Cashin In

Recap of Sat., Nov. 2: Worst To First!

Stock Smarts: Worst To First!

From worst to first – the bear market’s biggest losers have been big winners lately. From the market’s peak in March of 2000 to the five-year low on October 9, 2002, tech and telecom stocks fell twice as much as any other sector. But since that low both sectors have come back twice as big as the rest of the market:

High to Low Since Low
Technology Down 82% Up 27%
Telecom Down 74% Up 27%
S&P 500 Down 49% Up 15%

So is now the time to bottom-fish if you want to come out on top?

Jason Trennert of ISI Group says a couple of weeks ago you could have bought almost any tech or telecom stock and seen gains, because the sectors had been so oversold, but now you have to be more selective and look for quality stocks if you want to buy in these sectors. He says now is the time to cash in on recent profits in troubled companies like Lucent (LU) and buy companies that are leaders in their markets like JDS Uniphase (JDSU) which he has been buying.

Dagen McDowell of FOX Business News says some areas of tech still look good like companies that sell into the PC business but telecom equipment makers binged on spending in the late nineties and she would not be a buyer of these right now.

Hilary Kramer of Montgomery Asset Management says the Internet is going to create new winners which might not include Lucent or JDS Uniphase in technology. She says we have to think about the defense sector when we talk about technology and she says Northop Grumman (NOC) and United Technology (UTX) are technology stocks she likes.

Jonathan Hoenig of Capitalistpig Asset Management says you have to pick your theme in tech and not chase fads. He is buying international telecom like New Zealand Telecom (NZT) and Koninklijke KPN (KPN), a telecommunications company in the Netherlands. He says pick a theme and stick to it.

Wayne Rogers of Wayne Rogers & Co. says the tech and telecom gains we are seeing are in stocks that have been decimated, and betting on stocks like Lucent is still very speculative. He says the rally in tech and telecom is purely driven by short covering and he isn’t buying into it.

Mutual Fund Face-Off: Buy Now and Sell Later

History says the period from November through April is the best time of year to make money in the market. So which mutual fund will make you the most over the next six months? Dagen and Jonas make some picks.

Dagen – Transamerica Premier Equity Fund (TEQUX)

Year-to-date (as of 11-1-02): DOWN 24.7 percent

Minimum Investment: $1,000

Expenses: $13.4 0 a year

Jonas – Wasatch Global Science & Technology Fund (WAGTX)

Year-to-date (as of 11-1-02): DOWN 34.4 percent

Minimum Investment: $2,000

Expenses: $19.50 for every $1,000 invested

Ca$h Count!

This time last year our crew picked stocks they said would make money in a tough post September 11 market. Were they right?

Hilary's Cash Count: Unilever (UL)

UP 37 percent

Since October 20, 2001

Friday's close (11-1-02): $39.44

Hilary still likes and owns Unilever but she thinks it’s fairly valued right now. Jason likes the consumer sector Unilever is in and he thinks it’s a great pick. Jonathan’s not a buyer but he likes the idea of owning international stocks right now.

Jason’s Cash Count: Southwest Airlines (LUV)

DOWN 2 percent

Since October 20, 2001

Friday's close (11-1-02): $14.79

Southwest Airlines survived better than most airline stocks. It actually moved 47% higher before coming back to where Jason recommended it last year. He says it’s a well-run coming with less debt than most airlines and he thinks the price is attractive right now. Hilary agrees Southwest is the best in the airline group, but she says they may see some labor problems and profit margins may get thinner. Jonathan doesn’t own any airline stocks and he says if he was going to buy one it would be Ryanair (RYAAY) another foreign carrier.

Jonathan’s Cash Count: Templeton Global Income Fund (GIM)

UP 17 percent

Since October 20, 2001

Friday's close (11-1-02): $7.15

Jonathan still likes this fund, though he’s not as passionate about funds as he was a couple of weeks ago, he’s still holding onto this fund. He thinks it’s a good idea for people to take some kind of interest rate or currency risk right now and he likes non U.S. bonds. Jason says he’d be careful here because people sometimes don’t realize they can lose money in bonds just like in stocks and with the fed aggressively easing, he thinks stocks are the place to be right now. He expects the Fed to cut Interest rates another half point this week. Hilary says it’s a great pick and a great way to diversify internationally.

Money Mail

Wayne, Dagen and Jonathan capped off the show by answering some of your questions.

Question: “Where would the market be if terrorists detonate a weapon of mass destruction in the U.S.? What would the best investment be then?”

Dagen says the market would obviously crater, the same as it did after 9/12, if a weapon of any magnitude went off here in the U.S. But the location of the attack and the devastation it caused would determine how long the market stays down. This is the reason you always want to diversify into stocks, bonds, cash and even gold. Jonathan says he’d be in gold if a bomb went off in the U.S. Wayne would move to cash.

Question: “I work for Raytheon (RTN). I don't have much of the stock in my 401(k) but may buy more now that it's down. What do you think?”

Jonathan doesn’t like Raytheon. He thinks it’s a laggard stock even amongst the defense group which is not his favorite place to invest right now. Wayne says he thinks there are better defense stocks out there like Alliant Techsystems (ATK) and United Technologies (UTX) but the these are fairly valued and he’s not buying them right now. Dagen says a lot of money managers just don’t like Raytheon’s management which is why this stock has not done as well as other defense stocks.

Question: “Why do your guests think of Philip Morris (MO)? We still need to eat, drink and smoke to chase stress away.”

Wayne says he thinks Philip Morris is always worth a look. The company sold off Miller which he thinks was a good move, but he says “the bogey in all of this is the lawsuits” and you have to be careful what you pay for the stock. Dagen points out that people are managing to buy cheaper cigarettes which is hurting the tobacco companies. Jonathan says he owns and still prefers British American Tobacco (BTI) stock to Philip Morris.


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