It all started one year ago with Martha Stewart, Tyco and WorldCom. And by last July, the market was in a full-blown panic. Now it is June 2003 – Martha is back in court, her friend Sam Waksal is off to jail on July 2 and a long line of fallen executives could be right behind him.
Will these ”dogs” make the dog days of summer a downer for your stocks?
Hilary Kramer of A&G Capital thinks that investors will absolutely love seeing these “criminals” go to court and then possibly go to jail - that is the fuel that the stock market needs. (She brings up Martin Grass of Rite Aid as the latest example of a Wall Street scandal giving the market a little boost.) Just the scene of a CEO being taken away in cuffs helps the market. With a case like Tyco (TYC), now there is “visibility” in the company, meaning the company is ready to openly deal with its problems and its future dealings (Hilary owns shares of Tyco). The stock market can take adversity – but the market doesn’t like surprises.
Price Headley of BigTrends.com thinks the question should be about what new scandals we might see – as some of the prior scandals have already been priced into the market. In terms of investors, it’s all about the reaction to the bad news. The reaction was bad last year, but this year the reaction has been good – so far. Price is looking to a rate cut from the Fed – but he says that has been priced in.
Wayne Rogers of Wayne Rogers & Co. does not think the scandals matters – it all comes down to earnings. There have always been scandals, and in the end, no one cares. Big companies will still continue to run – someone gets busted, and someone else will come in and replace them. Morally, it is right to put these guys behind bars. But for the market, it isn’t a big deal.
Jonathan Hoenig of Capitalistpig Asset Management does not think that the scandals really have any major bearing on stocks. However, if the scandals lead to more government regulations for businesses and investors, then that will be bad for the market.
Jonas Max Ferris of Maxfunds.com agrees with Wayne in that it is all about earnings – but the point is that we as investors can’t trust the earnings because of the guys who are getting in trouble. And while earnings are crucial, the market is also about faith. And right now investors are staring to regain faith in the market.
Be$t Bets: Sizzling Stocks!
They are back – and with a vengeance! Some big-name stocks that you know (and probably loved) before the bear market are hitting the highest levels in a year. So how much higher can they fly?
American Express (AXP)
52-week high: $44.84
52-week low: $26.55
Friday's close (6-20-03): $42.93
Jonathan thinks that American Express can go substantially higher – possibly in the range of 15-20 percent. He’s not buying it, but he does see some of the big cap stocks with upside. Jonathan likes stocks that can double – and this stock, while attractive, doesn’t fit that bill. Wayne isn’t crazy about American Express, but he does point out that the big-cap stocks move with the market, so if the market continues to rise, so will stocks like American Express. Price owns AXP as a short-term play, looking for it to reach $50 – but he is not high on the big-cap stocks overall.
52-week high: $67.54
52-week low: $30.57
Friday's close (6-20-03): $64.97
Hilary thinks Amgen can go to $80 a share. In terms of biotech – bigger is better, and Amgen has a lot of drugs and research in the pipeline. Price thinks Amgen can hit $90, and the stock will benefit from all the money flowing into the biotech sector – it should be a core holding for someone playing biotech. Jonathan does agree that biotech is a very strong sector – but it isn’t a sector he is looking at.
52-week high: $65.35
52-week low: $42.75
Friday's close (6-20-03): $63.01
Price thinks FedEx is very stable right now, but it is sensitive to the economy. He does see it going $80 over the next 12-18 months. Hilary gets excited when FedEx comes with a delivery, but she doesn’t like the stock – too much competition from other shipping companies. Wayne isn’t thrilled with FedEx, and Jonathan like UPS (UPS) a little better.
Cashin’ In Challenge
Who is taking charge of the $10,000 “Cashin’ In Challenge”? To find out who’s ahead, check out the website at: www.foxnews.com/challenge
Price, Jonathan and Wayne answered some of your questions.
Question: “Why are Imclone (IMCLE) shares still going up? Won’t lawsuits hurt the stock?”
Wayne doesn’t like Imclone – class action lawsuits could hurt the company. Price would buy Imclone if it loses ground because of lawsuits.
Question: “Genentech (DNA) has rallied strongly. What's your price target on the stock?”
Price likes Genentech – it could get back to the $97 range. Jonathan notes that it is very strong right now – but he would rather see someone put a stop-loss order in, as opposed to looking towards a sell price.
Question: “I'm going away for two years and want to invest $5,000. I don't want a mutual fund - I want one stock. What should it be?
Jonathan thinks that Nick is being foolish – if you are only investing $5,000, you shouldn’t limit yourself. Buying a fund makes the most sense, or just having the money in a savings account would work. Price likes gold stocks, and he says Newmont Mining (NEM) is a great play for the next two years.