Stock Smarts: Waiting For War

Who holds the key to what happens to your money? It may not be Fed chairman Alan Greenspan – maybe not even President Bush or the Congress. As the stock market waits for war, the men to watch are Chief U.N. Weapons Inspector Hans Blix and Saddam Hussein. What Blix finds and whether Saddam cooperates could make the difference between war and peace.

If this drags on without a clear resolution, will it pull stocks down?

Meredith Whitney of Circle T Partners says she thinks until there is some conclusion to the Iraq situation the market will remain “range bound”  -- trading within a tight range with no significant trend up or down.

Hilary Kramer of Montgomery Asset Management thinks the market will continue to rise now that investors see a united coalition with U.N., NATO, Congress, and voters all backing President Bush’s efforts to disarm Iraq.  She’s buying mid and small cap stocks like Panamerican Beverages (PB).

Jonathan Hoenig of Capitalistpig Asset Management says we are in a trader’s market.  He says, “This is not a market in which you want to sit around holding the major indices.”   But he points out that some individual sectors like Internet stocks are up 100 to 200 percent and some smaller names as well as some emerging market names and telecom are also up.  He says, the market is rewarding risk and you can trade these stocks and make money, but you can’t buy and forget them right now.

Wayne Rogers of Wayne Rogers & Co. says the market hates uncertainty and so he agrees with Jonathan and doesn’t expect the broader indices to rally.  Like Jonathan, he believes the way to profit now is by trading smaller individual names (with market caps below $500 million).

Jonas Max Ferris of Maxfunds.com doesn’t think the market is waiting for anything.  He points out that the broad indexes are all up 20 percent form recent lows and he thinks investors are jumping in so they don’t miss the boat.   He says the market’s searching for earnings right now, not waiting for bombs.

Mutual Fund Face-Off: Turkey Funds

Unfortunately,  turkeys aren’t just served on Thanksgiving. Occasionally you get a few on this program. What were the biggest turkeys in our mutual fund segment this year? Dagen and Jonas went hunting and picked each other’s worst call of the year.

Dagen’s Turkey: ABN AMRO Veredus Aggressive Growth Fund (VERDX)
Since 2-4-02: DOWN 34.5 percent
Minimum Investment: $2,500
Expenses: $14.00 for every $1,000 invested

Jonas’ Turkey: Payden Europportunity (PEAGX)
Since 2-4-02: DOWN 38.7 percent
Minimum Investment: $5,000
Expenses: $10.50 for every $1,000 invested

Homeland $ecurity Stocks

The new Department of Homeland Security is in motion – set to protect us from future terror threats. And with a budget of nearly $38 billion, the government has some cash to spend. What stocks will benefit?

Hilary's $ecurity Stock: Raytheon (RTN)         
52-week high: $45.70
52-week low: $26.30
Friday's close (11-22-02): $29.05

Jonathan points out that Hilary picked this stock months ago at a higher price and he didn’t like it then and he doesn’t like it now.  He says it’s not where the action is right now.  Meredith says RTN is “not a cheap stock” and she is worried about the price.  Wayne doesn’t think this stock will benefit from homeland security spending.

Meredith's $ecurity Stock: Kimberly-Clark (KMB)     
52-week high: $66.79
52-week low: $49.37
Friday's close (11-22-02): $51.00

Wayne points out that this stock isn’t likely to benefit from any homeland security spending either (Meredith picked it as a defensive play) and he doesn’t like it.   Jonathan’s not interested in this stock. 

Wayne's $ecurity Stock: American Int'l Group (AIG)
52-week high: $83.84
52-week low: $47.61
Friday's close (11-22-02): $65.51

Hilary likes the fact that the company is going global.  She likes the stock.  Meredith likes the company.  She says it could benefit from Tort reform but she says the stock may be a little pricey right now.  Jonathan prefers smaller companies in this sector - Fidelity National Financial (FNF) or W. R. Berkley Corporation (BER).

Jon's $ecurity Stock: Nuveen Senior Loan Fund (NSL)        
52-week high: $8.11
52-week low: $5.83
Friday's close (11-22-02): $7.04

Meredith likes this pick, but Wayne again points out this stock has nothing to do with homeland security.
 
Money Mail

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

Question: “What does the crew think about alternative energy stocks, like fuel cells?”

Dagen says these stocks generate more hype than profit since most of their technologies are still in the experimental stage, and they are hard to value and very risky.  Jonathan would avoid these stocks.  Wayne says, “wind machines and taking energy form the sun” are a long way from making money - he’s not a buyer.

Question: “I bought Strategic Global Income Fund (SGL) and San Juan Royalty Trust (SJT). What should I look for as a sign to get out?”

Jonathan still likes both these he’s holding on and doesn’t see a reason to sell right now. Dagen especially likes SGL.

Question: “What is your opinion of REITs at this time, and for the foreseeable future?”

Wayne says he’d stay away from any office realty trust and any commercial property trust.  He does like Senior Housing Properties Trust (SNH) and the Health Care REIT (HCN).   Dagen agrees you should avoid commercial property trusts.  Jonathan says he’s lost some money on some REITs and he was surprised by their volatility so they are not on the top of his list right now.   

Transcripts

If you are interested in receiving a transcript of the show, please call 888-443-6988.