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 and Price Headley, investment strategy at BigTrends.com.
The president's top money men are out and Saddam's weapon's declaration is coming in. What's that going to do to your stocks? Let's find out in the Trading Pit.
Trading Pit
Saddam's deadline meant dead money for stocks all week. The Dow down 273 points by Thursday. But Friday's one-two punch to the president's money men sent the market up 22 points.
Price says we've got problems ahead for this market. He thinks the market is going to react badly. The rally Friday was just a bounce and the market is heading in a downtrend. You're going to see more shake-outs after the Saddam news.
Tobin thinks now will be the buying opportunities that everyone has been waiting for. Good investors will take advantage and buy some good stocks on a pullback. We are going to have military solutions and we shouldn't worry about that. Also, if you look at valuation for S&P stocks, fifteen or sixteen times those earnings is not expensive. If we get a drop, you won't get many chances like that to get in.
Gary B. Smith disagrees with Price and says that we may have already gotten the pullback. He thinks we've had the buying opportunity already. Gary would be very bullish on the market if the S&P passes the 965 level. He doesn't think now is a time to be ultra bearish.
Scott disagrees with both Price and Tobin and says a consolidation phase is what the market needs. If the market has to go down, then you buy. The new changes to Bush's team will be very bullish but not from a trader's point of view. It will be bullish for investors. That's the key.
Pat says the deliverance of Saddam's papers is a non-event and won't have any effect on the market. Military action will happen so put your list together now. Go Christmas shopping now. And with the removal of Bush's economic team Pat guesses we'll get a huge tax cut that sends us back to deficits. It's a short-term thing that sets themselves up better for 2004.
Stock X-Change
What stocks are heading up, now that Bush's economic team is heading out? Let's find out in the Stock X-Change.
Scott's stock is ING Group (ING), a multinational financial company based in the Netherlands. This is the Merrill Lynch of Europe, with a worldwide presence. It's selling at 8 times earnings yielding at 5 percent. Scott says this stock will do better after tax reform and more investing.
Tobin says a stock like this is something you'd want to buy when the bad news comes out. The bad news came out this week so now's the time to buy if you're thinking about this company.
Price picks mortgage lender, New Century Financial (NCEN) because he says interest rates are not going to rise based on this "new shake-up." Price think rates will stay relatively flat.
Tobin thinks New Century should have a higher dividend and if they raise, then they'll be a good buy.
Scott thinks jumping from $18 to $35, to $35 to $18 again is a sign of weakness. He thinks a stock trading at three times earnings because of a one time gain is discounting a lot. But he doesn't think this stock has a lot of upside.
Tobin picks Rus Berrie and Company (RUS). He says there's going to be a new thing you're going to look for in stocks with dividends being non-taxable. You're going to look for companies heavily owned by insiders, who have cash, and can distribute that cash in a one time event. Rus Berrie is one such a company and will go up 25 percent.
Price is not a fan of retail but thinks Rus Berrie is a relative out-performer.
Scott thinks it does have some upside because of the dividends being non-taxable, but reminds Tobin that that hasn't happened yet. Scott thinks Tobin might be jumping the gun on this one.
Ask the Chartman
When the market soared for eight straight weeks, these stocks barely moved. Are they ready to break out now? Let's ask the Chartman.
Back with us is Gary B. Smith and Pat Dorsey.
First up, the king of fast food McDonald's (MCD). Gary says he likes the food. He says its chart shows some positive signs. It had a double bottom in October and another one back in August. It's building a base so it's shaking out the extreme buyers and sellers. The thing to look for is the right time to buy. Gary says McDonald's still has to close above $20 for him to get interested.
Pat says this company has had problems with currency and their beef but they seem to be getting over them. 15 percent of their sales are from overseas and 20 percent from Europe alone. They're beating their competitors and are generating a ton of cash flow. Pat says he'd buy it here. This stock is at a good price right now.
On to drugstore chain Walgreen (WAG). Gary discloses that he is long on Walgreen. He says Walgreen has been in a long-term downtrend but recently bounced off the bottom. Gary likes to buy a stock off strength. He says Walgreen has a good chance of going back to the mid-30's but would sell it if it closed below $27. Gary would be a buyer of Walgreen's on Monday.
Pat says this company is way ahead of its competition. It has mid-teens earnings growth, all of it internally financed. It's very conservative and well managed. The whole thing that's going on with generic drug prices and prescriptions helps Walgreen because they make a profit margin on generic drugs. Pat thinks this stock is worth $32 a share and would buy it at $25.
Predictions
Tobin: AOL (AOL) not A-OK. Sell!
Price: Call me Grinch! Market down in December.
Gary B: Southwest Airlines (LUV) loves UAL's blunder; Up 25 percent by mid '03.
Pat: Capital One (COF) is the one to buy; Up 30 percent in year.
Scott: Paine Webber ex-chief Don Marron replaces O'Neill.
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