Stock Smarts: Summer of Terror?
Terror threats have pushed the homeland security alert higher – and stocks lower. Does this mean we are in for a summer of discontent on Wall Street, or is now the time to buy?
Mike Norman of Economic Contrarian Update says he thinks we will see a summer rally and that law enforcement and security efforts here will prevent any attacks from occurring on U.S. soil, keeping terror far enough away from the market to lift stocks. He says he is more concerned with Federal Reserve Chairman Alan Greenspan’s “flip flopping” on the strength of the economy – suggesting that the economy is soft one day and strong the next. Norman says Greenspan’s message needs to be consistent before investors will feel confident.
Hilary Kramer of A&G Capital says she thinks the market will remain concerned about terrorism, and the fear that an attack here could occur here will keep investors skittish throughout the summer, creating a volatile market.
Jonathan Hoenig of Capitalistpig Asset Management says he sees a lot of opportunity in this market despite all the terror talk. He still likes San Juan Basin Royalty Trust (SJT) and Plains All American Pipeline (PAA) as well as bonds.
Jonas Max Ferris of MAXfunds.com says the American market will not suffer from terror fears as long as the attacks remain overseas, but the moment another attack occurs here we could see a dramatic slide in stocks.
Wayne Rogers of Wayne Rogers & Co agrees with Jonas. He says that until another attack occurs here in the United States investors aren’t going to focus on terror. He still likes PAA and PetroChina (PTR) the Chinese oil company he has in his Cashin’ In Challenge portfolio.
Be$t Bets: Anti-Terror Stocks!
National security is big business, and some small companies are cashing in. Will betting on their stocks help you cash in too?
52-week high: $29.35
52-week low: $18.90
Friday's close (5-23-03): $22.14
Anteon provides information technology systems for defense and homeland security, supplying government agencies. Hilary thinks this is a great opportunity - they have a huge backlog of orders, with “enough work for the next five years.” Mike says it’s a good, necessary industry, but he thinks the stock is a little “rich” as it has had a bit of a run-up already. Jonathan is nervous about any company that depends so much on government spending (like Anteon), and this stock really isn’t setting him on fire.
SRA International (SRX)
52-week high: $30.65
52-week low: $21.10
Friday's close (5-23-03): $29.00
SRA International is also an information technology service provider in three main areas: national security, health care and public health. Jonathan says that this stock, like any other relatively new stock, can certainly take off. But, in terms of putting new money to work, this one isn’t the place for him. Hilary likes this stock. She’s not going a buyer, but she says if someone is looking for the “next big thing” – this could be the play. Mike says this is more attractive than some of the other stocks in the sector.
52-week high: $26.00
52-week low: $17.50
Friday's close (5-23-03): $23.12
Veridian specializes in mission-critical national security programs. Mike says it needs to get profitable - it’s a little weak financially compared to the others. Hilary likes the division that specializes in chemical and biological weapons detection, but says there is competition from the “big boys”, like Raytheon (RTN) and Northrop Grumman (NOC). And Jonathan says while this is a growth name, it is not one on his buy list.
Cashin’ In Challenge Update
Want to find out who’s taking the lead in our “Cashin’ In Challenge”? Check out the website:
Wayne, Jonathan and Dagen answered some of your questions.
Question: “What do you think of Metro-Goldwyn-Mayer (MGM)? I own the stock, and want to know how it looks long-term.”
Wayne says that the movie industry is a volatile business, and in the short term he is worried about MGM. He says the company has a great film library, but business really depends on the summer releases. He quotes screenwriter William Goldman, who said about Hollywood “nobody knows anything.” Dagen says it’s not a good long-term holding because so much depends on the box office – if Legally Blonde II doesn’t have a big summer, the stock could be hurt. Jonathan thinks this stock is a lot like Anheuser-Busch (BUD), in that it is popping up as of late – he says, “Keep your eye on the group.”
Question: “Is Sun Microsystems (SUNW) a realistic target for a takeover?”
Dagen doesn’t think a takeover is a sure thing. She’s not sure why any big company would need to acquire a company like SUNW. For example, IBM (IBM) already has a whole line-up of server computers – it doesn’t need SUNW for that.
Question: “With the threat of SARS and the falling dollar, does investing in Asia make any sense right now?”
Jonathan says he wouldn’t pay any attention to SARS – but if you are looking to invest in Asia, don’t look at funds - look to the stocks. One stock that Jonathan has been buying is Asia Satellite (SAT). Dagen says that SARS is just a temporary setback, and she thinks a fund is a pretty good way to go.
Question: “With cyber-terrorism a strong possibility, what do you think about Internet security stocks like Check Point Software (CHKP)?”
Wayne likes this company, and at these prices it looks like a good buy. Dagen thinks it has a lot of competition from Cisco (CSCO) which she says could “eat Check Point for lunch.”