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 Bob Olstein, president of the Olstein Funds.

Trading Pit

When the stock market reopened after September 11th, the sell-off was stunning.  The losses in the last few weeks haven't been as dramatic, but they have been nearly as damaging to our bottom lines. 

The Nasdaq and S&P 500 closed Friday only slightly above the post attack lows set on September 21st.  This was a level many thought we would not revisit without another attack on America. 

Now the Dow has also been hit hard lately, falling well below 10,000, but it's still over 1,000 points above the low that it reached September 21st.

Bob doesn't worry about the averages, but instead worries about the stocks inside the averages.  Right now he thinks Home Depot (HD) is expensive, but Merck (MRK) is cheap.

Tobin said that the Nasdaq is in a bear market, and that is pulling down the Dow.  He thinks Microsoft (MSFT) could hit $45, and that Intel (INTC) is overvalued at $22.  He set the Dow's bottom at 9,000.

Gary B. disagreed with Bob's point that investors should not worry about the index averages.  The Chartman does not think the Dow is headed for its post attack low near 8,200.   He showed on its chart that those lows are unlikely because the Dow still has support of the October lows near 9,000. 

Scott took a contrarian point of view.  He said since everyone on the show, and everyone he talks to says the Dow is going to 9,000, it's either not going that low, or is going to fall right through it.  But, the Dow will not hit its post attack low.

Pat agreed with Bob that investors should not worry about the indices.  Pat said he doesn't know whether the Dow is going to 8,000 or 9,000, and that the blue chip stocks in the Dow are not safe investments.

Gary B. continued his point that investors should care about the indices, because if the indices fall far enough, investors will just start selling stocks, regardless of whether those stocks are cheap or not.  Tobin said investors should listen to his QQQ's: quality of earnings, quantity of earnings, and quickness of recovery.  He added if investors applied this philosophy to the Dow, they could throw out 10 of its stocks and have a very good index.

Stock X-Change

So what are the best Dow stocks to own right now?  Bob, Scott, and Tobin all came with their favorites.

Scott started things off by choosing McDonald's (MCD).  He likes the stock because it is not volatile, and a good way to protect assets.  Also, it benefits from a weaker dollar and is the fourth best gaining Dow stock this year.  Tobin would buy it around $26 (the stock closed Friday at $29.12) and Bob said he values McDonald's stock between $30-$32, and likened buying it now to "kissing your sister."

Tobin selected International Paper (IP) because it is a classic cyclical stock, and will benefit the most from a normal recovery.  Bob and Scott weren't totally sold on the stock, but did like the fact that it does have a lot of hidden assets.

Bob's favorite Dow stock right now is Citigroup (C).  He likes the company because it is a worldwide franchise and it is cheap.  Bob values the stock, which closed Friday at $40.20, at $55.  Tobin and Scott both do not like the stock.

Chartman

Inspired by the World Cup, Gary B. and Pat searched the globe for their favorite international stock.  Gary B. chose Electrolux (ELUX), a Swedish company that makes kitchen and cleaning appliances.  Pat picked life insurer, AEGON (AEG), from the Netherlands.

Gary B. chose Electrolux because it has been a terrific performing stock that has been spending time working off its great run of last year.  He said Electrolux's chart is strong and the stock is an outright buy if it closes above $38.  But Pat did not agree because the company faces fierce competition and is 25% overvalued.

Next the two took a look at Pat's stock, AEGON.  Pat likes the stock because it is always cutting costs, has a good yield, and could rise 50%.  Gary B. did not like it.  He said that AEGON's chart is in a downtrend, getting lower, and who knows how far it will fall.  But if you decide you love the stock, pick and spot and get out.