Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Gregg Hymowitz, founder of EnTrust Capital; and Bill Fleckenstien, president of Fleckenstien Capital Management.
Trading Pit
Patience is a virtue, especially when it comes to investing. But have we been too patient with some of the biggest and most loved stocks?
Since January 1, 2000, Microsoft (MSFT), General Electric (GE), and Cisco (CSCO), three stocks so many investors bought and continue to hold, are down, and down a lot. (In that time frame, Microsoft is down 56 percent, GE lost 38 percent, and Cisco fell 71 percent.)
Gregg said doesn't own any of these stocks. He thinks Microsoft and Cisco are too expensive right now, but GE looks cheap. He said the economy is improving, but stock market is not. The S&P earnings that are projected to grow the most in 2003 are information technology. That said, he thinks that tech may be due for a rebound. He recommended to hold GE and Microsoft, but sell Cisco.
Tobin said that if you owned Cisco when it was at $70, and you earn it now, the stock is worth more as a tax loss then as anything else. He advised to take the tax loss, and reinvest the money into companies that are going to grow. He said that the discount has been put into GE, and it has a real business. But if you owned Microsoft when it was more expensive, and you want to sell it, you should have a better idea of what you want to own. However if you have profits from Microsoft, take them, because it is expensive and is not going to grow.
Bill said he is short Cisco, and believes investors should sell GE and Microsoft. He doesn't think that there is going to be enough of an increase in information technology spending to justify Microsoft's price, but it is not outrageously priced when compared to other tech stocks.
Scott thinks investors should sell them all, and that Microsoft has the biggest downside out of the three. He said Microsoft will crack wide open before the Nasdaq finds a good bottom, GE is dead money and will go nowhere, and Cisco has the downside of its old low.
Gregg said the economy and profits are already coming around, but the market needs confidence, because nuclear threats from Pakistan and India, terrorism, and Enron are weighing on the market. Bill said the price of stock market is wrong because it is too expensive, and that the economic rebound may not be happening right now. Tobin said these stocks led the last bull market and will not lead the next one because people want to sell them. Scott said these stocks are all over-owned by institutions, and when they want to sell stocks to buy new ones, they are going to sell stocks like these three.
Stock X-Change
So if you do sell your losers what should you buy?
Bill said to short Intel (INTC) because it is too expensive, the PC market is saturated, and Advanced Micro Devices (AMD) is going to hammer Intel. Toby agreed, but added to sell on a rally, and then short. Scott thinks the big question is whether AMD can compete. Gregg said he'd also short the stock.
Tobin said sell your dogs and buy Healthcare Realty Trust (HR) because it has growing earnings and growing cash flow. Gregg said it looks like an interesting opportunity, but doesn't see a lot of room for the stock to move. Scott likes the stock because it is stable and has a big yield. Bill thinks the stock is worth looking into.
Scott said if you're going to sell your bellwethers, you have to replace them with another, and that should be Philip Morris (MO) because it has a good yield and has a lot of liquidity. Gregg wasn't sold on the stock, and neither was Bill. But Toby thinks it can go to $60 or $70.
Gregg likes Citigroup (C) because it is cheap and the economy is improving. Bill doesn't like the stock due to accounting issues with financial institutions. Scott said the stock is dead money. Toby likes Golden State Bankcorp (GSB) better.
Ask the Chartman
Gary B. has received a ton of e-mails from viewers asking for his opinion on their favorite stocks.
First up, Paul wanted to know about software maker, PeopleSoft (PSFT). The Chartman is bearish on this stock because it gapped down recently, has no strength at all, and looks like it's headed back to its 2001 lows.
Emily is interested in small cap stocks, and wanted the Chartman's opinion on the Russell 2000. He's also bearish on this one too. He showed on the chart that small caps were in their own bull market, but now that that uptrend has been broken, the index is rolling over, and the good times are gone.
Another "Gary" e-mailed the Gary B. to get his thumbs up or down on Expedia (EXPE). No surprise here, he doesn't like this stock either. He said the stock has had a great run, but that run may be exhausted. He advised to sell the stock if it closes below the uptrend it has established since February 2002, but don't buy it unless it makes a new high.
Scott wanted to know about Ford (F). The chart looked a little better than the previous chart, but he's still not bullish on it. He said that since September 2001, this stock has been the definition of sideways movement. He advised to do nothing now, but buy it if it breaks to the upside.
And lastly, Nicole asked for the Chartman to take a look at Gap (GPS). He's not totally sold on the stock, because like Ford, it also has been stuck moving sideways. But he said Gap has been building a nice base, and he'd buy it if it can close above $17.
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