Brenda Buttner was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, CEO of ChangeWave Capital Partners; Scott Bleier, FOX Business News contributor; and Gregg Hymowitz, founder of EnTrust Capital.
Trading Pit
For weeks now, violence in the Middle East has dominated the headlines, and now that region stands on the brink of an all out war. This has weighed heavily on Wall Street, hitting stocks hard, with the Dow and Nasdaq both falling last week. As a matter of fact, on Wednesday, they closed at levels last seen in late February. Add to that some bad news on the earnings front and the question has to be asked: Is there just too much turmoil for the stock market right now?
Gregg thinks that situation in the Mideast will have little effect on Wall Street. He said that ultimately the market will focus on the economy.
Tobin sees things getting worse before they get better. He said traders don't want to buy stocks right now, but there are good stocks to buy for investors. He warned not to buy high P/E stocks right now.
Scott said that the market should have gone down more, but it didn't because it is stuck in a trading range.
Gary B. charted the Nasdaq, which he refers to as the stock market "mood ring". He's bearish on it right now, and thinks it will return to its February low near 1,700 due to all the turmoil in the world.
Pat said that we need to keep things about the economy in perspective. He believes we've been in a mild recession and we'll be past it pretty soon.
Stock X-Change
With a dangerous world and a risky market in mind, Scott, Tobin, and Gregg each picked a "safe stock". These stocks may not take off like a rocket, but are safe in very unsafe times, both in the Middle East and on Wall Street.
Scott selected Con Edison (ED) because it is cheap when compared to its competitors and it has a 5.25% yield. The stock closed at $42.27 on Friday and Scott thinks it can go to $50 by the end of the year. Gregg thinks the stock has run up as far as it can go. Tobin said he likes Duke Energy (DUK) better because it was hit harder than Con Ed and can make a bigger gain.
Toby picked Student Loan Corp. (STU) due to high college enrollments. Also with this stock, he said investors get a nice dividend and its growth pattern just keeps growing and growing. He sees the stock reaching $120 in the next 2 years. (It closed at $91.30 on Friday.) Scott said the stock is reasonably cheap and its chart looks terrific. Gregg likes the stock because it was helped when President Bush cut financial aid, which forced more students to get student loans.
Gregg likes BJ's Wholesale Club (BJ) because it has a lot of room for growth, it's buying back shares, and has no long-term debt. Toby and Scott agreed and both like the stock.
Chartman
Gary B. and Pat came back to look at small and mid-cap stocks, both of which have been real performers so far this year. (Small-cap stocks were defined as stocks with a total value of under $1 billion and mid-cap stocks were valued between $1-$5 billion.)
First the duo took a look at the S&P Mid Cap Index (MDY). Gary B's bullish on mid-caps since they have had a great run and aren't broken yet. But, he warned that long-term resistance just above $100 might thwart any move for awhile. Pat also likes mid-caps because they are not as volatile as small-caps, but tend to outperform large-caps during a recovery. This can also be a great way for conservative investors to diversify their portfolios. But Pat also warned that mid-caps are no longer the bargain they were a couple of years ago.
Next the two looked at S&P Small Index (IJR). (Normally individual stocks valued under $500 million are not discussed on this show because these stocks can move a lot on just a mention, but IJR is a basket of those stocks.) Gary B's bullish on small-caps too. He said these stocks are still strong and don't have the overhead problem like the mid-caps. However, he advised to wait until it broke above its current congestion around $120 before buying. Pat disagreed with the Chartman because small-caps have had a bad 20 year run. But he did say that every diversified portfolio should have between 10-25% in small-caps because they zig when the large-caps zag. Pat recommended small-cap funds like Baron Growth (BGRFX), Third Avenue Value (TAVFX), or Royce Total Return (RYTRX) instead of IJR for investors that want exposure to small-caps.
Predictions
Tobin: Nasdaq falls more; 1700 by Tax Day
Scott: It gets worse! Nasdaq 1500 by Memorial Day
Gary B: Sticking to my guns! S&P going up 10%
Gregg: Oil prices have peaked & no inflation ahead
Pat: L-3 (LLL) has topped out; don't buy & sell now!
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