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 Bill Fleckenstein, president of Fleckenstein Capital Management. 

Trading Pit

What a difference a new year makes! Investors have a new attitude and are buying, not selling!  The Dow’s up 5 percent.  The Nasdaq is even better, up 8 percent.

Bill said that the bull is not back.  The gains that have been made are due to a rally, not a new bull market.

Scott agreed that we are not in a bull market, but investors now have a reason to invest.  He said the stimulus package is really an investor confidence package.  Investors now can earn tax-free income and this has renewed the market’s confidence.

Gary B. is still worried about the Dow.  His concern is that it will hit a downtrend line it established in August, roll over it, and then end down for the month.  He warned if that happens, watch out for another down year.

Pat said the overall economy is getting better, but not good enough to justify an 8 percent gain in the Nasdaq.  He explained that business spending on information technology cannot support the level the Nasdaq is at right now.

Tobin thinks an attack on Iraq will bring the market down and stocks will keep bouncing around, but the stimulus package will give investors incentive to invest.

Stock X-Change

Can stocks that are already up double digits since January 1 keep going?

First stock ... J.P. Morgan (JPM).  The big bank in the Dow is up 15 percent already this year.  Scott thinks the stock won’t go lower, but also won’t head much higher.  He believes investors will be drawn to the company’s 5 percent yield.  Tobin likes the stock and said most of J.P. Morgan’s bad news is behind it.  The stock closed at $27.09 on Friday, and he predicted it will be at $40 by the end of year.  Bill said he has a bias against financial institutions because he does not trust their accounting.

Another stock loving the new year is Sun Microsystems (SUNW). Now granted, it’s gain of 21 percent this year comes on a price still below $4, but this former high-flyer still has a market cap of about $12-billion.  Bill said out of all the big tech companies, Sun Micro’s management is the most honest, so you can believe what they say.  However he is not bullish on tech because he foresees weak IT spending.  Tobin does not think it is a good idea to short this company, but if you own it, get out when it gets to $5.  Scott is bullish on Nasdaq stocks and said Sun Micro is headed to $6.

Another stock fast out of the gate this year: Yahoo! (YHOO).  It’s up 22 percent since January 1. A little deja vu from the days before the bubble burst! Toby said Yahoo! is overvalued and is really worth $12 a share.  It closed Friday at $20, but he advised to sell it if it goes to $25.  Bill said Yahoo! is impossible to value.  He’s not short it, but wouldn’t buy it either.  Scott stuck with his bullish belief in the Nasdaq and thinks Yahoo! is headed for $30.

Chartman

The Chartman put himself on the line and predicted the stock in the Dow, Nasdaq 100 and S&P 500 that will be the best performer in 2003.

Gary B. said his favorite stock of the 30 stocks in the Dow is Home Depot (HD).  He thinks that the stock is headed to $30 ($21.58 close on Friday) because it is at a long-term support level.  But he warned to sell the stock if it dips to the teens.  Pat also likes the stock because the company’s profit margins are expanding, it has no debt and lots of cash.  Pat thinks this stock has huge gains to come.

Which Nasdaq 100 stock is tops on Gary B’s list?  It’s CIENA (CIEN).  When the stock broke a downtrend it’s been in since 2001, Gary B. said the path of least resistance was up.  He thinks CIENA is headed for the $10 area.  (It closed at $7.34 on Friday.)  Pat couldn’t disagree with the Chartman more.  Pat said telecom stocks are still weak and Lucent (LU) and Nortel (NT) have an edge over CIENA.  Also, he argued CIENA’s sales growth is not sustainable and its stock is already 50 percent overvalued.

Lots of stocks to choose from in the S&P 500.  But the one that stood out the most to the Chartman was Circuit City (CC).  He likes the stock because it is at a long-term low and is already down 50 percent from its 2001 high.  Pat didn’t love or hate the stock.  He said the company had weak holiday sales and Best Buy (BBY) is eating its lunch.  But the company may be interesting and worth buying at $6.  (It closed on Friday at $7.22).

Predictions

Tobin: 100 percent tax free dividends passes; Duke (DUK) up 20 percent

Gary B: IBM (IBM) down 30 percent by mid-summer

Bill: Dude I was wrong; but now Dell's (DELL) a short

Pat: Northern Trust (NTRS) up 20 percent in 2003

Scott: Bank on it!  Regional banks are the place to be
Scott specifically recommends: Colonial BancGroup (CNB), National City (NCC), and FirstMerit (FMER)