Stock Smarts: The Next Big Move?

First, a spectacular move for the Dow in just four trading days – 1,000 points to the upside. And we didn’t give it back. So where will the next thousand points take us: up or down?

Charles Payne of Wall Street Strategies believes the next thousand points will be to the upside.  He’s using history as a guide. He points out that this is the sixth trading rally we’ve had since the Dow began to fall apart in January 2000.  At a minimum, he expects this rally to take the Dow to 8700, but, he says, if we se any of the vigor we saw in last year’s fourth quarter rally, the next thousand points will be up.

Hilary Kramer of Montgomery Asset Management calls the recent run up an “earnings rally” and she says the direction of the next thousand points depends on what happens this week when companies like AOL Time Warner (AOL), Hasbro (HAS), Eli Lilly (LLY), and Dupont (DD) report earnings.

Jonas Max Ferris of Maxfunds.com thinks the thousand point rally happened because people decided the market was oversold and they can do better in stocks than in bonds that are yielding just 3.5 percent.  He thinks the next thousand points will move the market up but more slowly than last week, and that the gain will come from earnings. 

Jonathan Hoenig of Capitalistpig Asset Management agrees it has been a painful week for those invested in bonds, but over the long haul he believes bonds not stocks are the place to be. He thinks the next thousand points for the market will be down.

Wayne Rogers of Wayne Rogers & Co. still thinks we have not seen the market bottom and he’s wary of stocks right now.   He thinks we are locked in a trading range and the rally we have seen is a technical move and we will retrace the gain.

New Bull Bets!

When the market moved up 13 percent in four days, the following stocks moved higher. Are they the ones you should ride into the next bull market?

Yahoo! (YHOO)
52-week high: $21.35
52-week low: $8.94
Friday’s close (10-18-02): $15.01

Hilary doesn’t like this stock.  She says it’s too expensive.   Charles agrees.  He says it is difficult for this company to grow and he points out that insiders have sold about 4 or 5 million shares themselves so there is no compelling reason to buy Yahoo!  Wayne owns Yahoo! But he doesn’t think the stock has a lot of room to move up.  He hasn’t sold because he owns it cheaper than where it is now and is holding on for a short-term blip. Jonathan thinks there are some opportunities in the Internet sector right now, but mostly in the very small cap stocks. So if he had to pick a stock right now this is the place he’d be looking.

Citigroup (C
52-week high: $52.20
52-week low: $24.42
Friday's close (10-18-02): $34.95

Charles says even thought there are concerns surrounding Citigroup they will fade away just like the concerns in 1990 did, and he thinks Citigroup now is as good a buying opportunity as it was back then and if you buy now you will make out very well in the next several years.   Hilary says Citigroup is too big to fail and has a great business.  Her firm owns a lot of it.  Wayne thinks it’s a sound company and he’s owned it for years.  Jonathan says forget Citigroup if you are looking to make money in this sector now go out and buy the smallest savings and loans you can find they are doing very well.

General Electric (GE)
52-week high: $41.84
52-week low: $21.40
Friday's close (10-18-02): $26.58

Jonathan says he’s not looking to go long or short this stock right now.  It just doesn’t interest him. Wayne says it's trading at 16 times earnings and it’s cheap and is probably still a good buy and could see $30 or $31 in the next couple of months. It’s a stock he’s held long-term and he’s buying more. Charles agrees GE is cheap right now, trading at a five-year low in terms of it’s P/E ratio and he thinks it is one of the only conglomerates that will make it through today’s anti-conglomerate environment.  Hilary thinks that NBC is the only business within GE that has any hope.  She doesn’t like the stock.

Mutual Fund Face-Off: Bon Jovi’s Bet!

Millions of fans and millions of dollars - rock and roll stars Jon Bon Jovi and Richie Sambora have ‘em both. And when it comes to investing, they are total conservatives, preferring to stay out of the stock market. Dagen and Jonas tell them to get to nerve up and get into the market through some mutual funds, and they recommended a couple for the rockers.
 
Dagen – Eclipsed Balanced Fund (EBALX)
Year-to-date (as of 10-18-02): DOWN 3.2 percent
Minimum Investment: $1,000
Expenses: $9.40 a year

Jonas – Fidelity Spartan International Index Fund (FSIIX)
Year-to-date (as of 10-18-02): DOWN 16.5 percent
Minimum Investment: $10,000
Expenses: $3.50 for every $1,000 invested

Money Mail

Wayne, Dagen and Jonathan capped off the show by answering some of your questions.

Question: “I am a new investor looking for the best blue chip stock for the next 15 to 20 years. Which do you recommend?”

Dagen recommends a fund if you want to jump into blue chips. She recommends The Harbor Capital Appreciation Fund (HACAX) rather than just one stock. Wayne says check out Johnson & Johnson (JNJ) and Clorox (CLX) if you are looking for blue chips. Jonathan says he looked at all the blue chips and he doesn’t like any of the stocks, he’d be more interested in their bonds.  He says buy solid gold bullion or bars and put them in a safety deposit box if you are looking for a long-term investment.

Question: “I have stock in Tyco (TYC) and Disney (DIS), but I am nervous about both. What do you think about them?”

Wayne doesn’t like Tyco; he’d sell.  As for Disney, he says it’s a tough “ship” to turn around and he  thinks there is probably a $10 downside risk and maybe $20 upside potential on Disney if management can turn it around.  If the risk is worth it to you hold on.  Dagen says dump both of these.  She says Tyco will suffer because it was run by corrupt management and Disney’s still being run by “bad” management.  Jonathan says he’d get out of both of these.

Transcripts

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