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; Meredith Whitney, Fox Business News contributor; Adam Lashinsky, senior writer for Fortune magazine
Is Iraq the new most important ally for America and the market?
Saudi Arabia is a tenuous ally at best. The majority there is anti-American causing many to worry about a future coup. The problem is that America gets a large percentage of its oil from the Saudis and if they become hostile, how would we replace that oil without crippling our economy and stock market? Does this make Iraq our new ally?
Adam Lashinsky: Iraq could be our next new ally, but only if things went extremely well in the next year or so. Frankly, I think this is wishful thinking. I believe Saudi Arabia is too important a source of oil to replace in the short, medium, and maybe even the long term. They represent around 9 or 10 million barrels of oil per day to the United States versus 80 million barrels to the world. We can’t replace them that easily. A Saudi coup would cripple the economy.
Meredith Whitney: There is a codependent relationship between the U.S. and Saudi Arabia. The U.S. is funding the Saudi royal family through our dependence upon Saudi oil. However, our dependency has lessened over the last decade. In the past Saudi Arabia represented 28 percent of our oil consumption where as now it represents only 18 percent. We are still effectively funding the Saudi welfare state so the relationship is too valuable on either side to think that the Saudi’s would ever close the taps. I think a terrorist strike there is the bigger worry than the Royal family turning against us. I don’t think we can discount Iraq’s significance since Iraq produces about 4 million barrels of oil per day.
Tobin Smith: There are many different factors in our relationship with Saudi Arabia. Iran plays a part in our relationship because of the Shiites. We need Iran’s Shiites to mitigate the issue, because the area in Saudi Arabia that controls shipping is made up of Shiites. However, I think at the end of the day Saudi Arabia needs our money -- they need western money -- and we will see this come to some conclusion, but it isn’t going to be pretty. As far as the market goes, I’ve been waiting until it gets to that top range to take my profits. I wait for that bad day before changing my position. We are starting to get some really good values. Knock on wood if we could just get a week of good news we’re likely to see a breakthrough from this sideways, small gains, movement.
Gary B. Smith: The charts show that the Dow has been in a downward trend, but now we’ve been marching straight up. The Dow has been seeing the most action of the indices. I think what will happen now is a pause to build some sort of base. We had a pretty good day Friday, and we’ll probably need 5 to 7 days of sideways movement before we get a big thrust upwards. I think the pause really gives us time to get into the market, particularly in the tech area, right before we see a breakthrough.
Pat Dorsey: I think the bottom line is don’t look towards Iraq to become the U.S.’s most important ally. Their population is still going to be broadly anti-American because U.S. policy in the Middle East has not generally favored the Muslim world. It’s going to take more than a figurehead democratic regime to change that.
Scott Bleier: Iraq is going to be meaningless to the global supply of oil. Saudi Arabia is much more important. The Saudi royal family is in the midst of a Saudi royal family feud, and that’s going to be a big problem for exporting oil from them. Here’s the key, we need to open up Alaska, and I know I’ll get hate mail for that, but we’ve got to cultivate relationships with other oil exporting nations like Venezuela. We need to get away from Middle Eastern oil as best we can and as quickly as possible. I think if we can spend money on developing synthetic fuels we can have the answer in five years.
Meredith, Pat, Scott, Tobin, and Adam all looked at stocks they say will go up no matter what happens next with oil prices.
Meredith picked JP Morgan Chase (JPM), which recently merged with Bank One (ONE). She said it will have an upside to earnings and could even be cheaper to manage. (JP Morgan Chase closed at $37.28 on Friday.) Pat said this pick makes a lot of sense in the long term. He thinks it paid a good price for Bank One, but huge deals like this have a problem of going awry when you don’t expect them to. He would rather wait until it was at a cheaper price - $32-33. Tobin said mergers do usually work for banks.
Adam liked Pfizer (PFE). He thinks it is a solid company. Right now it is at a discounted price and it could easily reach $45. He also mentioned that it is working on a blindness drug that could be huge. (Pfizer closed on Friday at $35.63.) Toby said the most popular name-brand drugs are being outdone by generic drugs. He doesn’t think Pfizer will ever go higher than 40.
Scott chose Johnson & Johnson (JNJ). He said it is a quality company and it has great management. It has been trading in a narrow trading range for years, but it is about to break out of it and is going to $75. (Johnson & Johnson closed on Friday at $56.36.) Meredith loves the pharmaceutical sector, but would rather own Pfizer (PFE).
Pat picked Accenture (ACN), which is a management consulting and technology services company. It has a lot of cash and is a class act in this industry. He thinks it can go to $35 in the next two years. (Accenture closed on Friday at $24.99.) Adam didn’t like this pick.
Toby liked Varian Medical Systems (VAR). The company produces and designs integrated systems of equipment and software for treating cancer with radiation therapy. He said this summer it is going to introduce a new system that is going to change the face of medicine. He thinks it could go to $100 and then split. (Varian Medical Systems closed on Friday at $82.98.) Scott said it has had a great run over the last few years, but it is fully valued right now.
You’ve got the questions and he’s got the answers. Gary B. tackled them in the Chartman.
Bradley asked, “Can you check out the chart on Juniper (JNPR)? I would love to see your opinion on it.” Gary said that Juniper had a great run, but it doesn’t look good from here. He thinks its next big move is down. He said sell. (Juniper closed on Friday at $19.91.)
Next, Bin wanted to see a chart of Applied Materials (AMAT). Gary said it keeps hammering away at a support line around $18, but the support line keeps weakening. He thinks this stock is going to fall below $18. (Applied Materials closed on Friday at $18.76.)
Andre asked what Gary’s chart said about Midway Games (MWY). Gary charted the stock and said that it has been a star performer and broke to a new high, but right now it is too extended. There’s no reason to get rid of it right now. Gary would prefer to buy this one if it falls back to $10. (Midway Games closed on Friday at $11.61.)
Gene wrote and asked if Gary liked Thornburg Mortgage (TMA). Gary said this is a stock that has been all over the place since a breakdown a few months ago. He said he would use its latest run to take profits. (Thornburg Mortgage closed on Friday at $26.60.)
Since Gary didn’t like any of these charts, he picked his favorite chart of the moment, CNA Financial (CNA). He said this has the perfect chart because it had been moving sideways, but has recently broken out of this sideways trend and headed up. It should be at $40 by the end of the year. (CNA Financial closed on Friday at $29.83.)
Adam’s prediction: Disney (DIS) gets Mel by Labor Day; stock gains 20 percent
Scott's prediction: Tony Soprano is buying? You should be selling! Housing going down 10 percent
Tobin's prediction: Interest rates are hiked 50 pts. this month; stocks GAIN 15 percent
Pat's prediction: Brinker (EAT) looks yummy; stock up 30 percent by next year
Gary B's prediction: Obvious but true: Exxon Mobil (XOM) fueled by gas prices up 20 percent by 2005
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Stuart Varney, Fox Business News contributor; Charles Payne, CEO of Wall Street Strategies; Brett Gallagher, head of US equities at Julius Baer Investment Management; Barbara Corcoran, founder of the Corcoran Group; and Arianna Huffington, co-founder of the Detroit Project.
$top Worrying About Iraq?
Neil Cavuto: Is it time to for investors to officially stop worrying about Iraq?
Stuart Varney: Absolutely. We're going to have a summer rally on Wall Street because the economy is booming. We have massive job gain and solid growth. This economy is firing on all cylinders. This summer we're going to see a rally.
Jim Rogers: Stuart happens to be right. We had a sharp decline and now we're going to have a nice rally.
Gregg Hymowitz: We really haven't had a sharp decline. The market had a great year last year. I agree with Stuart. Earnings have come through but you haven't really seen the market move that much. So you have to ask yourself what is keeping the market back somewhat. I still think the budget deficit weighs on the market. Longer term, I'm very nervous.
Barbara Corcoran: My industry is fabulous but that's just the slice of the pie. I think I'm on a different universe than the rest of you. The average person doesn't feel all the shininess that everyone is talking about. They're paying more for their gas, more for their groceries and they're not making any more money.
Gregg Hymowitz: What about everyone buying all these apartments in New York City?
Barbara Corcoran: That's a really warped marketplace. I'm talking about the average person.
Gregg Hymowitz: How are they able to afford it though?
Barbara Corcoran: Cheap money and leverage.
Brett Gallagher: I think the economy is doing well. Jobs are continuing to grow. But what I do disagree with is the profit outlook. Right now we have corporate profit margins at record levels. There are some temporary reasons for that and those reasons will fade by the end of the year. I don't think we'll get a summer rally. We might get a head fake.
Gregg Hymowitz: Why do margins shrink here if you believe that productivity continues?
Brett Gallagher: Two reasons. One is employment. We've been able to sell more goods without hiring more people. As you have to hire more labor, that margin will decrease. Secondly, accelerated depreciation that George Bush has put through, runs out at the end of this year.
Stuart Varney: I just don't see how you can ignore the big picture barometers that are so favorable for this economy.
Barbara Corcoran: I think Iraq is a big deal and will play out its cards come November. And whenever there's uncertainty, generally the stock market doesn't do well on the heels of it.
Jim Rogers: It doesn't matter who wins in November. Next year is going to be bad.
More for Your Money: Stocks for Hire!
Neil Cavuto: One point four million! That's how many workers have been hired in the past nine months. Hiring workers is usually a sign a company is growing, But is it also a sign for investors to buy that company's stock?
Charles Payne: I think you need to differentiate between those companies benefiting from overall job growth, and those out executing their peers. A clear cut buy signal is a company that is in a niche and is hiring when their peers aren't. I like Accenture (ACN). They haven't announced a lot of hirings, but they've had some high profile deals. The stock is really undervalued here and they're going to begin to hire. I do not own it.
Jim Rogers: Normally, I try and buy companies before they start hiring. I'm very bullish on Japan. Nissan (NSANY) makes smaller cars. Smaller cars are going to make a comeback. I don't own it, but I'd rather own this than some of the others.
Gregg Hymowitz: A lot of technology names are beginning to hire again. I'm pretty bullish in that area. I like Cisco (CSCO). I do not own it, but I truly believe we're going to be in a second wave of technology innovation.
Brett Gallagher: You want to be there before a company starts hiring. We own and are focusing on Automatic Data Processing (ADP). They're more of a direct market play. More jobs means more checks to process.
Neil Cavuto: A lot of people base this on the notion that the job growth continues. What do you think?
Charles Payne: I think it may begin to level off. Employers waited till the last minute and squeezed all the productivity out that they could. Although the numbers are really fantastic for the nation, I think we start to see numbers like 150-175 thousand a month going forward.
Jim Rogers: One thing we're not going to see is unemployment going higher. People are going to continue to hire at least till the end of this year.
Head to Head: The Gas Blame Game
Neil Cavuto: Are ads like the one by the Detroit Project that blame President Bush for high gas prices, fair? Arianna Huffington, author of, "Fanatics and Fools" and one of the backers of that commercial says yes..
Arianna Huffington: There's been absolutely no leadership from the Bush administration in terms of providing the kind of tax incentive the city of Detroit needs to produce hybrid cars. They're perpetuating scandalous loopholes.
Neil Cavuto: To be fair, he submitted an energy policy that would call for drilling in Anwar and off the coast of Florida two years ago. So he was looking for alternative energy supplies two years ago.
Arianna Huffington: Neil you know that's not a solution. It would take 10 years to produce any oil from Anwar and that would last us for six months.
Neil Cavuto: We had an opportunity to do this ten years ago. And by now we would've had a million and a half barrels of oil. I look at this as opportunity missed. Not conservation missed.
Arianna Huffington: We could've increased fuel efficiency standards by seven miles per gallon. And we could've saved ourselves two billion gallons of oil a day. This is the amount we're begging OPEC to increase its oil production by.
Neil Cavuto: Can you argue that conservation itself cannot solve the problem. I fully agree with you that it's part of it. But we also have a global economy improving. This is a supply and demand story. This isn't a blame the president story.
Arianna Huffington: But all the incentive that this administration is giving is going in the wrong direction. The president is giving $23 billion of incentives to the energy and oil industry.
Neil Cavuto: If you want incentives, how about getting incentives to trigger refinery building in this country? We can't conserve our way out of higher energy prices.
Arianna Huffington: We also can't drill our way out of higher energy prices.
Neil Cavuto: Would you be willing to drill oil in Anwar?
Arianna Huffington: No.
Neil Cavuto: You'd be more inclined to get it from OPEC?
Arianna Huffington: No, I want to produce renewable alternative energy sources. We can actually reduce our dependence on foreign oil. We don't want to be dependent on oil from countries who are friendly to terrorists.
Neil Cavuto: Well, then part of the solution is getting more here.
FOX on the Spot
Jim Rogers: OPEC won't cause oil slide. Do NOT sell oil stocks! I own oil and oil stocks.
Brett Gallagher: Buy Disney (DIS) even if Mel and Mickey don't hook up. We own it.
Charles Payne: Get a leg up with Legg Mason (LM). This stock has a limited downside and lots of upside potential. I do not own it.
Gregg Hymowitz: George Tenet is first of many to fall, helping stocks rise.
Stuart Varney: Kerry picks Bill Richardson as his vice presidential running mate, but still loses.
Neil Cavuto: We'll wipe out the 2 million plus jobs that Democrats say have been lost under the Bush watch. The economy will cease to be an election issue!
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, host: Those lazy, hazy ‘days of summer’ stocks usually have a tough time until after Labor Day. but this summer could buck the trend. So are you missing out if your stocks take the summer off? What is different this year? We have an election coming up. In the second half of an election year, the Dow goes up, on average, 11 percent compared to the 2 percent it goes up in non-election years. So, Dennis, are you a buyer this summer?
Dennis Kneale, managing editor: I am the bull in the Forbes sweatshop. It has been a very wobbly, milquetoast market. We are afraid interest rates might go up or afraid of terrorism. But soon traders will realize this market is cheap. If you look at a couple of different measures, stocks are the cheapest in some ways than they have been, pound for pound, in 20 years. And this is going to be a summer when stocks recover and rally.
David Asman: So get in while they're cheap?
Victoria Murphy, staff writer: Yeah. What's amazing here is that every week, we hear some great economic news. This week, we found out that in the past three months, one million jobs have been created. Even in the manufacturing sector, we found that semiconductor sales are up. So I agree, if you look at fundamentals, this is a great market to be in. But we are still wringing our hands over all this other stuff that's going on, like Iraq, oil prices, and interest rates, which I think psychologically, once we get over the interest rate hump, we will be in better shape because I don’t think that will be a big negative for the market. But it's an odd place to be. The fundamentals are great.
David Asman: What's more important, the fundamentals or the worries that we have?
Steve Forbes, editor-in-chief: The fundamentals are strong. And the worries I think are a bullish sign. Because the cliché of a bull market is ‘the bull market climbs walls of worry.’ Nobody is happy when the market goes up, we saw that last year. The economy is strong. The only thing that’s keeping it back is worries about oil, which will dissipate. And also interest rates which are already factored in. If you have money, buy. And invest the same amount each month. Don't get whipsawed. And you will do fine.
Jim Michaels, editorial vice president: I really don't give a damn what the stock market does this summer. If I'm in the right stocks, I'm going to stand. If I'm a little worried about this summer, just stop reading the papers every day. You look at the big trend. If you start trading for summer rallies or any rallies or any past historical patterns, you are just going to make the brokers rich and run up your tax bills.
Steve Forbes: Dollar cost averaging is one of the great miracles that's still under-appreciated.
David Asman: But Jim, you say we should have a cash reserve in case something bad happens.
Jim Michaels: Sure. If you got another 9-11, you get a chance to buy stocks 30 percent off. It's always good to have a cash reserve. But basically you want to be in the stocks you like and don't worry about what the market does.
David Asman: And you used to be in about 80 percent. Are you still?
Jim Michaels: More like 75 percent. 70 percent.
Bill Baldwin, editor: The next issue of Forbes magazine has an interesting story that says that during election years the market does very badly in the spring, when investors realize that either one of the candidates might be elected president. They’re aghast. And in the summer it rebounds. And that's what happened this year. This spring, investors came to the realization that George Bush or Senator Kerry could get elected.
David Asman: The rebound was just about to happen, if it hasn't happened already.
Quentin Hardy, Silicon Valley bureau chief: The one problem with the ‘wall of worry’ theory is none of us appear to be worried. Everybody here is being bullish and even I feel pretty good about things. And as to the point of the election, is Bush even running against Kerry yet? Kerry doesn't seem to have any visibility. So maybe that effect will be delayed. But generally, conditions look pretty benign right now.
David Asman: I got to stick with you. You think things look pretty good and you are usually concerned about things.
Quentin Hardy: You worry about $40-a-barrel oil. In real terms, oil is like half what it was in the 1970's. Not a big worry yet. Jobs are being created, to everyone's surprise.
Victoria Murphy: I think It's really dangerous to play the average game and say, you know, on election years, on average, ‘X’ happens, because the averages don't tell you the up and down swings. And if you tried to play Bush Sr's election, for example, you would have had to buy in August. You can't predict this stuff. You might as well go to Vegas and put your money on the table.
David Asman: You can't go by history all the time.
Bill Baldwin: It’s just a theory. We studied all the statistics to 1899. To be sure about the theory we only need 100 more presidential election cycles.
Dennis Kneale: A major component of a strong stock market, that we aren't mentioning, is that tech spending truly is back. Tech spending is half of all capital spending in this country. You hear Cisco (CSCO) and John Chambers, the CEO there, who has been timid for three years. The swagger is back and that’s going to help the market as well.
Victoria Murphy: The tech executives have been smart about not setting expectations too high. So I agree that tech right now is a really promising sector. You have to be careful about what you buy.
David Asman: Silicon Valley Bureau Chief, Quentin Hardy, what do you say about tech?
Quentin Hardy: On Thursday, Intel also upgraded its outlook. And the tech guys aren't ripping people off the way they used to. So, it’s working pretty well.
Jim Michaels: I'm getting nervous. Quentin is turning bullish. You're a contrary indicator.
Steve Forbes: One potential downer. If John Kerry wins the election, since the tax cuts are not permanent that have fueled this great boom, watch out, the market will take a hit. That's the only down I see on the horizon.
David Asman: Say that Kerry wins the election and we have some terrorist thing happening before the election. What is that going to do to the market?
Dennis Kneale: If Kerry wins and terror happens, take that cash reserve that Jim Michaels talks about and put it into more stocks because stocks will come back even harder.
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: $40-a-barrel for oil. Maybe even $50. Bring it on. It's good for us and it's bad for the Saudis. How in the world is $40-a-barrel oil good for us?
Jim Michaels: All you can do is curse the Arabs and pay through the nose. But the price of oil is coming down. There is a $10-a-barrel premium in there because of worry about Iraq. But look, the good will come out of this, if this puts some scare into the American people and make us understand that long-range, we do not want to be dependent upon a politically volatile part of the world for the energy that provides the guts of our economy. We've got to start developing long-term alternatives. Nuclear is the most obvious. But there are a lot of other things we can do.
David Asman: This will force us to get off of the Saudi habit.
Quentin Hardy: I don't know why you want to curse the Arabs or the Saudis. They are slaves to the market like everybody else. Demand is up, the economy is recovering, so prices are rising. What's the big surprise? I don't think they rising enough to develop alternative sources though, particularly if Iraq is stable and develops an infrastructure over time that starts unleashing a lot of oil in the world. Prices will come back and the alternatives will fail as investments.
David Asman: Others say if the price stays between $25 and $35-a-barrel, then all these other alternatives like coal, for instance, and extracting oil from sand, they become very profitable.
Bill Baldwin: I think oil will stay fairly high and great for something like Suncor (SU) which is strong in extracting heavy oil from oil sand. But I see a political benefit in the high oil prices. If they stay high enough, long enough, then conservation will happen naturally. Alternative fuels will happen naturally. And we can repeal all these federal subsidies and boondoggles for things like windmills and ethanol and synfuel, absurd things that need to be repealed.
Victoria Murphy: I think the costs have to stay high for a long time for that to happen. The cost for setting up a nuclear power plant is huge. And the cost-per-kilowatt output is still higher than coal and still higher than gas. So this is not totally obvious. We are dependent on gas, because it's an efficient resource for us. I think what is hanging is on the demand side. If you look at auto sales in April, and this is fascinating, Hummer sales were down 21 percent. Ford Expedition, down 34 percent. The good news here is that Americans are changing their consumption patterns. We'll see if it lasts.
David Asman: What about the alternates to Persian oil?
Steve Forbes: I think the alternates will not come on anytime soon. It takes years to do it. And the best way to really punish OPEC is stop punishing people who drill for oil. Both in this country and around the world, Mexico, China, Russia do not have the property rights we have. You discover oil in Mexico the government takes it away from you. There is plenty of oil in the ground. Protect the wildcatters and we will have oil coming out our ears.
Jim Michaels: Let me say something about nuclear. Nuclear is very cost competitive. Once you get the plants built, the fuel costs are almost zero. The French get 30 percent of their energy from nuclear. The Japanese get 30 percent. We get 19 percent.
David Asman: I knew you would find a way of blaming the French for this. But go ahead.
Jim Michaels: Nuclear works. It's just that we have this political prejudice against it. But it's one thing that we can start doing now and by the way, the Bush energy bill, which congress bottled up, had provisions for encouraging both coal burning and nuclear.
Victoria Murphy: I agree with Jim that nuclear is a great way to get energy. But it is still more costly. A study done by MIT researchers show that you would still have to heavily incentivize nuclear power for it to make economic sense for investors to put money into.
David Asman: Quentin, the only way nuclear has survived is by a lot of government subsidies, right?
Quentin Hardy: That’s right. And this is where Bill makes a big mistake thinking we will get ethanol subsidies out of it, too. Those subsidies are voted for by supposedly anti-big government, midwestern congressmen who need to support a huge corn economy that makes no sense. I just don't see anything in energy policy changing that. It's a sweetheart deal by a bunch of republican congressmen.
David Asman: We are subsidizing farmers in the midwest.
Bill Baldwin: And not just farmers. It's all kinds of crazy people. There is a synfuel subsidy. You pour a tablespoon of salad oil on a load of coal and you call it a synfuel. We need to get all of that stuff off the federal statute books. All the garbage, by the way, that's in the Jim’s favorite energy bill.
Steve Forbes: That's the thing. In terms of having a sensible energy policy, $10 out of that $40 is inflation from the Federal Reserve. You print too much money, you have problems. When the fed tightens up, oil will go down to $30 a barrel.
Makers and Breakers
• Health Management Associates (HMA)
Ben Halliburton, managing director of Traditional Capital Management: MAKER
Health management operates about 50 hospitals in rural and non-urban areas in the US. And they have a great management team. But their biggest benefit, since they are in non-urban areas, they have a monopoly presence in their particular market. That gives them pricing advantage and helps them as they manage their business. Not a lot of competition. So we think it is a great place to be and a great stock.
David Asman: It's at $22 (Friday’s close: $22.13) and you think it goes to $30.
Ben Halliburton: Our estimate is a $30 value.
Jim Michaels: BREAKER
A great record but they got it by cherry picking their spots for hospitals. They will run out of cherries and the growth will slow. It’s a 16 times earnings stock. The growth is priced in. I'm skeptical on it.
Dennis Kneale: BREAKER
I'm also a breaker on this stock. I want to be fair. With 14 years of growing earnings, something has to go wrong sometime. And hospitals are in for a new round of cost cuts and cost pressure.
Ben Halliburton: Great management team. P.E. lower than it normally is. They are going to grow at twice the S&P 500 over the longer term as far as their earnings. A great buy here today.
• Prudential Financial (PRU)
Ben Halliburton: MAKER
Prudential is in the process of going from being a policyholder-owned mutual company to a shareholder-owned corporation. And as that process takes place, they are improving their efficiencies and improving the profitability.
David Asman: So a great time to get in. You think it can go up to $66, right? (Friday’s close: $44.66)
Ben Halliburton: The stock has been strong and will continue to move for the next couple of years.
Dennis Kneale: MAKER
I like the stock a lot. Prudential has been to hell and back in recent years. Imagine what will happen if they are put into an index and institutions start loading up on that stock.
Jim Michaels: MAKER
I like it precisely because it's a laggard. And that means that they can get that return on equity up from 9 percent to 12 percent. You got a lot of push in the stock. I think it’s a good play on financials.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Mel Karmazin, the guy who turned Viacom (VIA) into a megamedia powerhouse is a free agent. So where is he going next? Should you buy that company's stock before he gets there?
Chana Schoenberger, staff writer: I think he is going to Disney (DIS). They have to get rid of [Michael] Eisner (Chairman and CEO). He has lost the confidence of shareholders. There is that whole Comcast (CMCSA) takeover scenario fiasco that didn't happen. And they could use a long ad-driving CEO like Mel.
Dennis Kneale: Chana is crazy. Never going to happen. I had lunch with Michael Eisner a couple of weeks ago. That guy ain't going anywhere until they carry him out.
David Asman: So where is Mel going?
Dennis Kneale: He will go to Time Warner (TWX). Which is an even crazier idea. Dick Parsons is the CEO of that company and he is not an ad guy, not a hard seller and not knocked heads to make these divisions work together. Mel Karmazin could knock those heads and turn out a better company at Time Warner.
Pete Newcomb, senior editor: How about the largest radio company in the country.
David Asman: Radio?
Pete Newcomb: Yeah, Clear Channel (CCU). That's what he does best.
David Asman: Howard Stern's former channel. Do you want a piece of Howard?
Pete Newcomb: Mel and Howard are very tight and he could get Howard back on the air.
David Asman: It’s retro. We will talk about that in a moment. What do you think about Mel? Is he as great as everyone says?
Mike Ozanian: I think he’s a has-been. I know he is only 60, but the stock (Viacom) has underperformed the market during his tenure there. And this guy also sat on the board of the NYSE that gave Grasso these fat pay packages. He’s on the board of Westwood One (WON) and Blockbuster (BBI), two doggish stocks.
Dennis Kneale: This guy is a killer and makes it happen. I would bet on him no matter where he goes.
Pete Newcomb: I like what Mike is saying. What happened, the other number two there, Frank Biondi, he disappeared, and the same thing could happen to Mel.
David Asman: So Chana, is made up to be more than he really is?
Chana Schoenberger: No, and I stick with the Disney play. I think the radio one is pretty interesting.
Dennis Kneale: I can tell you that will not happen, either. Had lunch with the number two guy at Clear Channel, and he the son of the founder. He has spent his adult career and life at the company and it won't happen.
David Asman: Going back to radio, it’s a retro technology. Doesn't he want to go into television and the future?
Pete Newcomb: I’m sure he’d like to do a lot of things but I don’t think he has that many options.
Mike Ozanian: One of the problems with a lot of these media companies is that they are controlled by the founding families still, so it is tough for anyone to do anything.
Stock Smarts: Will Kerry Nuke Stocks?
Terrorists with nuclear weapons are coming to America and President Bush isn’t doing enough to stop them. That’s John Kerry’s latest battle cry. Will his campaign of fear level the stock market?
Bob Beckel, Democratic strategist, says Wall Street won’t pay attention to Kerry’s call to eliminate the nuclear terrorist threat, but it should, because, he says, this is not a campaign of fear; it’s a campaign of fact. He points to two cargo ships full of equipment that could be used to make nuclear weapons that have disappeared. He says only 10 percent of known nuclear waste and processed plutonium from the former Soviet Union has been located and identified, and he says President Bush isn’t doing enough to locate the rest.
Wayne Rogers of Wayne Rogers & Company says the President is doing a great job protecting America from terrorists, and the fact that we have not had a major attack in the United States since September 11, 2001--despite terrorists’ desire to carry one out--is evidence that the Bush administration is on the right track.
Jonathan Hoenig of Capitalistpig Asset Management says since President Bush vowed not to tolerate terrorists, and the countries that harbor terrorists, we have seen dictators like Saddam Hussein and the Taliban removed, and dictators like Yasser Arafat marginalized, and the world has become a safer place. That’s why Wall Street’s not focused on Kerry’s rhetoric.
Gary Kaltbaum of Kaltbaum and Associates agrees that Kerry's accusations will have no effect on the stock market because the market is used to this kind of campaign rhetoric, and the truth is that under George Bush, the threat posed by Saddam’s Iraq has been eliminated, the terrorist training camps supported by Afghanistan have been wiped off the map, Libya has been tamed, and the A.Q. Khan network, which headed Pakistan's nuclear program for 25 years, has been disrupted.
Bob Sellers of Fox News Channel says Wall Street is watching John Kerry’s campaign because the market fears that a Kerry presidency would see an end to the Bush tax cuts, which would spell disaster for stocks. But, he says, the more accusations John Kerry levels against the president without outlining his own policies, the more unlikable he becomes, and the better it is for Wall Street.
Dagen McDowell agrees with Bob Sellers that the more unlikable John Kerry appears in his campaign the more Wall Street will cheer, and his latest criticism of the president’s efforts in the war on terrorism are a perfect example of the kind of campaign approach that could hurt, not help Kerry.
Best Bets: Unbelievably Hot Stocks!
Sizzling stocks that are at or near their all-time highs! Should you buy them?
• Wrigley (WWY)
All-time high: $63.70 on June 2, 2004
Friday’s close: $62.92
Wrigley – Leigh Gallagher, senior editor at Smart Money magazine says she’d bet on Wrigley now because the company has great profits and a 50 percent share of a fragmented business. Gary Kaltbaum says Wrigley has consistent earnings and revenue growth and will do well in a good or bad economic environment. Wayne Rogers agrees with Gary that the company has impressive growth in earnings, and he adds that the stock is strong and largely owned by institutions. Jonathan Hoenig rounds out the chorus of bulls. He points out that Wrigley is a strong stock in a strong sector.
• Quest Diagnostics (DGX)
All-time high: $91.53 on June 10, 2002
Friday’s close: $88.60
Quest – Jonathan says this is a strong stock in a business that appears to have a lot of upside because of the aging demographics in America and very little downside. Wayne calls this is a terrific company.
• Marriott (MAR)
All-time high: $50.50 on June 4, 2004
Friday’s close: $50.50
Marriott – Wayne says Marriott is an extremely well run company that is buying back stock. He points out that earnings are up, revenue is up, and they are adding rooms all the time. He likes the stock. Leigh agrees this is a great company. She says we are in the middle of a bone fide recovery in this industry, and Marriott is the company to bet on. Gary agrees with Wayne and Leigh.
Check out who’s ahead in the $10,000 Cashin’ In Challenge: www.foxnews.com/challenge
Cash Count: The Best Of…
The best calls from our Cashin’ In crew! (We’ll do the worst ones next week.)
Wayne Rogers picked Yahoo! (YHOO) on May 17, 2003. It’s up 130 percent since then. Wayne says he still owns the stock and would buy more today.
Jonathan Hoenig picked STET Hellas (STHLY) on January 4, 2003. It’s up 141 percent since then. Jonathan says he sold the stock, and has moved onto other ideas, but he says international telecom is still a sector to watch.
Jonas Max Ferris picked T. Rowe Price Media and Telecom Fund (PRMTX) on January 18, 2003. It’s up 61 percent since then. Jonas says this was a contrarian play when he suggested it. He calls the fund a “hold” but too expensive to buy now.
Dagen McDowell picked Bridgeway Ultra-Small Company Market Fund (BRSIX) on May 3, 2003. It’s up 68 percent since then. Dagen says she’s planning to sell this fund. She says small company stocks will lose steam in this rising interest rate environment.
Stock Of The Week
Leigh Gallagher says Tommy Hilfiger (TOM) will rise when the retailer reports earnings next week. She says the company is in the middle of a turnaround with a new CEO.
Jonathan Hoenig calls Tommy Hilfiger the IZOD of the late ‘90s. He says its brand is losing steam. He doesn’t like the stock. Jonas Max Ferris agrees. He wouldn’t bet on this one next week, or any other week.
Last week’s Stock of The Week: Hovnanian (HOV) picked by Charles Payne fell 0.8 percent