Stock Smarts: State of the Stocks!

Monday could be Saddam’s last chance.  Then on Tuesday a presidential address that some are saying will be a call to arms, as thousands of our troops move into the gulf.  And through it all, President Bush continues to pitch a tax plan the White House hopes will jump-start Wall Street and the economy. 

So should you be buying, selling or sitting on your hands right now?

Dave Nelson of DC Nelson Asset Management says that it is an important week with the U.N. report on Monday and the state of the union on Tuesday.  He knows that President Bush will say that the state of the union is strong. But Dave thinks that the economy is not – he says it’s tepid at best. The blame for the weakness in the markets should not be on international problems, but on the economy.

Dagen McDowell of FOX Business News says that the cautious outlooks we have been getting from companies is bothering investors. But if there is a resolution to the Iraq conflict within the next few months, then she thinks will see the economy pick up. She also says to be careful with gold as an investment, as there has been so much money put in already.

Jonas Max Ferris of Maxfunds.com says he fears that the early run up in stocks at the start of the year was based on anticipation of good earnings reports that did not materialize. Now that the reports are starting to come in to the negative side, stocks have been forced to pull back. But Jonas thinks the economy is in better shape than many think.  As an example he cites the fact that places like Starbucks can charge $4.00 for a cup of coffee. In terms of the discussion on gold, he points out that gold is not a stock, and it doesn’t have to meet earnings – it’s just a collectable.

Wayne Rogers of Wayne Rogers & Co. is still bearish – but thinks there are still selective stocks  to buy right now. He does not trust the overall market averages. He has taken some profits off the table selling some Nortel (NT) and Yahoo! (YHOO).  He says when there are times of uncertainty, there is a flock to gold.  But he prefers to play gold stocks as opposed to the commodity itself.

Jonathan Hoenig of Capitalistpig Asset Management is worried about the big decline in the Dow and the fact that no one is talking about it. The Dow is a very weak market, with big-time stocks like ATT (T), McDonalds (MCD) and Pfizer (PFE) really hurting the average. He says that 3M (MMM) is the only strong Dow stock right now. And for him, gold is still the place to be.

Best Bet$: “Great Shape” Stocks!

The state of the stock market might be shaky, but what are the individual stocks that are in great shape to buy right now? Our crew offered their best bets.

Wayne's "Great Shape" Stock: Plains All American (PAA)
52-week high: $27.30
52-week low: $19.50
Friday's close (1-24-03): $25.41

Wayne says this stock pays a 9 percent dividend, and has a very strong balance sheet. Dave likes the stock. Jonathan thinks this is a great way for investors to play commodity prices. Wayne does own this stock.

Dave's "Great Shape" Stock: Constellation Brands (STZ)
52-week high: $32.00
52-week low: $21.99
Friday's close (1-24-03): $25.69

Constellation markets Corona beer and Paul Mason wines. Dave owned this stock last year, but got out when the liquor industry headed south.  He recently bought back in to STZ but he is shorting Budweiser (BUD). Jonathan likes STZ’s product, but is worried about the weakness of the group in general and doesn’t’ think the stock is a buy. Wayne likes STZ as a long-term play.

Jon's "Great Shape" Pick: Aberdeen Asia Fund (FAX)
52-week high: $4.97
52-week low: $3.92
Friday's close (1-24-03): $4.94

Jonathan owns this fund, which owns Australian bonds.  He says it’s a great play on the weak dollar. Wayne is concerned about anything involved with international investing, with so much uncertainly in terms of geopolitical risks. The fact that this is a closed-end fund makes Dave a little nervous.
 
Mutual Fund Face-Off: “Vulture Funds”

Most investors lose big when a company is about to go bust. But some mutual funds actually profit from investing in companies on the brink. It’s a risky game, but if you want to play you could win big.

So what is the best bottom-feeding fund to buy? Dagen and Jonas picked out a couple of vultures.

Dagen – Longleaf Partners Fund (LLPFX)
2002: DOWN 8.3 percent
Year-to-date (as of 1-27-03): UP 0.8 percent
Minimum Investment: $10,000
Expenses: $9.40 for every $1,000 invested

Jonas – Excelsior High Yield Fund (UMHYX)
2002: DOWN 16.2 percent
Year-to-date (as of 1-27-03): UP 5.4 percent
Minimum Investment: $500
Expenses: $10.50 for every $1,000 invested

Money Mail

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

Up first: When he’s not crushing the dreams of superstar wannabe’s, American Idol judge, Simon Cowell, is looking for places to invest his money. But he’s not keen on the U.S. stock market right now and he’s looking for some advice on real estate:

"If I was going to invest some money in property, perhaps as rental investment, for example, what would be the best city in America, at the moment, to invest in?"

Wayne points out that there are three kinds of rental properties: apartment, business and commercial. He says that right now, San Diego is the best place in terms of buying rental property (of course this was Super Bowl weekend). But the best way to make money right now from real estate is to buy a sale-leaseback property, meaning that you would buy a property and immediately lease it to a major corporation.   Dagen says Simon’s plan is pathetic, wanting to buy into a housing bubble. Jonathan would rather own a mortgage than buy a mortgage.

Question: “I bought 600 shares of ImClone (IMCL) at $25 and 400 shares at $7. What should I do?”

Dagen says this stock is still “tainted goods” and he should sell it. For some plays in the biotech sector, she says to take a look at Fidelity Select Biotechnology (FBIOX) and T. Rowe Price Health Sciences (PRHSX). Wayne has one word for ImClone: “Goodbye.” Jonathan would put some stop-loss orders in, and move on.

Question: “If there was just one gold stock you could buy, what would you recommend?”

If there was one gold stock Jonathan would buy right now, it would be Glamis Gold (GLG). But Jonathan would rather buy gold – the metal itself, as opposed to a gold stock. Wayne likes Glamis as well.

Transcripts

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