Stock Smarts: Bin Laden vs. The Bull

An Al Qaeda (search) terror attack aimed at Americans in Saudi Arabia last week halted a promising bull run for stocks here at home. Many experts say it’s the work of Usama bin Laden – and that raised fears of another deadly attack on American soil.

Does bin Laden need to be captured or killed before a bull market can really start charging ahead?

Hilary Kramer of A&G Capital says Usama bin Laden is a fundamental threat to our safety and to the sanity of the stock market. She says his continued threats of terror undermine investor confidence, and he must be captured before enough confidence can return to the market and support a sustained bull run.

Dave Nelson of DC Nelson Asset Management totally disagrees with Hilary. He says Usama bin Laden will not be a factor in this market. As for the market’s reaction to last week’s terror attack, Dave says it was merely a “yawn.” He says Americans are much better able to deal with the prospect of terror now, and that Usama bin Laden does not need to be captured or killed for a bull market to thrive.

Dagen McDowell of Fox Business agrees with Dave, but she adds that the frequency and severity of terror attacks could change her view. Both she and Dave do say that while they do not think bin Laden is a factor in the market now, another major event like 9-11 would change that.
 
Wayne Rogers of Wayne Rogers & Co. says the market doesn’t care where bin Laden is as long as companies are earning money. He says if companies are earning money, the market’s going to reflect that. Of course, he says, another major terror attack that affects an industry like travel and tourism will negatively impact earnings and take stocks lower.

Jonathan Hoenig of Capitalistpig Asset Management says bin Laden doesn’t have any effect on his trading and investing decisions at all.

Be$t Bets: Bin Laden vs The Bull: Stocks to buy!

The market is still trading on terror, but our crew says some stocks are on their way up whether bin Laden is dead or alive. Here are their “Best Bets”

Hilary's Buy: ExxonMobil (XOM)
52-week high: $41.10
52-week low: $29.75
Friday's close (5-16-03): $35.45

Wayne says he likes ExxonMobil, and he’s owned shares in it for years, but he doesn’t see the stock taking off from current levels. Jonathan says investing in big cap energy companies like ExxonMobil hasn’t worked, and he prefers other energy plays like the pipeline companies right now. He mentioned one Wayne recommended months ago -- Plains All American Pipeline (PAA). Dave says he’s owned ExxonMobil for years, and he says waiting for this stock to take off is “like watching paint dry.” He says you can count on the dividend and that’s about it.

Wayne’s Buy: Yahoo! (YHOO)
52-week high: $28.00
52-week low: $8.94
Friday's close (5-16-03): $27.75

Dave likes Yahoo!, though he says it’s trading in “bubble territory” but he thinks the lesson we have learned is that stocks are worth what people are willing to pay for them and he thinks people are willing to pay even more for Yahoo! Hilary likes Yahoo! and thinks it will go higher. Jonathan says Yahoo! stock has been hot for a while, and he’s not buying it right now.

Dave’s Buy: United Defense Industries (UDI)
52-week high: $26.06
52-week low: $17.60
Friday's close (5-16-03): $25.68

Hilary says beaten down defense stocks are due for an upswing, and United Defense Industries has the right customer (The Pentagon), the right sales force, and strong management, and should do well. Jonathan says he gets nervous investing in industries that are so dependent on government spending, and while he says UDI is a really hot stock right now, he doesn’t like the fact that the industry as a whole is weak, and he’s not a buyer. Wayne says he loves the chart on UDI but it’s a bit pricey for his taste right now.

Jon's Buy: iShares Lehman 20+ Year Treasure Bond (TLT)
52-week high: $93.76
52-week low: $81.32
Friday's close (5-16-03): $93.72

Dave says buying this bond fund now while the bond market has been so hot is a bit like playing musical chairs: “It’s great while the music going, but boy when the music stops you had better have a chair.” He’s not buying here. Hilary says she’s sticking to stocks which is where she sees the most upside potential. Wayne thinks interest rates will rise and hurt this fund.

Mutual Fund Face-Off: Tax Cut Winners!

Which mutual funds stand to get the biggest boost from the President’s tax cut? Dagen and Jonas faced off over their favorites.

Dagen – LKCM Equity Fund (LKEQX)
Year-to-date performance (as of 5-16-03): UP 5.7 percent
Minimum investment: $10,000
Expenses: $8.000 for every $1,000 invested

Jonas – Fidelity Floating Rate High Income Fund (FFRHX)
Year-to-date performance (as of 5-16-03): UP 2.9 percent
Minimum investment: $2,500
Expenses: $9.50 for every $1,000 invested

Money Mail

Wayne, Jonathan and Jonas answered some of your questions.

Question: One viewer who is playing the “Cashin’ In Challenge” at home sent in his portfolio for the crew to see. He put three Vanguard funds into his “Challenge” portfolio: Total Stock (VTSMX), Total International Stock (VGTSX) and Vanguard’s REIT Index fund (VGSIX) and asked what the crew thought.

Jonas says since this portfolio is made up entirely of inexpensive index funds and is fully invested, this viewer will do well if the market does, and, in fact, he will beat Jonas’ portfolio which still has some cash in a money market. But, if the market goes down, Jonas says this portfolio will underperform those in the “Cashin’ In Challenge”.

Question: “Should I dump my shares of General Electric (GE)? I bought them at $37.14 a share”

Wayne says anyone waiting for GE to rise to $37 will have to be very patient as he does not see it getting to that level any time soon. Jonathan says GE is not on his radar screen at all. He is not betting for it or against it right now. Jonas says this stock perhaps more than any other represents the stock market and the economy, and he would hold onto it.

Question: “What do you think about Anheuser-Busch (BUD)? Good times and bad, people love to drink.”

Wayne says he’s neutral on BUD. He doesn’t see it growing market share at any rapid pace right now. Jonathan says this stock appears to be working, but he would like to see the group strengthen before buying. Jonas doesn’t like the stock.