DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Price Headley, investment strategist for BigTrends.com; and Herb Greenberg, senior columnist for MarketWatch.com.
Trading Pit: Start of Something Big?
Last week the Dow had a very good week, gaining 285 points. In fact, this gain was the largest it has made in one week this whole year.
So is this the start of something big?
Pat Dorsey: I’m seeing a good number of stocks to buy. There should be smooth sailing for a while. But keep your expectations modest. There was a huge earnings growth coming out of the recession, but the comparisons will get tougher, and earnings growth is going to slow. Look at stocks like Weight Watchers (WTW) and Apollo Group (APOL), which have been taken out for no good reason. Everyone’s ignoring them because they’re chasing other stocks.
Herb Greenberg: There are going to be more weeks when stocks head higher, but there are going to be more down weeks as well. There has been no consensus on economic numbers. My real concerns are inflation and higher interest rates. I’m expecting the market to head lower, especially if interest rates continue to go higher. The market will “Follow the Fed”, which it did on the way down and will do on the way up.
Gary B. Smith: I think stocks will finish at least flat for year, and the Dow may even make a new yearly high. The pullback this year, annoying as it is, is just what the market needs in order to head higher. This is because stocks can’t go straight up or else they’ll come crashing down. I expect we’ll make a big move into the election.
Tobin Smith: Stocks are not down that much this year, but there have been some big moves between the highs and lows. Oil is not going to $38/barrel in the next couple of weeks, so what will be the catalyst? Not earnings, not psychology. The buys are in the individual sectors, especially the stocks that have been sold for no reason.
Price Headley: There is so much bad news that is going to linger: election uncertainty and Iraq, to name a few. Also, oil has gone up so much so quickly, but it is the one thing that can improve in the short term. I expect a “trading bounce” that’ll take the Dow to 10,400. Then the market will come back down as we enter the fall season and once the election uncertainties are cleared up, it’ll blast to the upside.
Scott Bleier: The key to heading the higher is holding the lows that the market made 2 weeks ago. If we hold them, we’re heading higher. However if we break below them, it could be all over. Be careful, but you have a chance to be very bullish right here—especially on technology stocks. Everyone is too bearish on these stocks, which makes them a great buying opportunity.
Hurricane season has just started. Hurricane Charley was a disaster and the loss of life was indeed a tragedy. But the fact is this storm alone did billions of dollars in damage and unfortunately other storms are likely to come. Price, Scott, Pat, and Toby each picked companies that will help rebuild whatever damage is done.
Price chose Allstate (ALL) as the stock that will help in any clean up and rebuilding effort. He said it’s the second largest insurer in the nation and has 10 ½ percent of the Florida market. Unlike Hurricane Andrew in 1992, the insurers are prepared and have big reserves set aside. He added that the stock is making new all-time highs and didn’t budge, which says it’s strong. Pat does not like the stock because it’s too expensive and its competition is too stiff. Scott agreed with Price and said the stock is the model of stability and is reasonably priced. (Allstate closed at $47.52 on Friday.)
Scott selected Florida Rock (FRK) as his hurricane season stock because it makes cement and concrete and there is a cement shortage in Florida right now. Also, he likes its yield. However, Price does not like the stock because it is a cement company and is trading like a “go go” stock. He said to buy it if it can pullback to $37. But Toby likes the stock because he thinks there are going to be more homes built. (Florida Rock closed at $45.85 on Friday.)
Pat picked RenaissanceRe Holdings (RNR) a reinsurance company, which means it’s an insurance company for other insurance companies. He said it’s extremely profitable and is one of the best in its industry. Also, its CEO owns 5 percent of the company, while directors and officers own 10 percent, so there’s a vested interest for the company to do better. Toby and Scott like the stock, but both said if there are a lot of storms, the company will have to pay out a lot of money, so it’s a bit of a bet on the weather. (RenaissanceRe closed at $51.30 on Friday.)
Toby said Plum Creek Timber (PCL) will build up. He explained that all the rain in June limited the amount of logging, which caused the company’s earnings to dip. But now lumber prices are going up and Plum Creek has a lot of lumber that’s needed for rebuilding. Plus he likes that the company pays most of their earnings out in dividends. Price said lumber prices have soared recently and he is concerned this may be a bubble or mania. He thinks the stock may have some short-term volatility, but is a good long-term play. (Plum Creek Timber closed $32.80 on Friday.)
"Dream Team" stocks. Gary brought a couple of "Dream Team" stocks — ones that haven't played up to their potential, but could still turn it around and dominate.
Gary said Fifth Third Bancorp (FITB) is the star of his line up because it is right at a support level. This means it’s a great time to buy the stock. He added he would only sell the stock if it fell below $45. But Herb said this is no slam dunk because it was on steroids! And once the regulators took away its steroids, it fell. He admitted Fifth Third is a well-run bank company, but even fans of the stock have been cutting earnings estimates. Herb thinks the stock won’t take a big fall, but won’t make a big gain either. (Fifth Third Bancorp closed at $49.87 on Friday.)
Gary also thinks Dick’s Sporting Goods (DKS) can bring home the gold. He said the stock has been going up since late last year and the only way he’d sell it is if it dropped below $26. He thinks it will make a 52-week high ($34.87) and then continue to even head higher. But Herb doesn’t even think this stock will make it to the medal round. He said the stock is very risky due to a horrible acquisition it just made, even though Dick’s is the best sporting goods retailer. (Dick’s Sporting Goods closed on Friday at $32.41.)
Gary B's prediction: After Google's (GOOG) initial pop it will fall 50 percent in one year
Price's prediction: Google's (GOOG) got it! Stock doubles within one year
Scott's prediction: Najaf victory lowers oil prices which will send stocks higher
Tobin's prediction: JetBlue (JBLU) buys US Airways and gains 50 percent by spring
Pat's prediction: It's really smart to buy NetIQ (NTIQ); up 40 percent in 1 year
Cavuto on Business
Neil was joined by Jim Rogers, author of "Adventure Capitalist"; Meredith Whitney, FOX News Business Contributor; Charles Payne, CEO of Wall Street Strategies; Rob Stein, managing director of Astor Asset Management; Adam Lashinsky, senior writer at Fortune magazine; Mike Thompson, director of research at Thomson Financial; Mike Norman, founder of Economic Contrarian Update; and Wendy Murphy, founder of Victims Advocacy & Research Group.
The Bottom Line: Is Wall Street Ignoring Good New$?
Neil Cavuto: Is Wall Street ignoring good news that could ignite a new bull market?
Mike Thompson: Yes, in some ways, investors are ignoring good news in three seperate areas. First, stock prices are historically cheap when comparing the risk premium, which represents the excess return offered by stocks over treasuries. Secondly, earnings are very strong. S&P 500 companies saw a 25 percent profit increase in the second quarter. While profits are decelerating, companies are still expected to post about a 15 percent earnings increase for the next two quarters. Thirdly, the job market is better than people realize. While the Labor Department's business survey showed only 32,000 new jobs were added in July, the Department's household survey showed 629,000 jobs were created. Thomson Financial has charted these two separate surveys and found the household survey is often the leading indicator, meaning we could see significant job growth in future labor reports.
Meredith Whitney: I think stocks are cheap, but I may be becoming a Jim Rogers disciple. 2005 looks rough for the economy. And the market is never going to reward decelerating earnings.
Jim Rogers: I actually find the market very expensive. That said, I am long the market right now because I expect a short term rally. Despite the major indices being down for the year and the summer, stocks trading on the NYSE have advanced 80 percent of the weeks this summer.
Neil Cavuto: Where are we seeing the advances.
Jim Rogers: Natural resources are performing well along with many other sectors.
Adam Lashinsky: I agree with Jim. And I also think the market is not ignoring good news. Last week several companies reported good quarterly earnings and the stocks did extremely well. That tells me the market is still rewarding companies that do well. And that's exactly what it's suppose to do.
Charles Payne:A lot of people are negative and expectations are very low. That's why those stocks Adam mentioned did well. Just a few weeks ago companies were blowing past profit estimates and given strong guidance, but their stocks were getting hammered. Now expectations are much lower and that very good for the market.
Rob Stein: I see the economy rolling over a bit and that the good news everyone is talking about is price into the stock market at this point. The economy is slowing down from where it was at beginning of year and I expect it to slow even more. We haven't had the job growth needed to create 8 percent-12 percent stock market returns.
Jim Rogers: But we will have good news going into the election. I think Pres. Bush will do something to make things look better and the market will rally into the Fall like it usually does. But I am worried about next year.
Mike Thompson: We just had four quarters of at least 20 percent growth. That's only happened five times in the last 50 years. So, earning slowing to mid-teens for rest of 2004 is not a bad thing. In mid 90's we had average profit growth or 12-13 percent, and market literally doubled in value from 1995-1998.
Adam Lashinsky: But money managers have more cash on hand than since 9/11 because they are have uncertainty about the a lot of things like oil prices, the economy, Iraq and election.
Charles Payne: You don't need a survey to show there is anxiety in the market. Just look at the light volume of stocks being traded. But don't forget that anxiety has always led to big buying opportunities.
More for Your Money: Follow the Money!
Neil Cavuto: If you follow the money will you get more for your money? More companies are spending big time money to boost their businesses. In fact, corporate spending has increased 10.5 percent in the first half of this year. That is the first increase in two years. Mike Norman, should investors invest in companies investing in themselves?
Mike Norman: Yes, for the most part. Companies that continue to aggressively invest to boost their productivity will see their profit growth follow.
Jim Rogers: You should always invest in companies spending more money because that's a sign of good business. But sometimes business spending can lead to over capacity, so be careful. You can't just invest in companies spending money.
Charles Payne: I think the way to play this is to invest in companies that are at the receiveing end of corporate spending. Also, I look for businesses that are hiring employees to meet higher goals for higher revenues which is where the real financial growth comes from in a company.
Meredith Whitney: I think this is an excellent thesis on searching for companies to invest in. One of the big corporate spenders I like is Procter & Gamble (PG ). I do not own it now, but plan on buying it in the near future.
Mike Norman: I like Comcast (CMCSA ). It's investing heavily in fiber opitcs and its cable business. I do not own it.
Charles Payne: Yellow Roadway (YELL ) is a freight company that should beneift by delivering all these products that businesses are building and shipping. I do not own it.
Jim Rogers: I would not buy anything right now. I think stocks will rally into Fall, but then drop soon after the election.
Head to Head: Celebrity $Hakedown?
Neil Cavuto: Celebrity shakedown! Are some prosecutors using your tax dollars to put the rich and famous on trial, so they can become rich and famous themselves? Time to go head to head. In Boston, Wendy Murphy, a former prosecutor and founder of the victim advocacy and research group
Wendy Murphy: The idea that there should be an economically driven decision whether or not to take on a celebrity is preposterous. Justice and law, and especially when it comes to serious criminal behavior, which is what we're talking about with Kobe Bryant and Michael Jackson is what should drive us. You cannot have a justice system that anyone would respect if we let market forces determine whether we go after one person or another. Every celebrity that we're talking about is extremely wealthy. Do you want a two-tier justice system where we just give a pass to the wealthy?
Neil Cavuto: Here's what I'm afraid of Wendy. Yes, there might be some high profile criminals out there. But there are also some murderers, rapists, and worst out there. When you're focusing on just the Kobe Bryants you're missing out on scores of these other people who are doing heinous things. And maybe ignoring it all together. That's what I worry about.
Wendy Murphy: But Neil you're missing the point. The Kobe Bryant case is a very serious felony. We keep hearing about how he's facing the possibility of life in prison. That's because what he's accused of is very serious. And let me add that we don't know the half of what he did to this woman. What he did after he bent her over and raped her has been hidden from public view, through a judge's gag order.
Neil Cavuto: By the way, that's allegedly. Nor do we know much about the person he "allegedly" raped. We're not here to debate this cases. We're here to debate the dollars spent to forward them. A lot of times it's for notoriety and fame and not to get these guys behind bars.
Wendy Murphy: Prosecutors who have to be responsible to the public and who have a fixed budget would rather stick pins in their eyes than go after a wealthy celebrity.
Neil Cavuto: Oh come on! Some of them use it as a launching pad to run for office.
Wendy Murphy:Name one prosecutor who literally was able to turn a win against a celebrity into something big for them politically. You know why prosecutors don't like to go after rich celebrities? Because there's a really good chance the celebrity's going to win. And also, because the prosecutor loses on the world stage.
Neil Cavuto: What about Los Angeles District Attorney, Gil Garcetti, in the O.J. case. And can you argue that New York State Attorney General, Eliot Spitzer, is all for cleaning up the industry and not for advancing his political career.
Wendy Murphy: I'm not saying people don't become prosecutors because they're not interested in political careers. I'm saying it's preposterous to think that the reason they pick on celebrities is because they think they're going to get a big bang out of that.
Neil Cavuto: Do you think some of these guys take their eyes off the ball when there are murderers and rapists out there. That they're so focused on getting the celebrity that they're losing the real criminals right in their midst.
Wendy Murphy: No Neil. I think there's no evidence that they're trading off at all.
Neil Cavuto: In the case of Michael Jackson. Every time he shows up in this Mary Poppins getup, they have to hire more guards to bring him in. It's $70,000. That's double what it normally takes. And I'm just wondering whether we're getting any bang for the buck off of that.
Wendy Murphy: I think what we get from a prosecution of Michael Jackson is, oh I don't know, safer kids comes to mind. Who are you blaming for the cost of these cases Neil? It's not the public's fault. It's not the prosecutor's fault. It is the wealth of these celebrity's fault. They literally create press releases and dance on top of cars. I think the media is partly to blame and certainly the defendants who are wasting the money.
FOX on the Spots
Adam Lashinsky: Google (GOOG ) goes up 50 percent by Thanksgiving. I do not own it.
Charles Payne: Don't get giddy over Google (GOOG )! Stock will fall below offering price of $85.
Meredith Whitney: Bush military plan to re-deploy troops saves money, market & Bush campaign.
Jim Rogers: Meredith is right! Bush plan boosts security & stocks.
Mike Norman: Dow drops to 9400 by year end as corporate profits drop.
Neil Cavuto: The Olympics give President Bush a gold medal sheen. And he benefits from all the good publicity for the United States. So it's good to be the prez at this time!
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 says he'll cut taxes for 98 percent of all Americans if he's elected. Here's the gist of the Kerry tax plan: He's raise taxes for individuals or couples making over $200,000 a year; he'd cut taxes for middle class Americans and give them tax credits on health care and college tuition.
Mike Ozanian, senior editor: His numbers don't add up. You can't increase spending the way he wants to, and also simultaneously erase the deficit, and oh by the way only increase spending on people earning over $200,000? Its all bogus. Remember N.J. Governor McGreevey? He was going to have the "millionaire tax." Next thing we knew "millionaires" were anyone making $500,000 or more. Its the same thing here.
Lea Goldman, staff writer: The right likes to perennially trot out the excuse that the Kerry tax plan is going to squash growth, and that there's not going to be any job creation under that plan. Like we're seeing any under the Bush plan! But, I like his plan. He's planning on cutting the cap gains tax for start ups (businesses) that's going to increase investments and venture capital. That's great and I think that's going to spur job growth in areas where we need it, out west in the emerging tech markets. That's great. Cutting the corporate tax rate — again, another job growth kind of tax cut.
David Asman: Jim, he sounds like he's for big business!
Jim Michaels, editorial vice president: Right. He's for big business. If he implements even a fraction of these tax cuts, you're going to see a deficit the likes of which we've never seen! These are open-ended promises: college tuition, all these things. And in the end, what's he doing? He's going to take part of it by taxing the business man who's creating the jobs. Business people are already paying 45 percent of their marginal income in taxes. Every time you raise that, you make it less profitable for them to take risks. All he's going to do, if he ever carries it out, and he's never kept his word yet, but if he carried it out, all he's going to do is balloon the deficit.
David Asman: Victoria, the main argument I'm hearing against this plan is that Kerry is going to tax small business owners who are making $200,000 a year.
Victoria Murphy, staff writer: Well, that's true. But both Bush and Kerry are guilty of very fuzzy math. They're both saying they're going to reduce taxes, but also cut the deficit in half. $400 billion down to $200 billion — that's a lot of money. But these are based on totally unrealistic assumptions. Bush's plan says there'll be no increase in spending for defense and homeland security — now that would be a wild departure from recent years. Kerry says let's give everyone universal health care — now that's wonderful but its going to cost us $650 billion!
Dennis Kneale, managing editor: Kerry's never going to be able to deliver on these tax cuts. Lemme tell you, some years ago, a really wealthy venture capital friend of mine was complaining about tax increases. I said 'what do I care about tax hikes, they're for the rich.' and he said 'one day you'll be rich.' A few years later, I was earning $100,000 a year. My spouse was earning $100,000 a year. And in the view of John Kerry, that makes us rich. If you live in New York City and make $200,000 a year, you're not rich! Already the top 1 percent of all taxpayers pay 33 percent of all taxes! They're going to raise our taxes again?
Lea Goldman: Only in New York City is $200,000 not a lot. We're talking about a myth. The idea that $200,000 is middle class is a myth. I want to remind the public that only 4 percent of small business owners in this country make in excess of $200,000. These are not the "job creators" that the Republicans say they are.
Dennis Kneale: Look, I've paid enough taxes, I'm tired of paying more taxes, and I'm not going to vote for some bastard who wants to raise my taxes again!
Victoria Murphy: Someone has to pay, we've gone to war in Iraq, if Kerry gets elected we have universal health care. The problem with Kerry's plan, I think is that it seems to make our tax code more and more complicated. Its already so complicated. It's like he's saying "you have three kids, and they all get into Yale, then you get $3000 off their college tuition." I'm making fun of it but it's sort of gimmicky because there are all of these ratchets.
Mike Ozanian: Victoria makes a good point in that the numbers on either side don't really add up. But there's one thing that's indisputable — that's that Bush wants to leave a much higher percentage of income over to the market, and Kerry wants to bring a lot more over to the government. That's what I don't like.
Jim Michaels: Everyone's overlooking the fact that recent history shows that when we've cut taxes at the higher levels, you end up with a spurt of growth, of job creation, and you have a strong stock market.
Lea Goldman: We're all waiting with bated breadth for that to happen in this administration! This administration has had the worst record of job creation.
David Asman: But Alan Greenspan has said that if it weren't for these tax cuts, the recession would have been much worse, and its one thing that got us out of the recession.
Lea Goldman: Listen, you want the American public to hold our hands and pray that everything works out for them in the next administration? The stakes are too high. And let's talk about the deficits, shall we? Let's talk about how this administration has spent more ..
Jim Michaels: Well, are we going to talk about deficits or are we going to talk about growth? Nobody doubts that the Reagan tax cuts in the 80's led to the boom of the 90's. The same thing with the Kennedy tax cuts — led to a boom in the 70's. History shows when you make business more profitable by cutting taxes, you increase investment and employment.
Dennis Kneale: I'm sorry to be the ugly "rich" American. I'll tell ya: the bottom 50 percent of income in this entire country pays only 4 percent of the tax revenue. Let's stop this populist and divisive debate. I think we're all paying way too much because our government spends too much. We need to work on spending, guys.
Mike Ozanian: Absolutely. That's why Kerry's numbers are bogus. You can't just raise income taxes on people making over $200,000 a year to balance the budget. You have to go all the way down.
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: Americans pay more for prescription drugs because we should. So Dennis, why do we pay more and why is that good?
Dennis Kneale: The US is the only market in the entire world, pretty much, where drug prices are utterly unregulated. You can charge whatever you want, and if it's too high, people won't buy it and if it's low people will buy it.
David Asman: Why is that a good thing?
Dennis Kneale: That funds incredible research, and in the U.S. we come up with over half of all the new drugs in the entire world. I know drugs are costly. I know a lot of elderly Americans, in particular, can't afford to take all the drugs they should. But they just passed new Medicare coverage to help that. If we don't pay those high prices, you will have more money but you’ll have that money to leave over to your kids after you die because you’re not going to get the new drugs that will cure you.
David Asman: It’s a lot cheaper up in Canada.
Elizabeth MacDonald, senior editor: Unbelievable. That is totally ridiculous. Look, what was going on right now is that Americans are essentially subsidizing these price-controlled economies. These bankrupt socialist economies where drug prices are capped. Why should Americans have to pay more for higher drug prices here when they don't have to pay for higher drug costs there? The US accounts for half of the industry's profits. These economies have to get up and reform their welfare states. Maybe they will get a cure for cancer. Americans should not have to foot that bill.
Victoria Murphy: Dennis, you are so generous. We're talking about sending drugs like Viagra to Canada. You know the new add with the devil horns? That’s what we’re paying for. Look at Pfizer (PFE). 15 percent of their revenue goes to research and development. 35 percent goes to sales and marketing.
Dennis Kneale: Are you arguing for price controls?
Victoria Murphy: I'm not arguing for price controls but why subsidize Canadians taking Viagra?
Chana Schoenberger, staff writer: Here's the problem. The problem is that we live in the only country where drug research is done in any volume. And this means that we are going to have to pay more. We're just going to have to pay more. The way to stop this all is to stop the marketing to individual consumers. You don't need to be able to walk into your doctor and say ‘please, give me the purple pill.’ That's what you have a doctor for. The man went to medical school.
David Asman: So it would be cheaper if you had the doctor take control?
Chana Schoenberger: That's right.
David Asman: What about Dennis' point about price controls? You aren't in favor of price controls, are you?
Jim Michaels: Of course not. I'm for what's called arbitrage. If prices are too high in one market, you buy in the cheaper market. Now, if Americans exercise their right to buy drugs in the cheapest place, that's economic freedom. Look, the drug companies made a pact with the devil many years ago. They said, look, the Americans, we'll charge enough for drugs to cover all our costs in the United States. And we'll sell to you socialized medicine people at below cost. The Americans will subsidize it. That's the deal they're stuck with. Let them get out of this deal.
Elizabeth MacDonald: Jim is right. These bankrupt socialist economies need to reform their welfare states. Why is it that I can get a Volvo shipped into the US, but I can't get a drug from Canada?
Dennis Kneale: Illinois has just become the fifth state to, not only sanction, but encourage and set up their residents to be allowed to buy the same drugs at a cheaper rate from Canada. This is irresponsible action by government that is twisting the market. When all Americans buy their drugs from Canada, we have no money funding research in the US.
David Asman: Hold on. Victoria, if we start opening up our doors to Canada, what happens if our health system becomes like the Canadians? Do we want that?
Victoria Murphy: I don't think that would cause our health system to be like the Canadians in any way, it will just bring our drug costs down, which is a great thing.
Dennis Kneale: No it won’t. What will our companies do to fund their drug research if we aren’t buying the same amount?
Elizabeth MacDonald: Why should Americans have to pay? It's wrong. The drug companies are afraid that their patents are going to get ripped off.
Dennis Kneale: All of you guys who are upset about high drug prices, you will just have to die inside, a little bit, and pay up.
Makers & Breakers
American Eagle Outfitters (AEOS)
Mary Lisanti, president and portfolio manager of AH Lisanti Growth: MAKER
This is basically a teen retail turnaround. They had some problems earlier on. Fixed their margins and now they got the merchandise right. It's hot as a pistol. Denim, and they do denim better than anybody, and their stuff is flying off the shelves even when teens are bypassing Abercrombie & Fitch (ANF).
David Asman: You think it can double to $65 (Friday’s close: $34.11). Jim, can it double?
Jim Michaels: BREAKER
Your daughter loves American Eagle, now. Two years from now she will say, “Where? Nobody goes there anymore.” That's always the fate of these places. Old Navy, Gap [which owns Old Navy - (GPS)], name 'em, they depend on teenage fashions and teenage fashions are fickle. I wouldn't pay five times earnings for this stock. Let alone 30.
Elizabeth MacDonald: BREAKER
I'm a breaker. I'm sorry. Retail stocks, I just don't like them. I don't invest in them. I just think that Jim is right. That fashion tastes change faster than Brittany Spears changes her clothes in one concert. Also the three years earnings growth rate for this company is down about 10 percent. So I would just stay away from these retail stocks in general.
Mary Lisanti: That's exactly the point. It's a turnaround. They've fixed the business and growing like crazy and a good three years before anybody turns around and says ‘I don't want it anymore.’ Every time this stock goes down, you buy it and double your money.
Martek Biosciences (MATK)
Mary Lisanti: MAKER
They put nutritional products, oils back in that we have taken out in processing food. These oils do amazing things. They improve your brain, they improve your heart. They had a problem with their manufacturing. They fixed it. They have an enormous backlog. They have demand they can't fill. They're in infant formulas. That are about to go in cereals and the only people who do this. This is really a unique story.
David Asman: And you think the target is $70 (Friday’s close: $57.09). Can it go up 25 percent?
Elizabeth MacDonald: BREAKER
This is a company with a terrific management team. It sounds like an exciting stock. The problem is it's trading at about 95 times earnings. I want to get that momentum out of the stock first before I invest in it.
Jim Michaels: MAKER
I'm a sucker for a biotech stock, where there are real earnings and real assets and real products. I kind of like this stock.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Satellite radio may be the wave of the future. Will it be like cable TV? Is everybody going to get satellite radio sooner or later? And should you buy the stocks now before it goes mainstream?
Dennis Kneale: Very cool stuff. The worst thing about radio: terrible, obnoxious ads. Here’s a new service that's crystal clear and gives you whatever you want. That gives you no advertising. It is the future. The biggest name is XM Satellite Radio (XMSR). The other is Sirius Satellite Radio (SIRI), it's weaker. Look at XM. It’s an expensive stock, OK. It's out of range. But if you want anything in new technology and radio, buy it.
Mike Ozanian: The technology is cool but it costs a lot of money to produce. These companies are not making any money yet and I wonder, ‘is there too much of a parallel like cable?’ People said cable was great and someday they will make a lot of money and it never happened.
David Asman: I remember the VCR wasn't supposed to go anywhere, but it did.
Lea Goldman: Now it's nowhere. Now it’s DVD. I like it. I think it's the coolest thing since sliced bread. I like Sirius. I think they are doing really smart things with contracts. For content; NFL, NHL, Eminem, my boy Tony Hawk. They have really cool people on.
David Asman: But you are for investing right now. You think it’s going to take off, big time.
Lea Goldman: It’s at $2 a share. I think it’s going to pop.
David Asman: You like the satellite carrier?
Chana Schoenberger: Actually, there are people who make other cool gadgets using satellite technology. Global positioning system stuff. Neat little gadgets that tell you where you are and give you a map. It's great.
Dennis Kneale: There’s nothing wrong with that, but the fact is you need critical mass. XM Satellite Radio doubled its membership to a million people. General Motors (GM) is putting it into GM cars. This is going to be a car play, and they are the future.
David Asman: XM does have a lot of debt compared to Sirius.
Dennis Kneale: Sure, and it’s going to have a huge loss. This is a very wild stock. It was at $50 in the bubble in 2000 and at $25 now.
Lea Goldman: I like Sirius because it’s not just about the car radio, they have other platforms. They have a stereo system like what iPod [Apple Computer (AAPL)] had been doing.
David Asman: What about fun money? Is it ok to put 5 percent of your income into these stocks?
Mike Ozanian: Yeah, but I wouldn’t put a lot of money into them.
Stock Smarts: Fear of Stocks?
What will it take to shake fear from the market?
Gary Kaltbaum of Kaltbaum & Associates says it's not a matter of fear that has the market down. It's a matter of rising oil prices and lower earnings. The market follows earnings and this quarter a lot of companies have said things are slowing down. Add that to close to $50 a barrel of oil and you have a serious problem right now. He thinks investors have the right to be cautious and holding cash is a good idea now.
Wayne Rogers of Wayne Rogers & Company agrees oil is the problem right now. We've had an outflow from mutual funds and as FDR said, "the only thing we need to fear, is fear itself." Wayne does not see an end to the fear in the market until after the election. He has 50 percent cash and wish he had more.
Jenny Anderson of New York Post says there is nothing to shake this fear out of market right now. The data on the economy and earnings are mixed and that confuses investors. They need another big topic to capture their imagination like the internet, nanotechnology or fuel cells.
Jonathan Hoenig of Capitalist Pig Asset Management says big ideas right now are commodities like gold. He disagrees that the market needs the hype of another internet or something similar. And warns that type of hype could lead to bubbles which hurt investor confidence. He thinks the political environment is adding to the uncertainty, explaining that Wall Street could be worried about John Kerry becoming president and raising taxes and deficits with his Healthcare plan.
Jonas Max Ferris of MaxFunds.com says fear is that the economic recovery may not be the real deal and that we may not have a way to stimulate the economy if there is another downturn since we already cut taxes and lowered rates. He thinks investors would jump back in to the market if they start seeing positive economic and profit reports.
Dave Nelson of DC Nelson Asset Management agrees that investors would start buying on good news. He says investors fear missing a market upturn more than losing money in the market. He's not sure if stocks have hit the bottom yet, but he is cautiously bullish and thinks there are some positive economic and earnings numbers coming out.
Be$t Bets: No Fear Stocks
The crew give stocks that have no fear.
Dave says McDonald's (MCD)
Friday's close: $27.07
Dave owns the MCD and believes people are going to eat hamburgers no matter what happens in Iraq and to the price of oil. The fast food chain has extended its hours to attract people who work late and that will help increase sales. Wayne and Jonathan think the company will not grow much and say to stay away. Gary likes the stock and is impressed with McDonald's turnaround over the past year.
Gary says Symantec (SYMC)
Friday's close: $48.04
The company dominates the anti-virus software industry and its stock has shown strength by falling along with a lot of tech companies this year. Jonathan uses the product and wishes he owned the stock. Wayne thinks it's priced too high.
Jonathan says ASA Limited (ASA)
Friday's close: $38.46
Jonathan owns the closed end fund that invests in gold companies. He believes the stock should benefit as the dollar falls against world currencies. Gary thinks gold is going up to $450 an ounce and that will help ASA. Dave thinks gold will go higher but that investors should buy individual gold companies instead of a closed end fund. Jonathan says ASA trades at a discount which helps offset higher trading costs for the fund.
Wayne says Possis Medical (POSS)
Friday's close: $29.68
Wayne owns it. The company makes products that help remove blood clots. Earnings are up this year and over 50 percent of the stock is owned by institutional investors. Jonathan thinks the stock is too expensive and would not buy it right now, but says to hold it if you own it on hopes a new product could spark a run up.
Stock of the Week
Dave says Eastman Kodak (EK) is remaking itself into a powerhouse digital imaging and health imaging company with a lot of cash flow. He owns the stock and says it's also a contrarian play since most Wall Street analysts have a "sell" or "hold" rating on the stock. Jonas likes the contrarian play but doesn't think Kodak can remake itself from an old film company and that it may not be around in 20 years. Gary says he's not sure about the long term viability of the company, but thinks the stock is set to get a short term pop.
Wayne, Jonathan and Gary answered some of your emails.
Question: With all that went down for the Google (GOOG) IPO, is it a sign to stay away from the stock?
Jonathan, Wayne and Gary say the young stock is too expensive. None of them would buy it.
Question: Most of my portfolio is in large-cap stocks, but I want to diversify. What about iShares of the S&P 600 SmallCap (IJR)?
Wayne thinks small cap stocks will outperform big caps, but he would recommend buying them at a lower price. Gary says it's smart to diversify, but he warns that small caps usually lose more in a bear market.
Question: Is T. Rowe Price (TROW) a buy right now?
Gary says TROW is one of the best run companies in the fund industry, but it only does well when the market does well. He recommends waiting until the stock market heads higher.
Question: I own shares of Chesapeake Energy (CHK). Do you think the stock is worth holding?
Jonathan thinks energy is a strong group and to hold on to CHK if you already own it. Wayne says he owns and prefers Ultra Petroleum (UPL), PetroKazakhstan (PKZ) and Pengrowth Energy Trust (PGH) over CHK.