Brenda Buttner and 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.
Seven weeks and counting. That’s the current winning streak for the Dow-its longest winning streak in almost 5 years. These gains are despite war worries, more terror threats and confirmation that bin Laden is still alive.
Bob is bullish on the market. He said the 3-year bear market is over and we are now in a stock picker’s market.
Gary B. is not sure the bear market is over because the gains made so far in the current rally have happened in 8 days. He said since the Dow went up so far so fast, it only has about 10 percent left before it pulls back 7-10 percent.
Tobin thinks a pull back would be healthy for the Dow. He added that the market is trading on the expected positive news for next year, not what is happening right now.
Pat said corporate profits are improving and have been growing at a double-digit rate for the past 3 quarters. He thinks things are getting better and the bear market is at its end.
Scott agreed that the bear market is over but warned that we are not in a new bull market just yet. He advised for investors to start selling some of their stocks.
Pat, Tobin, Scott, and Bob all stayed on to give their recommendations on the Dow stocks that should move the most with the next move in the war on terror or an invasion of Iraq.
First up the big oil of the blue chips: ExxonMobil (XOM). It’s the world's largest oil company and is always sensitive to a war involving oil-producing nations. Pat said if there is a long drawn out war, oil prices will stay high and the company will make a lot of money. But if it is a short war and a new regime is put in place, production could triple putting a cap on oil prices. Tobin thinks the stock is well valued and if it jumped on an invasion-sell! Bob said owning this stock is like kissing your sister. Scott believes ExxonMobil can go to $40 (closed Friday at $34.22) because the oil index will go up taking this stock with it.
Next a company caught in the middle: Boeing (BA). It's a big defense contractor, so more military moves means more business. But it is also the number one maker of commercial jets, and people travel less when violence breaks out. Scott said the stock is dead money, so leave it alone. He believes its defense business is good, but its commercial business is very, very bad and will take years to recover. Toby said airlines that are growing are not buying Boeing’s jets. Again he advised to sell the stock if it got a pop on an invasion. Bob disagreed with Scott and Toby, saying the stock is cheap because a lot of negative news is built into the stock. He thinks it can go to $45 within 3 years. (Boeing closed at $34.00 on Friday.) Pat conceded Boeing might be worth $45, but it will need to invest a lot of money in next generation airplanes, which will keep its earnings in the tank.
And lastly a company dependent on your travel and leisure dollars: Disney (DIS). Those leisure dollars are not something most of us are willing to spend during a time of war or worries about terrorism. Toby is neutral on the stock. He said it will do better when the economy does better. Also, spending on advertising has been down so much, it can only go up, and Disney will benefit. But it’s a big company with big problems that are not going away. The stock closed on Friday at $19.53, and Toby advised to sell it if it gets to $25. Bob owns the stock in his funds and agreed with Toby that the sell price is $25. Pat’s big worry about Disney is its new franchise generation. Lilo & Stitch and Spirit: the Stallion of the Cimarron just isn’t doing it for him. Also, Disney has to renegotiate its deal with Pixar, so it will be making a lot less money from those hit movies. Scott said the stock is up 30 percent in a month and is fairly valued.
Ask the Chartman
Can stocks in the news, put you in the money? Gary B. came back and charted stocks making headlines to determine if they’ll make you a profit or not.
First he took a look at drug maker, Eli Lilly (LLY). The company benefits from a controversial addition to the Homeland Security Act, though most think that addition will be taken out after the New Year. The stock has been in a downtrend since late 2000 and Gary B. thinks any move up will be short lived.
Next up, Wal-Mart (WMT). It’s holiday shopping time, but Wal-Mart had some tough times last week when it reported weak sales. The Chartman said the stock has only moved sideways for the past three years and he’d only buy it if it could close above $64. (Wal-Mart closed at $53.76 on Friday.)
Bad news, but good gains for General Electric (GE) last week. Its earnings now and for next year will be less than what Wall Street expects. Long-term though, this stock has been under performing the stock market. He doesn’t think that the stock will fall to its October low of $21.40, but also said that it won’t move much past $28. He said the stock is good for a long-term portfolio, but too tricky for the short-termers.
Home Depot (HD) was hammered last week when it warned full year sales are going to fall short of expectations. And Gary B. doesn’t expect much from this chart. The stock is trading near a 5-year low, it just gapped down, and is in a downtrend. Home Depot closed Friday at $25.15, but the Chartman advised not to even think about buying it unless it dipped to the low $20s.
And finally, Lockheed Martin (LMT). The company makes the stuff we'll use if we go to war. But that still doesn’t mean the Chartman likes it. He said despite all the war talk, the stock has been a dog. If Lockheed can break through the downtrend it has been in since late September he’d consider buying it, but not before.
Scott: Tech has topped; Sell now!
Gary B: Call me “Scrooge”! Rally dies by Christmas
Tobin: Don't believe “Scrooge”; rally goes to Easter!
Pat: Amazon dot bomb (AMZN)! Falls 35 percent by spring