Cavuto on Business

Recap of December 28: Shield of Safety?

Molly de Ramel, FOX News Business Correspondent, filled in for Neil Cavuto. She was joined by Retired U.S. Army Colonel David Hackworth; Jim Rogers, president of; Ben Stein, economist and Rob Black, president and portfolio manager of Goodwyn, Long & Black.

$hield of $afety?

President Bush has announced plans to build a missile defense system. The so-called ‘Star Wars’ system will cost tens of billions of dollars and take years to build. Molly asked her guests if we can afford a system and how investors can profit from it?

Col. Hackworth said we can afford it, but believes money still needs to be spent on research and development and not deployment. Ben Stein and Rob Black agree that the system is worth it and that it will protect Americans and investors. Ben also says we can’t afford not to protect our shores from missile attacks. Jim Rogers disagreed. He thinks the missile defense system will never work and is a waste of money. He thinks the money would be better spent on building roads and other infrastructures in the U.S.

Out of the defense contractors that would benefit from building the missile intercept system, Rob says Lockheed Martin (LMT) is the best positioned. His firm has a buy rating on the stock, but warns it is a bit expensive right now. His firm also has a buy rating on Northrop Grumman (NOC), but cautions that it’s earnings will be hurt this year due to costs associated with recent purchases. He recommends staying away from most other defense stocks. Jim recommends staying away from all defense stocks because he thinks they are over priced right now.

More for Your Money: Sell Your House Now?

Home prices are up more that 20 percent over the past three years, while the Dow Industrials Index is down nearly 30 percent over the same period. Will this trend continue and should homeowners sell their house to lock in profits before the housing market turns to the downside?

Ben says no! Homeowners should not sell their house, because it has tax breaks and the market may turn lower but it will maintain its value over the long term. Plus Ben says, you have to live somewhere, and it is a better investment to buy than rent. Jim says property values are high right now, so it is not a good time to invest in that particular market. All the guests said investors should still own stocks and have a diversified portfolio.

Molly also asked her guests about three home-related stocks that have benefited from a hot housing market.

1) Pulte Homes (PHM): Rob recommends the home builder. He says it is spreading its business to rural communities and company insiders have been buying the stock recently. Jim says Pulte Home’s stock price has run up to high to fast. Both Jim and Rob agree home builders will suffer if the housing market slows down.

2) La-Z-Boy (LZB): Rob recommends the furniture maker. He says fundamentals of the company look good, profits are impressive and it has a long term history of raising dividends.

3) Countrywide Financial International (CFC): Rob says stay away from this mortgage provider stock, because he is concerned about the company’s debt load and exposure to the sub-prime lending market.

Fox On the Spot:

Jim says raw materials will be a good investment in 2003.

Rob says First Virginia Bank (FVB) will be a good investment in 2003.

Ben says Fidelity Short Term Bond fund (FSHBX) will be good investment in 2003.

Col. Hackworth says the U.S. will drop bombs on its enemies in 2003.

Molly says U.S. companies will hire back laid off workers in 2003.