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Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Mike Norman, founder of The Economic Contrarian; Adam Lashinsky, senior writer for Fortune Magazine; and Bob Beckel, Democratic strategist.
Trading Pit: Election Countdown
The race for the White House is now hitting the homestretch. In six months, no more campaigning, no more commercials, we go to the polls and vote.
But the stock market will be voting in its own way between now and then. So far this year stocks haven't moved much, but how they do until Election Day could help determine our next president.
Mike: The market could have a huge influence on the election. President Bush’s poll numbers are not that far ahead of Senator Kerry’s and there is still concern about war in Iraq, jobs, and the economy. So the last thing Bush needs is a market downturn right before the election. He wants the president to be re-elected, but thinks the market will head down into November.
Tobin: Kerry will implode by about August and people won’t support him because he hasn’t brought a fresh idea to the table. The market will then anticipate a Bush victory and will be relieved because he is pro business, pro consumer, and pro trade.
Bob: It doesn’t matter what the market wants, because Wall Street analysts are no good at predicting elections. Most people are not in stocks but in retirement funds that will take decades to get back to the level they were at during President Clinton’s years in office. On Main Street people joke that they haven't opened their 401k statements for fear of a heart attack. Most voters are concerned about job creation. Wealth creation, though nice, takes second place. If it weren't for 9/11 Bush couldn't get elected to the Crawford City Council.
Gary B: Fifty percent of Americans are somehow involved in the stock market, so if it goes up, it will help the president. He explained using the example that if someone goes from $0 to $100, and then falls to $80, it hurts — even though you’re up huge from $0. The problem is that you don’t remember that you were a $0 a little while ago. That’s why if the market goes up, it will help Bush. He then charted the Dow and showed that if it can get above the downtrend that started in February, Bush is a shoo-in. If it’s well below it, he’s a shoo-OUT!
Adam: Voters are more interested right now in the overall health of the economy, jobs growth, and the war in Iraq. The stock market had a great year in 2003, so investors have returned from the fall. However, a big fall right before the election, could certainly affect the outcome.
Scott: The economy is doing much better, and the market is going through a long overdue correction. Right now it is locked in trading range and will continue this way until it is clear that Bush will win. The market fears that a Democratic president will increase taxes.
Scott, Tobin, Adam, and Mike picked the best stocks to buy now and sell by Election Day.
Adam chose General Electric (GE). He likes its dividend and although the stock hasn’t done much lately, it has great global exposure and will greatly benefit from an industrial pick up. Tobin agreed and added that if earnings grow across the board, GE will do well. Mike said that GE is tied too much to the global economy, which will keep it down. Scott said the stock is worth about $5 more. (General Electric closed on Friday at $29.95.)
Toby picked oil and gas company, Newfield Exploration (NFX), because natural gas prices are high and will heading higher. He thinks this stock has a 20-25 percent upside. (Newfield Exploration closed on Friday at $52.68.) Adam said energy prices are going up and he agreed that this is a good bet. Scott also agreed that Newfield will keep going up until the election, because the only group up over the last month has been energy. Mike said it has been a great bet, but not now because all commodities, including energy, are going down.
Scott likes Motorola (MOT). He said it is a surprise that this a leading tech stock right now. It’s doing very well under a new chairman and he thinks it will hit $25. (Motorola closed on Friday at $18.25.) Toby likes the stock too because it is beating Nokia (NOK) and is planning to spin off a new semiconductor business. Adam also likes it and thinks the company is just beginning to spin on all cylinders. However not all were in agreement. Mike thinks Motorola has already had a big run.
Mike selected Mitsubishi Tokyo Financial Group (MTF) because Japanese banks are finally on the mend. He added that this is a huge bank in Japan and it will benefit from the country’s big rebound in domestic consumption. Adam said if it bails out Mitsubishi Motors, it’s not a good pick. But if it doesn’t, this could turn out to be a good pick. Toby isn’t so sure about buying this stock. Scott said even though the Japanese market has done very well and he thinks it will continue to do well, this is a risky pick. He thinks a better one is the Japanese iShares (EWJ). (Mitsubishi Tokyo Financial Group closed on Friday at $8.90.)
Gary B. answered your questions, including the one most asked, “What is the single best chart in the world right now?”
Michael wrote in and wanted Gary to chart Comcast (CMCSK). Gary said that it’s been up and down with the news as to whether or not it was going to buy Disney (DIS). The chart showed that it has built a nice base and attempted to break out, but it got shot down. He would wait for it to close above $30 before buying. (Comcast closed on Friday at $29.12)
Next, Patrick asked about Lincare Holdings (LNCR). Gary said this is a good one. It also has been building a base and finally broke to the upside. He thinks it should reach the $40s fairly soon. (Lincare Holdings closed on Friday at $34.62.)
Chris questioned a call that Gary made in January about CMGI (CMGI). At that time, it was at $2.01 and Gary said it would hit $10. The stock went up to $3.29, but then fell back to $2.00. Chris wants to know if Gary still stands by his call. Gary said he still likes CMGI and added that at the time he said it would hit $10 in two years. He said it’s a good to buy because it is right at a support line and still has 20 months to reach $10! (CMGI closed on Friday at $1.73.)
Jean-Noel owns NVIDIA (NVDA) and thinks it is at a key juncture. She wondered what Gary’s chart said. Gary said this is one of the volatile tech stocks that went straight down very fast. The good news is that it is right near a support line and it looks like it is in good shape. He said buy now, but get out if it closes below $20. (NVIDIA closed on Friday at $20.52.)
Lastly, Gary charted PETsMART (PETM), which he said has one of the best charts in the world right now. It is closing in on a new all-time high, a price that hasn’t been seen since 1996! Gary said it is the quintessential strong, getting stronger chart. In fact, if it can close above $30, he thinks it could almost double! (PETsMART closed on Friday at $27.73.)
Adam's prediction: Don't believe the auction hype; you won't make money on Google!
Gary B's prediction: April showers bring May flowers; market rallies more than 10 percent in May
Mike's prediction: Economy is WEAKER than expected! Dow down 10 percent by year end
Tobin's prediction: Controversy does not hurt Halliburton (HAL); up 70 percent by November
Scott's prediction: Disney (DIS) will "dis" investors; falls 20 percent by year end
Cavuto on Business
Stop the Ceasefire and Restart the Bull Market?
Neil Cavuto was off this week. Stuart Varney hosted and was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Ben Boissevain, managing partner of Agile Equity; Meredith Whitney, Fox Business News contributor; Natalie Pace, CEO of Women's Investment Network; Colonel David Hunt, Fox News military analyst; and Rob Gordon, civil attorney with Weitz & Luxenburg.
Stuart Varney: Declaring all-out war on Iraqi insurgents, is that the best way to help Iraq and our market.
Col. Hunt: I think clearly you have to attack the guerillas in Iraq but I think what you're seeing in Fallujah is actually negotiations. We have Baathist generals going in, which we wouldn't have allowed before. And we're surrounding Najaf, we haven't taken that city yet. I think it's been a successful measured approach. It's been a terrible month for loss of soldiers. But I don't see us wiping out Fallujah. We're attacking bad guys.
Stuart Varney: Natalie, if there's a big bashing of the bad guys, does the market go up?
Natalie Pace: I think the markets will go up with assertive action. The markets definitely don't like uncertainty. When we decided to attack Iraq last year, the markets went up 10-12 percent. But I don't think you'll see that this time because you're not going to have statues falling.
Jim Rogers: But you have a whole different situation this time. A year ago the economy was going to get stronger. We were flooding the market with money. And we were spending so we knew the economy would get better.
Natalie Pace: Consumer confidence was really low then.
Gregg Hymowitz: Jim's a 100 percent right. It was a completely different situation. We all thought we were going to go in and win this war quickly.
Col. Hunt: We did win the war quickly.
Gregg Hymowitz: Colonel, with all due respect the war is still going on.
Col. Hunt: There's two parts to the war. We won the first part.
Gregg Hymowitz: The problem is now even if we solve this problem, the market understands and people know that we're going to be there for a long long time. This is not going to end easily and the market is going to be concerned for a really long time about Iraq, terrorism, and other matters.
Ben Boissevain: We need to go in there with a very strong hand. The key is security and stability for Iraqi people and that'll also play into Wall Street. We had this policy in force before the war and the market rallied.
Stuart Varney: So if we go in there big time and make it a flat out victory scenario, which is what we want, then the market goes up?
Ben Boissevain: Absolutely.
Jim Rogers: But Ben that's crazy. If you go in and flatten that city and wipe out everyone there, we're in deeper. Then we have to spend even more money.
Col. Hunt: We're not going to flatten the city. We don't fight that way.
Natalie Pace: Bush is not flattening cities. He's going in there and taking care of the terrorists.
Stuart Varney: Let's get the military perspective, can you in fact beat the insurgents without flattening cities?
Col. Hunt: Absolutely. You have to go and pinpoint. We've had real problems with our strategy and our tactics. We have not done some things well, however we cannot cut and run with this. Fallujah needs to be taken out surgically, as does Najaf.
Stuart Varney: Gregg, I'm going to ask you the other side of the question. If we do this, will the market go down?
Gregg Hymowitz: Iraq has been a complete disaster for the market. There is no positive that anyone can draw that has anything to do with the market. The best case scenario is that somehow this situation in Iraq resolves itself. And somehow we bring in some international support so that we don't seem to be seen as the invaders. That's the only positive you could get for this and the market. Nothing in Iraq helped us vis a vis the market.
Col. Hunt: Well, we didn't attack Iraq for the market.
Ben Boissevain: I would agree with the last point. The market was irrelevant when we attacked. We attacked for our own security. The effect of the market is a long term effect. It's a ten year process. We're going to occupy that country and build it up. It's just like Bosnia. It's like Korea. It's like Japan and Germany. And the thing you need to bring first is security and stability. And the only way to do that is overwhelming force.
Stuart Varney: Last question goes to Col. Hunt. Can we win against these insurgents using overwhelming power? Can it be done militarily?
Col. Hunt: Yes, but not by itself. It has to have economic structure.
Stuart Varney: Is it possible to win in Fallujah?
Col. Hunt: Absolutely. Fallujah is about to be won. But there's a lot more of the country that has to be helped with.
Jim Rogers: Why are we spending hundreds of billions of dollars of our money on Iraq?
Col. Hunt: We have to clean up what we started. We can't run away. We have to get this done right.
More for Your Money: Biotech Bonanza!
Stuart Varney: A biotech bonanza! OSI Pharmaceuticals (OSIP) shares jumping off the charts. Soaring nearly 140 percent last Monday after a study showed an experimental lung cancer drug helped patients live longer. Meredith, there's bound to be countless stories like this in the next couple decades. Is biotech the place to be?
Meredith Whitney: The reason why the market reacted so favorably to OSI Pharmaceuticals is because the FDA is perceived to be much more lenient in approvals. That's positive for the whole sector. A lot of phase 2, phase 3 drugs are focused just on these baby boomer type issues. In addition, there's very little growth in pharmaceuticals and you're going to see continued consolidation in these areas.
Jim Rogers: These stocks are too expensive. And you have to know science and you have to know management to understand these stocks. It's not like buying steel or homebuilders where they'll all go up if things go right.
Meredith Whitney: This is not for everyone. This is not for income oriented investors. It's for an investor who wants high growth.
Natalie Pace: People cite Imclone, but if you go for companies that have already received FDA approval your reward risk ratio is quite more in line.
Ben Boissevain: It's very difficult to select the right stocks. If you look at Martha Stewart, who is a pretty savvy investor, she sold Imclone and had legal problems there after and the stock went up. So how is everyone else supposed to pick the right stock?
Gregg Hymowitz: The future is clearly in biotech. Meredith is right but Jim is also right. It's an expensive sector. It's probably better for a long term investor to have a small percentage of their portfolio in biotech. And I think you do it in a diverse way. One of the ways I would do it is with ML Biotech Holders (BBH). I do not own it but it's a cheap way of doing them and you get exposure to most of them.
Meredith Whitney: I agree with everyone who says you diversify your risk by building a basket of stocks. I think you could do Ariad Pharmaceuticals (ARIA), AtheroGenics (AGIX), and Telik (TELK). I do not own them.
Ben Boissevain: You should go with the basket, the Nasdaq Biotech Index (IBB). It's the safest by far. I do not own it.
Stuart Varney: Jim, you wouldn't touch these?
Jim Rogers: I wouldn't touch them with a ten foot pole, but I am in favor of anti-aging.
Head to Head: Fire All Trial Lawyers?
Stuart Varney: Fire all the trial lawyers! Is that what we need to do to strengthen our economy? In 2002, $223 billion was paid out in tort costs, $70 billion of which went to the lawyers. Tell me how that makes America better?
Rob Gordon: First of all, half of that went to defense attorneys who were representing corporations who were sued. So not all of that goes to the plaintiff.
Stuart Varney: One third of the contingency fee plus expenses, administrative expenses, that's $70 billion.
Rob Gordon: Defense lawyers get paid too and so do the plaintiffs. And it's unfortunate that we have so many corporations making products that are harming people. We don't have the government regulating like they do in Europe. The only institution that protects people from harmful products is the institution of plaintiff attorneys.
Stuart Varney: Let's look at asbestos. The big gorilla of all these suits. $54 billion paid out in asbestos suits so far, of which more than half went to the trial lawyers. Is that justice for the plaintiffs?
Rob Gordon: When we talk about the amount of dollars going, $1 went to the plaintiff, $1 to the plaintiff's attorney and $1 to the defense attorney.
Stuart Varney: Sir, you're gaming the system. You're turning this into a monopoly.
Rob Gordon: Anyone who wants to can get into the business of representing these people if they have a law degree. Most of these lawyers take these cases on a contingency basis because most of their clients can't afford it. They're working men and women.
Stuart Varney: 90 percent of the cases in the asbestos suits are for non-malignant conditions. These people are not sick. They might get sick. They're simply taking money out of the system.
Rob Gordon: Non-malignant means not cancerous. Yes, 10 percent of cancers. The other 90 percent have diseases like chronic pulmonary diseases that prevent them.
Stuart Varney: A lot of these people made claims because they had been exposed to asbestos and are not sick at this point. They may never get sick but they're taking billions out of the system.
Rob Gordon: No, they're not. They might've filed a lawsuit but they're not allowed to have a claim. The U.S. Supreme Court said you may have been exposed to asbestos but that's not enough. You have to have an injury from asbestos to bring a claim.
Stuart Varney: Would you agree that the mammoth size of the asbestos investigation is putting a lot of power behind the tort reform movement.
Rob Gordon: I agree with you that the Republicans are trying to use asbestos as a way to attack the tort system in this country. Unfortunately there's thousands and thousands of people, more than died in the World Trade Center, who die every year from diseases related to asbestos.
Stuart Varney: You've turned the law from a profession into a monopoly. You've undermined the world's greatest judicial system. You've put tens of thousands of people out of work.
Rob Gordon: There's absolutely no basis for any of those statements. This is the greatest civil justice in the world. People come from all over the world to study to see how to make it better. Losing their pensions? Hundreds of people have lost their lives to dangerous products in this country. And the only people protecting them are plaintiff attorneys.
FOX on the Spot
Gregg Hymowitz: Don't go ga-ga over Google stock hype!
Ben Boissevain: Bet on tech by betting on Motorola (MOT). I do not own it.
Natalie Pace: Sleeping media giant Sony (SNE) finally wakes up! I do not own it.
Meredith Whitney: Market dip creates big buying opportunities.
Jim Rogers: Bigger is not better! Don't buy new EU stocks!
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: A Democratic Iraq is hopefully just weeks away. So if the June 30th handover is a fresh start for the Iraqi people, will it give a fresh start to stocks here in America? It’s fair to say the new wave of fighting in Iraq has stalled the markets. Despite good economic news, stocks were down in April. Jim, does the market start picking up again on June 30?
Jim Michaels, editorial vice president: If you want to know what will happen in the market, watch Iraq. You’re absolutely right. We’ve had terrific economic news, and yet the market has gone nowhere because things have gone badly in Iraq. We’re close to a turnover. If we can get a turnover of power that ends up with a government that is reasonably to our liking; we’re not going to get everything we like, we’re not going to get a really democratic Iraq. Maybe we’ll have to give ground on women’s rights and some other things, but if we get a government that’s stable and pays attention to the welfare of the Iraqi people, I think we’ll have a rally in the market.
David Asman: So, Victoria, a reasonable democracy after June 30th means a market rally?
Victoria Murphy, senior reporter: I think we’re far from it. June 30th, at best, is a photo opportunity. Iraq is not ready for self-government; Iraq has no effective police force and no effective military force. Without those, no government can claim real control. We are going to be in Iraq for a lot longer, and the market doesn’t like it. There is a kind of ‘uncertainty discount’ on stocks right now, despite great economic news.
David Asman: Quentin, clearly we are going to be the military force in there for a while, but if there is some kind of democratic transition, does that help the markets here?
Quentin Hardy, Silicon Valley bureau chief: I suspect it will be a false dawn. Jim, you used to like this war so much and, like George Bush, you don’t anymore. And George Bush is going to have to turn it over to the UN after all, because we just don’t have an exit strategy. And he is going to be able to take a victory lap at the Republican convention, but the fact of the matter is the place is full of Mullahs. You can’t cause an instant democracy there and by October it’s going to be falling apart. I think it’s going to be a false dawn over the summer, that might encourage the market, but I think the place is going to be falling apart, and putting pressure on our army.
Jim Michaels: Quentin, you don’t like the war, and you never did.
Quentin Hardy: Darn right.
Jim Michaels: All I’m saying is, if we can get a government in there that’s reasonably stable, that respects people’s rights and doesn’t invade its neighbors and poison gas its people, that’s going to be good for the United States and a lot better than we had before.
Lea Goldman, staff writer: What you are trying to achieve there is so tenuous, a brokering that’s never been done before between Shiites who can’t stand the Sunni or the Kurds. What we’re looking at is a debacle in the waiting, and I think it’s a matter of time.
Mike Ozanian, senior editor: Jim’s absolutely right. Quentin’s upset because Bush hasn’t shared his exit strategy with him. We will prevail in Iraq, but I don’t think there’s going to be a sudden impact in stock prices. News is fed in daily on the market, and we’re seeing the market fluctuate, daily. On the handover date, there’s not going to be a big move in stock prices.
David Asman: Quentin, what about this good economic news? Three quarters of the S&P 500 better-than-average earnings. We have consumer confidence levels rising up. Why isn’t that affecting the market positively? Is it Iraq?
Quentin Hardy: You may have noticed that there were terrorist attacks in Jordan, Saudi Arabia and Syria at the same time we’re pinned down in multiple cities in Iraq. This has never happened in the Middle East before. We have lit a power keg, and the market is worried about it.
Jim Michaels: There’s still the possibility of disaster in Iraq. As long as that possibility is there, it’s going to weigh on the market. If we get past this handover, and things work out reasonably well, you’re not going to have paradise on Earth, but if things work out reasonably well, I think the economic news will start to be reflected and the market will be stronger.
David Asman: Victoria, Iraq is a mess, I think most people would agree to that in many ways, but we got rid of a tyrant who was threatening the Middle East. He was ignoring U.N. resolutions, ignoring peace treaties, and he was harboring some terrorists. Isn't that good news for Iraq?
Victoria Murphy: That is good news for Iraq, but it is still a mess, as we all seem to say. I spoke to one very qualified stock picker this week who said that two weeks ago he couldn’t find enough reasons to sell a stock, whereas now he can’t find enough reasons to buy a stock. Part of that has to do with Iraq. It’s also important that if we ignore this June 30th deadline, if we kind of let it pass, that sends a strong message to the international community that our deadlines don’t mean anything. I think that in the long term, that’s potentially a big deal.
Mike Ozanian: Relative to earnings, stocks are about 10-15 percent cheaper than they were a year ago. If you’re a long-term investor, this uncertainty is a great opportunity.
Quentin Hardy: This thing about ‘Saddam is gone’ isn’t that good for Iraq. This isn’t played out yet, and I’ve got to tell you that the guy who is in charge of Hezbollah, one of the worst terrorist groups in the world, was educated in Najaf, Iraq. Some bad stuff goes on in there, and it could take over.
Jim Michaels: We don’t need a perfect democracy in Iraq. We’re living with Saudi Arabia. They’re not giving us problems. We’re living with Syria. The fact is that Saddam Hussein was over the top. He was a threat to everybody and he’s gone. If we can get an Iraq that’s just reasonably stable, and has some reasonable economic growth, I think it is very possible.
Lea Goldman: The problem is that now we have Shiite clerics in the mosques saying that 9-11 was a gift to Earth, we have the rise of radical clerics fomenting unrest and anti-American sentiment.
Victoria Murphy: Lea is right. This has sparked anti-American sentiment. This is urban warfare. Women and children die, and that’s sparked anti-American sentiment, and that’s bad for the market.
David Asman: Victoria, wasn’t there anti-American sentiment before?
Victoria Murphy: Don’t you think it’s greater now?
Quentin Hardy: Maybe it’s like Jim said. Maybe if we give a little ground on women’s rights, everything will be swell. Come on.
Jim Michaels: Bush isn’t running for president in Iraq. Popularity isn’t the issue. The issue is getting a government in there that we can live with, and that the world can live with.
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: Halliburton (HAL) the company is an American hero, and our troops in Iraq would be in big trouble without them. Quentin, how are they doing?
Quentin Hardy: They accused Halliburton of overcharging and mismanaging. I do remember in the [Ronald] Reagan years the $300 hammers and those $500 toilet seats. Halliburton’s done nothing that bad. They get a lot of problems because they’re going up, they’re going down, they’re going this way and that way. They’re just reflecting what the Pentagon wants. The Pentagon’s had to change strategy and dial up and dial down real fast. I think Halliburton is responding beautifully to that.
Lea Goldman: The fact that you are mitigating overcharges and brushing them under the rug is astonishing. Taxpayers should be incensed by that. Millions of dollars overcharging for transportation of gas, overcharging for meals served, you want to talk about egregious graft, they were charging for 40,000 meals a day served.
Quentin Hardy: And accountability like you never saw when it was inside the Pentagon.
Lea Goldman: And, in Halliburton’s defense, “stupid mistakes?” Come on, this is a world-class company.
David Asman: Well, stupid mistakes, but they’re also talking about the bribe structure in Iraq. Jim, should they have taken the job in the first place?
Jim Michaels: Look, when you want to get stuff to the troops in a hurry, you don’t say ‘oh, the invoice isn’t right.’ You get the stuff to the troops, and you sort out the invoices later. Quentin and I agree, but I don’t think he’s going to agree with what I say now. These attacks on Halliburton are political. Halliburton was Dick Cheney’s old company, he was the head of Halliburton. It’s a Texas company, so you attack them, you blacken Bush, you attack Halliburton, you blacken Cheney, and the liberals like to say the war is all to hell.
Bob Lenzner, national editor: That’s all totally legitimate, because this contract was given to Halliburton in the most unseemly fashion, right after the war was over. The attacks are legitimate. Why is Halliburton supplying ice and food? The Kellogg, Brown & Root division of Halliburton builds bridges, airports and highways. It’s somewhat ridiculous. Now the truth is that they’re only getting 1 percent of their growth, but it is important to Halliburton. You can see because yesterday, when they published their revenues, Iraq was a big portion of their revenue.
Mike Ozanian: Maybe I’m the only capitalist here, but Halliburton is a public company and exists for the sole purpose of making its shareholders richer. It does a terrible job of that. Its CEO has made $17 million over the last four years while the stock is down 40 percent. Soldiers are heroes over there, no doubt, but we wouldn’t let them come back and let them steal.
Jim Michaels: They were hit by the legal terrorists in this asbestos thing, and they had to pay $4 billion. That’s not management’s fault.
David Asman: Quentin, a lot of people say the bad thing about Halliburton is they are just interested in keeping the brass happy. They are not looking so much at the expense sheet. What do you think about that?
Quentin Hardy: I think they’re delivering a very tough service that the pentagon would have even more trouble delivering than they do. And the fact of the matter is more and more military functions probably will get outsourced, same as they do in business. Halliburton is moving up a learning curve. How do you manage that? One thing’s for sure; the Pentagon will not shrink, defense will not shrink, Halliburton will be a part of this. If they manage it more effectively, that means more profits in the future.
David Asman: This is dangerous work. Those who work for Halliburton, Halliburton employees and subcontractors, 34 have been killed in this conflict. That has a cost all its own.
Lea Goldman: With all due respects to the real-life concerns over there, just singing the “Star Spangled Banner” in Iraq does not make Halliburton a patriotic company. This is a business. They’re not the Salvation Army, they did not go over there for the good of mankind. They went over there for a buck.
Makers & Breakers
*Disclosure: Kevin Caron’s firm owns shares of JNJ and NMGa
• Johnson & Johnson (JNJ)
Kevin Caron, market strategist at Ryan Beck and Company: MAKER
They have done a great job in transitioning the brand from being Band-Aids to being much more aggressive in the area of life sciences, genomics and spinal cord research. So Johnson & Johnson is at a point now where they have taken the cash flow. They have invested it wisely. They are set to break out. The stock has been consolidating here. I think there is a big move ahead.
David Asman: Now in the mid $50’s (Friday’s close: $54.03.) You think it can go up to $82?
Kevin Caron: That’s right.
Mike Ozanian: MAKER
I think it is a powerful brand, profitable, growing fast and the segment it is moving into with health care is booming.
Jim Michaels: BREAKER
I agree completely but for one thing. The pharma company has made a pact with the devil when they agreed to charge Americans twice as much for drugs as Canadians, French and Germans. That's coming back to haunt them and they will be under terrific political pressure which I think will hurt the stock.
• Neiman Marcus (NMG.A)
Kevin Caron: MAKER
Neiman Marcus caters to the right people at this point in time. The wealth in the country has exploded. Even though the stock market has pulled back in the last couple of years. Net worth is $41 trillion. So we set new records there. People are going back to work. The stock has had a little bit of a run but we think there is more room ahead, because the company is growing. It's profitable and well capitalized. We think they do a good job.
David Asman: You have a target price of $82, even though it’s now in the high $40’s? (Friday’s close: $48.64.) That’s quite a jump.
Kevin Caron: That’s right.
Jim Michaels: MAKER
I’d buy it. You’re right. This super-premium market is growing. They know how to sell it. They are beating all the other retail companies. And I'm buying it.
Mike Ozanian: BREAKER
I'm a breaker. I was looking at their books. They aren't collecting money from their customers. That bothers me. I think there is something phony about their growth.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: If you knew a month ago that Sony (SNE) wanted to buy MGM Studios (MGM), you could have made a double-digit profit almost instantly. What are the next companies to merge? Bob, Wal-Mart’s (WMT) a big company, is it going to have any competition?
Bob Lenzner: There’s a lot of talk around about how you compete with Wal-Mart, it’s a little late now. Actually, you should have sold the food companies, because they couldn’t compete. Their stocks all went down in the last 3 years, but the big retail companies and a lot of the specialty product companies are where you can beat Wal-Mart. Target (TGT) has beaten them on clothing. It’s a $40 billion company, it’s very attractive. I don’t know if it’s for sale, but they are beating Wal-Mart. Whole Foods Market (WFMI) in the food area is beating Wal-Mart, and Bed Bath and Beyond (BBBY) in the home furnishings. Maybe those are attractive companies to take over, because they’re able to compete with Wal-Mart.
Victoria Murphy: I think that Whole Foods is just as overpriced as their organic oranges. Bed Bath and Beyond looks like a better deal. If you’re playing takeovers, you still have to look at the fundamentals of these companies, and their stock prices relative to earnings. The rumor in Silicon Valley is to look at Larry Ellison [CEO, Oracle (ORCL)], he’s gone for PeopleSoft (PSFT), it might not go through, so he might look at BEA Systems (BEAS) or the business intelligence firm Cognos (COGN). BEA is a nice fit, technologically. Some 70 percent of the customers who run BEA servers are running them on top of Oracle databases, but apparently the BEA CEO says the company is not for sale.
Mike Ozanian: I’m much greedier than my colleagues. I want to buy the bankers that make the fat fees off of the deals. I like Credit Suisse First Boston (CSR); it’s in the middle of a great turnaround. It’s going from losses to profits. It’s going to collect nice fees on the impending Google IPO, and the stock’s very cheap.
Jim Michaels: Here we go again. Time Warner (TWX) spent years making overpriced mergers, they watered their shareholders down and built up a lot of debt. Now they’re slowly pulling out of it, and what are they going to do? They’re talking about making more mega-mergers. I want to invest in companies where the CEOs build their businesses. I don’t want companies where they’re out to see who can make the biggest mergers.
David Asman: So Jim is saying ‘a plague on all your houses.’
Bob Lenzner: No, he’s saying that all those companies that grow by acquisition go down because they can't manage what they bought. That’s what happened with Cisco (CSCO). I’m talking about the companies that could be taken over because of their strategic position and that they’re great companies.
Victoria Murphy: Well, if you look at the software space, there are like 500 publicly traded software companies, it’s a market in desperate need of consolidation, and a company like Oracle hasn’t made a lot of acquisitions. So I don’t think it would be unmanageable for someone like Larry Ellison.
Mike Ozanian: I don’t like Oracle, I like Bob’s pick on Whole Foods. I’ve shopped there, and people turn money over faster than you can count.
Stock Smarts: Why May Could Be a Do or Die Month for the Market!
This month investors will find out If the jobs recovery is real; if interest rates will rise sooner, rather than later; if the June 30 deadline to turn over sovereignty in Iraq can be met, and if May really is the month in which you should “sell and go away” as the old saying goes.
Jonathan Hoenig of Capitalistpig Asset Management calls May a “very important month” for the market. He believes that selling in May and going away might not be a bad idea this year because there is so much on the table. He says the charts suggest that if the Dow does not make it to at least 10,500 it could fall below 9,000 this month, and given the market’s flatline so far this year, and the uncertainty of interest rates, he doesn’t see a lot of reason to invest in stocks right now.
Gary Kaltbaum of Kaltbaum & Associates says the market indicators he’s watching are the most negative he’s seen in years. He says the semiconductor stocks, the financials, and the real estate investment trusts have all been “blasted” and the only reason the major indexes are holding up is because -- in a market like this -- big money flows to the relative safety of bigger cap stocks, but he calls this pattern “classic topping action” and says that eventually those will feel the pain as well. He thinks there is a good chance the market will buckle, and we will see a loss of 500 to 1,000 points on the Dow, if not this month, then in the near term.
Dagen McDowell of Fox Business News says the very fact that money managers have nothing good to say about the market makes this a perfect time to buy. She says investors nerves will not be as frayed after the Federal Reserve meets on May 4 and they realize interest rates are not going to rise fast and furiously, and she says trouble in Iraq is already factored into the market, and now is the time to “buy and hold, and by the end of the year you’ll have gains.
Joe Battipaglia of Ryan Beck & Company agrees with Dagen. He says, “Buy in May, don’t delay!” Joe believes that the only surprises left for the market this month will be good ones – an improving economy, better-than-expected earnings in the second quarter, and he says we already know the Fed is going to raise rates and that won’t be an issue for stocks. He believes the recent pullback will prove a good launching point for a market rally.
Charles Payne of Wall Street Strategies says investors really should respect the month of May. He says there are so many unknowns that you cannot ignore right now, and the average investor should not jump into the market because it could really fall apart. He says events in Iraq and the direction of interest rates are just two unknowns that will prey on the market. He believes that even good news is cause for concern because now that this earnings season has been so great, investors are already assuming the next round of earnings will fail to impress Wall Street by comparison, and stocks will fall.
Jonas Max Ferris of MAXfunds.com says interest rates, election and war all are important considerations and people are placing their bets now on their direction. He says foreign bonds are a good bet right now.
Best Bets – Cashin’ In Derby
Stocks that will beat all the odds and make you a winner in May!
Jonas’ Derby Pick: ManTech International (MANT)
Friday’s close: $25.17
Jonas says this national security systems and technologies firm is going to benefit during this election year as candidates criticize each other for not spending enough on national security and defense. Joe agrees, and says the stock is priced attractively. Gary says the stock is acting perfectly – it gapped up on its latest earnings report, insiders have been buying, and he says the firm has accelerated earnings and revenue growth. He likes the pick.
Joe’s Derby Pick: Goldman Sachs (GS)
Fridays’ close: $96.75
Joe says the investment banking group has been a weak stock because of uncertainly about the economy and the financial markets. He says that uncertainty will be settled in the month of May, making this stock a winner. He owns shares in the firm. Jonas says this is a great business, but it’s a leveraged bet on the market, and if the stock market is weak, this stock will be weak. Gary agrees with Jonas, but he says this is the strongest stock in its sector, and if the market manages to do well, it’s a good stock to own.
Gary’s Derby Pick: Potomac U.S. Short Fund (PSPSX)
Friday’s close: $31.62
Gary says if you are fully invested in the market, you should hedge your bets with this bear fund -- which goes up if the S&P 500 falls -- because he thinks the risk of a market downfall in May is very high. Joe disagrees. Jonas says he’d short the Nasdaq, not the S&P 500.
Stock of the Week
Charles says Marvell Technology (MRVL) has been unjustly oversold. He says this is a very compelling semiconductor play that deserves to be trading higher, and he believes the stock will head higher this week after the firm appears at the J.P. Morgan Tech and Telecom conference.
Jonathan says this is a weak stock. Gary agrees with Charles that this is a great company with great earnings and revenue, but he wouldn’t bet on the stock because he says the semiconductor stocks are in their own bear market right now, and it’s not a good time to play the sector.
Last week’s Stock of the Week: Tom Adkins’ pick -- Accredited Home Lenders (LEND)
Down 14.5 percent Last week
Check out who’s ahead in the Cashin’ In Challenge at www.foxnews.com/challenge
Question: Which nanotechnology stock do you recommend?
Charles says there are a lot of ways to make a bet on this molecular technology, which is being applied to many different industries for a variety of uses, but he would avoid the smaller companies. He says Flamel (FLML), which is a biopharmaceutical play, is a good one to check out, but warns that it is highly risky. Jonas thinks the best way to play this sector is by betting on big established companies that will use the technology. He recommends General Electric (GE) or 3M (MMM). But he says if you still want a pure play, then check out Cabot (CBT). Jonathan says most of the pure plays in the group are tiny penny stocks with too much volatility, and he wouldn’t bet on any of them.
Question: Now that Janus Funds has agreed to pay $225 million to settle improper trading allegations, how can a Janus shareholders get some of that money?
Jonas says the payback is complicated and much of it comes in the form of reduced fees over time. He says ultimately the payout will add up to just pennies per shareholder. Charles thinks the settlement was too small; he says investors are being shortchanged because the behavior is being swept under the rug instead of punished properly.
Question: How do you know when it’s time to sell a stock?
Jonathan says one reason to sell a stock is if it has become too big a part of your asset allocation and you need to rebalance your investment portfolio. Charles says if you know why you bought the stock that will help you sell it. If you bought it for technical reasons, then watch the indicators and you’ll know when to sell. If you bought it because the fundamentals looked good, then sell if they deteriorate.