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 Mike Norman, founder of The Economic Contrarian.
Can the streak of three straight down years finally be broken?
It looks good so far. We’re halfway through 2003 and despite a war with Iraq, a bunch of scandals, and the constant threat of terror attacks, the Dow and Nasdaq (search) are both up this year.
Mike thinks the market will finish higher this year. About a year ago he switched from being bearish to bullish because there was a tremendous amount of negativity towards the market. Ever the contrarian, Mike said the reason he’s staying positive, even though the market has been gaining ground, is due to the amount of negative economic data.
Gary B. charted the Dow’s performance for 2003 and thinks it will finish the year in positive territory-but just barely. He believes the index will pull back and then bounce.
Scott said the economy has been miserable for a long time, but it will turn around next year. He believes earnings will then come through and make the market go higher.
Tobin said that companies have been doing well but it will take some time to work that into their earnings. He predicted that the third quarter will be much better than what people expect.
Pat can only find a few good stocks to buy because he thinks the market is reasonably valued right now. He advised to buy on any pull back because the market is headed nowhere.
There have been some big moves for some big stocks. Toby, Scott, and Mike stayed to on determine which way they’re going now.
First up, AOL Time Warner (AOL). Since the start of the year it's made a gain of 21-percent. Mike thinks AOL is a-okay because it is a leadership stock and if the market rises, it will too. Tobin had been negative on AOL in the past, but now he likes the stock, and believes it will hit $20. (AOL Time Warner closed on Friday at $15.82.) Scott also likes the stock, but isn’t as bullish as Toby, and thinks it will only hit $17.
Next up, General Electric (GE). GE has been the place to be for investors, up 19-percent since January 1st. Toby likes GE because its business is very well managed. Scott does not like GE for the reason that the market will have to do a lot better for this stock to do better. Mike said this stock is a winner because it benefits from a weak dollar and the dollar has been hammered this year. (General Electric closed at $28.62 on Friday.)
Onto eBay (EBAY). Investors have bid up the online auctioneer 51 percent this year. Even though he thinks the stock may head a bit higher, Scott said he wouldn’t bid on eBay because the stock is just too risky. Tobin agreed with Scott that the stock is just too risky. Mike said he’s taking some advice from Warren Buffett on this one, and not investing in things he doesn’t understand. (eBay closed at $102.36 on Friday.)
Pat found some stocks that have not been a part of the rally so far this year, but he says that's about to end!
Pat’s first comeback stock: General Dynamics (GD). He said the company has a tremendous track record, is one of only two navy ship builders, and has another 35-percent upside in it. Gary B. almost agreed. He admitted the stock has made a great run since March, however it’s not time to buy it just yet. He advised to wait until it broke through a downtrend it has been in since September. (General Dynamics closed at $72.94 on Friday.)
Another stock Pat thinks is ready to turn around is Automatic Data Processing (ADP). He thinks it has a big potential for growth. He added that the company is buying back shares and that higher interest rates will help the stock. Again, Gary B. just quite didn’t agree. He said not to pay attention to the stock until it closed above $36. (Automatic Data Processing closed at $33.66 on Friday.)
Pat’s last pick was State Street (STT). He said it is in some great businesses, and even though it has made some questionable deals, it is still 25 percent undervalued. Gary B. did not like that this stock has not been able to clear a downtrend it has been in since early 2002. He advised not to buy the stock until it closed in the mid $40s.
Gary B's Prediction
I love gooooooold! Newmont Mining (NEM) up 20 percent by Labor Day
Nasdaq drops to 1500; when it does buy the Qs (QQQ)
Toys "R" Us (TOY) a tax cut winner; up 40 percent by Christmas
Interest rates are going up; get out of bonds NOW!
Get off the drugs and sell Genentech (DNA); going down 30 percent