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 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; Scott Bleier, president of HybridInvestors.com; and Dr. Bob Froehlich, chief investment strategist at Deutsche Asset Management.
Will stocks head higher in 2004? There’s a strong indication that they will, and it all has to do with the first 5 trading days of the year.
The last 35 times the Dow has headed higher in those 5 days, it’s finished up for the year 27 times.
And the good news for investors is that the Dow gained 139 points in the first 5 days of 2004.
Bob thinks this trend will hold true for 2004 and is very bullish. He believes the year will look a lot like this past week. There will be a lot of good news, but some bad news that will cause the market to overreact. He expects a lot of volatility in 2004, but thinks stocks are set up to head higher.
Gary B. charted the Dow’s performance since December. He said it doesn’t feel comfortable being a bull right now because the market has gone almost straight up in that time. He predicts a struggle as the Dow approaches its 2002 highs (as it did at the end of last week), but still expects it to gain 10-15 percent this year.
Tobin is not worried about the pullback the Dow suffered on Friday. He explained that a classic bull market takes two steps forward and one step back. He said if someone wants to make money, they should buy stocks now!
Pat is not as optimistic. He is finding fewer and fewer stocks at good prices. However, he said there are some bargains, especially drug stocks, title insurers, and the Chicago Mercantile Exchange (CME), also known as “the Merc”.
Scott said the Nasdaq suffered a pullback in December and it was easy to pick winning stocks. With that in mind, he advised investors to buy stocks when market pulls back. He offered another piece of fundamental advice: buy stocks to sell them!
If you e-mail the show, you know we read and respond to every one. This week, Scott, Tobin and Bob answered some of your questions.
First up, Phyllis from North Carolina asked if Procter & Gamble (PG) is going to grow in 2004.
Bob thinks Procter & Gamble is a good company. He loves the stock and said it’s one to buy and hold onto. He said the company produces 2 soap operas and the reason this is important is because it keeps people at home using their products. Scott agreed that this is a great company that makes great products, but is not a great stock to buy right now. He said this is a stock you want to own in a flat or down economy because that is when it outperforms the market. Tobin said Procter & Gamble is undervalued and suggests investors should buy this stock at $94 and sell it at $120. He added that this stock is a great one to buy for someone that has a tech heavy portfolio. (Procter & Gamble closed on Friday at $99.64.)
Larry in Austin, TX wanted to know what the Bulls & Bears thought about 3M (MMM).
Bob doesn’t really like 3M because it has poor sales growth and he believes its sector (capital goods) is going to under perform. Scott said 3M is the poster child for cyclical stocks. He admitted over the past couple weeks it has done well, along with other cyclical stocks, but he thinks there are a lot better places to put your money. Tobin would sell the stock because it is overpriced. (3M closed on Friday at $82.40.)
Dennis in Alabama asked about Sirius Satellite Radio (SIRI). He likes the service, but wondered if he should own the stock.
Scott said Sirius Satellite Radio is vastly overvalued and is going to remain overvalued for years. However, he thinks that it’s a great stock to trade and would buy it under $3 and sell it at $3.50. (Sirius Satellite Radio closed on Friday at $3.44.) Tobin likes Sirius, but admitted that it has had some problems, especially that one of its competitors, XM Satellite Radio (XMSR), is going to be making money in 2005. He recommended that as an investment, not as a trade, he would wait for Sirius to pull back because it could go to $8. Bob isn’t thrilled about this stock. He doesn’t like start up companies because there isn’t much of a track record to gauge their sales.
Gary B. and Pat each picked a stock that deserves a second chance.
Gary B. picked CMGI (CMGI), which once traded as high as $163 and is now at $2. He said even though CMGI had that huge fall, it has continued to fight back. He likes that the stock has been strong since last year and continues to be strong. He would wait for the stock to close at $2.25 before buying, but thinks it could get to $10 within two years. Pat doesn’t like CMGI because it has not generated any positive cash flow. (CMGI closed on Friday at $2.01.)
Pat chose Biogen Idec (BIIB), which didn’t have the big plunge that CMGI had, but was still cut in half. Pat said this is a very profitable and well-known biotech company and has some leading drugs for non-Hodgkin’s lymphoma and multiple sclerosis. Pat thinks it is headed to $55. (Biogen Idec closed on Friday at $42.38.) Gary B. charted Biogen Idec and showed that this stock has been strong lately, but it’s bound to run into some resistance. He’d sell the stock at $47.
Bob's prediction: 2004: Bush is re-elected, Usama gets caught, & the Dow closes at 12,500
Tobin's prediction: Nasdaq up 50 percent MORE than the Dow this year
Gary B's prediction: Martha walks and her stock (MSO) runs up 30 percent in '04
Pat's prediction: There's still life in homebuilders! Centex (CTX) up 20 percent this year
Scott's prediction: Australia & New Zealand Bank (ANZ) going up 20 percent in six months
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, President of JimRogers.com; Gregg Hymowitz, Founder of Entrust Capital; Stuart Varney, Fox News Business Contributor; Greta Van Susteren, Host of "On the Record"; Barbara Corcoran, Founder of the Corcoran Group; Ellis Henican, Newsday Columnist.
Neil Cavuto: If Martha goes to jail, will the American dream go with her? Martha Stewart, a true American icon, living the American dream by building a media empire out of nothing. But prosecutors say she also tried to protect that empire by lying to federal prosecutors. Greta, to you first. Do you see this as more than a simple obstruction of justice trial? Is capitalism on trial here to a degree?
Greta Van Susteren: I can't get over the stupid factor with this. She's not being charged with insider trading. What Martha Stewart is being charged with is lying in the investigation. I don't know if she did that or not. Is it putting capitalism on trial? It may be about putting someone on trial who did something extremely stupid, maybe even criminal, but we don't know that yet. Why in the world did she talk? She should listen to her lawyers and stay in the kitchen.
Neil Cavuto: If she goes to jail, not only is that bad for her stock, but some say it might be sending people the wrong message. What do you think?
Stuart Varney: Everyone on this panel has worked with an executive who has been neo-abusive. I think Martha has been convicted in the court of public opinion of not being very nice and of exercising her power in an illegitimate fashion. I think there is an element of sexism here in my personal opinion.
Jim Rogers: Who cares if she's an abusive employer. I have nothing against her for that. I do have something against her if she may have lied to prosecutors.
Stuart Varney: I'm making a distinction between the legal case against her and her trial in the court of public opinion.
Neil Cavuto: It doesn't matter if you're a man or a woman. If you obstructed justice, you obstructed justice.
Gregg Hymowitz: The issue is did she lie and did she obstruct justice. If she did, the markets want to see people like that punished. We need, and have needed for some time now, more confidence in the equity markets. Let's prosecute her but let's not treat her differently than we would a man. I think the idea that they're treating her harder just because she's a woman is bogus.
Stuart Varney: This goes back to 18 months ago when corporate scandals were right front and center. The public wanted to see perp walks and executives in handcuffs. This is a direct result of that. I think this is an over zealous prosecution.
Jim Rogers: Don't you want to see people in handcuffs if they break the law?
Greta Van Susteren: I don't think this is a case of sexism. However, the reason why the prosecution would like to go after her very intensively is because she's high profile. She sends out a message to everybody because she is Martha Stewart.
Barbara Corcoran: I think it sends a terrible message to women who are self-made and who have made it in life. It's more than the fact that she is a well known executive and that she is famous. It's very much about the fact that she's a female who's perceived as arrogant. She's being tried for misjudgment and arrogance. And there's no way that if she were a man this would have stayed in the news for so long.
Jim Rogers: Right now in Houston, Andrew Fastow is getting ten years while his wife, Lea is only getting five months. The woman is getting off.
Barbara Corcoran: But Martha is being lumped in with these Enron creeps. She has nothing to do with that. She didn't rip anyone off. She had a failure of judgment in my opinion.
Greta Van Susteren: Women are often held to a greater standard and with that comes a greater responsibility.
Barbara Corcoran: That's not fair.
Greta Van Susteren: It may not be fair but it may be realistic. If she did lie to investigators then shame on her and it's a big disappointment to all the women out there.
Barbara Corcoran: And she should be overly punished?
Greta Van Susteren: No, not overly punished.
Gregg Hymowitz: Greta, I think your high profile comment really back fires on you in this instance. Ultimately, people here believe that they are going after her because she is high profile. Therefore, what level of deterrence does it actually provide? Secondly, I don't know where lawyers learn that a person should be more heavily prosecuted because of their profile or celebrity-ness.
Greta Van Susteren: Let me answer that in two ways. And not because I agree with it, but because it is high profile the media will pick it up and create and deterrence. I think she has been thoroughly punished. I think what's she gone through has been pure hell for her. I would now settle the case for her and I'd give her a misdemeanor. I wouldn't cost the tax payers anymore money either in prosecuting her.
Neil Cavuto: If she is punished, it obviously hurts her stock. But does it hurt the market?
Jim Rogers: The market doesn't care. It's totally irrelevant to the market.
Stuart Varney: The political response to corporate scandals, Sarbanes/Oxley, could do some damage to future corporate managements. It's open season now for lawyers to go after chief executives.
Greta Van Susteren: What's wrong with making sure things are done honorably and holding people responsible?
Stuart Varney: I can see the day when lawyers climb all over a chief executive for being too cautious, because by being cautious he or she put down the value of the stock. In this day and age, that is going to be actionable.
Barbara Corcoran: This sends the wrong message to women in the business world. It says, don't be famous and don't be a woman or you'll pay double.
More for Your Money
Neil Cavuto: On a week we learned the U.S. economy added only a meager 1,000 jobs last month, is this the right time to be telling up to twelve million illegal immigrants, it's ok to stay. Would that plan actually help all of us get more for our money?
Stuart Varney: We have a problem with illegal coming into the country. If we do nothing, more come. You can't seal the borders. You can't attempt forced repatriation. And if we fine employers for having illegal employers, we'll have a recession. This is a rational plan to get some documentation in place and to start to tackle this problem.
Neil Cavuto: Gregg, do you think this sends a signal to those who got here illegally that they just got a free pass?
Gregg Hymowitz: No. I think Stuart is right. There are millions of undocumented illegal aliens in this country working and they're not on the tax rolls. To some extent, I think this program probably doesn't go far enough. And that's why you see some Democratic groups not very happy with this. This program gives you three years and then you're sort of in legal limbo. And I think that's a problem. I think this is election year grand standing.
Neil Cavuto: I don't know if it's election year grand standing because no one seems to be pleased with it. Barbara Corcoran, in your business does this sort of plan make a difference?
Barbara Corcoran: It makes a huge difference in my business because my business depends on using immigrant workers for things that the other people don't want to do. I think it's great that we're taking our head out of the sand on this issue. I'm glad that this is finally being addressed. The majority of these people come here and work very hard. Why aren't we treating them like hard working future Americans?
Jim Rogers: I think it's wonderful that the President is doing something. It doesn't go far enough as far as I'm concerned. And it's not going to hurt American jobs.
Greta Van Susteren: I think this idea is either really smart or really stupid. And I can't figure out which it is just yet. This is at least trying to address a very big problem that we have. One question I have that I haven't seen addressed anywhere is these illegal in this country who have children and then those children become automatic citizens and that's just a social problem we'll have to address in the future. I'm glad to see us trying to solve this problem, but I'm not going to predict whether this is right or bad till I see it happening.
Jim Rogers: Are you saying that they cannot be citizens? Are you saying that they cannot go to school?
Greta Van Susteren: No, they become American citizens by birth. The question is what if we send their parents out of the country. Suddenly we're sending all these three year old Americans out of the country. I'm just saying that this is an issue we are going to have to address.
Gregg Hymowitz: Isn't that the same situation we face today. Someone born here is automatically a citizen, so it doesn't put us in a different situation.
Greta Van Susteren: No, but it's more of an invitation. We're bringing people in and just expanding the issue.
Stuart Varney: All of eastern and central Europe has a declining population. You cannot have economic growth when your population is declining. Now compare and contrast with America where we have a vigorous input of immigrant people coming into this country. We're going to have economic growth in the future.
Jim Rogers: We would be declining in population if we did not have immigration.
Head to Head
Neil Cavuto: Impressive pictures from Mars but are they worth $820 million? The president seems to think so. He's apparently poised to spend a lot more than that to send a man there. Is this good use of our money? Time to go head to head.
Ellis Henican: Neil you're a dreamer. You think these big dreams about space and I'm going to drive you back to Earth on this one. $820 million is just a drop in the bucket. The history of the space program in this country is sadly one of missed opportunities, boosters, and of exaggerated promises. And fewer results of our hard earned money.
Neil Cavuto: Have you ever taken an MRI?
Ellis Henican: I've never taken an MRI.
Neil Cavuto: Good, you're healthy. The space program made that possible. The space program even made things like convenient hair dryers possible. The space program made the modern day pace maker possible. It's about the technologies we gain from putting someone up there on that surface.
Ellis Henican: It is certainly true that if you spend an enormous amount of money on the road to anything, you're going to have some corollary benefits.
Neil Cavuto: Don't you think you get more of that going into space than in any other field?
Ellis Henican: There is no way better than to solve the problems in the world than to try to solve those problems. If we could take the money that you want to go to Mars and cure Leukemia, we're much more likely to do that if we give it to people who are working in cancer labs.
Neil Cavuto: There's something inherent that you don't put a price tag on and that is man's intrinsic desire to learn and expand more. If your mentality had been in place when Columbus was sailing, he never would've sailed in the first place.
Ellis Henican: There are all kinds of things we need to do to promote ourselves as human beings. But let's make some intelligent decisions about it. Let me focus you on this area of manned travel. History teaches us that this has been the most waste of money and the least good science. And that's exactly where we're heading because we like the boosters of it. Show some skepticism my friend.
Neil Cavuto: I want to volunteer you to be that first person on Mars.
FOX on the Spot
Barbara Corcoran: Real estate rules in 2004. Sell stocks and buy homes!
Jim Rogers: Tourism turnaround! Buy U.S. hotel stocks.
Stuart Varney: Rallies live! Stock & gold head higher rest of the month.
Gregg Hymowitz: Bush still vulnerable! Jobs and Iraq not fixed yet.
Greta Van Susteren: Super Packers! Green Bay beats Philadelphia Eagles!
Neil Cavuto: Dick Gephardt will win Iowa and Wall Street will start getting scared Dean isn't the instant presumed nominee. More trouble for this largely Republican bastion that thinks the President wins in a walk if Dean's the challenger!
Forbes on Fox
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: There’s no stopping tech!! Even the names that haven't seen big gains yet may start building up real soon! And Lisa, you’ve got one of those names for us.
Lisa DiCarlo, Forbes.com senior editor: Yes, I do, a company called Zoran (ZRAN). I know a lot of people haven’t heard of this company, but these are the guys that make the chips that go into DVD players, DVD recorders and digital televisions. They’re trading at 27 times ’04 earnings, but they’re posted for sales growth of 40 percent this year and 20 percent long-term.
David Asman: Mike, you’ve got a more familiar name for us?
Mike Ozanian, senior editor: I’ve got Dell Computer (DELL), the big PC maker. Last week they announced that they were going to give 0 percent financing to customers who buy $500 more of their computer. I think that this is going to increase their market share and increase their profits. They’re stock’s at $39 (Friday’s close: $35.57) and I think it’ll be $50 by the end of the year.
David Asman: Lea, another name that we may not know about?
Lea Goldman, senior reporter: I like Sandisk (SNDK), they make the flash memory cards that are basic components of MP3 players like iPods, and digital cameras. Those were the hot-ticket items this Christmas season. They had a bit of a stumble before the new year on warnings of increased competition, but I only see sales of those kinds of things picking up in the new year.
David Asman: Victoria, Microsoft (MSFT), the old standard. Why do you like it?
Victoria Murphy, staff writer: The old standard. Well, we’re saying tech is unstoppable, and I’m sitting here thinking ‘Now I’m in Silicon Valley. Is this 1999 or 2004?’ It’s 2004. So I like Dell and I like Microsoft. I think Bill Gates is unstoppable, and I think once all the tech money managers get scared and start to profit-take, Microsoft is going to look like a really nice shelter.
David Asman: Well, there’s another old standard, Sun Microsystems (SUNW), which was on a roll this week, by the way.
Dennis Kneale: Bet on the stock only if you can afford to lose everything. Sun makes these big workstations and they were a “horseman of the Internet.” Then they fell from $60 a few years ago, and now they bumped along, and some people thought they are going to die.
David Asman: It was trading at $60 and now it’s down to $5 (Friday’s close: $5.31). Is it ever going to rise again?
Dennis Kneale: It was up a buck recently, and some people bought it for $2.50. I think it’s going to keep going up, and I bet on the CEO, Scott McNealy. He’s the founder, he has something to prove, he hasn’t left and I believe in the man.
Victoria Murphy: Everyone just wants Sun to win, but they never do. And you don’t want to hold this stock. Microsoft, on the other hand, always wins. Go Microsoft. This stock hasn’t done anything in the past year.
Dennis Kneale: I was recommending Microsoft only weeks ago, and I could swear that that pup out there in Silicon Valley told me I was wrong.
Victoria Murphy: I did not. I’ve liked Microsoft for a while. The problem is, this stock has done nothing in the past year, but the folks I’ve been talking to recently say that it’s due for a change.
In Focus: Will Martha Stewart walk?
At the end of the In Focus debate, David Asman asked the Forbes panel for their quick predictions on the outcome of the Martha Stewart trial:
Quentin Hardy, Forbes Silicon Valley bureau chief: Martha's guilty and the jury will find her guilty.
Lea Goldman, senior reporter: Guilty. Send her away.
Mike Ozanian, senior editor: I think she's innocent, but it doesn't matter. The stock market's going up anyway.
Leigh Gallagher, staff writer: Martha walks.
Dennis Kneale, managing editor: Martha walks.
Makers and Breakers
• Coca-Cola (KO)
David Asman: First we have Coke. We all know what it is and we all know they lost a very important contract in Iraq, but still you’re for the stock?
Moet Meira: MAKER
Yes I am, and I’ll put that into perspective for you in just a minute. We’re looking at a 15-20 percent upside move in Coke, and that includes the 1.7 percent dividend that we’re expecting. Coke did not participate in last year’s rally, it was dormant for two years. Now, because of the weaker dollar, we think the stock’s going to move. 70 percent of Coke’s profits are garnered internationally. So in Japan, when somebody goes out and buys a can of Coke, he’s paying for that in Yen. Translate that back into dollars, and we get profit.
David Asman: Bottom line is, it’s trading at about $50-51 (Friday’s close: $49.51), you think it goes up to what?
Moet Meira: Definitely $58. The other 30 percent of the revenues are garnered here in the United States and Canada.
Pete Newcomb: BREAKER
I love the beverage, it’s the only soft drink I drink. However, the beverage industry is kind of soft now. The real growth is coming in bottled water and some of these sports drinks.
Moet Meira: Well, we also have bottled water: Minute Maid, Dasani, Evian, we have many other drinks; a whole lot of products.
Dennis Kneale: MAKER
I like Coke. It’s a prodigious world brand. It’s beating the hell out of everybody in China. It’s a growth stock and a growth brand.
Moet Meira: Speaking of Iraq, we’re talking about the city of Baghdad – 10 million people. That’s a fringe marketplace. We’re more concerned with China and the 1.3 billion people.
• iShares Dow Jones US Basic Materials Sector Index Fund (IYM)
Moet Meira: MAKER
This is an ETF (Exchange Traded Fund – A fund that is tracked like an index but is traded like a stock). Basically, there is a lot of uncertainty right now, it’s going to be a very conservative year for the market. But the one thing we’re sure about is that the US economy is growing and growing – fourth quarter, 8 percent. The best way to play that growth is with IYM, the basic material companies in the Dow Jones: chemicals, mining, iron, paper, steel, a diversified basket of blue chip companies – 66 different companies.
David Asman: It’s now trading at $45 or so (Friday’s close: $45.35), you think it can go up to what?
Moet Meira: It’s going to go to $50, and we’re very happy with that, and we know that it will.
Dennis Kneale: BREAKER
I find myself compelled to agree with Moet on almost anything, but I have to say, unfortunately, do not buy this instrument, this ETF. It’s up over 50 percent in less than a year, and you’ve got old-world companies or pulp and paper and aluminum, and yet it’s priced at the value of a growth tech fund, I’d say stay away from it.
Moet Meira: It doesn’t matter once an ETF fund is growing in double-digits, at far faster than any mutual funds.
Pete Newcomb: MAKER
You know what? You get companies like DuPont (DD) and Georgia Pacific (GP) and Weyerhaeuser (WY). These companies pay dividends, these are strong stocks. It’s 25 times earnings, it’s not the expensive.
Stock Smarts: Diva v$ Dictator
Jury selection began in the Martha Stewart trial last week. And a possible trial in Iraq for Saddam Hussein later this year could be a major step towards democracy in that country.
So which trail is Wall Street watching?
Dagen McDowell of Fox Business News says that Wall Street wants some of these corporate crooks to go to jail, but the situation overseas is so much more important to investors. If we suffer any kind of set back in Iraq or with the War on Terror, our country and the stock market would suffer a major setback. She also thinks that foreign perception of the U.S is important, since we need foreign money coming into the market to keeps stocks on the upswing.
Fox Legal Analyst Lis Wiehl does think that the Saddam trial is the most important trial out there, but in terms of the stock market, she thinks that Martha is the one to watch, strictly from a symbolic standpoint. It’s all about whether or not consumers can have confidence, and the Martha trial speaks to that confidence. She thinks that Martha will be convicted; the cover-up is always worse than the crime, and the prosecution will have a pretty strong case. The Enron case will also be for the market this year. And in terms of Iraq, the capture of Saddam was more important to Americans than his potential trail, which is more symbolic for democracy in Iraq. We know what the outcome of the Saddam trial will be (guilty).
Wayne Rogers of Wayne Rogers & Co doesn’t think the Martha trial will matter all that much. He says that we have seen scandals throught history (mentioning the Savings and Loans scanaldas and the Michael Milken case), and the market has dealt with them. What you can’t ignore is the huge deficit we are running in Iraq, and that will potentially hurt the economy. Iraq will take care of itself – the problem is the cost of winning in Iraq.
Jonathan Hoenig of Capitalistpig Asset Management says that Martha Stewart has as much impact on the market as “Hot Lips Hoolihan” from M*A*S*H (drawing a chuckle from Wayne). Jonathan thinks we focus too much on the headlines; he is still looking overseas as opposed to U.S. stocks.
John “Bradshaw” Layfield, author of “Have More Money Now”, does agree that Martha Stewart is a symbol, but she is an overblown symbol, and doesn’t deserve to be put in the same category as someone like Dennis Kozlowski (former head of Tyco), and she shouldn’t go to jail. He does think that we are going to see the fruits of our labor in Iraq this year, and that will be good for the market. In terms of the scandals, what matters to the market is that they are being addressed and taken care of; it’s not necessarily the outcomes of the trails that are of importance.
Jonas Max Ferris of Maxfunds.com thinks we need closure on both the Martha trial and the Iraq issue, and he does see the growing costs in Iraq as being very important. But he thinks the Martha trial is a crucial aspect to restoring total consumer confidence back to the market. And if we see another “A-list” scandal, the market would take another hit. People want to see these “bad guys” go to jail.
Be$t Bet: Big News, Big Money?
A lot of big-name stocks are reporting earnings this week – and we’ve got the scoop on some potential buys.
• Yahoo! (YHOO)
Reporting on Jan. 14
Friday's close (1-9-04): $48.12
Wayne says “it’s all good” with Yahoo! (he owns the stock). He thinks it’s a wonderful company and that the stock still has room to go up. Bradshaw also loves the company, but he thinks the stock price has gone ahead of itself (“there is perfection priced into the stock”). Jonathan says that Internet stocks were one of the big stories in 2003, and he certainly wouldn’t fight Yahoo! right now. It is a very strong stock.
• Bank of America (BAC)
Reporting on Jan. 15
Friday's close (1-9-04): $78.35
Jonathan says the banking sector is pretty strong right now. He wouldn’t short BAC, but he likes the regional banks and the foreign financial stocks better – he mentions Banco Santander (STD) and the National Bank of Greece (NBG) and financial plays he likes (he owns both stocks). Bradshaw says that BAC had a great acquisition in FleetBoston. And even thought Internet banking is becoming more popular, people still like to go to local branches, and BAC has the best positioning. Wayne is pretty much neutral on this stock – he doesn’t really love the big banks. A couple of regional banking plays he likes are Southtrust (SOTR) and Amsouth (ASO) – he owns both stocks.
• Sun Microsystems (SUNW)
Reporting on Jan. 15
Friday's close (1-9-04): $5.31
Bradshaw does not like SUNW (“potential does not pay the rent”) at all. Wayne thinks that the chart for SUNW looks great, and he likes it right now. Jonathan says that stocks we have been conditioned to hate, like Nortel (NT) and Cisco (CSCO) are strong right now. He’s not buying SUNW, but he wouldn’t fight it.
Stock of the Week
Last week’s pick (which was for Stock of the Week) was from Charles Payne: Corvis (CORV)
It was up 25 percent from January 5 – January 9, 2004.
This week, Bradshaw says the stock to watch is Anadarko Petroleum (APC). He thinks that the shortage of natural gas is playing a big role in stocks like APC, since the winter has been so cold. And with more cold temperatures on the horizon, APC could have a good move in the short-term. Jonas doesn’t think that weather forecasts are a reliable enough tool on which to base an investment decision.
Wayne, Jonathan and Dagen answered some of your questions.
Question: “Will we have big inflation in 2004?”
Dagen doesn’t think we need to worry about inflation. There is still so much pricing competition out there. The job market is also just getting off its back, which will help keep inflation away. Jonathan notes that in 2003 commodities were a huge story, and that “smells of inflation” (Dagen responded by saying it smells, but doesn’t stink). Jonathan is still playing the commodities, and is still buying gold. Wayne is worried about inflation, and it’s all a question of timing. Wayne likes the commodities as a protection against inflation, and he believes that inflation is coming at sometime, since we a re running such high deficits.
Wayne says that if he had to choose, he likes Johnson & Johnson as a turnaround play and Alcoa from this list. However, he says that he isn’t all that trilled about any of the stock on the list. Dagen says to look at the Dow Diamonds (DIA) instead of picking a couple of Dow stocks. Jonathan wouldn’t fight KSE or ECL, but he would stay far away from JNJ.
Question: “What would be some good stocks to buy when interest rates go up?”
Jonathan is playing off of the potential of rising rates by participating in a lot of floating bond funds, like the Citigroup Investment Corporate Loan Fund (TLI), Senior High Income Portfolio (ARK) and Salomon Emerging Markets floating Rate Fund (EFL), all funds that he owns. He even thinks REITS are still strong. Wayne says he isn’t that smart to play on the potential of rising rates.