Stock Smarts: Was That The Bottom?

The market was heading off a cliff, and no one knew how far it would go. The Dow closed at the 7700 level on July 23, but picked up a lot of those losses in the following days:

The Dow
7-23-02: 7,702
8-02-02: 8,313

Was 7,702 a bottom for this bear market?

Wayne Rogers of Wayne Rogers & Co. doesn’t know if we are at a bottom. He looks at the bottom as more of a process as opposed to an actual number (he did say that 7,700 might be the low). And we could be in that process of forming a bottom right now, but he still wouldn’t buy stocks right now, unless you are a trader. For the long-term investor, it’s still not the time.

Jonathan Hoenig of Capitalistpig Asset Management does not think that 7,700 is the low for this market. He feels that the Dow is in a period that was similar to the times between the early 1970’s and early 1980’s, where the Dow was in a pretty narrow trading range. And buy-and-hold investors are not at an advantage in a trading rage -- which favors short-term traders.

Hilary Kramer of Montgomery Asset Management thinks we have formed the base of a bottom, and that now is a good buying opportunity. She brings up a stock like Microsoft (MSFT) as an example of a company coming out with good news, making it an attractive buy (Hilary has a position in MSFT). And she thinks that the Fed could cut rates again, giving stocks a push.

Jason Trennert of ISI Group also thinks this is a good opportunity to buy, even though we might re-test the 7,700 levels. He sees the economy as strong (sighting rising auto sales as a good indicator). And the fact that people are refinancing their homes means that more people will have money to invest in the stock market.

Jonas Max Ferris of Maxfunds, who has been very bearing on stocks recently, is starting to like them now, mainly because the alternatives are so bad right now. Stocks aren’t something to ignore right now, because they are getting cheap.

Good New$ Stocks!

It hasn’t been all bad news on Wall Street these days. Some companies are actually making some money. Can the stocks make you some money in the process? Some members of the panel weighed in on some stocks in the news.

Unilever (UN)
52-Week High: $67.09
52-Week Low: $48.06
8-2-02: $57.73

Last week Unilever said its first quarter profits were 30% higher than the same period last year. The company also raised expectations for the rest of 2002.

Hilary still likes Unilever (she has a position in the stock) – a great defensive play. Jonathan sees this stock trading within a range – a little early or this stock. Wayne thinks it’s a great company, but not a great time to get into the stock. Jason likes the stock.

Black & Decker (BDK)
52-Week High: $50.50
52-Week Low: $28.26
8-2-02: $43.12

Strong sales helped Black & Decker to beat Wall Street estimate last quarter, and the company expects more of the same for the rest of the year.

Again, this is a company that Wayne likes, but isn’t so sure about the stock at this level. It might be a buy a little ways down the road, but not now. Jonathan thinks the stock is interesting, but not a buy. Jason is concerned with the company’s long-term sales, as is Hilary.

Amgen (AMGN)
52-Week High: $69.00
52-Week Low: $30.57
8-2-02: $43.51
The drug maker boasted strong second quarter numbers, along with raised expectations for the rest of 2002.

Jonathan says this is a broken stock, potentially heading down to the $20’s, frustrating both bulls and bears. Jason thinks it’s the best stock in the biotech sector. Hilary thinks it’s undervalued right now. Wayne thinks the stock still has a way to go before it reaches a buy level.

Mutual Fund Face-Off: Funds With Guts!

When you’re in the trenches, you want your field commander with you. And true for the stock battlefield as well. So which mutual fund should you invest in that has its own money manager as a big investor? Dagen and Jonas faced off over a couple possible winners.
Dagen – Longleaf Partners Fund (LLPFX)
Year-to-Date (as of 8-2-02): DOWN 7.0%
0-Year Average: UP 16.1%
Minimum Investment: $10,000
Expenses: $9.40 for every $1,000 invested

Jonas – Northeast Investors Trust Fund (NTHEX)
Year-to-Date (as of 8-2-02): DOWN 5.0%
10-Year Average: UP 7.9%
Minimum Investment: $1,000
Expenses: $6.50 for every $1,000 invested

Money Mail

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

Question: “I has 1,200 shares of Verizon (VZ) stock. Should I hold on to them or get rid of them?”

Dagen: The entire telecom sector is a disaster, but Verizon could be the best of them. Hold it if you have it, but don’t put any new money into it. Verizon is hurting from loss of customers for local service, due to cell-phone usage.

Jonathan: Just dump it.

Wayne: Get rid of it.
Question: “Shouldn’t investors wait for the major indexes to approach their 50 and 200 day moving averages before getting back into the markets?”

Wayne: Looking back at those levels really is just looking at the past, not really looking ahead to the future.

Jonathan: Look at moving averages is part of technical analysis, and that is a form of trading discipline. And as long as you pick one discipline to follow, you will be ok.

Question: “My Amazon.com (AMZN) has had a nice run-up since $7. Should I hold or sell?”

Jonathan: Maybe you could sell have of the share, and then put a stop-loss order in the $8 range for the other half of the shares.

Dagen: Maybe take the principal investment out.


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