Brenda Buttner was joined by: Gary B. Smith, TheStreet.com columnist, Pat Dorsey, Morningstar.com columnist; Scott Bleier, chief investment strategist at Prime Charter; Tobin Smith, editor of ChangeWave Investing; and Royce Kanofsky, chief market strategist for Investec, Ernst & Co.
What can make stocks soar into Labor Day? Not a summer rally. Not an earnings rally. Not an economic recovery. Royce said now is the time to make aggressive bets on the market because of investor sentiment. Once people have the perception things are going to get better, he believes things will turnaround. Gary B. took a look at the Nasdaq chart, and he is still a bear. He said that if the Nasdaq closes below its current support area at 1,940, the Nasdaq should be headed for its April lows. Scott said that the summer rally that he believed all summer was going to happen, isn't going to happen. Tobin said if you want to buy stocks that are going to go up, buy ones that are making their earnings. Pat thinks that investors just need to give the markets patience and time, and things will get better. Royce then added that investors that put their money in the market will be fine over the long haul. But if you look at the markets on a daily basis, it will drive you crazy.
Royce, Tobin, and Scott all stayed on to discuss three of the biggest mutual funds: Fidelity Magellan (FMAGX), Vanguard 500 Index (VFINX), and the Janus Fund (JANSX). Buying a mutual fund is like buying a bunch of stocks at one time, so like stocks, you need to know when to sell a fund. First up, the largest of mutual funds, Fidelity Magellan. So far this year, the fund is down 9.2%. Tobin thinks that the fund is a bit pricey, but he also said that now was not the time to sell because the market is at a bottom. Royce disagreed though, and believes that investors should sell because the fund is overexposed to tech stocks and has capital gains exposure, so someone who buys this fund can be taxed for capital gains at the end of the year and have a loss. Next up, the Vanguard 500 Index, which tracks the performance of the S&P 500. It's down 9.2% this year, and down 9.1% last year. Royce said that he likes the fund and it belongs in everyone's portfolio. Scott that index funds like this one should make up 5% of someone's portfolio. Tobin said if you want to own a fund, own the one that has the cheapest expenses and tracks the market. This gives you a gauge, and then, you can add on to your portfolio with some value funds. The discussion concluded with the Janus Fund, which is down 19.0% this year and down 14.9% last year. Royce said that the big problem with this fund is that it owns way too much tech, and it has gotten to be too big. The fund cannot easily get in and out of stocks. Tobin agreed and said that now is not the time to be in this fund.
You might not think of turning to the Chartman for this year's Fall Fashion, but when it comes to stocks that will be in fashion this fall, he knows all the "do's" and "don'ts". Both Gary B. and Pat chose a clothing company's stock that will either be flying off the racks or won't even leave the closet. Gary B. chose Jones Apparel (JNY), a stock that he thinks will be a big fashion faux pas this year. He looked at chart and didn't like that it broke a line of support. He said that at best, the stock (which closed on Friday at $32.15) will stop going down in the mid-20's. But Pat thinks the stock is tres chic because it has great long-term sales and shares are cheap based on earnings estimates. He chose Chico's FAS (CHS) as a stock "do", due to its incredible sales over the past three years and with only 300 stores, its ability to grow. But Gary B. said the stock is a "don't" because of its recent stumble back under resistance.
Royce: Comeback for tech stocks? FUHGETTABOUDIT!
Tobin: SunTrust (STI) takes over BB&T (BBT) at a 20% premium
Pat: One year from today Qwest (Q) will be 30% higher
Scott: Prescription Benefit companies like Caremark (CMX) do well
Gary B: Biotech goes lower; Biotech HLDRs down 15% by Oct. 31