Recap of Saturday, February 21


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Bulls & Bears

Brenda was joined by: Gary B. Smith, columnist; Pat Dorsey, director of stock research at; Scott Bleier, president of; Charles Payne, founder & CEO Wall Street Strategies; Bob Olstein, president of The Olstein Funds; and Stuart Varney, Fox Business News contributor.

Trading Pit

Can the Dow make a new all-time high this year?

As of Friday’s close, the Dow is only 11-hundred points away from the high it set back in January 2000. That means a gain of 10-percent and it’s a new high!

Charles thinks the Dow will match its all-time high within several months, but then will go nowhere until the presidential election. If President Bush wins that election, Charles believes the Dow will make a move and stay above its high. He added that interest rates are going to go up, but that is just confirmation that the economy is strong enough to sustain a strong stock market.

Stuart is not bearish, but believes we will be very lucky to see the Dow break its record high this year. He did admit it may touch that high this year, but added that it's a long shot. He expects long-term interest rates to rise by the summer, which will put a damper on the market. Also, for the Dow to rally 1,100 points from here, companies will have to have very strong gains in profits, which he also thinks is a long shot.

Bob said investors have to stop worrying about the Dow and need to focus on buying good stocks, because now more than ever, we are in a stock picker’s market. Likes Charles, he thinks interest rates will pick up sometime this year and that will lead to a 10% correction.

Gary B. charted the Dow’s performance over the past decade. He thinks there will be a correction and it will head down, but its recent move up broke the back of the bear market. He said it’s now going up and we should hit the all-time high by May.

Scott does not think the Dow will make a new all-time high this year. In fact, he believes it has already begun the correction that Bob and Gary B. mentioned. Scott said nobody likes a correction and everyone wants the market to go straight up all the time, but that is not going to happen. He expects the Dow to pull back to about 10,200. When it hits that mark, investors should start buying stocks again.

Pat also doesn’t see the Dow topping its high. He explained that companies are not going to get earnings growth needed to reach that mark, plus interest rates are going to rise. He said investors should be wary because that market is going up on high expectations that are not going to be met.

Stock X-Change

With the Dow’s high in sight, Scott, Pat and Bob each picked stocks that are set to break their all-time highs.

Bob chose WMS Industries (WMS), a company that makes slot machines. He said WMS Industries has cash and no debt and has the capability to increase earnings. He thinks it will make a new high in 2004 despite the fact that it’s doubled in the last two years. His fund owns over 1 million shares. (WMS Industries closed on Friday at $27.26. Its all-time high is $32.29.) Scott thinks this stock is priced fully and that Bob should take his profits. Pat said if everything goes right, then it has room to grow, but a lot of things have to go right in order for it to go up. Pat agreed with Scott and said that Bob should take his profits.

Pat picked Accenture (ACN), a consulting company. He said it has a good return on capital and it converts revenue into free cash flow. Also Accenture is very profitable and Pat thinks it has a lot of good upside. (Accenture closed on Friday at $22.73. Its all-time high is $29.90.) Bob said it is an outstanding company, but is priced to perfection. Scott thinks it is expensive and doesn’t think there is a lot of upside to it.

Scott chose ATI Technologies (ATYT), a leading maker of computer graphic chips. He said earnings are going to be up and it can go to $25. (ATI Technologies closed on Friday at $16.45. Its all-time high is $21.75.) Bob said it has an excellent balance sheet, but is fairly priced. Pat said this is a decent company in a very tough market. He said that product cycles in video chips are very short, so the winner can become the loser very fast.


Forget A-Rod! He may the best and highest paid player in baseball, but he won’t make you any money. However Gary B. and Charles could and each picked all-star stocks worth their price tag.

Gary B. chose MBNA Corporation (KRB). He said never argue with a stock like this that’s making an all-time high! He likes that it is strong, getting stronger, and could hit the mid $30s by the end of the year. Charles said this stock is expensive compared to some of its competitors. He said it has made a lot of acquisitions, but a lot of great things are already built into this stock, so it is set up for a fall. (MBNA closed on Friday at $27.77.)

Charles picked Corinthian Colleges (COCO). He said like A-Rod this stock has delivered consistently over a long time. Every time it reports its earnings, it beats the estimates. He admitted it has gone through some troubles, but he likes to see that—a stock be tested and then come back strong. He thinks it will continue to do well. (Corinthian Colleges closed on Friday at $61.92.) Gary B. said this stock has been hot, but it is still recovering from a massive sell-off in December. He wouldn’t buy the stock until it closes above $67.


Bob's Prediction: Comcast (CMCSA) ups its takeover bid for Disney (DIS) to $32

Gary B's Prediction: Cingular/AT&T Wireless merger a mess; Verizon (VZ) up 30%

Charles' Prediction: "Flash memory" will boost your bottom line in a flash (Charles specifically mentioned SanDisk-SNDK, Lexar Media-LEXR and Silicon Storage Technology-SSTI.)

Pat's Prediction: Home $weet Home! First American (FAF) going up 33%

Scott's Prediction: You should "Opt" to make big money! AU Optronics (AUO) up 50% in 1 year

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Cavuto on Business

Neil Cavuto was joined by Mark Mellman, Senior Adviser with John Kerry's Presidential Campaign; Tom Adkins, founder of; Jim Rogers, author of "Adventure Capitalist"; Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of "Yes, You Can Time the Market!"; and Nancy Skinner, Radio Talk Show Host and Democratic Candidate for U.S. Senate in Illinois.

Bull or Bubble?

The Big Question: Is it a bull or bubble?

2004: So far a year of big deals: The Disney takeover battle, AT&T Wireless sale. And maybe on of the biggest new stock offerings ever if Google goes public.

Is it all a sign of a bull market getting stronger or a warning that a bubble is about to burst?

Tom Adkins: Bull! New stock offerings is a sign of entrepreneurial faith. Profits are up, gross domestic product is up, personal income is up. I can't see anything going down.

Jim Rogers: You say bull. I say that's a lot of bull. This is a rally in a bear market. These pick up in deals and IPOs are signs of froth in the market and that the market is getting over-extended.

Gregg Hymowitz: I disagree with Jim. Stocks are cheap on a historical level. The S&P 500 is selling at a multiple of 18 times next year's earnings. The 60 year average is just 16 times future earnings. Plus, interest rates are at 45-year lows.

Neil Cavuto: So far this year, there have been 21 IPOs compared to just 5 during the same period last year. And there have been $230 billion worth of mergers and acquisitions this year compared to $39 billion last year. Is this a bullish sign?

Ben Stein: IPOs, especially tech offerings, are a sign of a frothy market. If you look at the Philly Semiconductor Index it's twice its historical price to earnings ratio. On the other hand, the M&A market is often a sign that stocks in those sectors are undervalued. I think we have a situation where techs are overvalued and old industrial stocks are slightly undervalued.

Jim Rogers: I disagree with Ben regarding M&As. A lot of these mergers happen when the acquiring company's stock is high and allows the company to use it as a currency to purchase other companies. So that is another sign of a market topping out.

Gregg Hymowitz: The IPO market was virtually dried up over the past two years. So, you can't really say this year's increase is froth. It's just getting back to a normal rate.

More For Your Money: "President" Kerry Stocks

Neil Cavuto: Fair and balanced: last week we looked at stocks that would benefit if President Bush is re-elected. This week we have stocks that win if John Kerry wins the White House.

Mark Mellman: John Kerry will focus on jobs and getting people back to work which will help the economy and the stock market. He also has a plan to cut the cost of healthcare for every business and individual, and a plan to cut the $500 billion deficit.

Ben Stein: Senator Kerry is very weak on defense. And that scares me. I would sell defense stocks if he is elected. I do not own it, but I would also buy the Rydex Ursa Fund (RYUCX), which shorts the market, because stocks would fall if Kerry becomes president. I think he will raise taxes and turn the country over to the trial lawyers.

Jim Rogers: Whoever wins in November, stocks will go down next year. And it doesn't matter if it's Pres. Bush or Sen. Kerry. I would also short the market. One way to do it is to buy the Zweig Fund (ZF) which as a balanced fund can short stocks. I own it and I am a director of the company.

Gregg Hymowitz: John Kerry is not weak on defense. He is a war veteran.

Ben Stein: Kerry has voted against every major defense program.

Gregg Hymowitz: Mark Mellman is right. Kerry is focusing on the things that matter: job growth, lowering the deficit and cutting healthcare costs. I think healthcare is a sector that will benefit from a Kerry administration. One stock I like and own in that sector is HCA Inc (HCA). It's the nation's largest hospital company. Its price is cheap compared to future earnings. And it has a great management team.

Tom Adkins: If Kerry is elected President, the economy will go in the toilet. The reason we came out of a recession is because George Bush cut taxes. If you raise taxes the economy will tank.

Gregg Hymowitz: George Bush Sr. and Ronald Reagan both raised taxes because of huge deficits.

Tom Adkins: And look what happened, it hurt the economy.

Mark Mellman: John Kerry would rescind taxes on upper income earners and keep tax cuts for the middle class.

Neil Cavuto: Kerry's plan to raise taxes on the wealthy would only raise about $28 billion. That's a small portion of the $500 billion deficit. How would he pay for the rest of it?

Mark Mellman: You can grow the economy and reduce the deficit at the same time.

Ben Stein: He doesn't have a plan. It's a secret plan.

Gregg Hymowitz: Many investors and conservative groups are worried about the amount of money the Bush administration is spending. I think a Kerry White House would be seen as controlling the deficit and that would help stocks.

Head to Head: Did Tax Cuts Save Our Stocks And Economy?

Neil Cavuto: I look at all these improving economic statistics and at the tax cuts and the timing of the tax cuts. I also look at a few months before we got these improving numbers and I’m saying to myself, “Game Over. Tax cuts work!”

Nancy Skinner: We need truth in advertising laws to apply to this administration. President Bush built this as a jobs plan. I think we’ll have an easier time finding the weapons of mass destruction than the 2.6 million jobs he has promised.

Neil Cavuto: You don’t acknowledge that the 320,000 jobs created over the last 5 months, while not dramatic, mean something?

Nancy Skinner: Certainly these jobs are a help, but it’s far from what he’ll need to have the worst job creation record since the Depression.

Neil Cavuto: Let’s talk about the economy. I agree that there’s tepid growth in regards to jobs, so that not withstanding, will you acknowledge that the economy has benefited from these tax cuts?

Nancy Skinner: The director of the Congressional Budget Office testified recently that there is no scientific base to conclude that the tax cuts help. There could be so many things at work here.

Neil Cavuto: The economic growth over the last couple of quarters has been staggering with the impact of these tax cuts. You have to give credit where credit is due. When people have more money, they spend more money. Businesses spend more money and everyone benefits.

Nancy Skinner: I agree that economic growth has tipped up, but we’ve had a number of interest rate reductions, low mortgage rates and the dollar has fallen by 30%. We also have massive deficit spending, which is classic fiscal stimulus. How can you take tax cuts?

Neil Cavuto: What is an acceptable rate you can take from Americans to get what you want for the government? Is it a third or half your income? Where do you draw the line and say you’re not paying enough, you have to give more?

Nancy Skinner: These are tax deferrals, not tax cuts. Now we have this half a trillion-dollar deficit and by 2009 we’ll be spending more. We’ll have all the interest on the debt and all of the discretionary spending together. Neil Cavuto: Do you put stock in economic projections on revenues? They’ve been wrong consistently, whether you go back to Ronald Reagan or to George Bush Sr. or to Bill Clinton. Bill Clinton started his presidency with deficits as far as the eye can see and we had economic growth. My point is that we get it wrong again and again.

Nancy Skinner: I don’t trust this administrations numbers. They low-ball the deficit, they highball the jobs market numbers. They don’t even put the appropriations for Iraq in there. They cherry pick what they want. How can you have faith in that?

Neil Cavuto: So, you would never give tax cuts to people, bottom line?

Nancy Skinner: No, I think we need tax cuts for the middle class and to stimulate the economy, but not for people making over $200,000 a year. We are all going to pay for this.

FOX On The Spot

GREGG: Martha's lies land her in jail.

TOM: Buy homes now! Interest rates stay low for next 6 months.

JIM: Sell Coca-Cola (KO). New CEO will not add fizz to profits. (Jim does not own stock.)

BEN: Powell will quit and Cheney will move to State Department.

NEIL: Mo' money from tax refunds means mo' boom to the economy.

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Forbes on Fox

How are politics and global events affecting your wallet? We’ll put the story In Focus and give you the bottom line.

David Asman: It's takeover mania on Wall Street. When somebody offers to buy a company for more than it’s current stock price, that stock price usually goes up. The trick is knowing which company is the next target. Jim, why is all this stuff happening now?

Jim Michaels, Editorial Vice President: We are in a bull market. The stocks are going up and the CEO’s are fat and happy and full of themselves. Instead of staying in the office and running the business and building their business, they go out and make deals and get their names in the paper.

Bob Lenzner, National Editor: There are more takeovers in banks than in entertainment. Last fall Bank of America (BAC), one of the largest banks took over FleetBoston (FBF) and paid a 50% premium on Fleet's shares. In other words, Fleet shares were selling at $31 and the offer was for $45. There you made a really instant big profit. When JP Morgan Chase (JPM) made the offer for BANK ONE (ONE), which is a Chicago bank, that offer was only about 14% higher than BANK ONE shares. So everybody is looking around for the next bank takeovers.

Dennis Kneale, Managing Editor: The cell industry is consolidating and it needs to. AT&T Wireless (AWE) just got bought. Every time a takeover happens the acquirer’s stock market goes down. And the company you are bidding for’s stock goes up. Look for independent little companies who look like they would be a great trinket on a charm bracelet. Verizon (VZ) will buy Sprint PCS (PCS), within two years. That is an undervalued stock and if you can figure out right now, given the AT&T Wireless deal, if you’re Verizon you figure you’ve got to counter this.

David Asman: Victoria, you know about Silicon Valley, any mergers in that field?

Victoria Murphy, Staff Writer: Yeah there is. Larry Ellison [Oracle CEO (ORCL) launched this wave and if you invested in PeopleSoft (PSFT), you benefited greatly from his actions. But I think investors who want to play takeovers in software need a really good fortuneteller. It's tough to say, and it’s a fragile industry. I would look at BEA Systems (BEAS) and Veritas (VRTS). Both companies have growth in license revenues, which is a rarity in the industry. With BEA, the rumor is that if Larry Ellison doesn't get PeopleSoft, he will go for BEA. The BEA C.E.O. (Alfred S. Chuang) says they are not for sell and that they are a great independent company. If Larry Ellison goes after them, it could be a different story. They are decent investments by themselves if you compare them with the rest of the software industry, which is maturing.

David Asman: Steve, in Wall Street and entertainment, timing is everything. As soon as you hear the rumor, do you buy at that point?

Steve Forbes, Editor-In-Chief: Investors shouldn't go in that game. It's good for the stock market. This is a surge and the urge to merge means the market as a whole is going up. But to try to play that game on rumors is a fool's game. If you have good stocks, somebody may buy. Look at areas like nanotechnology which is the wave of the future, there could be a lot of buys there. Another good thing this whole thing reminds us of is that we’ve got to get rid of poison pills. That is what management puts in that makes it impossible for them to be taken over unless they want to be bought out, like putting in a 98% stockholder approval or something like that. They put it in, in the ‘80’s to stop hostile takeovers. The best antidote for bad management, misgovernance is having a shareholder come in and say ‘we are taking you over, throw you out and turn the company around.’

Jim Michaels, Editorial Vice President: Once the stock is in play, the arbitrageurs move in. They are the professionals who make a living betting on deals. They have insights the average guy can't have. You don't play that game. I think that actually what you do is what Dennis says. You look for companies that are undervalued because they're temporarily out of favor, that have strong balance sheets. If they don't they're either going to get taken over or they're going to turn on their own.

Victoria Murphy: It is a really tough game to play, and in software especially. If you look across the board, license revenues are declining at the percentage of overall revenues. This means these companies are having a tough time finding new areas of growth and instead are milking support and services which are less profitable. It's dangerous.

Dennis Kneale: I think for the very brave investor, you can place some bets here. Look at Disney's (DIS) stock right now (Friday’s close: $26.55). That stock could easily go to $35. We looked at the breakup value of that company and while it has a total market value now of $48 or $50 billion, we think the real value is around $75 billion. I would buy Disney.

David Asman: Steve, what about something like that, where everybody knows that a lot of companies want to buy it, shouldn't you buy up Disney stock?

Steve Forbes: You should, but most of the gains are already over. The thing is to get in before everyone else discovers it. When you look at the proxy, see which companies have the poison pills. Amazingly, Disney didn't have the kind of defenses a company normally would have. I'm very, very surprised about it. But also if Washington is serious about corporate misgovernance, ban the poison pills and you will see shareholder value go up.

Bob Lenzner: I agree you shouldn't buy stocks because they are going to be taken over. If you are buying banks, buy banks in regions where you see the big banks wanting to expand. What’s happening is people are trying to become major factors in their own region or expand from the east to the west or trying to become global banks. We're going to see a huge wave of takeovers. But you have to buy bank shares that are already fairly valued in the market. If you get lucky, you get lucky.

Tired of hearing the same investing advice from every side? We’ll give you the contrarian approach to investing in our Flipside segment.

David Asman: A vote for Ralph Nader is a vote for stronger stocks. Jim, how can Ralph Nader help the stock market?

Jim Michaels, Editorial Vice President: If he runs, he siphons away votes from the bad guys [Democrats]. Dennis Kneale, Managing Editor: I have to tell you, I don't think there's the groundswell there was last time and not the disaffection with candidates. I met Ralph Nader and it was a little sad. He was off in a corner by himself with a stack of a bunch of books. He is a nice guy, but right now the angry voters went for Howard Dean. Voters who are anti-big business can go for John Edwards.

David Asman: We have done a Fox News opinion dynamics poll showing a dead heat between Kerry and Bush, and if Nader got in the running, he could make the difference, Steve, just like he did in Florida.

Steve Forbes, Editor-In-Chief: He may perform a great public service by running, especially by putting his name on the ballot in places like Florida. The only way you’re going to get Ralph Nader out of the race is have Al Gore endorse him and I don't think that will happen.

Elizabeth MacDonald, Senior Editor: I think Dennis is right. I don't think this is the same situation as in 2000, where it was Bush against ‘Bush Lite,’ according to the ‘lefties.’ I do think there is a tremendous groundswell of support for Kerry from the “Dean-iacs”. I don't think Nader will pick up those disaffected voters. By the way, there was a recent online poll that asked ‘would you vote for Nader if he ran?’ Only one out of nine said they would. That is a 60% drop-off from the year 2000. That is a huge deal.

Elizabeth Corcoran, Contributing Editor: This is complete television candy for the Republicans. Nader is not going to get a lot of money, unfortunately or fortunately, but at the end of the day, it is not going to matter. As Elizabeth said, very few of the progressives are going for Nader this time. A very progressive news magazine came out against him. He wants very hardcore Republicans who feel disenfranchised with the Bush administration. If you want to lead them that way, go ahead.

Jim Michaels, Editorial Vice President: The guy is an egomaniac. He can't stay alive if he doesn't get a piece of the publicity here. I don't think he’s going to make a difference.

Steve Forbes: Why do they call them progressives? They’re retro-gressives. They want us to move back into caves.

Elizabeth Corcoran: Labels are great. At the end of the day, he's just not getting a following anywhere right now.

Steve Forbes: What is going to happen when they find out John Kerry stands for nothing except his own election? Aren't they going to try to send a message again?

Elizabeth MacDonald: Kerry stands for a few other things than himself. He is raising interesting issues, too. But I think if Nader ran, he may turn off the people who were for him and that could hurt his cause greatly.

Dennis Kneale: Like Jim says, he is dying to be listened to, but you know what? Every single candidate who runs for president has the same size ego. You have to in order to even be in the game, right?

Makers & Breakers

Kraft Foods (KFT)

Mike Norman, Founder of the Economic Contrarian Update: MAKER

I am not that bullish on the economy for this year, so these are sort of defensive plays. I had been before, but there are things in the data now that I think shows that the economy is slowing down. Kraft is a food company, a major player, growing earnings very strongly. The stock is relatively cheap. Look at the P/E and its valuations. I think they are well positioned.

David Asman: They’re at about $33 now, (Friday’s close: $33.20). How high do you think it can go?

Mike Norman: I think it could go to $60, which is the all-time high.

Elizabeth Macdonald, Senior Editor: BREAKER

I am a breaker on the stock. It's going through a restructuring. Also, with the baby boomers becoming increasingly obsessive about their health, I don't think they want a junk food stock. I know Kraft Food is trying to cut back on the carbohydrates. How do you lower the carbohydrates in Jell-O without turning it into what it really is: plastic.

Jim Michaels, Editorial Vice President: BREAKER

Velveeta isn't even cheese. The company is a slow growth company. I'm a breaker.

Mike Norman: This is a great company. They are growing earnings at a very strong rate. It is a defensive play in an economy that I think you will need defensive plays in.


Mike Norman: MAKER

Drugstore, pharmacy chain, CVS is doing a lot of great things here. Compared to its peers, it is very attractively priced. Also, you have to look further out. The prescription drug bill, I think all the pharmacy companies will see earnings grow as a result.

David Asman: How high do you see it going? (Friday’s close: $36.48)

Mike Norman: $45

Jim Michaels: BREAKER

You haven't sold me. There's a 10-ton gorilla called Wal-Mart (WMT) lurking in the business. CVS is a middleman and we’re in a business with a price squeeze. The middleman always gets squeezed. Short-term, OK, but long-term I wouldn’t have it.

Elizabeth MacDonald: MAKER

I'm a maker on the stock. They are so smart with their restructuring and removing the stores from shopping malls where teens frequent because the obsessive baby boomers tend not to be in shopping malls and going into the hot growth areas where boomers may migrate to. That’s Phoenix and Florida.

Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:

David Asman: Should Martha take the stand to save herself and her company? That’s the big question.

Dennis Kneale, Managing Editor: Even with her best friend hurting her in the past week, saying ‘I can't remember certain things and whether I thought it or Martha said it,’ I think Martha has enough to be acquitted. There's reasonable doubt. But here is why she should take the stand, and here’s why she will. She is protecting her name. Her very existence is at risk here and she needs to win sympathy with the jury and bitch slap the broker assistant Douglas Faneuil who testified against her and put more doubt about the memory of her best friend Mariana Pasternak. Martha is a control freak and she wants to be heard on this.

Elizabeth MacDonald, Senior Editor: I think it could really hurt her credibility. Because if she takes the stand and say things such as "I don't recall" or acts in a disdainful way, that could anger the jury and turn it against her.

Victoria Murphy, Staff Writer: I think she's got to take the stand. She's got to fight this image as a coldhearted, greedy elitist. She is a great actress. She has made a career out of acting like a warm-hearted homemaker. It is no different. She needs to get on the stand and pull a Nicole Kidman and convince the jurors she is this value conscious wonderful person.

Steve Forbes, Editor-In-Chief: If she has to, she will. And she will learn this weekend how to eat humble pie, because she knows if she doesn't, she will have prison pie. I think all she needs to do is win one or two jurors. She’s going to go up there and she knows that if she gets convicted, even if it's overturned on appeal, she's ruined and the company is ruined. She has to win this and will throw the dice.

David Asman: Elizabeth, what about pleading? It is possible she mounts up all the evidence against her and says, “Maybe I should cop a plea?”

Elizabeth MacDonald: That is being discussed right now. Should she plea or wait and get a suspended jail sentence or a fine. I think her friend, Pasternak, who was with Martha and said apparently that Martha said, ‘Yes, I did know that Waksal was trading,’ but then made statements to the fact that maybe she had a memory lapse about something else. That is incredibly damaging, but the government has not really proven the case. There is a lot of reasonable doubt here.

Steve Forbes: The ones who should be on the stand are the prosecutors, for saying you should be convicted for proclaiming your innocence and it is security fraud if she proclaims her innocence. That is absurd. They should throw the case out on that.

Dennis Kneale: I think Martha can have it both ways. I think Martha can say, “I sold the stock of that ImClone (IMCL) company, because it fell below $60. But, yeah. If they told me Sam was selling, sure, but that's not why I sold. Both things can be true.”

Victoria Murphy: I agree with Dennis. She is a fighter and if she quits now the jurors will be let down. It looks really suspicious.

Steve Forbes: If she pleads, she's over, finished.

Elizabeth MacDonald: I don't think she's finished. People bounce back.

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Cashin' In

StockSmarts: The Next Big Thing!

In 2003, the big thing in the market was tech, leading stocks on a comeback trail.

So where is the place to be in 2004?

Dave Nelson of DC Nelson Asset Management says that the U.S. economy is getting better, and he likes the energy sector going forward in 2004. He thinks the valuations are reasonable, the yields are right there and the energy companies (on the whole) are cash rich. He sees the broad indices (Dow, S&P 500) holding up pretty well right now, and they will keep going up with the economy.

Dagen McDowell of Fox Business News says that a lot of companies are cash rich because of the rise in corporate profits. And because of those profits, companies are going to be spending money on new technology, and that will continue to help areas of the tech sector rise, specifically mentioning networking equipment and wireless communications. Dagen wonders where the guts have gone from some member of the crew (in terms of taking risks).

Jonas Max Ferris of says 2003 was all about risk - whether it was tech, junk bonds or emerging markets, and the safe stuff was placed on the backburner. He thinks that the “risk game” is going to be over (although he mentions telecom as a risky sector that will do well in 2004), and the safe assets will be the place to be. He thinks that the run in foreign stocks is pretty much done.

Gary Kaltbaum of Kaltbaum & Associates is taking “zero risk” right now, and he thinks the next big thing is that whatever was big in 2003 will not be big in 2004. He says the 2150 level of the Nasdaq is where we could top out. Gary does like energy, but is more interested in defensive plays, like food stocks. It will all come down to earnings and valuation. And “things change” - two words that Gary always comes back to (an not enough investors recognize these words). Most investors will sit there when things are changing in the market and think that everything will return back to a normal place, which doesn’t really happen. And all the deals and mergers going on are a positive for the market, but not an issue to make him more bullish.

Jonathan Hoenig of Capitalistpig Asset Management talked about an old saying: “when in doubt, stay out”, and that might be appropriate right now. For Jonathan, it always comes down to what your existing position is made up of, and he has a lot of cash on the sidelines. But he is still holding on to areas that have been strong for him, like utility stocks and international plays – even the gold stocks. But in terms of new money, he isn’t seeing anything major on his radar.

Mike Paul of MGP & Associates thinks that the market is all about perception, and credibility in the market is extremely important. He thinks the next big thing in the market will be what he calls “the three T’s”: trust, transparency and truth. The average consumer right now is really questioning what they can believe in terms of the stock market.

Best Bets: Big Pick$

What are the big picks for 2004? The crew came up with some potential winners.

Gary's Big Pick
Phoenix Companies (PNX)
Friday's close (2-20-04): $13.86

Gary owns shares in what he calls a “defensive play”. It’s part of a strong group (insurance), he likes the way the stock is acting, but more importantly, the people who are running the company are buying a lot of stock right now, and that is a great sign. Dave is frightened because he thinks the stock is a little too cheap in terms of price. Jonathan does think the insurance sector is very strong, although he is putting money to work in a company called Aon Corporation (AOC).

Jonathan's Big Pick
Scottish Power (SPI)
Friday's close (2-20-04): $27.25

Again, this is another play Jonathan likes from the foreign utility sector (he owns this stock). He’s ever been to Scotland, but he likes the stock. Dave also thinks this is a good play – he likes the company’s financials. And Gary says you can’t fight Jonathan’s foreign picks, as so many have turned out well.

Dave's Big Pick
Archer-Daniels-Midland (ADM)
Friday's close (2-20-04): $17.16

This is a play on the food market and energy as well (ADM is a big producer of Ethanol). This stock has something for everyone: technical people will love it because it keeps making new highs and momentum people will love it because it keeps revising its earning estimates up. Jonathan thinks this is a strong stock, as does Gary.

Stock of the Week

Last week’s pick was Telik (TELK) made by Wayne Rogers (he owns the stock). For the week of February 13-20, it was DOWN 2.1%

This week, Gary Kaltbaum thinks that United Technologies (UTX) is ready for a big week (he does not own the stock). In terms of looking for a quick move, he is always looking for a stock that has “big money” flowing into it. He loved the way UTX reacted so strongly after its earnings report, and he does think that the stock is ready to hit $100. Jonas thinks that this is the ultimate cyclical stock, and that could mean money is ready to be rotated out of this play really soon.

Cashin’ In Challenge

The 2004 Cashin’ In Challenge is underway. For an update of who’s hot and who’s not so far, check out the website at:


Gary, Jonathan and Dagen answered some of your questions.

Question : “I bought some Pearson (PSO) stock because Jonathan had it in the Challenge. Why did he sell it?”

Jonathan says he sold it because making money is ultimately about managing your position. And at the time, PSO was losing money and his other Challenge stock, Metso (MX), was picking up steam. But PSO has rallied back, and he still likes the stock.

Question : “What do you think about Taser (TASR)? Is it a buy right now?”

Dagen says the stock of this company, which makes stun guns, is “stunningly expensive”. If every “cop and corrections officer went out and bought a stun gun” right now, the total sales would still not reach the market value of the stock - not where you want to be. Gary says his favorite movie of all time is “One Flew Over the Cuckoo’s Nest”, and if you are buying this stock right now, it’s medication time. 75% of this stock is shorted (explaining the run up). Jonathan thinks this was a post 9/11 idea, and it just isn’t working for him right now.

Question : “I invested $8,000 in Novellus (NVLS) at $32.96. Should I hang on or sell it, and at what price?”

Gary says that long-term investors shouldn’t necessarily listen to him, but he thinks that a lot of the semi-conductor stocks are sells right now (Novellus in the mid-30’s). He would be really careful with this one. Jonathan says it’s not about where the stock is going, but where you want to get out of the stock. Set a stop-loss at just under $30 for this stock.