Stock Smarts: Buy Before War?

Saddam has never kept his word before, and if he balks this time, we go to war. Should you wait to see if it’s a quick American victory, or buy stocks now? 

Adam Lashinsky of Fortune magazine says he thinks it’s a bad idea to “trade the war,” but if you are going to try it, then you want to buy now because typically during the “saber rattling” period before a war begins people get nervous and stocks stay down. But once the war actually begins (assuming the U.S. does well) stocks tend to rally. 

Hilary Kramer of Montgomery Asset Management agrees. She says “buy on rumor, sell on war!”  Hilary thinks oil companies are a great buy before the war - “we’re not going to have $25 a barrel oil forever.”   She thinks BP (BP) and ExxonMobil (XOM) oil are good buys right now and good trades two or three months down the road.

Jonas Max Ferris of Maxfunds.com thinks it’s dangerous to assume the market will follow the same pattern this time around as it did during the Gulf War because stocks are not as cheap as they were then. He also says “we really can’t afford this war and I think the market sees that.”

Wayne Rogers of Wayne Rogers & Co. says the market hates uncertainty and we don’t know the outcome of this war, and we don’t know who will run Iraq.  Once the war starts (and if it is going well) he think that stocks will rally, but he doesn’t recommend trying to guess the timing. 

Jonathan Hoenig of Capitalistpig Asset Management says now is a great time to trade. If your focus is more short term, these are great days for you because there is so much volatility in the market.  He sees trading opportunities in Internet stocks and even some large cap tech stocks - “if you are trader, not a long term investor, you can make money here.”  But he says you have to stay in top of your trades.

Bin Laden Bets

There are stocks that suffer as long as Usama bin Laden lives – buy them now and profit when he’s finally taken out.

Hilary's bin Laden Bet: Starwood Hotels (HOT)         
52-week high: $39.94
52-week low: $19.00
Friday's close (11-15-02): $24.40

Jonathan thinks it may be too early for this stock. He says it’s a weak stock in a weak sector. Adam agrees with Hilary that this stock will get a pop when bin Laden is finally captured because it’s part of the hard hit travel industry that is suffering from fears of terrorism.

Adam's bin Laden Bet: Southwest Airlines (LUV)
52-week high: $22.00
52-week low: $10.90
Friday's close (11-15-02): $15.10

Jonathan would only by Ryanair (RYAAY) in the airline sector. Hilary says Southwest Airlines is the premier company in the sector and it’s a great company that has managed to avoid all the pitfalls of other airlines - she likes the pick.  

Jonathan's bin Laden Bet: Royal KPN (KPN)
52-week high: $6.75
52-week low: $3.45
Friday's close (11-15-02): $6.32
(Jonathan owns this stock)

Hilary says the telecom market is over saturated and she doesn’t like this pick.  Adam says, “if the “Evil One” gets knocked off, certain things are going to go up on that news, telecom is going to be the last one.”  He doesn’t like the pick.

Mutual Fund Face-Off: Best Bachelor Funds

Girls he can handle – but stocks really scare him. So what should the Bachelor do? Aaron Buerge, the star of ABC’s The Bachelor has no problem dumping women, and apparently the same applies to stocks! He sold off two years ago, just as things started to head south in a big way. But Dagen and Jonas say all Aaron needs to get over his fear and get back into the market is the right mutual fund:
 
Dagen – Transamerica Premier Balanced Fund (TBAIX)
Year-to-date (as of 11-15-02): Down 10.4 percent
Minimum Investment: $1,000
Expenses: $12.10 for every $1,000 invested

Jonas – Eclipse International Equity Fund
Year-to-date (as of 11-15-02): Down 3.2 percent
Minimum Investment: $1,000
Expenses: $10.30 for every $1,000 invested
 
Money Mail

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

Question: “Is there a possibility of short-term gains with anything related to the price of oil? If so, what are the best ways?”

Jonathan likes the fact that this viewer has picked a theme, but he wouldn’t run with this one right now. He says the oil stocks are in a bear market.  He would definitely avoid the bigger oil companies right now and stick with smaller ones.  He says Evergreen Resources (EVG) has been doing well and he likes San Juan Basin Royalty Trust (SJT) as another oil play.  Wayne thinks some of the smaller producing companies will do well.   Dagen says stay away form the big oil companies.

Question: “How do you think AT&T Wireless (AWE) will do over the next few years? Will it ever get back to the $30 level?”

Dagen says it will never get back to $30. Wayne says you’ll wait a long time if you are waiting for it to get back to $30. He says the chart looks like it hit a bottom – at least it broke a downtrend -- and it’s doubled in the last $30 days.  So you have to say that’s pretty good.”  But he doesn’t see it going to $30 soon.  Jonathan says for new money you really should be looking in the telecom sector but he prefers foreign telecom like KPN (which he mentioned before).  He says even Nippon Telegraph and Telephone (NTT) has been a strong stock.

Question: “Warren Buffett recently said that valuations are still way too high. Any comments?”

Wayne says multiples are probably closer to lows than to highs and so he thinks the market is closer to being fairly valued.  Jonathan agrees with Buffett - he doesn’t’ think the big stock leaders in the broader indexes are cheap right now.  Dagen says she thinks the market is fairly valued here and if you want cheap stocks you have to look in beaten down areas like broker stocks. 

Question: “I have a lot of capital losses. Is there any strategy that would help me to take advantage of the losses?”

Jonathan says taking these losses is the best thing to do (“Don’t hold onto your losers”).  Sell and reallocate new money in new areas that are working.  Wayne agrees - sell your losers and take the loss you can carry it forward to offset gains and some income for years. 

Transcripts

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