Brenda 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; and Scott Bleier, president of HybridInvestors.com; and Meredith Whitney, Fox business news contributor.
Trading Pit
After three years in hiding, the bulls are back on Wall Street (search).
Stocks had a big finish at the end of the week. This adds to an already impressive run this year for the Dow (up 15 percent) and Nasdaq (up 41 percent).
Meredith thinks there are going to be amazing buying opportunities in October, because it is historically the most volatile month of the year. She predicts that money will flood into the market and make it soar.
Tobin likes what is happening in the stock market. He said profits are the key, and thinks there is going to be a 25 percent profit growth in the 3rd quarter. He explained that profits create capital, and capital invites investments. He believes the pullback that happened in the beginning of last week, will be the last one of the year.
Gary B. charted the Nasdaq. He said that since the spring, it is up almost 40 percent. He thinks this move is too far too fast, but it is so hard to be a bear in this market. However, if the Nasdaq breaks below the uptrend it established in March, he predicts the index will fall 10 percent.
Pat said the economic news is getting better, but things must be kept in perspective. The jobs report on Friday showed the economy added 60,000 jobs, but 150,000 jobs per month are needed just to meet population growth. He said the market is priced as if the jobs’ growth is going great, but Friday’s numbers were really just a glimmer of hope. He thinks the market will be lucky to hang onto these gains and that October is going to be an ugly month for stocks.
Scott thinks the Dow’s triple digit gains on Friday will almost make the bears give up. He added that when people are saying, “It’s so hard to be bearish” like Gary B, investors must be careful. Scott admitted there’s no doubt the economy is getting better, but investors must be cautious.
Stock X-Change
Scott, Tobin and Meredith each picked the best stocks to buy for the fourth quarter.
Scott selected ICICI Bank (IBN), a bank based in India. He thinks the growth potential for this bank and the Indian economy is huge because the middle and upper middle class is growing. Meredith agreed that investors should look to companies from other countries like India and China for real growth. Tobin likes this stock because credit cards are just starting to be used in India, and ICICI Bank is the leading issuer in the country. (ICICI Bank closed on Friday at $11.21.)
Tobin picked online brokerage firm, AmeriTrade (AMTD). He chose this stock because during a bull market, more people trade stocks and this makes its earnings go up. He said if you’re looking to buy and hold a stock for the next 90 days, you should own stocks that are tied to the economy, the bull market, and the trading of stocks. Toby thinks it will hit $20 next year. (AmeriTrade closed on Friday at $12.34.) Scott thinks AmeriTrade has had a good run, but is too expensive. Meredith really likes this stock. She said now that AmeriTrade acquired fellow online broker, Datek, it has leverage over all other electronic brokers.
Meredith chose Paychex (PAYX). She said 80 percent of businesses in the United States are small to mid-sized businesses and a lot of these companies use Paychex to do their payrolls. Also, she thinks with the good jobs numbers that came out on Friday, this stock will soar through the end of the year. Scott agreed and also thinks the good employment numbers will help this stock head higher. Tobin said it’s a little expensive, but he too believes it will run up if more jobs are created. (Paychex closed on Friday at $35.73.)
Chartman
Gary B. and Pat returned and each picked the stock pick he is most proud of.
Gary B’s top choice was a stock he liked, but was actually picked by Pat. Gary B. said back in February, he noticed that Berkshire Hathaway Class B (BRK.B) was almost at a multi-year low. It’s up 20 percent since then. Back in February, he said to sell the stock once it hit $2500. It hit his price in August and hasn’t moved much since. He advised to buy the stock if it can close above $2600. (Berkshire Hathaway Class B closed at $2,534.50 on Friday.) Pat still likes the stock, but thinks its shares are worth about $2800. This makes it a decent buy but not a huge bargain.
Pat said the call he is most proud of came in August 2002, when he said to buy Tyco (TYC). It is up 75 percent since then. (Tyco closed on Friday at $21.22.) Back then he said the stock was insanely cheap. That was then, this is now. He doesn’t think Tyco is cheap anymore. He said there are some good signs the company is headed in the right direction, but there are better places to invest right now. However, Gary B. said he would stick with Tyco. He thinks its chart isn’t in bad shape and it has been rising steadily all summer. He advised to hold it if you own it, but don’t buy until it dips to $19.
Predictions
Meredith: Market drops in October are a buying opportunity!
Scott: An "upper" for your bottom line: Mylan Labs (MYL) gains 40 percent in a year!
Tobin: Dell (DELL) up 15 percent by Christmas while Gateway (GTW) tanks
Pat: Dodge taxes by buying Eaton Vance (EV); going up 30 percent
Gary B: Schering-Plough (SGP) on the rebound; going up 20 percent by year end
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