Recap of Sat., March 1: War-Torn Market

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 Joe Battipaglia, chief investment officer of Ryan, Beck & Co.

Trading Pit

February was another losing month for stocks.  The Dow will start March below the 8,000 mark.

And March could be the most pivotal month of the year-not just for stocks-but also for the world.  Most believe if there is war with Iraq, it will begin this month.

But Joe said this stock market can turn around if a war begins because the market has been holding its breath waiting for a diplomatic resolution.  Action must be taken now.  This will cause markets to behave normally.  Oil will come down and gold will back off.  Stocks will start to move again and the bond market won’t look as attractive because of its low yields.

Scott thinks that because so many people are trying to second-guess conventional wisdom, conventional wisdom is what will work in this market.  He noted that the market has been spinning its wheels-not crashing-with an imminent war, so if a war happens, it can head higher.

Tobin countered Joe and Scott, saying that conventional wisdom is usually wrong.  If we attack Iraq by ourselves, the U.N. and NATO both become irrelevant and the geopolitical risk goes up exponentially.  He thinks the market will get a boost, but be careful.

Gary B. charted his “Mood Ring” for the market, the Nasdaq.  He said in a bear market, averages always plunge and then rebound, giving the bulls glimpses of hope.  But as long as the Nasdaq remains in its current downtrend, prices will continue to drop further.

Pat agreed with Toby and added that if we act alone, it not only drives up the geopolitical risk, but economic one as well.  For example, if the war goes longer than expected or if there is a full scale rebuilding of Iraq, it could be a big drain on the economy.

Chartman

Gary B. looked through all his charts and found 3 stocks set to break out in March.  But would Pat agree?

Gary started things off by choosing Sun Microsystems (SUNW).  He thinks something big is going to happen to Sun Micro and that the stock will break out if it can close above $4.  Pat didn’t agree.  He said the server market will come back, but the problem is when will it come back.  He thinks the stock is a gamble not worth taking.

Another chart Gary said is ready to break out is EMC Corp. (EMC).  The stock has run up against resistance in the upper $8 area, but Gary thinks if EMC can close above $9, it’s a buy.  Pat likes EMC because the need for data storage is growing and it has a smart partnership with Dell (DELL), but he believes its stock is currently fairly priced. 

Gary’s final breakout stock was American Tower (AMT) because it is showing clear signs on its chart that it wants to head higher.  He recommended buying the stock after it clears its old high of $5.50.  Once again, Pat wasn’t sold.  He said American Tower’s competitors are getting stronger; it has no real competitive advantage, and is too dependent on wireless companies.  This makes the stock way too speculative to buy.

Stock X-Change

Tobin, Scott, and Joe returned to pick the best stock to buy when the opening bell rang on Monday morning.

Joe selected Autodesk (ADSK), a computer design company, because it generates a lot of cash and is growing at a double-digit rate.  Joe thinks it can go to $20.  (Autodesk closed on Friday at $14.49.)  Scott said the stock is interesting and could get to $20 in the next year, but it’s not cheap.  Tobin added that the company is coming out with an upgraded product at the end of April.  He recommended buying Autodesk before it upgraded, and then selling it once that good news was priced into the stock.   

Tobin chose FLIR Systems (FLIR).  He believes that the upcoming war with Iraq will be fought at night and FLIR Systems makes night goggles.  He said the stock is cheap and will jump into the $50 range.  (FLIR Systems closed on Friday at $44.21.)  Scott and Joe weren’t convinced the stock is a buy at its current price.

Scott picked Home Depot (HD).  Even though it was one of the worst performing stocks in the Dow last year and went from $50 to $20, he thinks it is a solid company and is priced to buy.  He predicted the stock is going to $27 in the next two months and will hit $30 in six months.  (Home Depot closed Friday at $23.45.)  Both Joe and Tobin don’t like the stock. 

Predictions

Tobin: Primewest (PWI): a gas stock about to catch fire!

Joe: Small & Mid-cap stocks outperform the Blue Chips

Scott: AOL (AOL) back online; heading up 50 percent

Pat: BMC Software (BMC) in for hard times; gets cut in half

Gary B: Starbucks (SBUX) a "decaf" stock; going down!