Dagen McDowell hosted for Brenda 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 Gary Kaltbaum, president of Kaltbaum & Associates.
Trading Pit
It’s been a year of turmoil and remarkably the market has shrugged it off. Even with a blackout (search) in the Northeast, the Dow still had a triple digit gain. And for the year, the Dow is up 1,007 points.
There’s still one big hurdle for a run away bull market - the grim reminder of the bombing last week in Baghdad, which did not move the market much in the United States. Are investors worried if a terrorist attack hits on American soil?
Gary K. thinks if a terrorist attack happens here it will affect the market, but stocks will bounce back especially if the market was strong before an attack. Another terrorist attack on American soil will not be as devastating to the market as the attack on the World Trade Center. Later adding that the banking index is breaking down and he’s watching financials like a hawk now.
Tobin said, yes we did have attacks in Baghdad and Israel and the fact that it didn’t have that much affect on the market is a good thing. We are now thinking before reacting. Investors are now asking questions like, “Does this really affect the economy? Does this make the company’s earnings go down?” He thinks we will withstand a terrorist attack if hit here in the United States. There will be a drop, but we will bounce back.
Gary B. charted the Nasdaq and said it is moving too far, too fast and this will result in it going splat. He thinks the market is saying we’ve had enough of the good times and now it’s time to pull back.
Pat is worrying less about a terrorist attack and more about earnings right now. The market showed a sharp drop off during the day on Friday as people took profits. This shows him that there’s some high expectations priced into this market right now. Tech stocks are overvalued and he’s not seeing a lot of cheap stocks right now.
Scott said the market has been trading in a very narrow range for the summer. He said this has been confusing those investors that look at charts. Scott uses some technical analysis and said it is morphing and changing and if you don’t adapt, not much money will be made.
Stock X-Change
Gary K, Scott, and Tobin all chose stocks each thinks are unstoppable.
Tobin picked Teva Pharmaceutical (TEVA) because it is the leading generic drug company. It is going to be the first company with a generic biotech drug. Tobin owns and recommends Teva. He said buy it on a pull back and never sell it. (Teva Pharmaceutical closed at $58.38 on Friday.) Gary K. likes this pick a lot. He said it’s about ready to break out of the trading range and it’s had consistently strong earnings. Scott also likes Teva.
Scott selected LeapFrog (LF), which makes electronic educational toys. He thinks this stock will double over the next year or two. It is an expensive stock, but this is a great market for them. Tobin also likes LeapFrog because it is now selling to school districts. Gary agrees with both Scott and Toby. (LeapFrog closed at $34.20 on Friday.) Scott recommends the stock on his site.
Gary K. chose Lowe’s (LOW). It continues to grow more than Home Depot and its earnings and revenue growth are accelerating. The stock broke out on heavy volume last week. Gary thinks the best of Lowe’s is still to come. Tobin said Lowe’s does outperform Home Depot and it’s had a great run, but if mortgage applications go down over 30 percent in the next two months, he would get out of Lowe’s. Scott likes Lowe’s. (Lowe’s closed at $52.91 on Friday.)
Chartman
Gary B. and Pat each picked a stock that reminds them Arnold Schwarzenegger and should help your bottom line.
Gary chose AOL Time Warner (AOL). Its Warner Bros. division made the last Terminator movie. This chart has Gary pumped because it is making a run to break through $17, even though it was knocked down the last two times it made a run to $17. (AOL Time Warner closed at $16.02 on Friday.) But Pat isn’t so pumped up on AOL. He conceded that it does own some of the most attractive assets in the media industry. However, investors still don’t know what’s going on under the company’s hood. Also, its AOL unit stinks and just lost 800,000 subscribers.
Pat picked General Dynamics (GD) because Arnold is always blowing up things in his movies, probably using stuff that General Dynamics makes. He said the company is very important the defense program and is one of only two companies that make Navy warships. On top of that, General Dynamics is getting more government funds for research and development. Pat thinks it’s at a decent price now and could hit $100 in a few years. (General Dynamics closed at $82.96 on Friday.)
Predictions
Pat’s prediction
PMI Group (PMI) will nearly double in two years
Tobin’s Prediction
My bullish Pfizer (PFE) call was wrong; sell the stock
Scott’s Prediction
Progress Energy (PGN) lights up your bottom line; up 20 percent in a year
Gary B’s Prediction
Nasdaq is about to run out of steam; will drop 15 percent from here
Gary K’s Prediction
Hewlett-Packard (HPQ) topping out; time to drop the stock
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