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; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Pat Dorsey, director of stock research at Morningstar.com; Bob Olstein, president of the Olstein Funds; Adam Lashinsky, senior writer for Fortune Magazine; and Stuart Varney, Fox Business News contributor.
Trading Pit: Big Bull Run?
The Dow is down since the start of the year, but that could be about to change. Is the market poised for a big bull run?
Stuart Varney said that the market is ready for a big bull run. A series of negative news events including rising interest rates, rising casualties in Iraq, and the prison scandal in Iraq have kept the market down, but the focus is about to shift to a much stronger economy and a bounce for the market taking it up 10 percent.
Pat Dorsey is a little more cautious than Stuart. He said that many factors are to blame for the bear market. He thinks the deficit is a big issue, along with rising interest rates, inflation and food prices, and oil prices sky-rocketing. The picture is not ugly, but it’s not rosy, either.
Tobin Smith thinks that the possibility of a Kerry administration is scaring investors right now, along with all of the factors that Pat mentioned. But, he thinks that some of the bad news is already priced into the market. He’s looking at sectors right now, rather than stocks.
Bob Olstein said that there are a number of conflicting factors right now, for example higher interest rates against increased earnings. He doesn’t think the overall market is going to go anywhere. He said it is a stock picker’s market.
Gary B. Smith agreed with Stuart. He took a look at the S&P 500 and his chart showed that it is typical to consolidate, especially after a huge run in 2003. He expects the next move up to begin once it clears $1150. (S&P closed on Friday at $1098.70.) He said that all the bad news is out right now and we’re at the bottom of the trading range. It is about to move out and above the March highs.
Scott Bleier also believes the market is about to move out of the trading range. It has been in a transition phase. He thinks the market is going to go a little lower, investors are going to get bearish and then it will rally to the top of the range with technology leading the way.
Adam Lashinsky said that all these topics that have been mentioned are only mildly important. The real reason the market has been in a pause is because of higher interest rates. He said that research shows that stocks fall in anticipation of higher rates and they will actually go up after the rate increases come.
Gary, Toby, Pat, Bob, Scott and Adam all picked stocks that are ready to lead the bull run.
Bob picked Hasbro (HAS), which he owns and thinks is worth $27. (Hasbro closed on Friday at $18.50.) Scott said that unfortunately “Hasbro is a has been.” He said it had a nice turn around and doubled. It’s a mature business and there’s no more growth. Toby also didn’t like this pick, but Gary did. He said Bob is right and Hasbro will head back up.
Toby liked AU Optronics (AUO), which he owns. Tobin thinks it has a lot of growth and will hit $40. (AU Optronics closed on Friday at $21.46.) Adam said this looks good, but it is in a crowded field and it’s only going to get more crowded. Pat agreed that the competition would be great, but he said the stock is reasonably valued and it does generate a lot of cash. He doesn’t know about it doubling, but he does see a lot of upside.
Scott chose Texas Instruments (TXN), a stock he recommends on his Web site. He said it had a good earnings report and has a great business going forward in DLP chips and analog chips for cell phones. He thinks it will hit $35. (Texas Instruments closed on Friday at $25.42.) Bob said Texas Instruments is over priced. Toby agreed with Scott and liked this stock.
Pat picked Valassis Communications (VCI). He said it is the perfect stock for a bargain hunter because the company delivers coupons. It is highly profitable and he loves that it only has one competitor. (Valassis Communications closed on Friday at $29.82.) Scott said it is a nice little company, but it has problems with debt and it is locked in a price war with its closest competitor. Gary said Pat is right thinks this is a great pick.
Gary’s stock was Impax Laboratories (IPXL). He loves its chart and said it is poised for huge break out. He thinks it is going to the mid $30s, once it closes above $25. (Impax Laboratories closed on Friday at $23.18.) Adam said this is no good because it has little reward and high risk. Bob also didn’t like it.
Adam liked Ascential Software (ASCL). It initially took a hit because it couldn’t hire enough people to sell the product, but now it is doubling its earnings. He thinks it has a lot of upside. (Ascential Software closed on Friday at $16.71.) Gary didn’t like it, but Toby said Adam is right and it’s going higher.
Scott’s prediction: Privatize the Iraqi prisons; Corrections Corp (CXW) up 30 percent
Gary B's prediction: Apple (AAPL) hits the right note with iTunes; up 50 percent by year-end (Gary B. Smith owns Apple)
Pat's prediction: Make big bucks by buying 99 Cents Stores (NDN); up 60 percent in 2 years
Bob's prediction: Tune in to radio frequency tags; UNOVA (UNA) up 40 percent in 1 year (Bob Olstein owns Unova)
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Charles Payne, CEO of Wall Street Strategies; Tom Adkins, founder of CommonConservative.com; Lis Wiehl, Fox Legal Analyst; Bill Daly, terrorism expert, and Meredith Whitney, Fox Business News Contributor.
Rumsfeld: $tay or Go?
Neil Cavuto: The pressure is mounting on Donald Rumsfeld. More politicians pressing the Defense Secretary to step down over what happened at Abu Ghraib. But what's Wall Street want him to do?
Tom Adkins: He should stay! He is a strong leader in our war on terror and that is good for our safety and our markets. Democrats fear him because he should really be on the "Butt Kickers" Hall of Fame. Democrats have practiced for 40 years the ankle grabbing diplomacy. And that's why we lose wars. If want to save the whales we call the Democrats. If we want to save the world we call the Republicans.
Gregg Hymowitz: Former Treasury Secretary, Paul O'Neill, and former White House economic advisor, Larry Lindsey, were fired because they weren't good enough salesmen for President Bush's tax cut. Donald Rumsfeld needs to take responsibility for what happened in the detention centers in Iraq. We have now enflamed Muslim hatred in America to a new high.
Neil Cavuto: But they always hated us.
Gregg Hymowitz: No, Neil they haven't. And we are now put in further risk because of what has happened. Someone in this administration has to be held accountable.
Bill Daly: There's nothing that suggests that Rumsfeld had any complicity in this at all.
Gregg Hymowitz: No one is saying that he is complicit. But it is his ultimate responsibility and he has to be held accountable.
Lis Wiehl: If you have a CEO or a CFO and under his leadership, or lack thereof, all of this bad stuff happens and the stock plummets then that CEO has got to go. That's the same thing that's happening here.
Neil Cavuto: So you ignore what the CEO did prior?
Lis Wiehl: I'm not saying you ignore it. But you've got to look at job performance.
Neil Cavuto: If every CEO had to resign when things hit the fan, we'd have no CEOs!
Jim Rogers: I am not a Democrat, but I am an American and I am an investor. I hope we don't have a double standard here. Condolezza Rice and Donald Rumsfeld said we have to get rid of Saddam Hussein because he abuses prisoners, he tortures Iraqis. We have been abusing prisoners and torturing Iraqis. Both have to go. Would you invest in a company where no one gets fired after mistakes are made?
Tom Adkins: Wait a second. A few knuckle heads in our Armed Forces made a couple of Iraqi prisoners run around in women's underwear. For eight years the Clinton administration made that the national policy in our own Armed Forces, trying to make our own Armed Forces run around in women's underwear.
Neil Cavuto: I don't remember any of the administration doing that, but go ahead.
Gregg Hymowitz: You know Neil, you said, let's not dismiss all the good he's done. Let's not forget that Rumsfeld was the main proponent for going into Iraq to find the weapons of mass destruction that they guaranteed were going to be there. He was wrong there.
Neil Cavuto: By the way, that your president said were there.
Gregg Hymowitz: Wall Street would respond positively to firing Rumsfeld and firing Wolfowitz.
Bill Daly: We need to stand strong and we can't keep politicizing these issues to the point in which we force someone out who has led the charge and who stands for the strength of our military.
Jim Rogers: Two years ago America was the most popular country among young Muslims. Now we're the most hated among young Muslims.
Bill Daly: And you think that by getting rid of Rumsfeld that we'll turn around that tide?
Gregg Hymowitz: It's not about turning it around. You just can't keep on saying you're sorry. Someone has to take accountability.
Neil Cavuto: Here's what I don't understand, no one is taking responsibility or looking for an apology for the 400,000 mass graves. No one is taking responsibility for brutally cutting and hanging those contractors a couple of months ago. What I'm wondering is where is the real standard of fairness?
Lis Wiehl: Neil, you can't justify one wrong by pointing to another wrong. Of course those people are murderers and they should apologize. They should do much more than that. We've got to hold ourselves to a higher standard. The answer to me is not minimizing what happened to those Iraqi prisoners by saying they just had their underpants flung around. That kind of message is a terrible message to send out to the world.
Tom Adkins: By your standards every single person in the Bush administration should resign because a couple of knuckle heads did something stupid in Iraq.
Jim Rogers: You're saying no one should resign? Just some sergeants and some privates?
Tom Adkins: You find out who did this and you hold them responsible.
Neil Cavuto: The president sticks by Donald Rumsfeld, sticks by his defense team. What message does that send to Wall Street?
Gregg Hymowitz: I think it's bad for Wall Street because he's literally increased the terrorist risk in this country.
Tom Adkins: The radical Muslims have hated us for 25, 30 years. That's not going to change. Keep in mind, the radical Muslims do not appreciate nice delicate diplomacy.
Bill Daly: If Rumsfeld stays on I think it shows strength. I think it would disrupt our position and our cause to politicize this.
More for Your Money: Ki$$ My Gas Stocks!
Neil Cavuto: Sticker shock at the pumps. But you might be more shocked to hear that record high gas prices could help you get more for your money! And no we're not talking about gas and oil stocks. Meredith, what other stocks go up with fuel bills?
Meredith Whitney: Arch Coal (ACI). First of all, I don't think gas prices and oil prices are sustainable at these levels. If in fact they are, coal is a great way to play this. It's a third as costly as gas. And states are easily levered to decrease their gas production and increase their coal production. I do not own it.
Charles Payne: I like AutoZone (AZO). I think people will try and get the most out of their cars and auto part stores like AutoZone will benefit. They also sell those very fuel efficient scooters. I do not own it, but I have an SUV and it cost me $56 the other day to fill it up. Whatever I can do to get one or two extra miles per gallon out of it, I'm willing to do.
Gregg Hymowitz: We're actually short AutoZone because we think the technology in cars has improved so greatly that you can't do it yourself anymore. We like and own York International (YRK). It's sort of a strange play on energy. They make energy efficient air conditioners. They also hedge out material costs so you have a hedge there. The company trades at roughly 13 times earnings.
Jim Rogers: I would certainly look for alternate energy sources. Uranium will come back as more and more people move to alternate energy. Nuclear power may not come back in the United States but it will abroad. One of the big producers is Cameco (CCJ). I do not own it. But I do own sugar and I prefer investing in it, because more and more people are going to turn sugar into ethanol, such as in Brazil and South America.
Tom Adkins: I like Boeing (BA). Their new 7e7 uses 20 percent less fuel and carries 60 percent more cargo. This is a product that is extremely efficient and will benefit over the long term. I do not own it.
Neil Cavuto: What if we're all wrong? Jim Rogers taught me this many a year ago. If the whole crowd says energy prices are going higher, what if the contrarian in me says wait a minute-- the crowd's wrong?
Meredith Whitney: What concerns me most about oil prices staying so high is you have an imbalance of power. There's more money going into Arab states, Saudi Arabia. And that's more tenuous for the U.S. and Europe.
Jim Rogers: We are well overdue for a consolidation. It will certainly happen by this fall when Bush sells oil out of the strategic oil reserves. Longer term, the price of oil is going to go to 60, 80, 100 dollars.
Head to Head: Is Le$$ Best?
Neil Cavuto: Bare it all or leave some room for the imagination? I'm talking about how much corporate America should be telling us about their bottom lines. Charles says "less is best" when it comes to companies revealing their bottom lines.
Charles Payne: I have a real problem with what's going on with corporate earnings. Businesses have these natural business cycles, whether it's a year or two years. Now they've had to compress these into 90 day business cycles by setting quarterly financial goals. And they better achieve those 90 day goals or else they're reputation and stock price will pay a heavy price. I also think it's become a circus. Over 75 percent of companies this earnings season beat the earnings estimates. It really is a joke at this point.
Neil Cavuto: Yes, but the alternative is companies might wait half a year or once a year to report their finances, much as they do in Europe or Asia. Then you wonder about the crooks that could be cooking things in the meantime. Most companies are ethical but we do know from the Enrons and the Worldcoms and the Global Crossings that given a lot of time, they can do a lot of damage.
Charles Payne: Everyone of those companies would've cooked the books if they had to report on a weekly basis or even a monthly basis. What's happened over the last 10 years is all corporations have been so desperate to appease investors and Wall Street that they've all moved into this gray area. And the gray area has become so wide that it enabled the Enrons to take advantage.
Neil Cavuto: A lot of these companies are secretive whether it's quarterly or monthly. They really do hold their cards tight. And in this day of shareholder lawsuits, they're all the more cautious. I welcome any light, brief as it is.
Charles Payne: Most of those lawsuits come on the tale of an earnings report.
Neil Cavuto: How different would it be if they did it just once a year?
Charles Payne: Let's say a company had a new product and they wanted to ship it and book the revenues. But they knew if they tweaked it a little bit more it would be substantially better. They're going to send it the way it is. And it's not going to be great for the customer.
Neil Cavuto: They'll do it twice a year just as effectively as they would do four times a year, right?
Charles Payne: We can have earnings, but the circus that it's become where a company can lose 30 percent of its value because earnings came in line is almost a joke.
Neil Cavuto: But you realize here at Fox we watch these quarterly earnings.
Charles Payne: I do too. At the end of the day it's really the individual investor who's getting the shaft.
FOX on the Spot
Charles Payne: Re-election money pumps up Air Products (APD). I do not own it.
Tom Adkins: Al Gore fails to "invent" a TV channel.
Jim Rogers: Agony of defeat! Summer Olympics may be canceled.
Meredith Whitney: Inflation lifts Lehman Brothers (LEH) sales. I do not own it.
Gregg Hymowitz: No inflation worries at Fed and no rate hike until 2005.
Neil Cavuto: The Fed will move to hike rates in June and the markets will love it!
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: John Kerry admits the economy is fine. Here’s the proof: John Kerry just spent $25 million on a new ad campaign. For that money, you want your key message heard loud and clear. Here’s the one he sent out.
(BEGIN VIDEO CLIP)
Kerry Ad: “I enlisted because I believe in service to country. I thought it was important, if you had a lot of privileges as I had had, to go to a great university like Yale, to give something back to your country.”
(END VIDEO CLIP)
David Asman: A lot of talk about Kerry, but no talk about a bad economy or lack of jobs. Jim, by omission is Kerry saying that the economy is great?
Jim Michaels, editorial vice president: Sure he is. Like any politician who has no core beliefs, he keeps throwing things up and hope they will give him some traction. So far he hasn’t gotten any traction out of anything, but he was originally hitting the economy, if you will remember, and it just wasn’t sticking. So he dropped it and now he’ll move on to other things.
David Asman: With these great new stats about how the economy is doing, it is hard to argue it is bad.
Dennis Kneale, managing editor: It sure is hard to argue that it’s bad, but this in no way admits that he thinks the economy is good. This is a counterstrike. The Bush campaign has hurt him badly on character. He’s going to continue to say the economy is bad, it’s just that it is not.
David Asman: Politicians love sound bites. There were no ‘economy is bad’ sound bites.
Mike Ozanian, senior editor: The best sound bite was Reagan’s when he ran; ‘Are you better off today than you were four years ago?’ Polls show that more people feel they are better off today than four years ago, than there are people feeling they are worse off. He’s lost the economy, he’s going to focus on the war.
David Asman: Is there anything bad about the economy that he can focus on?
Quentin Hardy, Silicon Valley bureau chief: Well, on Friday morning he did put out a statement saying that the average American family is $1500 worse off under Bush thanks to rising healthcare costs, college costs and oil costs. So he has that. That’s what he did. But Bush spent $60 million saying ‘he is a waffler, he’s got nothing on.’ He’s got to re-establish himself in the eyes of the American people, and this is a very good week to come at it as a war hero who did service because Bush is having such a bad week in Iraq.
David Asman: So, if he wanted to, he could talk about the bad economy?
Victoria Murphy, staff writer: Well, I think Kerry’s advisers are worried that come October, this economy is going to be roaring and he’ll look silly if he’s made the economy an issue in his campaign. But, as a voter who is on the fence, I think this is unfortunate, because it puts Kerry on the defensive. He’s trying to prove that he is a patriot, because Bush has painted him into this corner, saying that he didn’t always give the military money when they asked for it. Does anyone really doubt that he is a patriot? Yet that is what this million-dollar campaign is all about.
David Asman: Last week, you said you were a republican for Kerry. You’re still on the fence?
Victoria Murphy: I’m still on the fence. I’m waiting.
David Asman: Jim, the thing is that Kerry is trying to court the business community. He has Warren Buffett [Chairman, Berkshire Hathaway (BRK.A, BRK.B), working for him, he also has Steve Jobs [Apple Computer (AAPL) co-founder and CEO] working for him. Is that going to help his image about the economy?
Jim Michaels: Well, it’s interesting. When he first started, he was talking about ‘Benedict Arnold corporations,’ and he was off on a little bit of an anti-business thing. Now, suddenly, somebody said ‘you’re supposed to be a new democrat. You can’t do that.’ So, no he’s flip-flopping in the other direction, and not talking about the economy.
Mike Ozanian: Well, it shows classic flip-flopping, because Buffett, who he wants, hates stock options, and Jobs is addicted to them. It’s classic Kerry.
Dennis Kneale: I predict, no matter what we’ve said here, Kerry is going to continue to beat on the economy, people still are a little nervous, the markets are wobbly, and he’s got enough to go on.
David Asman: Quentin, we had a jobs number up, redo last week, where is turned out there was 10 percent better job growth in March than we had thought. Things look pretty good.
Quentin Hardy: Jobs is a bit of a face-off, isn’t it? Because, [Kerry] can refer to the fact that George Bush, no matter what, will end this term of office with fewer jobs. The first guy since Herbert Hoover to do that. The administration’s in a corner on that, so job creation would have to be unbelievable for that to be beaten. I think he’s still got a valid argument where that’s concerned. And this cost of living and healthcare, the fact that the administration can’t control it, the fact that families still live on less than they did, that something to go with.
Victoria Murphy: I think what’s interesting here is that it’s like the American psyche has not caught up with the job data, the numbers coming out of American corporations. The numbers all say that we’re going in the right direction, but we all kind of don’t feel like we’re there yet. Kerry can still take advantage of that.
David Asman: Quentin, how would you put everything you said into a bumper sticker?
Quentin Hardy: ‘There’s nobody home in the White House.’
Jim Michaels: Well, the way I’d put it is very simple. ‘Everything that Bush is doing is good, but we can do it better.’ That’s about all they have to say.
Dennis Kneale: I worry the campaign is too divisive. They should be talking about vision and ideas instead of pointing fingers at each other. I’m just so sick of it already.
David Asman: Isn’t Kerry talking about vision and ideas when he gets Warren Buffett and Steve Jobs onboard and talks about ways to bring jobs back to the United States?
Mike Ozanian: He nitpicks on little, different things but everything he takes from one side, he then takes from the other side. The problem he has is that overall, things are much better. People don’t feel it, as Victoria said. But the reason is the war.
Quentin Hardy: Jobs are back to where they were in 2000. It’s the kind of growth we had in 2000, it’s not that much better, it’s sort of back to where it was at the start of this failed administration.
David Asman: Are more people comfortable with Kerry or Bush?
Victoria Murphy: You get a very mixed view, and I think in general, what the problem is that a lot of people don’t feel great about what’s going on in Iraq, but don’t know where Kerry stands. Personally, that’s where I am. But, I’m sure Quentin and I will see the bumper sticker that you’re talking about in the next couple of months.
David Asman: Is it fair to put that bumper sticker the way Quentin did, as a failed administration?
Victoria Murphy: Quentin might be a little bit more extreme than I am. I think the administration has given itself a hard task. I do think that someone needs to take the fall, which we’ve said on this show before.
Jim Michaels: If it’s a failed administration, why is Kerry backing away from his original, anti-business stand? He was attacking the tax cuts, he was attacking ‘Benedict Arnold corporations,’ and all-of-a-sudden, he shut up on that.
Quentin Hardy: He had to defeat Howard Dean.
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: Arming or troops and keeping America safe? We can pay for it all faster with a big tax on gas. Bill, you got some heavy hitters against you but 35 cents a gallon? That's about $5 every time i go fill up my tank.
Bill Baldwin, editor: It’s a lot of money. I drive a big, fat Ford Expedition. Heavy things should pay their way. Right now, I'm already paying for damage to the pavement with highway taxes. Maybe I should pay extra for the adventures in the Middle East and maybe it should be itemized that way on the fuel pump.
David Asman: Jim, we sacrificed in World War II, and maybe we should do it again.
Jim Michaels: Listen Bill, that’s not going to drive you away from your SUV (sports utility vehicle). It’s $5 a week for you; you can afford it. It’s the worst kind of tax. It affects the poorest 2/3 of the population much more than it affects the richest 1/3. $5 in the budget of a well-to-do person is peanuts. But for a person who is struggling to get by and needs cars to get to work, this is a kick right in the pocket book.
David Asman: So, it’s a tax on the poor, not on the rich.
Quentin Hardy: So we’re for more taxes on the rich now? Let’s set that aside for a minute. We’ve spent over $100 billion in Iraq now, the Middle East is in shreds and the America has never been more feared or hated in the world and ever in its history. Than you Mr. Bush, Mr. Cheney, Mr. Rumsfeld. Maybe it’s time to start counting the costs, maybe it’s time to start paying the price. That would be a very good idea, to bring it home to America. Unfortunately, this administration doesn’t want to bring anything home to America.
Mike Ozanian: Bush is doing exactly the right thing. We have record low interest rates. Any time you can borrow money, long-term, for less than 6 percent, which is really what the government is doing….
David Asman: What you’re saying is forget the taxes, go into debt more?
Mike Ozanian: I don’t like Bill’s idea. We’re already taxed enough. Let the Japanese and the other people finance this war, which is what we’re doing.
Victoria Murphy: I think that it’s fascinating that the two people that drive cars the most are the ones arguing in favor of a gas tax. I feel so selfless. The issue here, let’s put aside the war for a second, is that Americans are not incentivized to drive fuel-efficient cars. In the past 15 years, we’ve been putting 20 percent more mileage on our cars, annually, than before. We’re also driving bigger cars. Unless you are a member of the Sierra Club, you’re not going to buy a Toyota Prius. I don’t drive a very fuel-efficient car. I should be incentivized to drive a fuel-efficient car. That’s a long-term plus.
Dennis Kneale, managing editor: Bill knows this, he’s just provoking us. This is an irresponsible idea. This is a crazy idea. No politician is going to do it, because it raises the ire of the great, unwashed masses. And let me say, let’s have a ‘jackass tax.’ If you drive a little Subaru, you don’t have to pay extra for gas. If you drive a big, old Hummer, you have to pay twice the price for gas.
David Asman: Is this just a provocateur? You don’t really believe in a higher tax, do you?
Bill Baldwin: Oh, yes I do. I’m not running for anything, so it’s very easy for me to be in favor of it. I share my colleague, Jim’s concern about the regressive nature of the tax. I think that as soon of the war is over, we should rebate it to poor people. That’s going to be easy to do. You could exempt the first $2 an hour of wages from payroll taxes.
Jim Michaels: That just creates more complications and more trouble at tax time. That fact is that gasoline is a big item in the budget of poor people. It’s peanuts to you. Furthermore, if you object aesthetically to SUVs, you can afford to buy a small car. A person who’s just getting by can’t just get a small car. He can’t afford to buy a new car. That person is stuck to pay the extra tax.
Dennis Kneale: That’s not the place to do it. There’s $180 billion a year in corporate subsidies to big agricultural companies. The government should just chop $40 billion a year out of that.
Makers and Breakers
• Pepsico (PEP)
Gene Hennsler, co-portfolio manager of the Henssler Equity Fund: MAKER
I like Pepsi because it is dominant in every area of the market except for soft drinks. That's the slowest growing area. This is a company that's delivered double-digit returns and income for the last 15 quarters. It earns 30 percent on equity, only one of 5 percent of the companies with that figure. And it’s getting more dominant in every area.
David Asman: Going for $54 (Friday’s close: $54.36) and you think it can go to $60?
Gene Hennsler: Yes.
Bill Baldin: MAKER
I like the business model. You’ve noticed that most of the people in China are lean and hungry looking. When Pepsi gets through with them, every single one will have a bag of junk food and one sugary soft drink.
Jim Michaels: BREAKER
Maybe it’s the thought of those greasy potato chips that turns me off, but I can't believe the whole world will end up eating snack food instead of the all the wonderful cuisine people have around. If it was a cheap stock I might take a flier on it.
• Bank of America (BAC)
Gene Hennsler: MAKER
What's not to like? Selling for 11 times earnings. Way below the indexes for both the index and for its industry. It pays a 4 percent dividend. Growing at 10 percent a year. Dominant in most of its market share. Just came in with FleetBoston.
David Asman: And if interest rates go up?
Gene Hennsler: They are not hedged against that. They are underlevered by $80 billion to put in the marketplace.
David Asman: You think it could go to $96 from $79? (Friday’s close: $78.55)
Gene Hennsler: Easily.
Jim Michaels: MAKER
They did overpay for Fleet and they will have to absorb that and pay for it. However, it's a very inexpensive stock. I like it. I would buy it.
Mike Ozanian: BREAKER
It’s a great inflation hedge. If interest rates are going up and they are well balanced, this is better than owning a bond.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Google is making tech cool again. A whole bunch of tech stocks could be in for big gains from the excitement over the Google public offering.
Quentin Hardy: Everything about Google is great but it is a speculative play. And the thing I think you ought to think about is two search engine companies that don't belong to anybody who is big. One is Ask Jeeves (ASKJ) and one is InfoSpace (INSP). Of the two I would look at InfoSpace more, because they are a search engine of search engines. They do a meta crawl of all of them. And they are also in the ring tone business, which sounds weird but is very valuable. They can get bought by somebody else.
Victoria Murphy: I really like eBay (EBAY). E-bay is a company that's using technology to revamp an industry, and not actually selling technology. Technology is still a tough industry. There is a lot of pricing pressure. And unlike Google, which has only one link to the end consumer, eBay has two. They have buyers and sellers. So long-term, I think eBay is a great play, because if they are really entrenched in that market it will be hard for anyone to take away share.
Dennis Kneale: eBay is one of the hottest tech stocks. I have one of the coldest, most awful tech stocks. Siebel Systems (SEBL). Left for dead, a stock everybody loves to hate. They are coming back. They’ve had two quarters of profits. Only half the price of a Microsoft (MSFT). A fourth of the price of Yahoo! (YHOO). It’s worth it, and I think that Larry Ellison and Oracle (ORCL) are going to buy Siebel.
Victoria Murphy: Funny you should mention Microsoft because I’ve been hearing in the Valley, where we love to hate Siebel, that Microsoft is eating Siebel's lunch. Microsoft is doing big deals.
Bill Baldwin: You should participate in the biotech revolution by buying Sigma-Aldrich (SIAL). This is the company that sells ingredients to biotech firms. And unlike some of those flaky things, that the Californians are trying to palm off on you, this thing has real earnings.
Mike Ozanian: I like National Instruments (NATI). They make software that allows companies in the energy and medical industries to test and measure their equipment. It's a great company. Profits are growing really fast. The stock’s at $32. I think it will be at $40 by the end of the year.
David Asman: What do you think about Bill’s stocks?
Mike Ozanian: I don't know as much about buy biotechnology as he does but I love the stock because Vanguard, one of the best fund families out there, own a big chunk of it. Vanguard owns it, I like it
Dennis Kneale: When Bill says ‘go after biotech,’ you should. He’s very conservative, and if he likes it, you should like it. Now, everyone’s going to be looking at the Google IPO, so take a look at something else that’s going to go public. There’s a company that will be going public in a month or two called Accent Optical Technologies. They make stuff that helps chip wafer makers do other things. It is like $14 a share. About the same cheap price as a Siebel and you ought to think about it.
Bill Baldwin: Would it be unchivalrous of me to ask if they have any earnings? I bet you don’t know.
Dennis Kneale: Don’t worry about earnings. Tech is back, the bubble is back. Don’t worry about earnings at all.
Stock StockSmarts: Why is Wal-Mart Backing Bush?
For every dollar Wal-Mart and its employees have given to John Kerry’s election they’ve given $125 to President Bush. So, why is the nation’s biggest employer backing the president for re-election?
Jonathan Hoenig of Capitalistpig Asset Management says Wal-Mart’s backing President Bush because he understands big business, and what’s good for Wal-Mart is good for America. Jonathan calls Wal-Mart “ one of the greatest success stories in modern history,” and he does not believe that John Kerry understands that or that he understands big business or free market economics in general.
Bob Beckel, Democratic strategist, says he’s not surprised Wal-Mart is backing Bush. He says Republican’s always support big business.
Gretchen Morgenson of The New York Times says Wal-Mart has a lot riding on the status quo, and the company supports President Bush because he has been very supportive of big business. She says Wal-Mart may fear that John Kerry would push for an increase in minimum wage, which would hurt Wal-Mart’s profits. She also believes Wal-Mart prefers President Bush’s immigration policy to any stance John Kerry may take on the immigration issue.
Mike Norman, founder of The Economic Contrarian Update says Wal-Mart has done more to help average Americans than probably anything else, and he believes that Wal-Mart has done more for the economy than the Federal Reserve when it comes to keeping inflation down. He says millions of Americans have benefited from the inexpensive goods they are able to buy at Wal-Mart, and President Bush should support that.
Wayne Rogers of Wayne Rogers & Company says Wal-Mart has destroyed small town America and put people in those towns out of work.
Dagen McDowell of Fox Business News says that a lot of the small town businesses that have been put out of business by Wal-Mart deserved to fail. She says Bush should be supportive of Wal-Mart because the company puts more Americans to work than it puts out of work.
Best Bets: Wayne’s Latest Buys!
Wayne aims to win the Cashin’ In Challenge and he’s been doing some stock buying to get back on top. Jonathan, Dagen and Jonas got a chance to comment on Wayne’s new purchases.
• Red Hat (RHAT)
Wayne bought 50 shares at $25.57
Friday's close: $24.93
Wayne says Red Hat has turned around, and he thinks the firm’s Linux operating system will be a winner. He owns the stock in his personal account as well as in the Challenge. Jonas says he’s skeptical of any business that has to compete with Microsoft (MSFT). Dagen agrees that this company could suffer from competition. Jonathan says this is a strong stock that could open 20 percent higher on any given day, and he thinks Wayne’s made a good bet here.
• Ultra Petroleum (UPL)
Wayne bought 50 shares at $34.70
Friday's close: $33.78
Wayne likes the earnings momentum this company has shown. He says earnings were up 437 percent last year and up over 140 percent in the first quarter of this year. He owns the stock both personally and in the Challenge. Jonathan says he would prefer to bet on ConocoPhillips (COP) if he were investing in this area, but oil is not a trend he would put his own money on right now. Jonas says the stock is too expensive. Dagen agrees.
• Overseas Shipholding (OSG)
Wayne bought 50 shares at $37.30
Friday's close: $32.73
Wayne says this is also an oil play but he believes his timing was off on this purchase. He says the stock is not under accumulation like the other two stocks and he got “stopped out” of the stock in his personal account though he still holds it in the Challenge. Dagen says she thinks this stock is the best buy of the three stocks Wayne’s added to the Challenge because it’s a play on both China and oil – two hot sectors right now. Jonathan thinks it’s the worst of Wayne’s three stocks.
Check out who’s ahead in the Cashin’ In Challenge at www.foxnews.com/challenge
Stock of the Week
Jonas says Pinnacle Systems (PCLE) executives have been increasing their stake in this stock and he thinks good news will follow, and the stock will head higher in the near term. Jonathan says the best indicator of the market is the market and this stock is going nowhere. Wayne agrees with Jonathan.
Last week’s Stock of the Week
Charles Payne's pick: Marvell Technology (MRVL)
UP 4.1 percent
Question: “Now that Nortel (NT) has admitted its executives “cooked the books” and the stock has fallen, is it a good time to buy?”
Gretchen says she wouldn’t buy any stock that has been tainted by scandals. Further, she says Nortel’s announcement that it will restate earnings is evidence that all the rules that were put into place to try and prevent accounting manipulations has not done anything to stem the tide of restatements. She believes that as long as company executives are paid compensation that is tied to company profits, there will be more accounting scandals to come.
Mike says Nortel is no Enron, and he believes you can make money by buying this stock now, while it’s down. He says what the company did was move revenue into 2003 because some executives had a financial incentive to do this, but he says those executives are gone, and Nortel is a good company to bet on.
Wayne agrees that you can make money by buying distressed stocks, but he says now is not the time to buy Nortel. He says he would wait and watch the pattern and volume of the stock to spot the turnaround, and then buy it.