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.com; and Price Headley, investment strategist at BigTrends.com.
Trading Pit
The October headlines shouted out the turmoil throughout the world. The terror here at home-sniper attacks. Plus the turmoil overseas-from more Al Qaeda attacks to nuclear weapons in North Korea and more talk of an invasion of Iraq.
That makes for plenty of worries for Wall Street. But both the Dow (up 11 percent) and Nasdaq (up 14 percent) have made big gains since October 1.
Pat’s been away on sabbatical for six weeks and he stated he has the reason for the recent market run up. Pat said, “When I left the country, the market had just started a steady decline. And when everybody heard I was coming back, that’s when we had this huge rally.” But seriously, he said it’s better that the market is going up instead of down, but there is still a lot of worry and uncertainty about corporate accounting.
Tobin thinks the market will continue to go up. He said we’ve had lots and lots of bad news, but the market is still gaining because investors are becoming more optimistic. Also, it looks like the Republicans are going to take the majority in Congress, and that means pro business legislation.
Gary B. charted the Dow’s performance since this time last year, and said the current move up has been quite impressive. In fact, if all goes well with the Dow, he thinks it can run all the way up to 10,000.
Scott said the Dow will rally to 8,750, which is the halfway point of the total loss. He thinks we have reached the bottom and that the sellers are finished selling.
Price believes that expectations got too low, and now more people want to get into the market. He expects that there will be more investors buying stocks especially in the short-term.
Stock X-Change
Scott, Tobin, and Price stayed put to determine if buying three stocks with big gains in October would be a trick or a treat for your money.
First up, the trio looked at IBM (IBM). Big blue's been big green lately. At the start of the month it was trading in the fifties, and now it’s in the mid-seventies. Price said the stock is more of a trick than treat for investors. He admitted that it did beat its earnings expectations, but those were lowered expectations. He recommended selling IBM at its current price. (IBM closed Friday at $74.56.). Tobin agreed, said IBM is fairly valued, and sell the stock if it hits $75. Scott said at $55 the stock is cheap, but it’s fairly valued at $70. He sees no growth in the company and recommends finding cheaper tech stocks.
Next up eBay (EBAY). Investors have been bidding up the online auctioneer. It's better by 17 percent since October 1. Toby said this is the unique dot com business that worked. He added never short stocks that are overvalued, because they will become more overvalued. eBay closed Friday at $61.99, and Toby thinks at $70, it is priced to perfection. He advised not to chase it. Price said the stock is stuck between $50-$70 and is over loved and overvalued. Scott added that the stock has never crashed like other dot-coms. He thinks it will disappoint one day, and wouldn’t want to own in when that happens.
Another stock heading north, BellSouth (BLS). It's been ringing up some solid gains in October, up 41 percent. Scott would not buy the stock now. He likes Verizon (VZ), a stock he has picked in the past, better, because it has a higher yield than BellSouth. Tobin said out of all the Baby Bells, BellSouth is the best play, but right now it is too expensive. He advised to buy the stock if it falls to the $20 range. Price agreed with Toby and added investors should aggressively sell the stock if it hits $30. (It closed on Friday at $25.60.) Price thinks investors could buy it at $20, but they’d be better off in other areas.
Chartman
Time to take a trip around the world with the Chartman!
Pat has just come back from a sabbatical that took him all over the world. But instead of bringing us back gifts... he brought back some names. Thanks, Pat.
One of the stops on Pat’s trip was London, England. There he found AstraZeneca (AZN). He likes this stock and thinks the drug company can gain 30 percent because it is well positioned with a great drug pipeline for lots of ailments.
Gary B’s charts left him a bit undecided on this one. He likes that the stock gapped up in October, but it has been unable to break through the $38 level in the past few months. If AstraZeneca’s closes above $38, he thinks it can easily to go $45.
Another stop on Pat’s trip was Australia. While in the land down under, Pat found National Australia Bank (NAB). He didn’t like this stock though. It is a good company and is buying back shares, but it has made some bad moves and there are better U.S. banks to buy.
Gary’s charts left him undecided on this one too. He said that the stock has been unable to build on its highs, but if it closed above $100, he’d buy it. (AstraZeneca closed at $92.80 on Friday.)
Predictions
Gary B: Dow hits 10,000 by May!
Tobin: Rally goes to 9,000; then spirals down to 8,000
Price: Bet the “over” with Overture (OVER); stock doubles
Scott: Macromedia (MACR) up 30% by year end
Pat: Buy bond insurer MBIA (MBI); heading up 30%
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