Brenda Buttner 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 Price Headley, investment strategist for BigTrends.com.
Trading Pit
It looked like the work of Al Qaeda (search) last week, targeting Americans with a car bomb in an Indonesian hotel.
That attack combined with new terrorist threats against our airliners caused stocks to stall. The Dow made a slight gain last week thanks to a late rally. But it only made a small move, despite good news on the jobs front, the economy and earnings.
Price thinks that these terror threats are part of the reason stocks aren’t heading higher, but he believes the bigger issue is that the market had a big run and it’s time for stocks to cool off a bit.
Tobin said terror threats could have lit the fire that caused stocks to stall, but the real culprit was the bond market. He explained that there are $5 trillion in the bond market and it had major problems last week. And when the bond market has serious problems, it hurts the stock market.
Pat said that you have to invest without thinking about threat of terror. He admitted it is now a reality of life, but overall, there is a still small chance of it happening. He added that investors should try to find cheap stocks, not sit around trying to predict when the next bomb will go off.
Gary B. had been bullish, but is now bearish. He charted the Nasdaq and said it cracked down pretty hard last week. He thinks terror has a small impact on the market, because unless it happens in the U.S., most investors ignore it. He believes it was not the threat of terror that caused stocks to stall, but that there are just more sellers than buyers.
Scott said investors have realized there are going to be terror attacks throughout the world, but they must go on. Unlike Gary B, Scott’s not bearish on the Nasdaq and thinks it’s ready to bounce.
Stock X-Change
Scott, Tobin and Price each picked companies that are doing the best job protecting us from terrorism.
Toby chose SRA International (SRX) because it provides information technology for national security. SRA International has a new radio contract with the joint strike task force that is going to help us fight the war against terrorism. Price likes SRA because it is performing well while a lot of defense stocks have been beaten down. The only negative thing Scott can find about the company is that it has only had one year reporting as a public company. (SRA International closed on Friday at $32.15.)
Scott picked Kroll (KROL), a risk consulting company. Kroll has made a decent run in 2003, but earlier this month it reported disappointing quarterly results. He thinks it’s cheap and in a buy zone. Toby likes the stock. Price said it’s a good stock to hold for the long term. (Kroll closed on Friday at $22.62.)
Price’s likes DRS Technologies (DRS), a company that makes electronic defense systems. The company just came out with great earnings and its revenues are up 30 percent. He said it is at a good price and likes the stock the long term. Toby used to recommend this stock but doesn’t like it anymore more because it just can’t seem to make a move. Scott agreed and added DRS Technologies is an excellent company, but a miserable stock. (DRS Technologies closed on Friday at $27.55.)
Chartman
Gary B. and Pat rejoined us to look at two companies that need your vacation money to survive even amid new terror threats from Al Qaeda.
First the pair looked at priceline.com (PCLN). Gary said the chart is strong and getting stronger. He thinks it’s a buy now and has a good chance of going to $50. (priceline.com closed on Friday at $31.11.) Pat wasn’t as optimistic. He said its but sales are stagnant and internals signs from the company show that the stock is topping out. Pat’s final point was that the company has less free cash-and so will you-if you buy it.
Next, the two checked out Carnival Cruise Lines (CCL). Gary thinks this stock is ready to make a major move up. He said it’s a buy after if it can close over $35. (Carnival closed on Friday at $34.01.) Pat said Carnival is the biggest and the best in the cruise industry. It has good long-term demographics because many baby boomers are going on cruises. But with the recent acquisition of Princess Cruises, the company may have too many ships. He thinks it’s a great company, but the stock needs to sink 30 percent before he’d buy.
Predictions
Gary B's Prediction
I hate to admit Toby was right-Nasdaq is going to 1500
Price's Prediction
It gets worse! Nasdaq drops to 1300 by year end
Pat's Prediction
Equifax (EFX) checks out; up 30 percent in a couple years
Tobin's Prediction
General Motors (GM) drops 20 percent by year end
Scott's Prediction
Thornburg Mtg (TMA) gains 15 percent despite rising rates
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