DISCLAIMER: THE FOLLOWING "Bulls & Bears 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 "Bulls & Bears Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Bob Olstein, president of the Olstein Funds; and Adam Lashinsky, senior writer at Fortune magazine.
What happened? The Dow was making a move straight to 10,000.
But in November — which is usually one of the best months for stocks — we’re going the other direction, down 10/15 days this month.
Tobin said fear is keeping us from Dow 10K. We’ve seen banks and embassies blowing up and a mutual fund scandal. Also, investors have profits for the first time in 3 years Tobin thinks when we get over the fear, we’ll see Dow 10,000 and he believes this will happen by the end of December.
Gary B. charted the Dow for the past six months. He said it’s been in an uptrend channel since June and explained this means if the Dow falls below 9600, it’s in big trouble. He thinks Dow 10K is unlikely by the end of the year, but said we’ll see our normal rally after Thanksgiving.
Bob believes that large cap stocks have gone too far too fast and that it is going to take a while for the Dow to hit 10,000. He thinks investors should look to mid and small cap stocks, because those are the ones that are undervalued and will make investors money.
Adam thinks all the good economic news that has come out is great, but the market reacted to that good news 3-5 months ago. He said every fund manager that he has talked to is glad to be on the plus side for the year, so they are playing a “prevent defense” for the rest of 2003.
Scott advised investors to buy stocks when they dip and said we should be prepared for more of a dip. The Dow hasn’t hit 10,000 yet due to the mutual fund scandal, more fears of terrorism, and investors’ desire to take profits.
Scott, Tobin and Bob looked at the stocks of the companies that run the mutual funds caught up in the scandal. (These are the stocks of the companies that own the funds, not the actual funds.)
First the group looked at Janus Capital Group (JNS). Its funds are accused of late trading and market timing for select clients. Bob likes Janus because investors are negative on the stock and that pessimism has produced the right price. He thinks the stock is undervalued and is worth about $20. (Janus closed on Friday at $13.95.) Tobin has been short Janus for the last couple of years, but said that if Bob took it over, he’d buy the stock. But until that happens, he doesn’t want anything to do with Janus. Scott said pessimism is not enough of a reason to buy the stock. He also doesn’t think Janus manages its funds well.
Next, the group examined Alliance Capital Management (AC). Alliance runs more than 100 mutual funds. Its president and other top officials resigned when the scandal hit. Scott wouldn’t own the stock at this price, but if it gets its act together, he thinks it can come back. Tobin said Alliance owned huge amounts of Enron and MCI, and has owned every other horrible stock. He advised to stay away from it. Bob agreed with Toby and also thinks it’s best to avoid this stock. (Alliance closed on Friday at $30.75.)
Lastly, the group looked at Marsh & McLennan (MMC), which runs Putnam — one of the fund families named early and often in this scandal. Tobin said Marsh & McLennan is a very large company and that 18% of its revenue comes from Putnam. He thinks Putnam will take it on the chin, but its other businesses are on an up tick and this can make its earnings rise. Bob said Marsh & McLennan is a superb insurance brokerage company. And even though Putnam is a tarnished jewel, it will survive. He’d like the stock at a cheaper price. Scott thinks Putnam is finished. He said Marsh & McLennan is good, but the scandal will hurt its future earnings. (Marsh & McLennan closed on Friday at $43.48.)
Christmas is coming early this year! Gary B. played Santa Claus and picked two stocks he thinks will make you enough money by Christmas to pay for all your presents!
Gary B. first chose Freddie Mac (FRE). His chart showed that after a nice summer run, it has pulled back to its current uptrend line. Gary said it’s at a great place to buy and should be up 10% by Christmas. (Freddie Mac closed on Friday at $55.67.) Adam said this is a scandal stock and it needs to restore all credibility. These problems make it hard to value. He thinks that Freddie Mac won’t be a buy until 2004.
Next, Gary picked Southwest Airlines (LUV). His chart showed that after a monster run in the second half of this year, Southwest has pulled back into perfect buying position. He thinks it will also gain 10% by Christmas. (Southwest closed on Friday at $17.40.) Adam said Southwest is not volatile enough for a fast profit. Also, the big airlines, which he thinks have more upside, are coming after Southwest with their own smaller airlines. Finally, and unfortunately, the threat of terror always is a factor.
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