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, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Danielle Hughes, president & CEO of Divine Capital Markets.
Trading Pit: Dow 12,000!
The Dow has been struggling to break through 11,000, an important psychological level, for almost two weeks.
Is this just a pause before a big push to 12K, or are the blue chips stuck?
Gary B. Smith: The market tends to move in legs. The first leg up was in October 2003 and it took us to 10,500. It’s pulled back for about last year or so and just broke out a few weeks ago. I think the Dow will hit 12,000 by September of this year.
Danielle Hughes: The dichotomy between the Dow and the Nasdaq is very interesting. Back during the technology boom, when tech was driving the market, the Nasdaq was at 5,000 and the Dow was at 11K. Now with energy and commodities driving the market, the Nasdaq is at 2,000 and the Dow is back at 11,000. I think we’ll definitely hit Dow 12K this year.
Pat Dorsey: Unlike 2000, right now the market is not cheap. Back then there was a big valuation dichotomy in the market—tech stocks were very expensive, but most others weren’t. The market’s not expensive, but it’s not a screaming buy either. “No way Jose” that we hit 12,000 on the Dow in 2005.
Tobin Smith: Interest rates and oil prices are really the big issues. If oil is at $80 a barrel, it won’t really hurt the economy. However, 5 percent interest rates will hurt badly and will take a chunk out of earnings. There’s no chance that we’ll hit Dow 12K this year.
Scott Bleier: Higher interest rates will hurt the economy the most. I agree with Gary B. that we’ll hit 12K by September, but it will be September 2007, not September 2005. The Dow will get there once interest rates are done going up and start to come down.
Boeing CEO, Harry Stonecipher, was ousted last week due to an affair with an employee. But the stock didn’t budge. What other stocks will stay strong and survive if a sex scandal hits?
Tobin: Oil refiner, Valero Energy (VLO). It just hit a sweet spot and no matter what, the stock is going to keep heading up over the next 2-3 years. I see it doubling profits and then doubling again. (Valero Energy closed on Friday at $68.93.)
Dani: There’s one thing we have to watch out for in these sex played stocks. Management has to really be focused on being conservative and this company is very wild. I don’t like it.
Scott: The earnings estimates for Valero have already been doubled and that’s already been factored in to the stock.
Dani: My pick is Exxon Mobil (XOM), which is similar to Valero, but much more diversified. It’s the world’s second largest oil company and very profitable. (Exxon Mobil closed on Friday at $61.05.)
Tobin: This company is underestimated by the rest of the world and I think it’s a good pick.
Pat: Exxon Mobil is diversified, but it’s overpriced. Wait for it to hit $45.
Pat: I like Berkshire Hathaway (BRB.B). Technically, Warren Buffett was living in sin for quite a number of years, so this issue really doesn’t matter that much for this stock. It’s a very reasonable price for one of America’s leading companies. I own it and think it’s worth $4000. (Brenda also owns this stock. Berkshire Hathaway closed on Friday at $3,001.00.)
Tobin: I would like Warren Buffett to pay a dividend. It may take ten years to get from $3000 to $4000 and I don’t want to wait that long.
Pat: Actually, it’s already up quite a bit since I recommended it about a year ago. Then, Berkshire was at $2100 and now it’s at $3000.
Scott: All blessings to Warren Buffet, but he’s in the 9th inning of his career. When he steps down, the stock will get cut into thirds.
Pat: That will be a great time to buy it.
Scott: I’m betting on Dow stock, Honeywell (HON). GE (GE) wanted to buy the company, but weren’t allowed. It has a great aerospace division, in addition to a great home and building division. Plus, all the bad news is behind them and I think it’s going to $50. (Honeywell closed on Friday at $38.52.)
Pat: Scott’s right. It is in some fantastic businesses, which it has just figured out how to run. I just don’t like that the stock is so expensive right now.
Dani: I like it. Great stock, and it’s diversified, which is the key.
In honor of St. Patrick’s Day, Gary B. is toasting the charts that are ready to make the most green.
Gary: First up, Impax Laboratories (IPXL), a generic drug maker. The chart looks ready to break out again and I think the stock is heading back to its all-time high of $25. (Impax Laboratories closed on Friday at $17.83.)
Tobin: I bought Impax at $9 and recently sold it at $17. From a generic drug standpoint, this is a great company. However, it is involved in a lot of lawsuits right now and could be bought out. I don’t like it.
Gary: Next, insurance brokers, Brown & Brown (BRO). The chart has been moving sideways and just broke to an all-time high. I think it’s heading even higher! (Brown & Brown closed on Friday at $47.61.)
Tobin: I don’t like this one either. A big part of the company’s profits might be taken away from regulations that New York State Attorney General, Eliot Spitzer, wants to enact.
Gary: Lastly, coffee icon, Starbucks (SBUX). The stock recently bounced nicely off a multi-year support line. I think it’s going to keep going up. This is a great stock for the short or long term. (Starbucks closed on Friday at $53.50.)
Tobin: I’ve been bullish on Starbucks for a long time, but watch out for hiccups. I recommend putting a stop on it at $50. However, if there are no hiccups, the stock could see $70.
Scott's prediction: Housing bubble bursts! Mortgage rates up 25 percent; Toll Bros (TOL) down 25 percent
Pat's prediction: Microsoft (MSFT) is cheap! Going up 20 percent within a year
Tobin's prediction: Manhattan Associates (MANH) bought out by Microsoft for 40 percent premium
Dani's prediction: In one year eBay (EBAY) going down 35 percent THEN bounces up 60 percent
Gary B's prediction: Smith Indicator! Callaway (ELY) driving up 15 percent by U.S. Open in June
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Stuart Varney, FOX Business News Contributor; Charles Payne, CEO of Wall Street Strategies; Chris Russo, former "Apprentice" contestant and senior vice president at Gunnallen Financial; Barbara Corcoran, chairman of the Corcoran Group; Bob Beckel, Democratic strategist; Leigh Gallagher, senior editor at SmartMoney magazine.
The Bottom Line
Neil Cavuto: There are lots of ideas on how to fund Social Security. None are very popular so far. But this one could start to gather a head of steam. A weekly national lottery could raise billions each year. It would be completely voluntary and if successful, the retirement age could stay the same, as would the benefits. Stuart, why not a lottery?
Stuart Varney: I think it's a great new idea. At the moment, $20 billion a year flows into state government via state lotteries. You have a national lottery, the prizes are higher, the intake of overall cash is much higher. You could contribute $30, $40, maybe $50 billion to the Social Security system. And you could sell those tickets overseas.
Gregg Hymowitz: This is the stupidest idea I've ever heard. It's an abdication of fiscal responsibility. Secondly, we all know that most of the people that play into these games are the people who can least afford it. You're basically trying to solve the problem by hitting people where they hurt the most. And if you're willing to do that, why stop at our lottery. Why not have government-sponsored casinos. We know they make money.
Stuart Varney: I'm offering it as voluntary. If you want to pay the tax, it's voluntary.
Gregg Hymowitz: So are casinos.
Barbara Corcoran: I think it's a great idea and it's not a new idea because Chile's been doing it for 18 years. Their benefits have doubled in 18 years. In Chile, no one would not buy a ticket. It's like the Irish sweepstakes. People love it.
Chris Russo: What's next, you have to win the lotto to collect your Social Security? This is the most ridiculous idea I've heard so far.
Neil Cavuto: As if the system we have isn't a little ridiculous?
Chris Russo: No, I'm not saying that. But the original idea for state lotteries was to give the money to the state schools and the jackpots have increased higher and higher and the school taxes continue to go higher. So to me, it's a complete scam.
Stuart Varney: What's wrong with $40 or $50 billion going to Social Security and we pay the transition costs into a privatized system.
Bob Beckel: People who buy lottery tickets are skewed to the lower income level a lot. I'll make a deal with Stuart. Let's put a lottery machine in the first T of every golf course and make it mandatory that you get a lottery ticket before you T off.
Neil Cavuto: But Bob, if this is all voluntary, what's the problem?
Bob Beckel: The problem is we know that poor people buy these things hoping to cash in on the big one. They are more desperate financially. Why don't politicians have the courage to step up and do what they need to do, which is to raise taxes or cut benefits.
Charles Payne: If the Democrats were around when Prometheus came down Mount Olympus they would've thrown the guy down the lake and blown his torch out. If you ever tried to stop a poor person from buying a lottery ticket they would rip you to shreds. If they want to do it, it's their option. No one is making anyone buy these tickets. Everyone is saying they can't plug the whole. You might need a whole lot of solutions to plug the Social Security hole. But the Democrats keep acting like it's not a problem.
Gregg Hymowitz: These lotteries are advertised in poor neighborhoods because poor people have no other hope than to wager their money on these. I agree with Bob. Why don't we have the political courage to make the tough decisions. Either raise the retirement age, cut benefits, or raise taxes.
Bob Beckel: To my friend Charles, George Bush has not come up with a single program to raise revenue necessary to fund Social Security. He's talked about these privatization plans, which are going to cost more money.
Charles Payne: He has been very presidential in this matter. He's put out an olive branch. But everything that comes up, the Democrats say no to.
Barbara Corcoran: Why not think outside the box? This pay as you go theory isn't going to work. Why not try something new?
Neil Cavuto: What about what Gregg is saying that the poor are more inclined to buy the ticket.
Barbara Corcoran: Listen, I don't consider myself poor and I buy tickets.
Neil Cavuto: There is no God if you win.
Chris Russo: What about the existing revenue that are generated right now from the lottery. And now they're going to the Social Security lottery. But the state's not making any money off the regular lottery and they're going to have to raise taxes.
Neil Cavuto: I thought the lottery would fix the school systems. I half expected everyone at my daughter's school to have a Mac or gold plated bathrooms. But I haven't seen that.
Stuart Varney: I can't speak to which states divert this source or another. Does anyone question my idea that you can sell lottery tickets overseas?
Gregg Hymowitz: It's very a regressive re-distribution of money from the poor who need Social Security the most to others.
More for Your Money
Neil Cavuto: Boxing is big again with "Million Dollar Baby" sweeping the Oscars and Rocky now on TV with a boxing show. So let's get knockout stocks so you can get more for your money! Leigh, to you first.
Leigh Gallagher: Talk about a heavyweight, I really like Nike (NKE). Nike has market share that is wielded by few companies in any industry. It has gone into markets that are very hard to penetrate. And it's made very few mis-steps over the years.
Gregg Hymowitz: It's a great company but the problem is exactly the positives you just gave. It's so well penetrated and saturated that we don't believe there's a lot of growth left relative to other sneaker companies. We think there are better opportunities.
Neil Cavuto: Such as?
Gregg Hymowitz: We like Puma (PMMAY). There's 23 euros on the balance sheet with no debt. The company trades at 9 times earnings versus 18 times earnings. We own a lot of this stock.
Charles Payne: Puma is a great company. Unfortunately it's up 300 percent so a lot what Gregg is talking about is already priced into the stock.
Gregg Hymowitz: Charles, you love momentum stocks so I'm shocked that it bothers you that it's actually up. It's trading at 9 times earnings so you can't argue that the earnings are priced in.
Leigh Gallagher: But Puma doesn't have the brand recognition that Nike does.
Neil Cavuto: Charles, how about you?
Charles Payne: My knockout play is Pepsi (PEP). They are crushing their competition, in particular Coke whose symbol happens to be KO. Their international division in their last quarter became their top profit center.
Chris Russo: I think this is like owning a turtle. It's nice but it's not going anywhere.
Neil Cavuto: I lost four pet turtles as a kid, so they obviously go somewhere.
Chris Russo: If I was in that sector, I'd rather go with Yum Brands (YUM).
Neil Cavuto: What's your knockout pick?
Chris Russo: I like Stillwater Mining (SWC). They mine palladium and platinum. Palladium remains one of the only cheap metals out there.
Leigh Gallagher: They're trying to get into jewelry and other things. They have a very unenviable task of trying to market in palladium.
Head to Head
Neil Cavuto: Do we hold CEOs to a higher standard than we do even the President of the United States? Bob, to you first. With the Harry Stonecipher news recently coming out, him having to step down because of an affair with a woman. Is there a double standard for CEOs versus the President of the United States?
Bob Beckel: Well, I wouldn't call getting impeached and being put on trial by the Senate exactly getting away with it. And also having his reputation impacted forever.
Neil Cavuto: But he did survive that Bob. He had a second term and he's had a nice post-presidency.
Bob Beckel: Let me just put it this way. I don't think the sex thing is the issue here. Big corporations screw people over everyday. CEOs everyday hold in their hands other people's wealth. Look at Enron and WorldCom. They have a much bigger impact on people's wealth than Congress does or politicians.
Neil Cavuto: So all CEOs and all companies are doing that?
Bob Beckel: No, no, no. I'm not saying all of them. I'm just saying some of them. But CEOs have an enormous amount of influence over people's wealth.
Barbara Corcoran: I must say I think the whole thing is nonsense. This man is a mature man and he's supposedly sleeping with someone who is 48 years old. There is this idea that it hurts his judgment as a CEO?
Neil Cavuto: Well, it was a little more than that. The issue was how it would effect defense contracts and the proximity of information.
Gregg Hymowitz: And also you have to remember that Boeing was already having many problems. In my opinion, it was a tremendous over-reaction. The difference between politicians and CEOs is that politicians can be voted out. Here a board of directors really makes the decision.
Charles Payne: Public officials work for all Americans. The CEOs work for their shareholders. And they can be voted out as well. This guy was voted out without any due process. Clinton was able to lie to the rest of the world and get away with it. Boeing was in bad shape. This guy turned it around and this is what he gets for it.
Barbara Corcoran: You know what behavior really bothers me about this? Who was the snitch?
Neil Cavuto: Well, this wasn't exactly a secret was it?
Barbara Corcoran: No, but they were reading the emails to come up with the damaging report.
Bob Beckel: Let's look at this outside the sexual connotations. Look at Michael Eisner. He doesn't work for shareholders. He's still hanging around because he stacked the board of directors. And a lot of people suffered as a result of that. He didn't do anything sexually immoral. Do I think he did anything immoral in how he ran that company? Yes. That is a moral failure that has much more impact on people's lives.
Gregg Hymowitz: I think the Boeing instance is a little different because there might have been national security issues. There were fears that if someone knew some of the information they could bribe him.
FOX on the Spot
Bob Beckel: No private accounts unless Bush hikes taxes!
Gregg Hymowitz: Michael Jackson goes to jail; Sony (SNE) unaffected!
Chris Russo: New show reveals the "real" Martha. No season No. 2!
Barbara Corcoran: Boeing's ousted CEO on reality TV in 6 months
Charles Payne: Politicians crush small company stocks!
Neil Cavuto: Commodities. I know they're a hot conversation right now, but too hot. Everyone's talking gold, oil, silver and cotton, but with apologies to my pal Jimmy Rogers, the run is done!
Forbes on FOX
"Forbes on FOX" was interrupted Saturday, March 12 2005 for breaking news. The show ran in its entirety on Sunday, March 13 at 11 a.m. ET.
Flipside: Sex in the Boardroom is OK!
David Asman, host: Boeing's CEO, Harry Stonecipher, was forced to resign by the board last week for having an affair with an employee. We should also add that he was reportedly separated from his wife during the affair. Jim, should he and other CEOs be fired for this?
Jim Michaels, editorial vice president: No, they shouldn't. You want to keep the bedroom out of the boardroom, but you also want to keep the boardroom out of the bedroom. Everyone is talking about the Boeing case. The lady involved is a 48 year-old, highly successful career woman, who was successful long before the affair started. If they have a mutual attraction towards each other it's certainly no business of the board.
Victoria Murphy, staff writer: If these affairs stay under the covers I have no problem with that, but often times they don't. Everyone likes to gossip, especially about high ranking executives. So people talk about affairs and it has a negative effect on a company. What if Mrs. CEO has an affair with Mr. Product Manager and a month later Mr. Product manager gets promoted to Vice President? Was it because he's very talented or because he was sleeping with the boss? This is the kind of culture you don't want to promote in a company.
Steve Forbes, editor-in-chief: As long as they are consenting adults, as long as this is not a direct report, as long as she had risen on her own and not through his patronage then it is fine. What he maybe should be fired for, and I don't think so, is being stupid about being an e-mail Romeo on the company time.
Elizabeth MacDonald, senior editor: I think that CEOs should be so clean that they squeak when they walk. Especially at a company like Boeing that has had a series of scandals.
Lea Goldman, staff writer: What really concerns me about this, besides the fact that it's no one else's business and nobody cares and investors don't care, is it fell under this oblique proviso under in his contract about not embarrassing the company. I think this is so vague it suggests that you could be fired for attending an anti-war rally or smoking in your off hours. To me this is dangerously open to interpretation.
Quentin Hardy, Silicon Bureau chief: What we do need is a little control on hypocrisy in this country. Our private lives are our own business but hypocrisy is a public thing. Harry Stonecipher, he promulgates this code of conduct saying no one in Boeing should do anything that casts fear or dispersions or any sort of discredit on the company, then he writes soft core porn on the company e-mail. To Harry's credit, he saw he made a mistake, then publicly said that he made a mistake and resigned.
Elizabeth MacDonald: I don't care if two people who work together have sex but I do think there is a serious problem when you are using company e-mails because it puts the CEO in a position of being possibly blackmailed or being involved in extortion. Especially the second largest defense contractor in the country.
Jim Michaels: This woman didn't rise through the patronage of Harry Stonecipher. She was a successful, capable woman. The bottom line, I want my CEO to be scrupulously honest, to be dynamic and to be capable, but I don't need them to be saints.
Victoria Murphy: You are assuming that this woman has landed where she wants to be. I'm sure she's very ambitious and wants to go higher at Boeing, but now her reputation is at risk. That's a shame. And saying that this doesn't effect investors is misguided. What if one party sues the other for sexual harassment. We may never hear of it because it's often settled out of court and out of the public's eye, but it will be a distraction to whoever is running the company.
Lea Goldman: This a real throwback to the 1990s, when the HR movement was coming forward and people were super sensitive to the notion of sexual harassment and litigations. But it's a dated argument now. It rarely happens, in this case it's so obviously not the case. This does not fall under the category of sexual harassment.
Steve Forbes: They fired him before she even filed a suit. There is no suit even being contemplated. As for hypocrisy, he was a good CEO, who cleaned up the company after scandals about its balance sheet and questionable ways of winning defense contracts. The stock fell when he was fired.
Jim Michaels: Celibacy has nothing to do with a CEO's ability.
David Asman: What about the liability question, you could have a CEO that puts the company at risk?
Quentin Hardy: I think that someone already flipped this e-mail to the world. They had a crisis that they had to handle. They were going to have to come forward with it somehow or other. If it went to the board who knew where it was going to go, and that was Harry Stonecipher's problem.
Elizabeth MacDonald: Sex with the CEO often times has nothing to do with sex and everything to do with power. It's very hard to consider these things as consensual when you are not on the same level as the CEO.
In Focus: Does America Need a Fat Tax?
Quentin Hardy: Obesity is the second largest cause of preventable death in America after smoking. It is linked to 30 diseases including four or five types of cancers, diabetes and heart disease. This is a drag on the Medicare/Medicaid crisis and is an actual fact of high health insurance bills. This is a serious thing. We have to do something about it. People can't control themselves very well. I say tax it and use that money that money against the insurance costs.
Jim Michaels: This is what I call a Prohibition mentality. They put in a prohibition against booze and that was suppose to cure drunkenness. Instead of killing themselves by drinking, people killed themselves with rot-gut from home-made illegal alcohol. The government should not regulate personal behavior, that's what democracy is all about. Give people the facts and let them decide what they want to do.
Elizabeth MacDonald: I ordinarily hate taxes and hate the idea of using them to regulate people's behaviors but this time we are talking about a serious drain on the economy from obesity. $120 billion a year. I say people should be pulling their own weight with the fat tax because it is a drain on Medicare. Use that tax to set up a national healthcare system for poor people.
Steve Forbes: The fat tax is simply the politicians liposuction of people's wallets and pockets. The real addiction is not obesity. The real obesity is politicians taking too much of our money, simply an excuse to fleece us!
Victoria Murphy: I know that Quentin recently traveled to France and you probably noticed that the diet there is really unhealthy, full of butter and cheese and fat. The French have half of the obesity rate that we have because they value moderation. Americans don't value moderation. We super-size everything. And you're not going to get rid of that by putting a tax on it.
Jim Michaels: Cigarette smoking is way down in this country. Not because of the high prices, it's down because people got the facts, it's taught in school and taught by example that smoking is bad.
Quentin Hardy: That's not true. The first medical literature against smoking was in 1939, and the Surgeon General addressed it in 1965. But smoking didn't start dropping until the 1980s when heavy taxes start to be put in place.
Elizabeth MacDonald: Jim is right. You really can't regulate people's behavior but you certainly can't stop the sugar lobbyists who went down to Washington having a screaming fit when the World Health Organization wanted to lower the sugar intake to 10 percent of the daily caloric intake. They had a fit and they threatened to cut the World Health Organization's budget.
Steve Forbes: How do you define what is bad food? If you have a cheese burger but you don't have the bun, which some dieters will say is good for you, do you tax it or not? Pate is very high in calories, do we tax that?
Elizabeth MacDonald: We already have a fat tax in a dozen states on soda. Britain already has a fat tax on soda and burgers.
The Informer: Credit Card Crisis!
Bill Baldwin, editor: Big credit cards issuers lose big money every year. The amount that they have to write off for people who don't pay their bills is $3-5 billion each for the big guys. Congress feels very sorry for these big companies and Congress is putting through a bankruptcy bill that makes it a lot harder to walk away from your credit card bills. Now I don't like deadbeats, but I don't like the credit card issuers either. They flood my mailbox and America's mailbox with junk mail and they are addicting us to credit we can't afford.
Jim Michaels: A lot of people are over their head in debt and in trouble. But look at the American consumer as a whole: household assets and the value of what they own, is five times their debt. If any corporation has an 80 percent equity ratio they are in very good shape. The American consumer is not in trouble.
Victoria Murphy: What concerns me is the boom that we've seen in home refinancing and home equity loans, which were up 35 percent last year. I think Americans are tapping out their homes which will eventually hit credit cards. But I don't think overall we're heading for a mass disaster like Bill is suggesting.
Lea Goldman: There is defiantly a problem with over extension. Americans like to charge it, we like credit but it's not a crisis of mass proportion.
David Asman: Bill, if you think the problem is as bad as you do, what do you buy or sell?
Bill Baldwin: Well you wouldn't want to buy a stock like Capital One (COF), a very successful one by the way or MBNA (KRB), another big credit card issuer. These are the ones with billions of dollars of charges.
Victoria Murphy: I don't agree. What's not to like? MBNA attracts marquee customers, these are clients with $70,000 or over income, they own their own houses, they have a history of paying their bills on time. With Capital One, I agree. If you have a pulse they'll give you a credit card. I don't like that one.
Jim Michaels: I think the American credit system is spreading through the whole world. That's why I would buy Citigroup (C). Citigroup is the world's leading consumer credit company. They are going to make a fortune in China and in India.
Victoria Murphy: I think Citigroup does have a lot of potential in China. Citigroup is diversified which I like. You're not banking only on credit card consumers. But it's not my favorite.
Lea Goldman: I like Providian Financial (PVN). Providian is a stock that got into some trouble some years back for basically doing exactly what Victoria said, giving a credit card to anyone with a pulse. But now they are kind of changing their tune. They are becoming higher quality lenders.
Bill Baldwin: I think there is some evidence that Providian is giving credit cards to people without pulses. Their charge off rate also known as delinquencies is 11 percent.
Lea Goldman: In the last year, they've migrated to better borrowers and they've doubled their earnings!
Makers & Breakers
• Fifth Third Bancorp (FITB)
Michael Thomsett, author of "Stock Profits: Getting to the Core": MAKER
I like them because they are regional and not national. I like them because they have a great record of growth in both the stock price and sales and profits. They've increased dividends every year for the past 31 years.
David Asman: Your 12-month target price is $60. (Friday's close: $44.14 )
Elizabeth MacDonald: BREAKER
It sounds great in the dividend picture, but their cost line is growing faster than their profit line and their revenue line.
Bill Baldwin: BREAKER
They've run out of cheap banks to buy. They use to buy banks for two and a half times what they were worth. Now they pay six times the money that's in the till.
Michael Thomsett: They are expanding geographically. They are going into Tennessee and Florida. I like the fact that they are regional.
• Paychex (PAYX)
Michael Thomsett: MAKER
I like Paychex because they specialize in payroll services for small businesses. I think that most of the small business growth we're going to see in the next 2-5 years is going to be in the 10-100 employee range.
David Asman: You think it will go up to $41. (Friday's close: $31.96)
Bill Baldwin: MAKER
They help small businesses deal with idiotic government paperwork. That's a growth industry!
Elizabeth MacDonald: MAKER
I'm with Bill, I think this is a great stock!
Stock "Cashin' In" was not seen at its regular Saturday 11:30a.m. ET slot, due to the breaking news coverage of the Atlanta courtroom shooting. "Cashin' In" was shown on Sunday, March 13, at 11:30 a.m. ET.
Stock Smarts: The Rich Get Richer!
2004 was an up and down year for stocks, but it was all-good for the CEOs who ran those companies. Last year saw CEO bonuses increase by 46.4 percent, the largest bump over the past five years.
Is this a good sign for the economy and the stock market?
Jonathan Hoenig of Capitalistpig Asset Management says it is a very bullish sign for the market. We love to “rag on CEOs” as overpaid fat cats. But if a CEO is able to generate money for his company and his shareholders, then he should be getting paid a lot. And he thinks a key point in terms of shareholders rights is that they do have the ability to vote on compensation issues. What he has a problem with is that we can’t vote on the salaries of people like Eliot Spizter or Kofi Annan. And ultimately, if you aren’t happy with a company’s compensation plan, don’t own the stock.
Wayne Rogers of Wayne Rogers & Company thinks that Jonathan is absolutely wrong. CEOs are absolutely “fat cats” who get their salaries and bonuses from the compensation committees run by a company’s board of directors. And the board of directors really doesn’t have the shareholders’ best interests in mind. If you are fed up with a company’s compensation practices, then sell the stock. It is a form of corruption against the rights of shareholders the way that compensation is decided.
Dagen McDowell of FOX Business News says that the fact that CEO bonuses were up so much in 2004 is a sign that business is healthy and that these businesses are growing and that they are flush with cash. And that’s a good sign for the stock market.
Adam Lashinsky of Fortune Magazine says that there are two kinds of CEOs. First, you have the “founder/entrepreneur” CEO, who absolutely deserves to squeeze every last dollar he or she can out of the company. Second, you have the “bureaucrat” CEOs who do not deserve to paid tens of million of dollars, especially when their stock price is going down. The thing is, a CEO will get paid a lot no matter what happens to the company, because there are always so many components to his or her pay structure (salary, bonus, stock options).
Jonas Max Ferris of MAXfunds.com says that if it is a relatively free market, he has no problem with a CEO getting paid a lot of money. The problem is that it isn’t a completely free market; the salary and bonus levels are decided by the company boards — a really a “buddy-buddy” type relationship. As far as the stock market goes, a lot of the compensation is tied to last year’s earnings. And earnings in 2004 were up. The same will probably happen in 2005. Jonas doesn’t think that CEO is any kind of indicator of future results of the stock market. If anything, higher CEO bonuses show that the market might be overpriced.
Price Headley of Bigtrends.com says that really only around 5 percent of CEOs whose company lost money got a bonus, and that shouldn’t be happening. But in most cases, when profits are going up, the CEOs deserve to be compensated — this is a multi-billion dollar game. And it really is all about performance. If the company does well, the CEO should be compensated.
Best Bets: Bubble Bargains
It was five years ago (3-10-00) when the Nasdaq hits its all-time high of 5,048.62. Last Friday (3-11-05) it was trading at 2,041.60 - less than half its peak level.
And some former high-fliers are now potential bargain buys. Our crew came up with some picks.
Price's Bubble Bargain: MicroStrategy (MSTR)
All-Time High: $3,130.00
Friday's Close: $64.89
This was one of the first stocks to have major problems when the bubble burst, as one week after the Nasdaq high, this company revealed some serious accounting problems that wiped out a lot of its earnings. But this is a stock you want to own ahead of its next earnings report in mid-April, as it has recently been beating analysts expectations. Jonathan says this stock isn’t on his radar right now.
Wayne's Bubble Bargain: Akamai (AKAM)
All-Time High: $327.63
Friday's Close: $11.00
Wayne says this company has moved from a loss to a positive earnings structure over the past five years, and even though the book value of this stock has deteriorated, he still thinks it is bound for a comeback. Adam thinks that Akamai has already had its comeback, and would actually wait for a pullback before getting in at this level.
Jonathan's Bubble Bargain: Spanish Broadcasting System (SBSA)
All-Time High: $40.25
Friday's Close: $10.70
Jonathan doesn’t love the Nasdaq right now, but look at Spanish Broadcasting — it’s not your typical former Nasdaq high-flier. This is playing on a demographic trend and on a possible consolidation trend within the broadcasting industry. Wayne thinks the stock is good, but not great. If he was going to play the Spanish broadcasting sector, he would go with Univision (UVN).
Adam's Bubble Bargain: Sandisk (SNDK)
All-Time High: $81.00
Friday's Close: $27.80
This is the company that makes the little memory cards that go inside of digital cameras. This one hasn’t come down nearly as far as the other picks. It has been under pressure because of concerns over its margins, but that concern is just about over and should be in a good place to move up. Price thinks that because of the pricing pressure this stock will be stuck in a trading range for a while.
Wayne, Dagen and Jonathan answered some of your questions.
Question: "I know how we can fix Social Security without raising taxes: a national weekly lottery. The states make a fortune, so why not?"
Jonathan says this is a dumb idea. There is no investment with a national lottery, only a random redistribution of wealth. It’s just a band-aid on the problem. And a lot of studies have shown that a lottery is nothing more than an additional tax on the poor. So if we are going to fix the Social Security problems, let’s really fix it. Wayne says the government should not be in the business of running a national lottery. And Dagen agrees that it would put the lower class at a disadvantage — wealthier people just wouldn’t play the lottery.
Question: "What do you think about Knightsbridge Tankers (VLCCF)? It's got a great dividend of 18 percent."
Wayne says that the tanker stocks have all suffered recently because of what is going on in the oil market. And he is a little leery of these oil tanker stocks right now. Jonathan would try and keep some kind of position in these stocks. Dagen says this stock is not for “widows or orphans”, meaning it is very risky.
Question: "I bought Toll Brothers (TOL) at $34.38 and it's now over $80. Is the run for housing stocks over?"
Dagen says if long-term rates go higher, the home building stocks will cool of. You need to take some profits — TOL has a fantastic business right now, but that is factored into the stock price. Jonathan thinks the best way to approach this is to put in a stop-loss order and let the market take you out. And Wayne agrees with both — take some profits right now and then put in a stop-loss order.
Cashin’ In Challenge
Check out the crew’s picks and standings on our “Cashin’ In Challenge” Web site: www.foxnews.com/challenge
Stock of the Week
Last week’s pick was Lions Gate (LGF) from Dave Nelson. For the week of March 5-12, the stock was down 1.7 percent
This week’s pick is Devon Energy (DVN) from John Curran, the former investment editor at Fortune Magazine. He says that DVN is a great stock, and even thought it has come off a bit, it has a huge amount of oil and gas reserves, which make it an attractive company for take over. The earnings are up and the stock pays a dividend (which is going to raised by 50 percent). And even though this is a big company, oil companies have to buy reserves, which makes the case for a take over. The dividend is what concerns Jonas about the energy sector. He thinks these stocks are too expensive. Wayne wonders why this is a pick for "stock of the week," and not stock of the "next three years."