Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Mike Norman, The Economic Contrarian Update publisher.
Last Wednesday, the market was moving up! The Dow wowed investors with its gain of 305 points, amounting to its biggest jump since the end of September. And the Nasdaq gained 122 points, its largest point gain in over a year.
It started with a good earnings report from Cisco (CSCO), and then emotions took over and the buyers were busting out. But remember what goes up, must come down — big-time! The rally followed a sell-off of 200 points on Monday after some cautious news on IBM (IBM). More minus signs on Thursday and Friday eventually wiped out any gains for the week.
The market's been up and down for a while now, but talk about emotional, our "perma-bear," Mike Norman is now bullish! He likes that the dollar is going down because it will help U.S. businesses by increasing competitiveness.
Scott thinks that the time for investors to get bullish is when the market heads lower and creates a situation where investors seem to give up hope.
Tobin said the rally on Wednesday had nothing to do with emotion or Cisco's earnings, but had to do with hedge funds that were short stocks, went in and bought those stocks.
Gary B. believes that Cisco (CSCO) is a great psychological barometer of the market. For the past year, the stock has been trading between $12 and $22. So the Chartman thinks that any rally is a bear market rally, unless Cisco breaks through $22.
Pat reminded investors that it is very important to use the market's volatility to your advantage. He advised to get your stock shopping list ready, and when the market sells off like it did on Tuesday, go in and buy your stocks.
Emotion-free stocks, that is stocks that you can buy, without worrying that just a hint of bad news will send them South and fast.
Scott picked Vornado Realty (VNO) as his "stoic" stock because it is a very well run company with a great dividend yield. Tobin and Mike were both on the fence with Scott's pick. Toby likes SL Green Reality (SLG) better.
Toby selected Aetna (AET) as his stock that won't swing too much. He likes the stock because it is so undervalued in the managed care business. He expects the stock to climb to $80. Scott and Mike think the stock will move sideways because it has made a great run recently.
Even Mike, our perennial bear, is bullish on some stocks. He joked that he was being bullish to get the guys on the show to like him. But he chose Disney (DIS) because he believes that tourism will increase dramatically and benefit the stock. Toby didn't agree because the Disney has to rely too heavily on advertising. Scott also doesn't like the stock because it has horrible management.
Warren Buffett is Pat Dorsey's investing hero. So much so, that Pat went to a conference two weeks ago and got some words of wisdom firsthand from "Oracle of Omaha". Buffett, who is the world's second richest man, believes in investing in companies that have an advantage over their competitors. Pat has studied the Buffett style, and he brought two stocks that even Warren would warm up to because they've got what he wants.
Pat's first stock was Paychex (PAYX). He said it's the best unheard of company, has a pure money making business model, and is worth the premium because it's still growing. Gary B. likes its chart as well due to the support it has gotten in the mid $30's since last December. He thinks the stock should be bought if it's around $35.
Next Pat brought Costco (COST) to the table. He knows that it's pricey, but he said that you must pay for quality. He called the company the "Target" of warehouse clubs because Costco sells high-end items at its warehouse clubs, like Target does at its discount retail stores. And Buffett's number two man is sits on Costco's board! But Gary, is not totally sold on the company because it has been stuck between $39 and $43 since the beginning of the year, and could head either up or down from here.