Recap of Sat., August 10: Place Your Bets!

Stock Smarts: Place Your Bets!

Stocks have rallied off recent lows, but the Dow and Nasdaq are still way off all-time highs set back in 2000.   Take a look: If you had invested $5,000 in the Dow Diamonds (DIA) on January 14, 2000, you would have $3,713 now.  Ouch!   Even worse, that same $5,000 invested in the Nasdaq 100 (QQQ) at the Nasdaq’s peak on March 10, 2000 is worth just $1,029 now.

So when the markets do make a serious comeback, which will rise faster and father: the Dow or the Nasdaq?

Wayne Rogers of Wayne Rogers & Co. thinks that the Dow will be the one to make the big comeback, as the Nasdaq is weighted too heavily in technology stocks. He says the big cap issues of the Dow have more potential, and they give you some security on the downside. In terms of Nasdaq stocks, you have to be very selective.

Hilary Kramer of Montgomery Asset Management says some of the tech companies can come back, but overall, it is going to be the Dow.  She believes 80% of the 30 Dow stocks are set for big gains (50%) over the next year. Overcapacity is still a problem in the tech sector, and that, she says, will keep the Nasdaq.

Jonas Max Ferris of has been very bearish on tech, but he is starting to come around on some of these stocks, for the simple reason that they are cheap. All the companies on the Nasdaq can be bought for less than the 30 Dow stocks – and, he says, value is the only reason to buy a stock.

Jonathan Hoenig of Capitalistpig Asset Management thinks that on a day-to-day basis, the Nasdaq is certainly more volatile than the Dow. And for that reason, the Nasdaq has the potential to come up faster and farther in a market turnaround. But he still thinks that we are not in a bull market yet, and that the bear market has yet to end.

Gregg Hymowitz of Entrust Capital says that companies have done a very good job over the past two years of cutting costs, and this will increase profits. Ultimately, this will help a comeback in tech spending, boosting beleaguered tech stocks. Dow stocks, right now, are not all that attractive. And people invest in technology because of history – investors are always looking for the next advance in technology.

Comeback Kid$

What are the best stock bets to make as the market battles back? Some members of the panel came up with some their favorite “Comeback Kids.” (All members of the panel own shares in the companies they recommended.)

Hilary’s Comeback Kid:
Duke Energy (DUK)
52-Week High: $41.35
52-Week Low: $18.10
8-9-02: $26.33

Hilary says this is a stock that should be in the mid-40’s. Gregg thinks the stock is too expensive, and there is no real upside to the stock. Wayne and Jonathan also don’t like Duke’s future prospects.
Gregg’s Comeback Kid:
52-Week High: $26.29
52-Week Low: $12.95
8-9-02: $19.24

Gregg says this is the best way to play the credit card business – a safe play. Wayne likes the company and is intrigued by the stock.

Jonathan’s Comeback Kid:
Scudder Intermediate Government Trust (KGT)
52-Week High: $7.40
52-Week Low: $6.50
8-9-02: $7.07

A play on bonds, which is an area Jonathan still thinks will grow – go where the action is. Gregg says this fund is too expensive and you should just buy bonds direct.

Wayne’s Comeback Kid:
General Electric (GE)
52-Week High: $43.11
52-Week Low: $23.02
8-9-02: $32.40

Another Dow stock that Wayne likes. Jonathan thinks these stocks will be in a trading range for a while. Gregg thinks it’s expensive, and Hilary doesn’t like the current management.

Mutual Fund Face-Off: Manic Market Funds

Market mood swings make for a manic investment climate. What you need is a mutual fund to help ride it out. Which one is the best for a crazy market? Dagen and Jonas came up with two potential winners.
Dagen – Dodge & Cox Balanced Fund (DODBX)
Minimum Investment: $2,500

Year-To-Date (as of 8-9-02): DOWN 5.9%
Last-Three Years (annualized, as of 8.9-02): UP 6.6%
Expenses: $5.40 for every $1,000 invested

Jonas – Dobson Covered Call Fund (DBCCX)
Minimum Investment: $1,000

Year-To-Date (as of 8-9-02): DOWN 14.8%
Last-Three Years (annualized, as of 8-9-02): DOWN 4.8%
Expenses: $15.00 for every $1,000 invested

Money Mail

Wayne, Dagen and Jonathan capped off the show by answering some of your questions.

Question: “I have been thinking about buying El Paso (EP). Should I wait until after August 14 to buy, or just go ahead now?”

Wayne: The August 14th date will totally matter – don’t take the risk and buy before the CEO sign-off deadline.

Dagen: Energy trading stocks are dangerous in the wake of Enron.

Jonathan: Not a place to put your money.

Question: “Why are analysts still moving markets when history has shown how wrong they are the majority of the time?”

Dagen: It’s a good question.  Maybe some institutional investors are still paying attention to analysts, but for the most part they have proven to be totally corrupt.  Maybe you should study technical analysis like Jonathan does because the charts don’t lie.

Wayne: Use a crystal ball.

Question: “What is your long-term outlook for Hewlett-Packard (HPQ)?”

Jonathan: Doesn’t look like there is much growth in this stock.

Wayne: The merger hurt this company.

Dagen: Still a lot of unanswered question about this stock to think about putting new money into it.


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