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 Bob Olstein, president of The Olstein Funds.
Trading Pit
Hurricane Isabel (search) battered the east coast last week, but it was much bigger and much stronger before making landfall. The bull market hurricane on Wall Street this year has shown pretty big gains for the Dow and the Nasdaq, which had a rally even as Dick Grasso (search) resigned from the NYSE. Will the bull market winds keep blowing or will they quiet down as Isabel did as she headed north?
Bob O. said we are in the eye of the hurricane and some could get hurt. He said there are bubbles out there, such as some of the Internet and tech stocks. If there is still some value underneath, investors have to play individual stocks.
Tobin said in the last three months the underlying economy improved faster than a lot of people thought. Hedge funds are way behind and private buyers are buying stocks. He still thinks there is value and he hopes we are in the eye of the storm. He is still bullish. He says, one of the things people haven’t factored in is the fact that we have a lot of good news to come.
Gary agrees with Bob. He charted the S&P 500, and it showed that once it cleared 1000, the bulls took control. It looks to be pausing before making the next assault. He thinks the Nasdaq is a little overextended.
Scott said the group forecasted that September would be a rush up in the market, and we’ve gotten it. We’re now in the 9th inning of the move that started 9 months ago. We’re going to have a great end of the year, and the economy is going to do well next year. But the market is expensive, and he said this is the best time to take your profits off the table. The best gains come now in the most speculative high, but the risk is highest.
Pat said the Nasdaq is a train wreck waiting to happen. There is still a little bit of value out there - a few asset managers and specialty insurers - but overall he says it’s pretty pricey and he’s not seeing a lot of values. He added if you own some telecom equipment names that have doubled this year, accept the gift now and take profits.
Stock X-Change
Ben Affleck had some fun with Jennifer Lopez, but got out of the relationship before it became a long-term thing. Is this a lesson in love and maybe a lesson in buying and selling stocks? The Bulls and Bears chose stocks to buy now, have some fun, make some money and then dump in a hurry.
Tobin chose OmniVision Technologies (OVTI). This company makes the chips that go into all the new cell phone cameras, which everyone will have soon. He says the stock is sexy because it is selling like crazy. Tobin thinks its earnings are going to double again over the next 12-18 months. He said buy now and sell at $60. (OmniVision Technologies closed on Friday at $46.10.) Scott said it’s a one-product technology company that is “all the rage,” but thinks investors should dump it soon. Bob thinks it’s too expensive.
Scott’s stock is Akamai Technologies (AKAM), which has a server farm and optimizes websites. He said this was the quintessential high-flying sexy stock, which was $340 at its peak. He said last year it was at 75 cents. He said buy now and sell at $8. (Akamai Technologies closed on Friday at $5.12.) Tobin said stay away from it.
Bob chose American Greetings (AM), which is the second largest greeting card company in the world. It’s a company that has been in trouble in the past because of its accounting, but has been turned around and now deals in contracts. Bob said every stock has to have a prenuptial agreement, so sell between $28-30. (American Greetings closed on Friday at $20.25.)
Chartman
Unlike what Ben said to Jen, Gary B. and Pat charted stocks they say you should marry.
Gary chose Anheuser-Busch (BUD). Its chart says, “This BUD’s for you!” It’s been going up for the past 17 years and Gary said there is no reason to think it’ll stop any time soon. Pat said it’s not the only stock investors should own, but it’s a great one. It dominates U.S. beer and has the best distribution system. It has also been buying and increasing stakes in foreign breweries in Mexico and China. Pat said it’s pricey, but worth it. (Anheuser-Busch closed on Friday at $51.10.)
Next, Pat chose McGraw-Hill (MHP). He said it has great businesses. Its S&P unit is boosting the bottom line and it runs the textbook business like printing money. Pat said it could gain 25 percent within two years. (McGraw-Hill closed on Friday at $59.96.) Gary said it has the same time frame as Anheuser-Busch, but McGraw-Hill has done nothing since 1998. He said it should break to a new high, but don’t buy before it does.
Predictions
Pat’s Prediction: Time to sell CIT Group (CIT); I might Monday morning
Bob’s Prediction: Hurricane, Schmurricane; buy insurance stocks!
Tobin’s Prediction: Allstate (ALL): good hands & a great stock; up 20 percent after Isabel
Gary B’s Prediction: Nike (NKE) keeps “doing it”; doubles in 3 years
Scott’s Prediction: Motorola (MOT) is going to ring up a 30 percent gain by year-end
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox