Stock Smarts: Greed Is Good
Greed is back! Investors are trying to make up for what they lost in the bear market by buying into the same risky stocks that burned them when the bubble burst. Will it be deja vu all over again, or is this green actually good for the market?
Jason Trennert of ISI Group thinks this rally is real – profits are good and the market looks technically solid – but he thinks the time for “risky” stocks is fading out. He sees investors making a move from risk into blue chip stocks. Investors should take a long-term view (money markets are weak), and that this is the best time to buy stocks from a tax perspective. Investors can’t buy the market as a whole – they must look at individual stocks.
Hilary Kramer of A&G Capital also thinks this rally is real, and is looking towards the financial stocks – she mentions Citigroup (C) – as a place for investment. And she thinks the tax stimulus makes it a great time to buy stocks.
Jonas Max Ferris of Maxfunds.com says the economy is “luke warm”, and the market is up as if there are no problems out there. Investors have a “get rich or die trying” mentality, and there will be disappointments out there at some point, and the market will react.
Jonathan Hoenig of Capitalistpig Asset Management says that risk is in – a stock’s reputation is not what matters, but how it’s doing at the time of analysis. You have to go where the action is – and right now that’s with the risky stocks.
Wayne Rogers of Wayne Rogers & Co. is not upping his risk profile – he sees investors revolving out of the risky stocks for blue chips. However, until you see volume on the down side, the risky stocks will keep doing well. He points out that this is a market of stocks, not a stock market – so you have to be selective and not just play the overall market. And he still loves the limited partnerships.
Be$t Bets: “Get Greedy” Stocks
Greed can be good – but only if you get greedy with the right stocks. Our crew has some picks that might be the ones to satisfy your greedy side.
Jon's "Get Greedy" Pick: National Bank of Greece (NBG)
52-week high: $3.85
52-week low: $1.82
Friday's close (7-11-03): $3.79
Jonathan loves the foreign and emerging markets – and even though this stock is thinly traded, the financials are doing well, and this is a good, bargain stock. Jason thinks that thematically it’s a good pick – it could be an interesting play for speculative investors. Wayne loves the chart, and notes that “Greece is the fountainhead of western civilization – and Jonathan is the fountain head of our information.”
Jason's "Get Greedy" Pick: Microsoft (MSFT)
52-week high: $29.48
52-week low: $20.70
Friday's close (7-11-03): $27.31
Jason bought some Microsoft last Thursday (7-10-03). It’s very attractive for a long-term perspective. They have very little debt, and they are a leader in terms of offering a dividend after the tax package came into play. Jonathan doesn’t love the stock – it just isn’t “sexy” enough for him. Wayne says you can’t bet against Microsoft, with the huge amounts of cash it has, but he doesn’t see much upside for the stock.
Wayne's "Get Greedy" Pick: Gen-Probe (GPRO)
52-week high: $49.53
52-week low: $13.00
Friday's close (7-11-03): $48.20
This company makes diagnostic blood testing equipment, and Wayne says this stock has been strong in the last quarter, and he loves the chart. Jason likes the pick as well, saying that all the money the president is putting into AIDS research will help the stock. Jonathan says that biotech is in, and he wouldn’t bet against it.
Power Plan: Sex, Shoes & Stocks!
Candace Bushnell, the author of Sex and the City and the real-life Carrie Bradshaw, is an expert on sex and shoes - but what about the stock market? Her new book Trading Up is about the steamy side of the fashion industry. Now she wants to know what kind of “fashion” stock to invest in: a high-end designer, or a company that markets to the masses?
Hilary and Wayne came up with two completely different answers.
Hilary's "Sexy" Stock: Wal-Mart (WMT)
52-week high: $58.03
52-week low: $43.72
Friday's close (7-11-03): $56.53
Hilary asks: “what’s sexier than making money?” Wal-Mart has so many stores and employs so many people and really knows how to squeeze out the profits. Wayne thinks Wal-Mart is ruining Middle America – and they also aren’t exclusively a fashion business.
Wayne's "Sexy" Stock: Liz Claiborne (LIZ)
52-week high: $36.96
52-week low: $23.55
Friday's close (7-11-03): $36.33
Liz Claiborne owns a lot of upscale clothing lines and it is a growing company – another stock with a great chart. Hilary thinks they have too many brands.
Jonas, Jonathan and Wayne answered some of your questions.
Question: “Jon recommended San Juan Royalty Trust (SJT) when it was at $14. It's done very well. Why didn't he buy it in the Challenge?”
Jonathan did not buy SJT for the Challenge because he had just sold his position in the stock when the contest began, and he did not want to have anything in his portfolio that he did not own. He still likes what he is doing with his picks, as investing isn’t a sprint (even though he only has until the end of the year in the Challenge).
And to find out who’s ahead, check out the website at: www.foxnews.com/challenge
Question: “After three years of investing, it seems to me that summer and fall are
the worst times for the market. Is this true?
Jonas says it’s a seasonality thing: fall and winter you want to be in the market, spring and summer (May through November), you want to be out. However, it is very difficult to act on this seasonality. Wayne doesn’t look at the calendar when he invests, but says there are historical realities to the seasonality of the market.
Question: “Which stocks will do well under the president's tax plan?
Wayne says stocks will continue to do well because of the tax plan, but he sees the consumers as the real beneficiaries of the plan. But there are other positive influences to the market (defense spending, low interest rates) in addition to the tax plan.