favorite stocks in today's hottest sectors.
Hilary's pick: Elbit Systems (ESLT). Jonathan likes the stock. It was one he recommended last year and still owns, but he's not adding to his position right now, as the chart isn't showing him any new strength. Wayne is concerned because the company is based in Israel, and he doesn't see peace in the Middle East anytime soon. (Hilary and Jonathan have positions in ESLT.)
Jonathan's pick: Alpine International Real Estate Fund (EGLRX). Hilary does not like the pick. Wayne doesn't like the play either, although he does like real estate as a pure investment play. (Jonathan has a position in EGLRX)
Wayne's pick: Clorox (CLX). He likes the stock at $40-$43. Jonathan likes the stock, but doesn't love it - he thinks they are ripe for a takeover, though. Hilary does not like CLX.
Mutual Fund Face-Off: "In The Money" Funds
It has been rough going for stocks in 2002. So which mutual funds have been able to pick out the winners in this losing market? Dagen and Jonas faced off over two of this year's winning funds.
Dagen: The Muhlenkamp Fund (MUHLX)
Minimum Investment: $1,500
Expenses: $11.70 for every $1,000 invested
Year-to-date (through 5-3-02): UP 8.6%
Jonas: FMI Sasco Contrarian Value Fund (FMIVX)
Minimum Investment: $1,000
Expenses: $13.00 for every $1,000 invested
Year-to-date (through 5-3-02): UP 12.3%
Dagen and Jonathan wrapped up the show by answering some email questions from viewers:
Question: "What's your opinion on Charter Communications (CHTR)? I kept using the dollar cost averaging method, and now I have $30,000 in the stock"
Dagen: $30,000 might be too much of one stock to have in your portfolio. CHTR is a very risky play. You should consider diversifying. If you want to stick with a position in this sector I would check out Cox Communications (COX).
Jonathan: I do not like dollar cost averaging, and I do not like CHTR.
Question: "Now that tech is dead, what will fuel the market? And do you see the Nasdaq falling below 1000?"
Jonathan: I think the NASDAQ could fall to 1,300.
Dagen: If you have been able to stomach the tech sector over the past couple of years, maybe you should look into the emerging markets.
Question: "What are the dollar divisions between large, mid and small cap stocks, and how is it figured out?"
Dagen: One rule of thumb is that if a stock has a market cap of under $1 billion, it is a small cap. And these stocks are very volatile.
Jonathan: Small cap stocks are the ones where the opportunities are in.
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