Recap of Saturday, April 27:Your Home, Your Money

Stock Smarts: Your Home, Your Money

Home prices have left stocks in the dust when it comes to investment returns over the past few years. If you had put $100,000 in the S&P 500 three years ago, your investment would have dropped to a little under $84,000. However, if you bough a $100,000 home three years ago, you would be looking at nearly $124,000.

But is the success in the home market about to change?

Hilary Kramer of A&G Capital think that there is a real estate bubble, but the concern in real estate should not be residential properties, but commercial properties. She says that commercial real state is totally over built right now. She does think stocks will benefit from a break in the housing bubble, especially stocks like Home Depot (HD) and Sears (S), as people will look to improve their existing homes, as opposed to buying new ones.

Dagen McDowell of Fox Business News says there is still a high demand for residential properties, and doesn’t think it’s fair to start proclaiming a housing bubble on the horizon. The reason there was an Internet stock bubble, she points out, is that a lot of the companies were pure fiction. With homes, you actually have a tangible investment.

Jonas Max Ferris of thinks that the scary thing about investing in a home right now is that you have to tie up so much equity into the purchase, that a 10-15% drop in prices pretty much kills the investment. He would wait on buying a home if renting is your current situation.

Jonathan Hoenig from Capitalistpig Asset Management first states that he is a stock trader and not a real estate agent, but he does think that we are not in a housing bubble. He actually believes that we are in a bull market for real estate and that prices have room to run. People still need places to live, and owning is still better than renting.

Ned Riley of State Street Global Advisors also thinks that the housing market is still strong and is not in a bubble. He notes the favorable conditions (low mortgage rates) adding to the strength. An excess of supply causes a bubble, and we just don’t have that with homes right now. He does point out that over the past 20 years, however, the S&P 500 has outperformed the overall housing market.

Housing Bubble Stocks!

Members of our panel offered up some picks that might help you weather the possibility of a burst in a housing bubble.

Jonathan: Aberdeen Asia-Pacific Fund (FAX). Hilary likes this fund. Ned wouldn’t buy it now.

Ned: Merck (MRK). Jonathan does not like MRK. Hilary thinks it is a good stock to have.

Hilary: Phillip Morris (MO). Both Ned and Jonathan like the play.

Mutual Fund Face-Off : The Best Value Fund.

Back on July 7, 2001, Dagen and Jonas each picked a value fund. This week’s segment took a look at how the funds have done since the picks were made.

Dagen: The Oakmark Fund (OAKMX)
Minimum Investment: $1,000
Expenses: $11.50 for every $1,000 invested
Since 7-6-01: UP 6.1%

Jonas: T. Rowe Price Capital Appreciation Fund (PRWCX)
Minimum Investment: $2,500
Expenses: $8.70 for every $1,000 invested
Since 7-6-01: UP 9.1%
Money Mail

Dagen and Jonathan wrapped up the show by answering some email questions from viewers:

Question: “Any advice on the wireless communication companies, both equipment and network? WIll they go bankrupt or just stay beaten down?”

Jonathan: I do not like this sector, and I wouldn’t put any serious investment money into these stocks.

Dagen: Run away from the telecoms. The pricing wars are just killing them.

Question: “I bought the Janus Mercury Fund (JAMRX) two years ago. I have lost over 50% of my investment. Is it time to take my losses?”

Dagen: Get rid of this fund. There is no rebound in sight for this one.

Jonathan: Janus seems to be stuck on large cap tech stocks. And unless the stocks turn around, or Janus starts picking other stocks, stay away.

Question: “Someone (Scott Blier) on Bulls & Bears recommended Methanex  (MEOH). I bought it at $5.40 a share and it is now around $8.00. Do I hold or sell?”
Jonathan: The only way I would sell now is if you aren’t diversified. Otherwise, it has room to grow. You might, however, want to put some stop loss orders on this one.

Dagen: I spoke with Scott, and he says that you should take some profits at $8.00, but that it’s still a buy under those levels.

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