Published January 13, 2015
Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Gretchen Morgenson, New York Times business editor.
In a market with wild moves up and down sometimes minute by minute you might have missed that the Dow is on a pretty good winning streak.
Last week was the third straight up week for the Dow.
Gary B. is now bullish on the Dow. He likes that buying is starting to pick up and pointed out a bullish indicator the lack of sell-offs at the end of trading days.
Gretchen didn't agree with Gary B's bullish sentiment. She said there is still a lot to work out in economy. It may be a relief for investors to be bullish, but they should worry about economy, because earnings are still short of expectations.
Tobin said traders, like Gary B, love great closes at the end of the trading day. But investors still have time to pick up great companies cheaply.
Scott said when the market is down in the morning and up in the afternoon it is a near term bullish phenomena, but we're still in the 8th inning of the bear market. The market rally from the 7,500 8,000 level was met with a lot of disbelief, but Scott thinks the Dow is headed to 9,000.
Pat thinks there is a bit of a risk for investors going into the fall. That is because this is the time that companies set their budgets for the year and this type of spending has been very weak. He continued that if the stock market stays weak, corporate managers will be worried about signing off on their books and won't be thinking about investing in their own companies. Then the economy will stay weak, more jobs will be cut, consumer spending will drop, and this will cause a lot of trouble. All that said though, Pat still says don't stay out of stocks, but be cautious.
Gary B. then charted the Dow's performance since May. He said that it is still in a downtrend, but the low at the end of July sure looks and feels like a bottom. He agreed with Scott and thinks the Dow is headed to 9,000. But Gretchen jumped in and said she still likes bonds. She thinks the bond market will keep going up, while yields go lower.
Gary B. and Pat decided to look at two stocks that have seen better days. Martha Stewart Living (MSO) and Tyco (TYC). These two stocks have been taken down by scandals and have fallen considerably from their 52-week highs. But are these sell-offs bigger than the scandal?
That's not the case with Martha Stewart Living according to both Gary B. and Pat. (This stock is below $500-million in market cap value and normally we don't talk about stocks that small in the show. But we did this time because the high profile scandal caused the steep drop.) Gary B. doesn't like this chart because it has headed lower, and he thinks this trend will continue. Pat agreed that buying this stock right now is a huge gamble. He doesn't like that the stock is so tied to Martha Stewart and the fact that her current scandal is hurting the stock.
The duo then looked at Tyco. There's been lots of trouble with this company. Most recently a report that the company virtually gave away $135-million to its former CEO. Gary B. was mixed on Tyco's chart, but said he would buy it with a close over $14. Pat is bullish on Tyco at its current price, $12.23 as of Friday's close. He think Tyco's new CEO is doing good work and even with its scandals, the stock is just too cheap.
Gretchen, Scott, and Tobin all returned to look at the worst performing Dow stocks this year.
At the bottom of the Dow this year is AT&T (T). The company has had a terrible year and has just about been cut in half since January 1st. Gretchen isn't optimistic on AT&T's future because its business is in immense price wars, it has a mountain of debt, and the huge telecom debacle. Toby is not as pessimistic about the stock, so long as Comcast (CMCSK) takes over AT&T. Scott said the ownership is just too chaotic and he would not touch it.
Next up the trio looked at Home Depot (HD), down 44% year-to-date. Its stock has not been a good home for you money, but the housing market is still booming. Toby said what's going on is that it just has too many stores. Gretchen thinks that because Home Depot's growth is decreasing, the bull market in real estate is ending. Scott believes the stock is cheap, but be patient with it.
Also a big Dow disappointment: Intel (INTC). Nothing's going right for this stock lately. Scott recommended to wait for it to fall to $12 and then buy it. Intel closed Friday at $17.86. Toby said no one wants Intel's new chip, which was supposed to be the company's savior. Gretchen added that Advanced Micro Devices (AMD) has a great chip to compete against Intel's. She thinks Intel is a great company, but tech is dead, and there is just no demand for it.
Last up, Citigroup (C). It's widely held and widely recommended. A lot of people are feeling pain on this one. Toby said patience will be rewarded with this stock because the company is a world leader, and in 5 years its stock price will be worth two times as much. Scott would wait for the stock to hit the low $20s before buying because he thinks Citigroup has more skeletons in its closet. Gretchen also believes the company is too much in the thick of Wall Street scandals.