Stock Smarts: Safe or Sorry?
As the Enron debacle continues to unravel, we wonder why Wall Street was unable to see it coming. How did the analysts and investors miss the signals?
Should we be looking more closely at some popular companies that are widely owned? Are there any warning signs out there?
Wayne Rogers, CEO of Wayne Rogers & Co. thinks there are questions about Tyco International, siting that it has been heavily shorted recently. Dagen McDowell of Fox Business News says in general you want to be careful with any company that is aggressively buying other businesses (like Tyco). And Jonas Max Ferris of Maxfunds.com says a possible warning sign from Tyco is the fact that many insiders are selling off shares.
Hilary Kramer of the Cisneros Group has some concerns about Gap Inc. (GPS). He problem is that the company’s high projections over the next five years just don’t seem realistic.
Jonathan Hoenig of Capitalistpig Asset Management says you should avoid the widely held stocks. The problem is that Wall Street loves these companies because they are so popular, and people like the feeling of buying into popularity. He points out that General Electric (GE) is a seemingly safe stock, but it could turn out to be a loser. Wayne sharply disagreed. And Hilary feels that GE is a company that people just don’t understand, making it dangerous.
Some members of the panel offered up some “simple stocks” – companies that are easy to understand and will help to simplify your portfolio.
Jonathan: Goldcorp (GG): This company explores for and produces minerals and precious metals in North America. Wayne loves the pick. Hilary says stay away.
Hilary: General Mills (GIS): General Mills makes food products. Wayne and Jonathan do not like the stock.
Wayne: Harley-Davidson (HDI): Harley is the world’s most famous maker of motorcycles. Hilary doesn’t like it, and Jonathan says the money has already been made here.
Mutual Fund Face-Off
Panel: Dagen and Jonas
Topic: Best Sector Fund.
Jonas and Dagen were each asked to select a specific sector that is ready for a good 2002. And both picked the beaten-down energy sector. But that is where the agreement ends, as each chose different funds.
Jonas: Excelsior Energy and Natural Resources Fund (UMESX)
Minimum Investment: $500
Expenses: $9.70 for every $1,000 invested
Dagen: Vanguard Energy Fund (VGENX)
Minimum Investment: $3,000
Expenses: $4.70 for every $1,000 invested
Dagen and Jonathan wrapped up the show by answering some email question from viewers:
Question: “I need to know if my Enron stock will ever be worth anything at all again? Can I still sell it?”
Jonathan: Even with the stock being de-listed on the NYSE, it is still being traded over-the-counter. So you can sell it.
Dagen: You can still sell it, and if you have it, get rid of it; Enron is done.
Question: “My wife's Janus Fund was stuck with millions of shares of Enron when the stock collapsed. Shouldn't Janus have seen the problem earlier?”
Dagen: This is the third strike for Janus, as this fund has not done well over the past couple of years. It is a closed fund, so you might not want to get out completely. But start looking for a better growth fund.
Jonathan: Janus is totally overrated.
Question: “What do you see in the future for airline stocks?”
Jonathan: Not my favorite sector, but take a look at Alaska Air (ALK).
Dagen: In general, airlines stocks are bad buys.
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