Charles Payne: Martha Stewart, the company, stock, and person have proven to be very resilient, but there could be a rough patch ahead. Part of the challenge is the general retailing environment. Retail stocks are under a ton of pressure, due in part to less disposable income among consumers (blame higher gasoline prices for that) and negative consumer sentiment. Recently, Sears Holdings fell from $167 to $135 a share — a sign that all the players are getting hit. Aside from the industry and company-specific issues let’s get back to the notion of getting out of a losing position at a higher price than the current price, but at a loss nonetheless. I’ve seen fortunes lost by people who have accepted the loss, but want to trim it a bit. Right now MSO looks vulnerable near-term, and I think there could be more pain. In the most recent spurt, the stock climbed to $21.60, but I would say the best you could ask for this time around is a break of $16.00, carrying the stock through $18.00. That said, find a worst-case scenario on the downside to limit further bloodletting.
Question: What do you think about Webex (WEBX)? Seems to me that high energy prices to will drive demand for this market leader. Would you buy? — Scott
Charles Payne: WEBX has always had appeal in part to the amount of money it could save corporate customers. Your thinking is right on point — higher energy equals higher travel costs, which equals more teleconferencing. I would like to add, however, this is an extremely volatile stock, so be ready for wild rides — and if history is an indicator, look for an occasional air pocket, too. But, I still like the stock long-term.
Question: Why is there a limit on the amount of money I can contribute to my Roth IRA? Thanks — Joe
Charles Payne: The Roth IRA is a retirement plan designed to give the average person a shot at building assets for the further. The appeal of the plan is its tax advantages, in which distribution is limited, or even tax-free, under certain circumstances. Currently, folks can contribute $4,000 a year and $5,000 beginning in 2008. The tax advantages are clawed back at certain income levels — for singles, $95,000, and for married couples, $150,000. Payouts are tax-free when:
• $10,000 is being used for a first time home purchase
• Your estate in the event of your death
• You are over 59.5 years of age
• You are permanently disabled
Question: I really want to buy Disney stock (DIS) as a fun gift for my daughter's 21st birthday, but I want it to be a worthwhile investment, and not just a "fun" thing. Is this a good idea, or should I stick with CDs and clothes? — Eileen (Long Island, NY)
Charles Payne: Eileen, forget the CDs and clothes! They will eventually be worthless, so even the riskiest stock looks appealing as an alternative. With that said I think there are better ideas than Disney, a sometimes-lumbering giant may be too old-school. Your daughter might like the idea of owning Google (GOOG) better, if you want to stick in that media space.
Question: As a new father, I've been noticing how Johnson & Johnson has their hand in just about every baby product I've been purchasing. I want to invest in a stock that will mature by the time my son graduates. Do you think this would be the way to go? — Robert (North Haledon, NJ)
Charles Payne: Welcome to fatherhood! It’s wonderful and very expensive. J&J is a huge company with tentacles in consumer products, as well as drugs and medical devices. The latter are big-ticket items that add more to the bottom line than Band-Aids and shampoo. Right now the stock has stalled a bit, but it is a very solid company and I can’t imagine it won’t be a great long-term investment for your son.
Charles Payne is the founder and CEO of www.wstreet.com and appears regularly on FNC's Cost of Freedom Business Block.
Charles Payne is the host of Making Money with Charles Payne (weekdays 6-7 PM/ET).