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, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Dave Nelson, CEO of DC Nelson Asset Management.
The moment is seared in our memory as one of the worst in America's history. Terrorists hijacked airplanes and crashed them into the World Trade Center (search) and the Pentagon (search). And just last week there was a warning they may be planning to do something similar.
Dave thinks if there is another catastrophic terrorist attack, it will derail the market, but only in the short term. He added that it an attack like the one on the World Trade Center and Pentagon happens again, it won’t have the same effect as September 11th, because America is at a much tougher place now.
Pat said you cannot predict an attack, so it is not something to worry about if you want to put money into the market. Instead, he thinks investors should be looking at how the economy is doing and trying to find stocks that are cheap. Pat also said investors should know their own risk tolerance.
Tobin is not worried about an attack because the U.S. is so much better at security now. He added, that if something were to happen, it would be a fluke because America is so much stronger and more concentrated on the terrorist problem.
Scott said stocks did go up, even after September 11th. With that in mind, he thinks the market will only be affected in the short-term if we were attacked again. He also said that the warnings, like we got last week, will only cause the market to take a small dip.
Gary B. charted the Dow’s performance over the last couple of months and showed that the market has been holding up extremely well. He predicted that if the Dow can close over 9400, it will be off to the races. However, he said that if there was another attack, it would derail parts of the economy.
Scott, Tobin, and Dave inspected airline stocks after the threat that al Qaeda may target airlines this summer.
The group first looked at AMR (AMR). This company was almost bankrupt, but Toby thinks it will be a survivor. Both Toby and Dave said the company is making the right moves to improve its business. But Dave cautioned this is volatile. Scott does not think individual investors should buy airline stocks because of the risk factor. (AMR closed on Friday at $8.95.)
Next, the trio reviewed Southwest Airlines (LUV). Scott said Southwest has an original business model and it knows how to control costs. It is not subject to a lot of the union demands that many other large carriers have to deal with. If he had to choose an airline stock to own, this would be it, but he still does not think individual investors should invest in airlines. Toby recommended to buy Southwest on a big dip, but he prefers JetBlue (JBLU) over Southwest. Dave thinks Southwest is a good company, but its stock is overpriced. (Southwest Airlines closed on Friday at $16.28.)
The last airline stock the three examined was Delta Air Lines (DAL). Dave said the company has a big problem because it has not settled with its unions. Toby thinks the company will stay in business, but he wouldn’t buy the stock. Scott agreed and said he wouldn’t buy the stock either. (Delta Air Lines closed on Friday at $11.23.)
This week Gary B. and Pat looked at a couple of stocks from China.
First, the pair examined SINA (SINA). If you bought $1,000 of this stock a year ago, you'd have over $20,000 now! Gary said there’s nothing to hate about SINA’s chart. It just keeps going up, and as long as it remains in its current uptrend, he recommended to be long the stock. Pat was surprised to find that SINA is a real company with real profits and good cash flow. The company provides Internet content and it makes a lot of money through advertising and wireless text messaging. It is the biggest Chinese portal by revenue and it’s growing like a weed. And even though the company has run up 1595 percent in a year, Pat said its price is not absurd. However, the Chinese government can do anything it wants to the company at anytime. Pat recommended to sell the stock. (SINA closed on Friday at $33.39.)
Next, the two reviewed chinadotcom (CHINA). The stock is up 417 percent over the past year and Gary said it’s not ready to quit yet. He thinks investors should buy it if it can close over $13. (chinadotcom closed on Friday at $11.99.) Pat said he saw a lot of red flags not to invest in this stock. First, it is shifting into less profitable areas. He pointed out that it is not really an Internet business, but does a lot of low cost programming for foreign companies. Also, AOL Time Warner (AOL) has a sizable stake in the company and since chinadotcom is moving away from its Internet business, Pat thinks AOL eventually may sell its stake in the company. He believes the stock is overpriced and advised investors to run away from it.
Gary B's Prediction
Good news keeps coming; Dow 10K by year end!
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MGIC Investment Corp (MTG) a bargain buy in mid $50s
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