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
September 21st. That's when stocks hit their lows after the market reopened following the terrorist attacks. The Dow dropped all the way down to 8,236. But since then it's gained 19% with Friday's close of 9,840.
And then there's the Nasdaq. It fell to 1,423. But tech has roared back even more, and Friday's close of 1,938 put it at a gain of 36% since September 21st.
That rebound came during the war, anthrax attacks, more threats of terror and a slew of bad news in the corporate world from layoffs to bankruptcies and scandals.
But the market has had a bad few weeks. So should investors be concerned of a false start? And can stocks go back to the lows they visited in September?
Scott doesn't think so. The market has had a big run and should expect to give some gains back.
Gregg agreed with Scott and definitely thinks that we are not going back to the post-attack lows. He is concerned that the consumer, which hung in throughout this recession so far, does not have a lot left.
Pat said that tech has come too far too fast, but he doesn't think that it will fall back to the 1,423 level. His sources are telling him that a lot of fund managers that were buying tech in October, are selling it now.
Gary B. thinks that stocks are going to remain moving sideways. After the big run of the late 1990's, he has noticed that most companies have just traded in a range. This is a trader's market, and to make money, you have to buy the dips and sell the peaks.
Tobin said that we must expect a slow recovery, and that the market is starting to price that in.
Pat believes this recovery will be different than others because there is no pent up consumer demand. Consumer spending stayed strong throughout the recession, which is unusual. So instead of the 5% quarterly growth rates that are usual out of a recession, there will be a more mild 2½% to 3% gain. Gregg said the Enron debacle changes all the rules because it is an example of a complete breakdown in the system. He thinks that we are undergoing a crisis of conflict that could keep a lid on this equity market. Gary B. disagreed and doesn't think that this will have an impact on the market. Tobin and Pat agreed with Gregg. And Pat concluded the segment by saying that since Enron, a lot more companies are coming clean with more disclosure, and this is a great thing for long term investors.
Chartman
New times need new leaders. This is especially true for the stock market. So the Chartman and Pat each picked their stock leaders of the future. These are the stocks that will take control and become the new bell-weathers.
The Chartman chose Tenet Healthcare (THC) because it has had a recent breakout, is near an all-time high, and it is pulling back, so now is the time to buy. Pat agreed and also likes the company because it focuses on high profit "acute-care" services and is in a good position to make new acquisitions.
Pat chose IMS Health (RX) because it has the best database in the drug business, its database model is low cost/high profit, and its new management could help the stock gain 50%. The Chartman remained on the fence for Pat's pick. Even though the stock looks like it hit a low in late 2001, it remains in a downtrend. But if it can close above $20, he'll be very interested. (On Friday, the stock closed at $20 even.) He said he'd like to see it close above the $20 to show some signs of strength.
Stock X-Change
Gregg, Tobin, and Scott returned to look at the stocks they picked around Thanksgiving time.
Gregg picked Wendy's (WEN) because among other things, he felt it had room to grow. It was at $29.99 then and closed Friday at $30.59. (Also in that time Wendy's founder, Dave Thomas passed away.) Gregg likes the stock more than ever. Tobin and Scott also like the stock.
Toby's Thanksgiving stock was ESS Technology (ESST). At the time he picked it, the stock was up 214% year to date. And sure enough it's had a nice little move in the two months since. At the time Toby selected ESS Technology, it was at $16.10, and closed Friday at $19.48. He said things still look great for the company and he'd be buying more if it came back to the $16 level. Scott and Gregg also like this stock.
Next, it was Scott's turn. He was giving thanks for Affiliated Computer Services (ACS). It was $96.20 on Thanksgiving. The stock had gone all the way to $110, but last week it got hammered and is now back to about $97.10. Scott said that he still likes the stock, even though it's not cheap, and he sees it going to $120 to $130 in a year. Gregg and Toby don't agree, and both think that the stock is just too expensive.
Predictions
Gregg: Tyco (TYC) split-up works! Stock rises 30%
Gary B: PC companies rally; Dell (DELL) makes new high
Pat: Yes, PC's rally, but Gateway (GTW) a dead stock
Tobin: Kmart (KM) survives and doubles to $2 within year
Scott: Recession is over! Markets higher this year
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