Published January 13, 2015
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 Mike Norman, The Economic Contrarian Update publisher.
Last week went upside down for stocks. First, the Dow took a steep 222 point dive on Monday and Tuesday. But in the final three days of the week, it made a U-turn and made a 289 point gain.
Tobin started things off by advising investors to look for stocks with great values. Buy these stocks, but don't jump in and out of the market.
Mike said there's still a lot of risk in the market, and what bothers him the most is the tremendous expectation that the economy is going to turn around. He doesn't think the economy is going to get better anytime soon and that stocks are too expensive right now.
Gary B. charted the NYSE Composite Index, and continued on his theme that stocks are moving sideways. He said that Tuesday's fall scared him, but the buying on Wednesday helped push this chart back over its support line. And thus, the sideways action just continues. But if he had to choose, the Chartman said he thinks that there is more downside to upside and recommends to be in cash on the sidelines right now.
Pat thinks that the market is in for rocky times. This is because the market hates uncertainty. And at the current time, it cannot price in risk, so there is an unknown hiding in companies' balance sheets.
Scott said now is a great buying opportunity, especially if a good company spikes down. He believes that the fear and selling is good because the market is ridding itself of all the overselling.
Gary B. disagreed with Scott and restated that he wouldn't be buying right now. Scott asked him when he would start buying again. Gary B. replied that he would wait until the market broke above its current state of congestion or dipped back to its September lows.
Fear and loathing was the theme on Wall Street last week. There was fear of bad accounting, and loathing for certain stocks. Tyco (TYC), The Williams Companies (WMB) and General Electric (GE) were all bloodied by the Enron Effect. But do they deserve it?
First up, Tyco. A lot is going on with this company. Execs dumped stock and now are buying some back. Plus there's a surprising split-up that no one seems to fully understand. The stock has taken quite a beating, and was down 18.1% last week. Mike thinks that Tyco is overvalued and has more tough times ahead. Toby disagreed and owns the stock because he thinks the stock is at a good price right now. Scott said he would wait and see what happens to Tyco after it completes its break up into four companies.
Next up, The Williams Companies. The stock was hit hard when it delayed the release of its earnings report. It's also an energy company, so the Enron jitters kicked in as well and caused it to fall 23.3% last week. Toby said this stock is a great investment under $20, and it also gives a 4% dividend. Mike and Scott agreed with Toby, and also like this stock.
General Electric. Some compare this stock to a great mutual fund, but others liken it to a very risky hedge fund, which could be moving its numbers around. Last week it lost 3.7%. Scott thinks the stock is dead money and is over owned. Toby and Mike also said that GE won't make any big moves.
Gary B. and Pat came back. And so did the Stock Super Bowl.
Here are the rules: We picked a stock from St. Louis (to represent the Rams), and one from New England (for the Patriots). And based on the stock that they liked, each would pick the winner of the Super Bowl.
Representing St. Louis, Anheuser-Busch (BUD). The Chartman likes this stock and went with BUD and the Rams because its chart is strong and getting stronger. Also, the stock should be bought because it is going to new highs. Pat said that the company has the best distribution and marketers but it is just too pricey until it drops to $40. (Anheuser-Busch closed at $47.70 on Friday.)
And for New England, FleetBoston Financial (FBF). The Chartman said the stock did bounce off of support at the $32 to $33 range which was good, but there's just too much overhead to buy it safely right now. Pat disagreed and went with Fleet and the Patriots because the bank is a very well diversified, and it is undervalued, so it could be bought out.
Mike: Bear rules. Dow 9,100; Nasdaq 1,400 by end of February
Scott: Midcap defense stocks like DRS (DRS) win
Gary B: Auto stocks surge, Ford (F) up 30% in next 6 months
Pat: Amazon.com (AMZN) sinks below $10 by July
Tobin: Gas prices heading higher; buy EOG (EOG)