Stock Smarts: Stocks Battle Back!

Usama bin Laden may be alive, but a bunch of his high-ranking Al Qaeda members have been captured or killed. And Saddam Hussein may still be in charge, but that may not last much longer with the world lining up to disarm him.

Battle by battle, we are winning the war on terror – and the market likes what it sees. Stocks are on a spectacular run since hitting one-year lows in October:

Dow -- Up 22 percent
Nasdaq -- Up 33 percent
S&P 500 -- Up 21 percent
Since October 9, 2002

Can we keep going higher from here?

Joe Battipaglia of Ryan, Beck & Co. says President Bush is not only winning the war on terror internationally, he’s winning big here at home with homeland security, terror insurance and a republican majority which suggests to him that tax relief can’t be far behind.  Joe says the market is gearing up for that. He thinks healthcare and financial services should provide strong leadership. 

Dagen McDowell of FOX Business News says the market is reacting to better economic news and better earnings, and she says if holiday sales look good the market could keep on running. She says it wouldn’t hurt to have positions in some big name tech stocks right now like Microsoft (MSFT) because PC sales could pick up.

Gary Kaltbaum of Tradingmarkets.com says President Bush has been underrated and is doing a great job in the war on terror. In addition, he says the economic numbers have gotten much better and all of these things have played into the current market rally.  That said, he still thinks that this rally is just a breather in a longer-term secular bear market.  He says he sees too much speculation in some stocks for the rally to be sustainable, particularly in shares that are trading for pennies, and in distressed stocks like Enron. He’s being very cautious right now.  He says he’s watching the semi-conductor index for leadership, and if that index continues to do well he thinks the market can continue to do well.

Jonathan Hoenig of Capitalistpig Asset Management still says he’s still avoiding the major indexes and looking for selective trades among Internet stocks and emerging markets and some corporate and high yield bonds. 

Hilary Kramer of Montgomery Asset Management says fast money is coming and going so quickly into stocks like Intel (INTC), Biogen (BGEN), and Merck (MRK) right now that the only way for individual investors to play these is “to go in, and go in for the long term.”

“Win-Win” Stocks

Which stocks does our group think will go up even if the market goes down?

Hilary's "Win-Win" Stock: Johnson & Johnson (JNJ)
52-week high: $65.89
52-week low: $41.40
Friday's close: $57.02

Jonathan calls this is “a weak stock in a weak area.”  Joe likes the stock.

Jon's "Win-Win" Stock: Matav ADR (MTA)
52-week high: $19.98
52-week low: $13.71
Friday's close: $18.85

Gary says he is concerned with the light trading volume in this stock and thinks it may be a little bit extended off the low here and could see a pullback. But he says if telecom does well it should continue to do well.  Joe calls this pick “scary.”  Hilary likes the stock. She says of all the telecoms in Europe, this one has the opportunity to really expand and grow.

Joe's "Win-Win" Stock: Kinder Morgan Energy (KMP)
52-week high: $38.89
52-week low: $23.90
Friday's close: $35.12

Hilary says this stock is a winner.  Gary agrees and he likes the dividend.  Jonathan says he prefers smaller names in this group.  
 
Gary's "Win-Win" Buy: iShares GS Investop (LQD)
52-week high: $108.23
52-week low: $101.00
Friday's close: $106.49

Jonathan likes and owns this fund.  Joe says he wouldn’t buy it right now, and neither would Hilary.  Both think higher interest rates down the road could negatively impact this pick.

Mutual Fund Face-Off: Best “Aggressive” Fund

The risk is high, but if your timing is right, so is the reward. If you want to roll the nice way, now may be the time to bet on an aggressive stock fund.

Jonas – American Century Utilities Fund (BULIX)
Year-to-date: Down 28.6 percent
Minimum Investment: $2,500
Expenses: $6.90 for every $1,000 invested

Dagen – Bridgeway Ultra-Small Company Tax Fund (BRSIX)
Year-to-date: Up 3.6 percent
Minimum Investment: $2,000
Expenses: $7.50 for every $1,000 invested

Money Mail

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

Question: “I bought 25 shares of GE for my 5-yr old a few years ago at $40. I can't claim the loss if I sell now, but should I sell anyway?”

Dagen says GE’s prospects don’t look good, sell!  Jonas says hold. Jonathan says let the market trade you out of it with stop loss orders at various prices $26, for example and another at $24, and he says don’t put any new money in the stock.  

Question: “Where do you think AT&T (T) will go now that it has completed its 1 for 5 reverse split?”

Jonas says it’s a good business and you should stick with the stock.  Jonathan says telecom is not a bad area right now.  Dagen says there’s too much competition in this group and you should avoid the stock. 

Question: “Can you explain the recent run-up in Amazon.com (AMZN)?”

Jonathan says Internet stocks have been very hot and are leading the pack right now and he would put new money into this stock.  Jonas says momentum investors are jumping on these stocks and running them up to values they don’t deserve, stay away!  Dagen says Amazon and stocks like it are too expensive.

Transcripts

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