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: 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; Price Headley, investment strategist at BigTrends.com.
Trading Pit: Bulls vs. Al Qaeda
A new wave of vicious, deadly and coordinated terror attacks. First the Madrid (search) massacre, that likely changed Spain’s election. Then a Baghdad hotel (search) was leveled by a car bomb. Both attacks are said to have Al Qaeda's fingerprints all over them.
Price said there hasn’t been a lot of good news for the market this month. The terror attacks are just adding to it and making the market go down in the short term. He thinks terror changed the outcome of the election in Spain and this increases the risk for our elections in the fall. But many people are too bearish and are waiting for a market correction. So when stocks pull back—buy!
Gary B. said, as usual, the “buy the pullback” crowd got scared when the market actually did pull back in late February and early March. But the Dow is still above an uptrend it established in July, and that means everything is fine and it’s headed up. He was tempted to sell his stocks on Friday, but held on because many times he has made the mistake of selling right before the buyers come in and jack the market up
Tobin is not concerned with the rough time the market has had for the past 6-7 weeks, because it is a correction, or a time when stocks sell off after an extended run. The market will learn to adapt to terror attacks, but unlike interest rates and inflation, it’s not something that can be measured. He advised investors to buy stocks of companies with increasing earnings. But if you’re nervous about buying stocks, he’d buy Treasury Bills or natural resources ETFs, which are a basket of natural resources stocks that you can buy like an individual stock.
Scott thinks that the trading on terror will continue, but things should be put into the proper prospective, because the correction was underway before the new wave of attacks. However, the attacks have added to weight of correction and he thinks the Dow will fall below 10K. He believes oil prices are the wild card though, because high oil prices are really hurting the economy. Scott concluded by saying that the market is the only place where you can buy things on sale, and nobody wants to buy the sale—you have to buy when investors are fearful.
Pat said terror shouldn’t affect how you invest at all, because it will only have a short-term effect on the market. He explained that stocks took a hit after Madrid bombings, but that was made up by the beginning of the next week. The same thing happened after the U.S.S. Cole was bombed, the Iraq war, and 9/11. These attacks freak out the market in the short term, but after a few weeks, their effects lessen and inflation, earnings, and interest rates take over again. He thinks more stocks are priced well and ended the segment by saying, “When there’s a lot of greed in the market, be fearful, but when there’s a lot of fear in the market, be greedy.”
Scott, Toby and Pat picked stocks that will help the bulls beat terror by helping you make money.
Scott chose OMI Corp. (OMM), a shipping company that transports oil and natural resources. He explained that shipping prices over the past year have gone through the roof and OMI’s double hull ships are extremely valuable. Pat said the shipping business is an attractive market, but he doesn’t think it will do as well as it did last year. Toby also likes this stock. He said oil production in our country has gone down 20 percent over the past 5 years, while the demand has gone up 7 percent. (OMI Corp. closed on Friday at $10.62.)
Toby picked Alvarion (ALVR), a wireless broadband company. He said Intel (INTC) is making a new chip that will make this market explode. He admitted this is a very aggressive stock, but he thinks it can hit $30 in a year. (Alvarion closed on Friday at $14.50.) Pat agreed that it is aggressive, and it may explode, but it is a very risky stock. Scott said it is a speculative stock, but does have a clean balance sheet and a lot of cash and a technology that could make it really take off. Scott would buy it, but recommended to put a stop loss at $10 or $11.
Pat’s selected First American Financial (FAF), a title insurance company. He said it’s very difficult to replicate its database, so this makes the company enormous profits. Also, its founders are still running the company, it’s cheap, and even if there were a rise in interest rates, the company would still do well. Pat thinks it could be a $50 stock. (First American closed on Friday at $31.38.) Toby thinks interest rates will be down or flat, as they have been over the past 30 days. He loves this stock, but warned if you think interest rates are going up, this is not a stock you should buy. Scott said this is a really great company, but he doesn’t know how much lower interest rates can go in order to make the stock head higher.
With March Madness in the air, Gary and Price picked their “Cinderella Stocks”.
Gary picked ING (ING), a financial service company. He said the stock is down almost 20 percent in the last month. But, even with that drop it is still above a long-term uptrend line it began a year ago. He advised to buy it now, but sell if it drops below $20. (ING closed on Friday at $21.74.) Price said this is going to be dead money for a while and investors should stay away. He thinks the stock is cheap due to its sensitivity to interest rates.
Price chose Overstock.com (OSTK), an online discount retailer. Many of its shareholders are short because they feel the stock has run up too far, too fast. But Price said when a stock is running up and everyone is worried, that’s when it can become a bigger winner. (Overstock.com closed on Friday at $30.01.) Gary agreed with most everything Price said, but pointed out that the stock just took a huge beating last week and broke below an uptrend it began in February. He said it is extremely weak right now and is heading down.
Price's prediction: March lows best time to buy! Dow up 15 percent and Nasdaq up 35 percent by year end
Scott's prediction: Usama's next! His end drives oil prices down & sends Dow to 11K
Gary B's prediction: Nasdaq rally catches everyone by surprise; up 10 percent by May 1
Tobin's prediction: Nortel's (NT) a buy again! Up 33 percent by end of year
Pat's prediction: AutoZone (AZO) will drive up your profits; gains 20 percent by next year
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Meredith Whitney, Fox Business News contributor; Mike Norman, founder of Economic Contrarian Update; Tom Adkins, founder of CommonConservative.com; Major Bob Bevelacqua, Fox News military analyst; Lori Wachs, portfolio manager at Delaware Investments; and Nancy Skinner, radio talk show host.
Did the Iraq War Save Our Stocks?
Neil Cavuto: Did 'shock and awe' save your stocks? Things certainly still unstable in Iraq with much more violence this past week, including that deadly and devastating bombing in Baghdad. But the war started a year ago and so did a huge new bull market. The Dow is up 23 percent since March 19. 2003. Tom Adkins, you say the war and the rally are definitely connected?
Tom Adkins: Absolutely. Without security you have no market. The market understood when George Bush said that he was going to take out terrorists all over the world, and it responded.
Jim Rogers: The market made its low in the fall of 2002. It went back down because the war was coming. The market does not like war. It would be even higher had we never attacked Iraq.
Meredith Whitney: The Iraq War has helped investor sentiment and will help in the long term. There's two separate issues on last year's rally. One, we didn't invite ourselves into the Middle East. It was a response to 9-11 and I think we will benefit from that. The larger issue is the market responded to over capacity and over liquidity in the late 90's and early 2000.
Neil Cavuto: Major Bob, you have been saying the trouble would be keeping the peace and rebuilding the country. But the market jumped 115 points on Wednesday's, the same day of that deadly terror attack on a Baghdad hotel. And I'm wondering if maybe people have more confidence there than some of the military pros.
Major Bevelacqua: Iraq is much better off without Saddam Hussein there. And so is that entire region. I don't know how anyone could argue with that.
Mike Norman: There is no other conclusion to come to other than the fact that this war was good for the market. We spent hundreds of billions of dollars in defense spending. Spending and investing in the private sector has been very very weak.
Jim Rogers: Spending money on defense is not a good thing. We need highways and we need schools.
Tom Adkins: It's better to have money go into the private sector and into people's pockets. When you take money and blow things up, it's not that great for your economy. But if you're going to get national security out of the deal, the markets are going to spiral. And it worked.
Neil Cavuto: Major Bob, you talk to the military guys both in there now and retired now. What do they say about the justification of this war and on a morale basis?
Major Bevelacqua: The return on investment has been ten-fold to the average Iraqi who lived in an oppressive environment. Whoever made the comment that war isn't good for the economy, who do you think builds bombs, tanks, planes, ships. The military? It's all built by civilian companies.
Jim Rogers: Nobody disputes that having Saddam Hussein out of Iraq is good. The idea that building tanks is better than building schools and roads is madness.
Tom Adkins: Jim's right that building bombs doesn't make the economy stronger. But Meredith is right that if the free part of your economy is inspired by the freedom and the security, you'll have a good economy.
Head to Head: Wimpy World Leaders Hurt Safety and Stocks
Neil Cavuto: The terror attacks in Spain were a tragedy, but so could be the response from Spain's new government to pull out of Iraq and reject America. Could wimpy world leaders in Europe put American lives and our bottom lines in harms way?
Nancy Skinner: Neil, we have to get the message out there that we're with our allies. And that's how we build a more secure world and a better global economy.
Neil Cavuto: Left to their own devices, a lot of our foreign friends would be more to appease than to attack. The fact that the French wanted to acquiesce to Adolph Hitler rings a bell. When everything hits the fan, our friends are either with us or against us. A growing number are against us. That doesn't mean the resolve of our fight isn't valid.
Nancy Skinner: You're confusing 'strong' on defense with 'stupid' on defense. We went after the wrong country with Iraq. If we had focused on al Qaeda and Afghanistan, that's being strong on defense. Going into Iraq just alienated us from the rest of the world.
Neil Cavuto: The attack in Baghdad this week, that we now know was orchestrated by al Qaeda, is proof that it's alive and well. The forces of evil are still in Iraq. How can you deny that?
Nancy Skinner: The fact is the war in Iraq was a major distraction. We went in there on false information. If we had President Gore, we would've gone after al Qaeda and beefed up security. We might've had a completely different situation right now.
Neil Cavuto: I'll tell you what, I'm going to look at it from a money perspective. Since our going into Iraq a year ago, our Dow is up 2,000 points.
Nancy Skinner: If you're looking at the Dow, during the 90's it went up 395 percent and most of that during Clinton's administration.
Neil Cavuto: Bill Clinton was very decisive in the way he handled Bosnia. I thought he did a very good job in the way he dealt with a butcher there. We're taking the lead right now in dealing with something much more sinister than that. I think longer term, that's not only good for our markets, but good for our security.
Nancy Skinner: We've racked up defense spending to the point that the IMF has warned that we're threatening the global economy.
Neil Cavuto: You're using a group that is going to judge us. This is the same group that is second guessing about our recovery when it's the strongest on the planet right now. I would use better sources than the IMF.
Nancy Skinner: You say it's the strongest recovery. You're only talking about markets. You're not talking about job growth. Newsflash, people don't have jobs.
Neil Cavuto: We have the strongest growth in the industrialized countries. We have the lowest unemployment rate in the industrialized countries. We have a lot of problems, but for the IMF and these other organizations to be judging us would be like me telling you what to eat in a bakery.
Nancy Skinner: The facts are this. The Asians are financing half of our deficit spending right now. They're buying our treasury securities. If the Asians stop doing that, what happens to U.S. markets? We are all interdependent. That's why you cannot go it alone in this world. We're dependent militarily and we're dependent economically.
More for Your Money: IRS Stock Winners!
Neil Cavuto: Everybody hates taxes, right? So why does someone, say this tax season will help you get more for your money? That person is Lori Wachs, portfolio manager at Delaware Investments. So Lori, how's the tax man helping stocks?
Lori Wachs: If you look at the tax refunds that are going to be coming through this season, we're expecting an increment of $40-60 billion dollars. That's an extra 1 percent to 2 percent going into the consumer's pocket. Wal-Mart is already starting to see it in their numbers from February, which are up 6 percent.
Neil Cavuto: In that environment, what do you like?
Lori Wachs: We like and own Nordstrom's (JWN). They've done a good job implementing new systems so they know which products are selling and how to go back for marked down money.
Jim Rogers: Doesn't everyone already know about the tax refunds? Hasn't this already been factored into the market?
Lori Wachs: The retailers have really yet to realize most of the benefits. We've seen about $10 billion but that's out of a total of $40 to $60 billion. So there's still a lot more to go there.
Meredith Whitney: What people don't know is that it's going to be a lot stronger for the luxury retailers. So I would say a Nordstrom's, a Neiman Marcus or a Sachs. I particularly like Neiman Marcus (NMGa). Their numbers have been great. There's a 20 percent reduction in tax burdens, so those who owe money are going to owe a lot less.
Mike Norman: I hear that argument a lot. What about higher gasoline prices? What about higher energy costs? Isn't that going to cut into spending? And I have to agree with Jim. I think it's built into the market. The prescription drug bill was passed into law last year. I like and own Rite Aid (RAD). I think pharmaceuticals will benefit.
Tom Adkins: I like Golden West Financial (GDW). I do not own it, but they're very innovative with mortgages. Their last year's sales growth was 2.6 percent. But their one year net income growth was 15.4 percent. That tells me something beyond just numbers.
Jim Rogers: I would buy and own Treasury Bills because I think the market is going to be static here for a while. But if you want to spend some money, buy hotel stocks because people are going to be traveling.
FOX on the Spot
Tom Adkins: Stay away from Spain, but get in Dow Diamonds (DIA)! Dow will hit 13k by end of year. I own it.
Jim Rogers: Spain is safe! But stay away from U.K. and Italy.
Meredith Whitney: Stocks stall till summer, but end year up 15 percent.
Mike Norman: Sun rises in Japan and so does Japan Index (EWJ). I own it.
Neil Cavuto: Nasty political advertising pickup and raise big bucks.
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: Socialism. It's all the rage in Europe. They practically live by it up in Canada. So could our capitalist system right here in America be taken down by socialism? Spanish socialists rode into power on the heels of terrorist attacks, but here in America, even hawkish Republicans are pushing cradle to grave government handouts.
Mike Ozanian, senior editor: That's the big danger. In 1929, the government was only 12 percent of the economy. Right now, it's over 26 percent. So we have been moving toward socialism.
David Asman: And Bush has been moving us there?
Mike Ozanian: He had those trade tariffs for a while. Right now, there are two pieces of legislation that need to make sure they don't get signed by congress and made into law. One is going to prohibit outsourcing by any company that wants to get a government contract. And the second, which is so much like France and Germany, who, by the way, have unemployment rates almost twice ours, is going to make companies have to tell the government if they're going to lay off more than 50 people.
David Asman: But, Dennis, do you buy that George Bush is moving toward socialism?
Dennis Kneale, managing editor: I don't buy that at all. It’s a great provocative topic and Mike is the wizard of numbers. But here is why socialism will never go anywhere. From 1999 to 2000, the U.S. work force was up 20 million jobs. All of Europe, which is very socialist, had zero net increase in jobs. People want to be wealthy and build their lives. You can't do that if the government is in every corner.
Quentin Hardy, Silicon Valley bureau chief: Socialism in this country has not had a chance since socialist Eugene Debs was thrown into jail at the beginning of the last century. We have welfare to work programs in this country. They cut retiree benefits and nobody riots in the streets. We have a nation of risk takers. If, by socialism, you mean big government, look at this administration. Mike is right. They have trade protection, agricultural subsidies, they bid low on how much it would cost the government to refund private sector health care in this country. This government is spending like mad.
David Asman: So in some ways we are spending more than the socialists themselves?
Steve Forbes, editor-in-chief: We are spending more. And the great antidote to that, to having a creeping government, is reform of social security and lowering taxes. John Kerry won't do it. He will repeal the Bush tax cuts, which will slow our economy down and put us back to 1970 and make us like France. So if you want to avoid quasi-socialism or ‘socialism lite,’ we have to keep those tax cuts.
David Asman: One thing holding capitalism back is the rules, regulation and spending beyond just the wages, right?
Elizabeth MacDonald, senior editor: Let me refresh everybody's memory here that with corporate donations coming into both political parties there probably will not be a socialist economy anytime soon. There is no true reformist party, labor party, like we had, like there is in Britain or Canada. Plus there is a lot of outsourcing of government programs to corporations like welfare. I don't see socialism happening anytime soon, but you are right. What is behind the job losses in manufacturing sector? 10 percent of the costs of manufacturing goes to wages. 30 percent comes from government regulations and, of course, corporate healthcare costs. And that's the biggest problem behind this issue. We have the highest costs in those areas only below two of our trading partners. Only France and Germany have higher costs.
Steve Forbes: It’s backwards socialism and we have another burden that the European countries don't face and that's trial lawyers who are seizing the nation's wealth.
David Asman: Quentin, you wouldn't have any problem diminishing the role of trial lawyers in government regulations, would you?
Quentin Hardy: I think trial lawyers are a great check on corporate lobbyists. They need to attack each other. I just wish they didn’t suck so much money from the taxpayers. Liz makes a great point, but do you think it’s Democratic controlled unions, which are eroding and falling away, or do you think it’s Republican lobbyists taking more corporate welfare that's the problem?
Elizabeth MacDonald: I think that the trade unions are not as powerful as they could have been in this point in time of our nation's history. Socialism is an abject failure. Look at Cuba and Cambodia.
David Asman: But it is on the march elsewhere, as in Europe and Canada.
Steve Forbes: Yeah. Everyone wants a handout. The danger in this country is often the biggest advocates of socialism, although they don't say it, are big companies looking for favors and for protectionism and for ways to keep the small guy down and the entrepreneur down.
David Asman: What happened to the era of big government being over? That's what Clinton said and Bush seemed to follow suit but it's back.
Dennis Kneale: I think growth will help outgrow the rate of government. And I think we need a little more strength on both sides of the aisle in congress, among Democrats and Republicans, but just remember that this socialism versus capitalism debate pretty much ended when the Berlin Wall fell.
Steve Forbes: They can't do it frontally so they will do it by a flanking movement.
Mike Ozanian: I want to know why 25 Republicans are pushing against outsourcing. Outsourcing is one of the best things to happen to this economy. It increases profits, which in the long term, helps hiring. Why doesn't anybody say to John Kerry, ‘your wife's family got rich by outsourcing thousands of jobs?’
Steve Forbes: We import more high-paid jobs than we export. That's what makes this country great.
Quentin Hardy: Money is a drug to politicians. And they are the ones who hurt risk-taking. Republicans are in power and they are subject to the drug now. It's their turn to suck the life out of this.
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: The FCC (Federal Communications Commission) crackdown on the Howard Sterns and Janet Jacksons of the world will not hurt the big media companies. In fact, these big fines could boost those stocks. Steve, government intrusion is good for business?
Steve Forbes: Government intrusion in radio has been there since the beginning. The government owns the airwaves. They never auctioned them off. They have a right to have community standards. If you want smut, you can go on the Internet; you can go everywhere to get it and pay for it. Do it up front. If you look at the 10 best grossing movies, they're all rated G, PG, PG-13. They're all clean like "The Lord of the Rings" and others. Goodness sells. You don't have to have smut to succeed.
David Asman: Of course, “The Passion” was rated R.
Dennis Kneale: I think America has become addicted to the outrage of the few. This overreaction to the supposed indecency problem is basically a result of small pressure groups and ambitious politicians and cowardly corporate executives. 20 Million homes subscribe to HBO and pay extra to watch Tony Soprano kill people and have sex with people. There is not an indecency problem. Of the 1000 people who watched the Super Bowl, two people had a problem and complained about seeing Janet Jackson's breast. What's the problem?
Lea Goldman, senior reporter: Dennis' numbers are slightly off. 20 Million people may subscribe to HBO but only 12 or 13 actually watch "The Sopranos." More people flock to "The Apprentice." Good, clean programming wins viewers. More viewers means higher ad revenues. Higher ad revenues are good for everybody's bottom line.
Victoria Murphy, staff writer: Do I wish that American discourse was cleaner, more dignified? Sure. Do I think the F.C.C. should get us there? No. We shouldn't be a nation of potty mouths. But that's not (FCC Chairman) Michael Powell's job. Let's leave that to the mothers and fathers of America.
Steve Forbes: How can they do it when it's all over the radio and all over the television? There should be mediums where you can go to and have clean entertainment. If you want dirty entertainment, pay for it and go on the Internet.
Chana Schoenberger, senior reporter: I actually think that there are, in fact, a lot of people that will make money from this trend. That's the cable and satellite broadcasters and other areas. People will pay for smut. Everbody likes smut.
David Asman: The government airwaves is one thing. You were talking about people who pay for smut. That's not what Steve is against.
Dennis Kneale: Here is the thing about Howard Stern. When you tune in to Howard Stern, you know you are going to get a guy who will push the edge. Listen to Don Imus otherwise. Conservatives hate government involvement except when they like government involvement.
Victoria Murphy: If government is going to tell me what I can and can't watch, they should give me the TV and radio to do it if we are going to take it that far.
Steve Forbes: You have plenty of choice. You have thousands of channels on cable and zillions of magazines if you want that stuff. In terms of the public airwaves, you ought to have cleanliness. If you want the other stuff, pay for it and there is plenty available.
Lea Goldman: It’s an incentive to broadcasters to come up with more creative programming. You don't have to be ‘bump and grind’ to get the viewers. The opposite of smut is not boring or snoozy.
Chana Schoenberger: I am not a parent. However, if I were a parent, and I really objected to what was on broadcast television I would throw out the TV and not watch “The Sopranos,” because it is my right to regulate what is on in my own home.
Dennis Kneale: Where are you going to draw the line and decide what is decent and what is indecent? If you let the market decide, and if you let customers say ‘they went too far, I'm tuning out of it,’ he will lose advertising and he will change. Right now, we have lost live television. Everything is on five-second delay, because they are cowards.
Steve Forbes: You need a sanctuary where you can get good, clean entertainment instead of the Howard Stern stuff.
Dennis Kneale: That’s “Nick-at-Nite” and "Leave it to Beaver."
Victoria Murphy: The viewer can go to that clean entertainment if they want it. The problem now is that Viacom (VIA) and Clear Channel (CCU) have to deal with these new regulations. That's a huge cost to them. They have to train their on-air talent and train their managers. That's bad for their bottom line.
Chana Schoenberger: Read books to your kids. Turn off the TV and go get Scholastic magazine. And for the adults of America, there should be something interesting to watch. If they don't like it, they will change the channel.
Makers & Breakers
• Medtronic (MDT)
Eric Thorne, vice president and senior portfolio manager at Bryn Mawr Trust Wealth Management: MAKER
We think that, in the long term, it’s a great demographic play. As the baby boomer gets older, there’s going to be huge pent-up demand for these kinds of products. In the shorter term you look at a company that's done nothing for four years. And yet in those same four years, earnings per share are up 75 percent.
David Asman: Trading at about $50 (Friday’s close: $47.40). How high can it go? What's your target?
Eric Thorne: We think it goes to $60, which is about a 20-25 percent move.
Elizabeth MacDonald: MAKER
I'm a maker on the stock. It’s a little pricey, but it has strong fundamentals. I think this is a great stock.
Mike Ozanian: MAKER
I'm a maker. I don't know anything about the complicated products it makes but I do know that the doctors and hospitals love the product.
David Asman: I have a caveat. It has gone up tremendously, at least since the 1980's. It still has room to grow?
Eric Thorne: It has. What we've seen recently is the share price got ahead of itself. The last couple of years, the earnings per share have caught up to the share price and valuations looks attractive
• Anheuser-Busch (BUD)
Eric Thorne: MAKER
Any company that can have a 50 percent market share in the U.S. with such a product that's so easy to make is absolutely amazing. The company is a marketing genius. We think the future bodes well for the stock.
David Asman: Trading around $47 (Friday’s close: $51.85). What do you think it can go?
Eric Thorne: $61. There are some major trends going on, most recently the low-carb trend. .
Mike Ozanian: BREAKER
I'm a breaker. The company has gone flat. It’s run by August Busch III, who has been chairman since 1962. It needs new blood.
Elizabeth MacDonald: MAKER
How can a sports fan not like a beer company? This is a great stock. They have low-carb beer that's really taking off and making inroads into China. I'm a Bud maker.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: March madness, spring training, and it won't be long until life begins for the Summer Olympics. The sports world is raking in the cash, and that means some stocks will be getting fatter, too. Which ones? Lea Goldman, what do you like?
Lea Goldman: Hibbett Sporting Goods (HIBB). You have never heard of it unless you are in the Southeast or Midwest. They are a chain of regional sporting goods stores. It’s March madness and kids want to go to school sporting their favorite jerseys or cap and they are insisting that mom and dad take them out shopping. They are going to these second-tier stores like Hibbett’s.
David Asman: Have you heard of it?
Leigh Gallagher: I have, but there’s another great ‘sleeper’ company in this industry, it’s only been public since 2002, called Dick's Sporting Goods (DKS). It’s a Pittsburgh-based retailer mostly in the Northeast. It’s got a great track record. And, actually, billionaire Paul Allen [Microsoft (MSFT) co-founder] owns 9 percent of it
Mike Ozanian: Sneakers is a street fight, and in a street fight I want the biggest, meanest dog, and that’s Nike (NKE). They have signed the most athletic stars, most recently is LeBron James, the phenom who went from high school right to the pros. His sneaker is selling twice as fast as Allen Iverson's first sneaker. It’s a huge success.
Leigh Gallagher: You usually pay a premium for that because you are buying a marketing machine. When you buy the retailers you are not only buying other brands that are strong in golf and other sports like tennis, but you are getting everything with the retailers.
Lea Goldman: The LeBron James sneaker is going to be huge for a store like Foot Locker (FL), which is going to start selling them by the second half of the year. That shoe will be outrageously popular.
David Asman: So, Foot Locker will piggyback on the success of LeBron James. Is there any problem with that?
Mike Ozanian: Not at all. One thing I do like about Nike is that they outsource a lot. A lot of cheap labor overseas keeps their profit margins up.
Lea Goldman: I'm not sure that customers in Middle America want to hear that.
David Asman: But they probably don't care when it comes to the sneaker they buy.
Leigh Gallagher: It’s good for investors, but I do have to point out that Foot Locker is cheaper right now.
David Asman: But what happens with all the media hype, when you get the Olympics coming and March madness? How does that directly affect the bottom line of these companies?
Mike Ozanian: It helps a company like Nike a lot, because they are spread so wide. They have the Olympics, NCAA and Major League Baseball. They have everything covered. All the bases.
StockSmarts: Does the Market Think John Kerry Can Lead the War on Terror?
Stuart Varney of Fox Business News says in his personal opinion the market thinks John Kerry lacks the credibility to be a leader in the War on Terror. “He’s consistently been hostile to military spending, consistently been hostile to the intelligence community, and to spending on it, and now he wants to bring in the utterly corrupt United Nations to run things. The market does not want an appeaser to win in November; it wants George Bush to go out and get ‘em and win!”
Michael Meehan, Kerry campaign senior adviser, says John Kerry has fought for this country and led troops in battle, and he will bring more experience to fight in a war than the current president has. He says the market should have no worries about John Kerry’s capacity to fight the War on Terror. He adds: “Just because you spend a lot of money on defense programs doesn’t mean you are tough on defense.”
Jonathan Hoenig of Capitalistpig Asset Management disagrees with Michael. He says you can’t underestimate the importance of the Commander in Chief, and he cites a long list of examples of John Kerry voting against military spending, and he believes that makes a difference when discussing Kerry’s credibility as a leader in the War on Terror. Jonathan feels that Kerry appears “more willing to appease evil than to deal with it.” He says, “I can’t say the market’s too crazy about Kerry.”
Adam Lashinsky of Fortune Magazine says the market will assume that if John Kerry were to become president, he would protect the United States, and he would fight the War on Terror. And in the end, the market will be more focused on the economy than on Kerry’s leadership in the War on Terror.
Jonas Max Ferris of MAXfunds.com disagrees with Adam. He asks, “What is the economy if not a reflection of people’s confidence to spend and travel.” He says if people are not made to feel safe, their purse strings will remain tight, and that will ultimately result in a poor economy. He says, “Right now there is about a quarter billion dollars being spent by both parties arguing about why you won’t be safe under the opposing candidate, and that’s already impacting confidence.”
Wayne Rogers of Wayne Rogers & Co. says the market will expect Kerry to fight the War on Terror, just as it expects President Bush to fight it. What may matter more than who becomes Commander in Chief is who the Commander in Chief puts in charge, and if it’s Kerry, the question becomes who will he appoint to replace Secretary of Defense, Donald Rumsfeld, Secretary of State, Colin Powell and National Security Advisor, Condoleeza Rice. He believes the market will pay more attention to the credibility of those appointees in terms of fighting the War on Terror than on the president himself.
Best Bets: Trading on Terror! The Next InVision?
InVision (INVN) shares are up about 1500 percent since September 11, 2001. That’s when the world discovered InVision had the technology to detect bombs in luggage. We asked our gang which anti-terror companies’ stocks could also benefit from their efforts to fight terror?
Wayne’s Anti-Terror Bet: L-3 Communications (LLL)
Friday’s close: $55.05
Wayne recommended InVision when it was trading about $12 cheaper. He still likes that company, but thinks the stock has become too pricey, and he says InVision competitor, L-3, is a better buy right now, and a good solid investment if you want to invest in this area. Adam wouldn’t buy L-3 here. Jonathan says the stock doesn’t interest him.
Adam’s Anti-Terror Bet: Motorola (MOT)
Friday’s close: $16.94
Adam says Motorola has a small unit that makes 2-way radio systems for police forces around the world, and it’s making a lot of money because of homeland security purchases, but he doesn’t think this profit is reflected in the stock yet. Jonathan likes Qualcomm (QCOM) better. Wayne says there are better plays in this industry than MOT.
Jonathan’s Anti-Terror Bet: North American Palladium (PAL)
Friday’s close: $11.31
Jonathan says Palladium is the metal of the future. He says commodity prices are continuing to rise, which is a function of the War on Terror, and PAL is a strong stock. Palladium is used in a lot of military appliances and demand for it remains high. Wayne likes the company and the stock.
Stock of the Week
Adam says Goldman Sachs (GS) will rise on a great earnings report next week.
Shares closed Friday at $102.66.
For an update on the Cashin’ In Challenge go to www.foxnews.com/challenge
Question: “If Howard Stern moves his radio show to Sirius Satellite Radio (SIRI), would that give the company’s stock a boost?”
Wayne says he likes Sirius, and he owns a lot of its stock. He calls it a terrific company that is going to give listeners a lot of choices, including the NFL, and he says Howard Stern isn’t going to make much difference to the stock one way or another. Jonathan says he wouldn’t own the stock. He says it’s the kind of single digit, low-priced name that’s just not for him, but he wouldn’t fight it either because, he says, it’s the kind of stock that could easily be up 15 to 20 percent in a very short amount of time. Jonas says he doesn’t believe Howard Stern’s ego could handle going from where he is now with millions of listeners to satellite radio with a far smaller audience. He’s bearish on all satellite radio stocks because he thinks they are priced too high.
Question: “Does Jonathan still hate General Electric (GE)?”
Jonathan says “hate” is a very strong word. He says he never “hates” a stock, he just might be short it, or not interested in buying it, and GE is the kind of “old washed up, big index, play that’s never going to see the kind of valuation it did back in the days when Jack Welch was featured on 60 Minutes.” Right now Jonathan has no position in the stock. Wayne says he’s owned GE since pre Jack Welch days and while he thinks there is something to what Jonathan says, he believes that over time, GE will always be a good bet.
Question: “Are there any good buys in the airline sector?”
Wayne says he doesn’t see any good buys in the airline sector right now. He says the price of fuel is the biggest factor in the cost of airlines right now, and with carriers like United Airlines and US Airways going bust, it’s clear there’s a lot of trouble in this industry, and he’s avoiding it. Jonas says the airline sector is the worst long-term area to invest in after gold, and there is so much discount competition right now that it’s a terrible business to invest in.