Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Scott Bleier, president of HybridInvestors.com; Bob Olstein, president of the Olstein Funds and Joe Battipaglia, chief investment officer of Ryan, Beck & Co.
Trading Pit
Last Tuesday, U.S. forces took out Saddam's two sons, Uday (search) and Qusay (search).
The Pentagon and White House loved it… and so did Wall Street.
The day started out as a bad one for the Dow, as it was down nearly 90 points early in the trading session. But once word hit the street that the Hussein boys had bit the dust, things turned around in a hurry and the Dow finished up 62 points. That equaled a turnaround of 150 points!
Joe thinks if we get Saddam, there’ll be a big triple digit gain. He explained that the War on Terror will either be a positive or negative thing for the U.S. and if there are more positives than negatives-like getting Saddam Hussein-confidence will build and economic activity will increase.
Pat said it does matter to market if we get Saddam, but making money off of the news is a totally different situation. This is because to make money off of the news, you would have to get the information before anyone else does.
Scott added that getting Saddam is a confidence builder, and that’s good for the market because it is built on confidence. He thinks if we get Saddam, the Dow will go up several hundred points.
Gary B. charted the Nasdaq’s performance over the past two months and said the index came to life when Saddam’s sons were killed. He disagreed with Pat, and said investors can buy on the news if Saddam is killed, because if you bought on the news when Uday and Qusay were killed, you would have a nice profit now.
Bob said confidence is important, but stocks are not going to trade on Saddam Hussein’s death, they are going to trade on valuations. This means investors should look at the numbers because to make money you are going to have to buy the best-valued stocks.
Stock X-Change
Joe, Bob, and Scott selected stocks that will soar when Saddam is dead and buried.
Bob chose Goldman Sachs (GS). He thinks it is a great stock for the long-term and in two years it’ll be north to $100. (Goldman Sachs closed on Friday at $86.42.) Scott agreed, but thinks investors should wait for it to drop $10 before buying it. Joe liked it too and said banks have had a great stellar performance, but the institutional brokerage firms, like Goldman Sachs, have not.
Scott picked Rio Tinto (RTP), a British mining company. He said that when the economy picks up, confidence will be renewed, causing a boost in production, and creating a need for mined metals. Also, Rio Tinto has a 3 percent yield and he thinks it will hit $100 in the near future. (Rio Tinto closed on Friday at $88.63.) Joe and Bob weren’t sold that the stock is a buy.
Joe said small cap stocks will flourish when Saddam goes down because there will be an increase in confidence. Joe chose iShares S&P SmallCap 600 (IJT), an ETF or exchange traded fund, which is a basket of stocks. Scott said it’s a diversified way to play the small cap market, but he thinks it’s already had a nice run. Bob didn’t like Joe’s pick. (iShares S&P SmallCap 600 closed on Friday at $76.28.)
Chartman
In late April, Gary B. and Pat looked at stocks that went up big once the bombs started dropping on Saddam. The pair was back this week to check up on these stocks.
First up, Sears (S), which made a gain of 31 percent from March 19th-April 25th. Back then, Gary said to buy the stock if it cleared $30. If you followed his advice, you’d have made $10 on it. Gary said this is a good example of how technicals trump fundamentals. But as for now, he thinks Sears has had a great ride, and it’s time to take profits. (Sears closed on Friday at $40.80.)
Three months ago Pat said Sears was a dying business and to avoid the stock, but obviously the stock still had a lot of life left. But Pat hates the stock even more now. He said Sears is taking its dying breaths. Even though Sears was smart to sell its credit card business and has good brand strength, he still thinks it’s a dying business. He still advised investors to avoid the stock.
Another war winner was J.P. Morgan (JPM). It was up 22 percent from March 19th-April 25th and has kept going. Pat owned J.P. Morgan back then and said he was sticking with it. Pat said it has some very profitable units and pays a hefty 4 percent dividend, but it has some potential time bombs and he plans to sell his shares soon. (J.P. Morgan closed on Friday at $35.47.)
Gary said J.P. Morgan needed to pull back to the mid $20s. It never did. It simply kept going up. Gary admitted the stock moved up more than he thought it would, but it has leveled off. He would still hold on to it, however advised to sell the stock if it falls below $33.
Predictions
Gary B's Prediction
Saddam gets caught or killed by Labor Day; Dow up 400 points on the news
Scott's Prediction
AOL’s (AOL) pullback is a gift; stock up 33 percent within a year
Joe's Prediction
Mergers are coming to biotech land!
(Joe named Antigenics-AGEN and Millennium Pharmaceuticals-MLNM as takeover candidates.)
Bob's Prediction
Elective surgery picks up; buy the stocks that make you beautiful
(Bob recommended Tenet Healthcare-THC, HCA-HCA, & Universal Health Services-UHS.)
Pat's Prediction
Crafty investors should buy Kraft (KFT); stock going up 30 percent
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