DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda was joined by: John “Bradshaw” Layfield, WWE Superstar and author of Have More Money Now; Bob Olstein, president of the Olstein Funds; 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.
Last week was a rough one for stocks. But October is still defying the odds with solid gains. So far this month, the Dow is up 307 points. However, there’s still some time left, and in October, these plus signs can be wiped away in a single day.
Bob said there is no trend to this market, and investors must pick the right stocks. Those who do get candy, those who don’t will get tricked.
Bradshaw thinks the market is heading higher so October will be a treat for investors. He said the only thing the bears had going for them were the unemployment (search) numbers, but now there’s more jobs being created. Also, the vast majority of S&P companies are meeting or exceeding expectations. He concluded by saying, stocks are the best place for your money right now.
On the October 18th show, Tobin’s prediction was that Microsoft (MSFT) would have a big earnings surprise and head up 20 percent. It did surprise, but came down in price. He said this means the market is tired. He added that the trend is up, earnings and fundamentals are both up, but the market has moved too far too fast, and needs to pullback. He stressed that investors must now make very good stock picks to make money, because those that buy index funds won’t see any profits.
Gary B. charted the Nasdaq’s performance for 2003 and showed that even with a number of scary setbacks, it established an uptrend in March. He said as long as this uptrend holds, any dip is a buying opportunity. However, he warned that if the index drops below this uptrend, watch out!
Scott thinks last week’s pullback was a good thing because it created new buying opportunities for stocks. He said for the first time in 6-8 months, stocks that reported disappointing earnings really got hammered. He believes the economy will keep getting better for next six months, so when the market dips, buy stocks.
Pat agreed with Toby that the market has simply moved too far too fast. He said that on Friday, JDS Uniphase (JDSU), Nortel (NT), and Scientific-Atlanta (SFA) got hammered, even though each reported earnings that weren’t that bad. Scientific-Atlanta went down 20 percent. He believes there is going to be more downside for the market, and advised investors to wait until then before buying stocks.
The return of the Lightning Round! This time the guys looked at stocks that have been in the news recently:
• Wal-Mart (WMT)
Friday’s Close: $58.11
Last Thursday, authorities arrested about 300 illegal immigrants working at Wal-Mart. The feds say Wal-Mart execs were in on it.
Scott: Bear. “This is the company that ate the world and continues to eat the world and get indigestion.” He doesn’t like it and said buy smaller retailers.
Gary B: Bull. “Scott’s giving me indigestion.” He said investors should buy this stock when it breaks over $60.
Bradshaw: Bear. “It had 300 workers that were illegal from contract laborers. I don’t think there’s any culpability for Wal-Mart execs. It’s the best play in the retail sector.” He thinks the price is too high now and to wait for a pullback to buy it.
Tobin: Bear. “The Bradshaw action figure in my local Wal-Mart is going for $5 and the Rock is going for $20. There’s something going on there.” He said wait and let it come back to $50.
Pat: Bear. “It is going to kill the entire grocery industry, but the shares are too expensive.” He said it’s a buy at $50.
Bob: Bear. “It’s going to march against the wall. It’s going lower.”
• Nike (NKE)
Friday’s Close: $62.03
Nike has Kobe Bryant as a major endorser and the company pays him $45 million.
Gary B: Bull. “It’s been moving sideways for six years. The momentum is back.” He said to buy this stock when it closes above $75.
Bob: Bear. “Too pricey. (The stock) goes the way of Air Jordan and Gary B.”
Bradshaw: Bull. “Kobe Bryant is guilty of a malignant case of stupidity and adultery.” He does not think the situation is going to affect the stock’s price. He added, “They have the ever-evasive street ‘cred’. Nike is a buy.”
Pat: Bear. “Most of their growth has coming from currency gains. That’s not sustainable.” He wouldn’t buy Nike until it hit around $40.
Tobin: Bull. “It’s going to $75. My ‘brother’, Gary B. Smith is right. LeBron James, ladies and gentlemen is the next big star.”
Scott: Bear. “The stock is fully priced. It’s had a nice move, but I like my bad boys bad. I’d rather buy Reebok (RBK).”
• Martha Stewart Omnimedia (MSO)
Friday’s Close: $9.53
A trial awaits Martha Stewart, in addition to a Barbara Walters interview.
Bob: Bear. “The stock is still too pricey. Get your pin stripes and leave Martha Stewart.”
Pat: Bear. “The company’s reputation is too closely tied to Martha. It hasn’t been able to diversify away from her and she’s still damaged goods.”
Tobin: Bear. “Her career is deader than Gray Davis’ political career. You want to buy it in January when it comes down after she gets convicted and spends time dressing up prison.”
Bradshaw: Bear. “If Martha Stewart goes to prison, you ought to send guys from Enron (ENRNQ) and WorldCom (WCOEQ) to the electric chair! I don’t think she should go (to prison), but I don’t think it matters. She’s lost her credibility, and in an industry like that, that’s all you have.”
Gary B: Bear. “The stock’s been going down for years and it continues to go down. Just stay away from this.”
Scott: Bull. “She’s going to get off scot-free. Gary and I have disagreed about this stock. It’s still almost $10. People are going to buy her goods.”
• Merck (MRK)
Friday’s Close: $44.79
The stock got hammered last week after announcing a lower outlook on earnings and over 4,000 layoffs.
Bradshaw: Bull. “The death of Merck has been greatly exaggerated. They still have a pristine balance sheet. They have a new cholesterol drug…the stock is a buy right now on a pure valuation play.”
Pat: Bear. “Yes it is cheap, but…we don’t know how much money they’re actually making. Its financial disclosure is awful.”
Scott: Bull. “This stock is actually starting to become a value stock and once prescription drug legislation passes, this stock…will pop.”
Bob: Bull. “I need Bradshaw to help me up in Westchester. There’s a big guy picking on me.”
Gary B: Bull. “Don’t ever disagree with a guy who throws chairs at people.” He thinks this stock has sold off and it’s going to head higher.
Tobin: Bear. “This company is more confused than Bradshaw at the all-you-can-eat buffet. It’s going down.”
Bob's prediction: McDonald's (MCD) being managed perfectly; up 30 percent within a year
Scott's prediction: Don't forgive the French, but you can buy Vivendi (V); going up 25 percent
Bradshaw's prediction: Get the hell out of Intel (INTC)! Drops 20 percent in next few months
Gary B's prediction: Best Buy (BBY) is a GREAT buy! Up 40 percent by end of next year
Pat's prediction: The "Accent" is on making money! Accenture (ACN); up 50 percent in 2 years
Tobin's prediction: I was early on Chesapeake (CHK); buy now, it's going up 20 percent by February
Cavuto on Business
Bob Sellers hosted the show this week. He was joined by Jim Rogers, president of JimRogers.com; Meredith Whitney, Fox business news contributor; Adam Lashinsky, senior writer at Fortune magazine; Alan Colmes, co-host of Hannity & Colmes; and Mike Norman, founder of Economic Contrarian Update.
Healthier and Wealthier?
Bob Sellers: If there was a tax that could make you healthier and richer, would you vote for it? A new Fox poll (search) shows the vast majority of you (73 percent versus 22 percent) would pay a new tax if it was used to cover all Americans under a healthcare plan. But if push came to shove, would America really go for that idea? And what would it mean to the economy and the stock market?
Alan Colmes: I think we should rescind the Bush tax cuts for the upper 1 percent of wealthy Americans to help pay for more domestic needs like healthcare. We don't need additional new taxes to do it. Let's just take the money we're already spending and distribute it better.
Jim Rogers: We in this country spend 15 percent of our income on health care. And we don't get good results from it. That's not the problem. The problem is the system is a mess. I would get the government out of health care. And I would get the insurance companies out of health care. And I would certainly get the litigation out of there.
Meredith Whitney: I think it's amazing the standards we use in the health care industry that doesn't survive for the rest of the industries. We have one of the highest productivity rates in the globe, but we have one of the lowest productivity rates in the healthcare industry. 85 percent of hospitals are not-for-profit. You've got to make these institutions competitive and let some survive and some not.
Mike Norman: There are two reasons why a tax would be bad. A tax would hurt the economy. We've seen how tax cuts have helped to stimulate demand. Higher taxes also hurt the market.
Bob Sellers: But 73 percent in this poll are saying, yes we would pay more.
Jim Rogers: Most doctors spend half a week doing nothing but paperwork. When I was a little boy, doctors took care of their patients. And it costs less to stay at the Waldorf Astoria hotel than to stay overnight in a hospital. Higher taxes and a new bureaucracy will not make those costs go down. Americans need to realize healthcare is not free and start paying for it themselves. That will cause them to be more selective with your health coverage, create competition and force costs to go down.
More for Your Money
Bob Sellers: Are healthcare stocks the best way to get more for your money? Adam, we just talked about the problems with our healthcare system, but what about healthcare stocks?
Adam Lashinsky: If you want to invest in healthcare, you can invest in hospitals. Even as baby boomers are aging and will have more problems and create more demand, the supply or the number of hospitals and hospital beds are going down. We have classic supply and demand that is out of whack. So hospitals are going to be a way to invest.
Jim Rogers: Insurance rates are up 40 percent in three years. We have a crisis here and something is going to pop. I don't want to be involved in healthcare when it breaks.
Meredith Whitney: The private companies are doing well, but the public ones are doing horrible. The privates ones are investing a lot in technology. The public ones are sacked by incredible cost inflation and they just can't compete.
Bob Sellers: Adam, if you want to buy a stock in healthcare, what do you do?
Adam Lashinsky: I'm going to make an extremely unpopular pick, which is Tenet Healthcare (THC). I don't own it, but it's cheap and it's also scandal-ridden which has beaten down the price. But for the future, it's an investing opportunity because their hospitals will benefit from increasing demand from an aging baby boomer generation.
Meredith Whitney: The last year and a half this stock has been atrocious. But I will say, they're planning on writing off everything this quarter. And that usually signals a bottom for a stock.
Mike Norman: I don't like it. I think it's a disaster. They're being subpoenaed. I don't think we've seen the worst of this stock.
Adam Lashinsky: I want to make clear, I'm not talking about a trading opportunity. We're playing the long term trend that we've been talking about.
Mike Norman: I like Oxford Health Plans (OHP) because. I don't own it, but I think we will get a prescription drug bill through Congress so a lot more people will be able to afford medications.
Meredith Whitney: My pick is Teva Pharmaceuticals (TEVA), which is the largest producer of generic drugs in the world. I don't own it by it is the best way to play lower end costs to consumers.
Bob Sellers: Jim, give us your solution to all this.
Jim Rogers: My solution is to not buy health care. The market is overdue for a correction and a healthcare crisis is developing. I don't expect this problem to get solved, and that's why I'm staying away from healthcare stocks.
Adam Lashinsky: I think Teva is extremely expensive. I agree with Jim that we're due for a correction. But you net that all out and you want to buy something cheap.
Head to Head
Bob Sellers: Billions of American dollars being spent to rebuild Iraq. Trillions of dollars worth of Iraqi oil in the ground. Should some of that be used to pay back America? Alan Colmes says yes. Iraq owes us some cash. I couldn't disagree more.
Alan Colmes: We were told that Iraq had all this oil to pay for their own reconstruction. Then we find out that a task force reported to the administration before the war started that the oil was not as productive as expected. And the administration never told the public this. We were sold a bill of goods about this war and now we're told we can't pay for it.
Bob Sellers: So what? At this point, whatever happened then, happened then. We now have a country that needs money. Now if we give them money and make them pay it back, at the same time we're talking to Russia and other countries who Iraq owes $200 billion to. How do we argue that?
Alan Colmes: We do believe in socialism in Iraq but not in this country. I don't think it's our role to instill our idea of democracy in these countries and pay for it with our hard earned money.
Bob Sellers: You wouldn't compare our country with Iraq. Certainly, we are a richer country than they are.
Alan Colmes: We've been running a bigger and bigger deficit since this administration has been in power. We haven't solved the problems in Iraq. Things are much more chaotic now with the guerrilla fighting that's going on. We have men and women being shot at. We have infrastructure that's not being built.
Bob Sellers: So you think they should pay back the money?
Alan Colmes: I'm saying at some point their oil will be up and running and why should the American public not have to pay if they have the money or will have the money soon
Bob Sellers: Is it in our interest to put money there to build a country that can be strong and democratic?
Alan Colmes: I'm not sure that we will be successful to create a democracy as we envision in the middle of the Arab world. What makes us think that despite all the years of fighting that we are going to get all these disparate entities together and that they're all going to get along.
Bob Sellers: Getting along and surviving together are two different things.
Alan Colmes: I don't think we're going to come in there with American tax dollars and make everything fine. We've been sold a bill of goods here that I'm not sure was right. And bottom line, I don't think American tax dollars are well spent in a country that will eventually have its own resources. It is not our role to be doing that.
FOX on the Spot
Meredith: Back to work! More jobs are created by year end and that will help the market.
Mike: Dow falls to 8800 by March 2004 due to Bush policy of a weak dollar.
Adam: International Paper (IP) shares get shredded this Monday after disappointing Wall Street with its latest quarterly report.
Jim: Lights out! More power outages in 2004. That's bad news for economy and market.
Alan: Hillary will NOT run in 2004!
Bob: Pres. Bush will pick a new running mate in 2004!
Forbes on Fox
David Asman: Spam (search)! You can't delete it from your email box fast enough! So should you be buying the stocks the stocks that fight spam?
Bill Baldwin, editor: It would be great if you could put a price tag on your mail box and charge spammers for every item they send you. Since AOL would never go for that.. I think the next best thing is to invest in companies that think they can control spam. Even if they can't, I think they're going to sell a lot of software. Network Associates is one of them, Symantec is another.
David Asman: Are they priced well at the moment?
Bill Baldwin: No, they're ridiculously overpriced, but BUT.. this is a growth industry!
David Asman: Bruce you have another anti-spam stock?
Bruce Upbin, senior editor: Internet Security Systems (ISSX), I'll throw them into the mix. They're coming through some troubles right now, so the stock may be a little cheaper than those others.
David Asman: Do you have any price targets for any of these stocks?
Bruce Upbin: I'd buy ISSX at around $10 or $12, and Bill's stocks are overpriced, but I'd buy Symantec below $60.
David Asman: Lea, are there any of these stocks that are priced right for the market?
Lea Goldman, senior reporter: I think Check Point Software (CHKP) is priced right right now. They're an Israeli-based company, they specialize in firewalls. They're sitting on a half-billion dollars in cash right now. They're going to make a play into other venues like anti-spam, anti-virus.
David Asman: What happens if you get the perfect anti-spam software, and then the spammers come out with something better, and you're wiped out?
Lea Goldman: Precisely! There's no silver bullet, you're never going to be able to get rid of spam entirely. No prosecution, no legislation. Deal with it. Get a good service.
David Asman: Now Mike, is that why you're a humbug about these stocks?
Mike Ozanian: That's one of the reasons. One of the reasons Lea's stock, Check Point, is priced right is the company's earnings are supposed to go down the next two years. So that's why the price is good. As Bill eluded to, the other companies are very expensive. Bruce's stock is earning 1 percent on his shareholder's money, I could do better in a CD. I mean, if you're going to go with risky stocks, put it in a biotech company like Genentech (DNA), where at least they're trying to find a cure for cancer.
David Asman: Bruce if you had your choice, biotech or anti-spam, which would you choose?
Bruce Upbin: I'd rather buy wireless stocks. People are going to be using their cellphone more, and avoiding their email inbox.
David Asman: But with the spam stocks, should we get in now, or wait for the prices to calm down?
Bruce Upbin: Wait until they calm down.
David Asman: Bill, you agree?
Bill Baldwin: No, I think there's going to be more money thrown at this. Look at Microsoft. They spend all this money trying to protect their own software from viruses, and there's still a huge and growing industry for anti-virus software.
Lea Goldman: As soon as the market picks up, the money is going into security. These IT budgets have been cut back for the last three years, they're ready to spend.
David Asman: So its not just anti-spam, these companies are doing other stuff too, like anti-virus. Mike did we sell you yet?
Mike Ozanian: Nope. The only tech stock that I'd pay a lot of money for would be something like Microsoft -- it had a monopoly. None of these companies have a monopoly that's worth this high a price.
Makers and Breakers
David Asman: This week our guest stock picker is Duane Roberts, from Dana Investment Advisors, his firm owns Affiliated Computer Services and AutoZone.
Affiliated Computer Services (ACS)
Duane Roberts: MAKER
They're a leader in an area called business process outsourcing" which means they help integrate technology into the business that they're in.
David Asman: They're now trading around $48, how high do you think it will go?
Duane Roberts: We can see this stock in the upper 50s, we've got a target of $57.
Elizabeth MacDonald, senior editor: MAKER
This is a great pick. They're big on scanning and digitizing all sorts of documents. They've got terrific free cash flow, and their debt is going down.
Jim Michaels, editorial vice president: MAKER
If you get mad at companies that send jobs abroad, you're not going to like this company. They were a pioneer in sending jobs abroad. But unfortunately, that's why I like it. They've got a cost advantage over their competitors, and a guaranteed growth at a market multiple.
Duane Roberts: MAKER
Its the only auto parts store with a national footprint. It's a very fragmented industry still, we see lots of room for consolidation. The company's been growing earnings over 30 percent a year, we see 15 percent going forward.
David Asman: Its trading at $96, near its 52-week high now, how high do you see it going?
Duane Roberts: We see going to $108.
Elizabeth MacDonald: BREAKER
I see it going into the red zone. It has been on a big acquisition spree, its free cash flow is plummeting in the last recorded period, as well as its operating cash flow. I see big problems for this stock.
Jim Michaels: BREAKER
I don't like this stock because half their earnings gains come from buying into their own stock. They bought in their own stock at $25-30 a share. Its $100 a share now, that buying in the stock won't work.
Duane Roberts: the cash flow is still pretty impressive and strong, and that's how they've been funding the stock buy-back. But they have been increasing the leverage with the stock repurchases but we think they're leverage still looks attractive.
Is the best yet to come?
October 9, 2002: 7,286
Friday’s close: 9,582
The Dow’s up more than 2000 points in a little over a year. So why do so many in our group say we ain’t seen nothing yet?
Dave Nelson of DC Nelson Asset Management says that despite last week’s volatility the best is yet to come. He says you need to forget the day-to-day noise and concentrate on the longer-term trend, which he says is up. He says assets are coming into the U.S. and that is bullish for the market.
Dagen McDowell of Fox Business News points out that the November, December, January stretch has historically been the best three-month span for stocks, and she says $20 billion has come into stock funds in the last couple of weeks, which means stock fund managers will be buying stocks.
Wayne Rogers of Wayne Rogers & Company says earnings make the market move, and earnings have been relatively strong.
Jonathan Hoenig of Capitalistpig Asset Management says you can’t bet on just anything, but he agrees the momentum is with stocks right now, though he sees more opportunity in international stocks than in U.S. companies.
Hilary Kramer of A&G Capital says we are going into an election year, which is generally a catalyst for a higher market.
Which stocks will make you the most money between now and the end of the year? We got our group’s best bets!
Hilary: Nextel (NXTL)
Friday's close: $22.09
Hilary says Nextel is going to clean up when cell phone customers are allowed to switch services and keep their old numbers because Nextel offers the best value. Dave says this was a great investment last year, but he’s not sure about now. Jonathan wouldn’t bet against it, but he wouldn’t bet on it now either. Wayne says the there is momentum in the stock and he doesn’t see it slowing yet.
Dave: Alcoa (AA)
Friday's close: $29.16
Dave says commodity prices are rising and China’s demand for aluminum is going to keep the prices high for aluminum which will help to boost Alocoa’s profits and stock price to the end of the year. Hilary doesn’t agree. Wayne thinks it’s a good company, but he says it will take a lot longer than to the end of the year for this stock to show a significant return. Jonathan says this is one way to play higher commodity prices, which is one trend he’s been watching.
Jonathan: Citigroup Investments Corporate Loan Fund (TLI)
Friday's close: $14.66
Jonathan says this is a play on rising interest rates. Hilary says this is not a time for the fixed income market; she does not like the pick. Wayne likes the pick. He thinks interest rates are going higher and this fund will benefit.
Wayne: PetroKazakhstan (PKZ)
Friday's close: $20.44
Wayne says PetroKazakhstan is a terrific company that doubled its earnings in the last quarter and is sitting on a ton of assets. Hilary says she bought the stock now that it’s on the London exchange because that gives it a lot of credibility and so she thinks it will do well. Dave says this is a great bet on a global recovery. Jonathan does not own the stock, but he thinks Wayne is shopping in the right market with this stock since it will also benefit from higher commodity prices.
Fund Face Off
Your mutual fund could be ripping you off. That’s what a new investigation into the trading practices at some of the nation’s largest mutual fund companies suggests. So should you dump your funds?
Hilary says, “Yes, dump all mutual funds and buy diversified company stocks instead.” She recommends: SPX Corp (SPW)
Dagen says, “No, not all funds are bad! If you are worried about fraud, buy an index fund that you can measure against the index every day and spot problems if they differ too dramatically.”
She recommends: Vanguard Total Stock Market Index Fund (VTSMX)
We took a look at the standing in the $10,000 “Cashin’ In Challenge”. To find out who’s ahead, check out the website at: www.foxnews.com/challenge
Wayne, Jonathan and Jonas answered some of your questions.
Question: “What do you think of Pixar (PIXR) as a long-term play?”
Wayne thinks the stock is overvalued right now. He doesn’t recommend you buy it here. Jonas says the only time you want to buy a stock like this to hold for the long term is right after they produce a “bomb,” not a successful movie like Finding Nemo because success can temporarily inflate the price of the stock. Jonathan says it’s not his top choice for new money, but he wouldn’t bet against it because he likes the company’s management. He says if you own it put a stop under it and let the market take you out if it falls.
Question: “Is now a good time to buy smaller stocks?”
Jonas says it is no longer a good time to invest in small stocks. They are supposed to fly the highest during an economic recovery, and people have jumped into them in the last year as signs of an economic recovery emerged. He says small caps are no longer cheap compared to larger stocks. Jonathan likes international small cap stocks. Wayne thinks small cap stocks will still give you the best bang for your buck if you pick the right small stocks.
Question: “Could you give me the name of a good dividend-paying stock to hold long term?”
Jonathan likes foreign bond funds for income. He recommends Aberdeen Asia-Pacific Prime Income Fund (FAX) and American Century International Bond Fund (BEGBX). Jonas prefers utilities for dividends. He likes Southern Company (SO). Wayne says master limited partnerships pay the best dividends. He recommends Pengrowth Energy Trust (PGH).