A lot of investors don’t remember a stock market that looked worse than today’s, as stocks have taken a staggering fall from their highs of two years ago:
Dow DOWN 26%
Nasdaq DOWN 70%
S&P 500 DOWN 43%
But that doesn’t mean it’s a bad time to buy stocks — it could be the best time. So are you in, or are you out?
Hilary Kramer of Montgomery Asset Management says it’s time to be in the market, as she thinks we are at the bottom, and there are some specific stocks that are screaming buy right now (she mentioned AT&T (T) and Hughes Electronics (GMH)). She also thinks the distressed utilities stocks are worth a look.
Jonathan Hoenig of Capitalistpig Asset Management says that you need live in the now and realize that we are in a serious bear market. And even with that, he is amazed that Americans as a whole still own a lot of large cap stocks. If you want to make a consistent with investing, you really need to look outside the realm of the large cap issues, as there are places to put your money. He thinks that bonds as an asset class are solid.
Wayne Rogers of Wayne Rogers & Co is in-between. He says that right now, stocks are very volatile and that a lot of stocks are oversold. The economy is sound, but the market doesn’t indicate that. And consumer sentiment is down, which is a reflection of all the business scandals we have recently seen. We are closer to a bottom, but we are not there yet. You need to see volume that shows some upside. Nothing says you have to be in the market. It’s okay to be on the sidelines.
Jonas Max Ferris of Maxfunds.com has been beating on stocks for a while, but now he is a little more bullish. "Where are you gonna go?" he asks. You can’t just hide in money market accounts, as the returns are so paltry. There are lots of "out-of-favor areas" (junk bonds and telecom stocks) that could be good investments.
Dagen McDowell of FOX Business News also thinks that now might be the time to consider getting back into stocks, if you can stomach a few more months of rough times. If you are looking to make long term investments (3-10 years), you can find some buys. And we have received some good earnings reports recently (Dell, Wal-Mart), and that might be some of the positive news investors are looking for.
Where To Hide?
Some members of the panel offered up some picks that could help you get through the bear market.
Hilary: Goodrich (GR) — A good defensive play. Jonathan thinks it dead money, as the stock isn’t really moving. Wayne isn’t interested by the stock.
Jonathan: American Century International Bond Fund (BEGBX) — Bonds are a juicy asset class, and this play works off of this, and the weakening dollar. Wayne doesn’t like this fund for a long-term play. Hilary thinks it a good fund, for the fact that it is betting on globalization.
Wayne: Short-Term Treasuries — Wayne wants to be in cash, so he can have money around for a market turnaround. Jonathan and Hilary say no to the treasuries.
Mutual Fund Face-Off
Hang Ten Funds
If you’re looking to buy and hold, what’s the best fund for the next ten years? Dagen and Jonas serve up some picks.
Vanguard Total Stock Market Index (VTSMX)
Minimum Investment: $3,000
Year-To-Date (as of 7-12-02): DOWN 17.7%
Last-Five Years (as of 7-12-02): UP 1.5%
Expenses: $2.00 for every $1,000 invested
Atlas Global Growth Fund (AGRAX)
Minimum Investment: $2,500
Year-To-Date (as of 7-12-02): DOWN 14.1%
Last-Five Years (as of 7-12-02): UP 7.6%
Expenses: $14.00 for every $1,000 investedMoneyMail
Wayne, Dagen and Jonathan capped off the show by answering some of your questions.
Question #1: "What are we supposed to look at when searching for a company’s ‘balance sheet,’ and what is the easiest way to get this information?"
Wayne: It’s worth looking at a balance sheet, but it’s very complicated. The key is to look at the footnotes. And you can’t tell what a stock is going to from a balance sheet.
Dagen: It’s a lot easier for investors to get this information today than it was in the past. You can go to the following websites for balance sheets from the SEC:
freeedgar.com (free service)
edgar-online.com (pay service)
Jonathan: The best indicator of a stock is the stock itself
Question #2: "What do you think about Procter & Gamble’s (PG) prospects?"
Jonathan: The real appeal of PG comes from its foreign sales. It’s a hold right now if you already own, but it’s not a place for new money.
Wayne: I own the stock, but am lightening my position. And it shouldn’t be a place for new money.
Dagen: Hold it if you’ve got it.
Question #3: "Is it time to put more assets into bonds and forget the stock market?"
Dagen: You want to own stocks, bonds and have some cash. Asset allocation is key.
Wayne: Real estate is also a key component in good asset allocation.
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