Recap of June 29: The Better Half?
{{#rendered}} {{/rendered}}Terry Keenan guest hosted for Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Adam Lashinsky, senior writer at Fortune Magazine; and Meredith Whitney, financial institutions analyst at Circle T Partners.
Trading Pit
Last week Wall Street discovered some new dirty words to go with Enron, Arthur Andersen, and Martha Stewart--Worldcom and Xerox.
{{#rendered}} {{/rendered}}And investors got more reasons to hate the stock market.
The year is half over and we're on our way to a third straight losing year.
In fact, for the first 6 months, all the major averages are lower. In the Dow is down 8 percent, the Nasdaq has lost 25 percent, and the S&P 500 lower by 14 percent.
{{#rendered}} {{/rendered}}Stocks have not had this bad of a time in the first half of the year since 1970.
Tobin said that companies in the "real economy," that is companies with real earnings will do well in the next 6 months.
Scott thinks the second half of the year will not be as bad for the market. The accounting irregularities were surprises, but now have been figured in. He predicts the market will do a lot better through the summer months, but come October, it's anyone's guess.
{{#rendered}} {{/rendered}}Gary B. charted the NYSE 40 day moving average (a chart that indicates what percentage of stocks are trading above their 40 day moving average) and showed that when only 25 percent of stocks are above their 40 day moving average, it's been a great time to buy.
Adam thinks that the market's extreme overvaluation has come down far enough that stocks are starting to look attractive. But he believes that investors still need 4-5 Worldcom-like blow-ups before being comfortable.
Meredith said these are unprecedented times, and that things are going to get worse. She thinks there is just too much selling pressure in the market right now.
{{#rendered}} {{/rendered}}Chartman
Gary B. had to look really hard, but he found some stocks that are up in the past 6 months, and his charts tell him they're heading higher.
Adam filled in for Pat this week, and took the Chartman's stocks to task.
{{#rendered}} {{/rendered}}First up, one of the top US retailers, Sears (S). The Chartman said even though Sears gotten knocked down recently, it is still in an uptrend. He thinks now is the time to buy the stock, but warned to sell it if it drops into the mid $40s. Adam did not agree with the Chartman. He said the company's performance is lagging and its stock will too. Also, its acquisition of Lands' End (LE) doesn't fit.
Next, Gary B. and Adam looked at Starbucks (SBUX), the top specialty coffee retailer in the U.S. The Chartman said he picked this company because it has been a steady performer since early this year. It has not succumbed to the bear market, and still has a strong chart. He said that if the stock can close above $25, investors should buy. Once again, Adam disagreed. Although he said the company has excellent management and growth, it is priced for perfection, and its growth will eventually hit a wall.
Stock X-Change
{{#rendered}} {{/rendered}}Toby, Scott, and Meredith picked stocks that have been losers all year, but now are ready to go on a winning streak.
Meredith started things off by choosing IndyMac Bancorp (NDE). It has a lot of upside for the second half because investors are heading out of the stock market and into the housing market, and IndyMac benefits from this move. Toby and Scott both like the stock.
Toby selected AT&T (T), an old favorite that's been written off by most investors. He likes the stock because it has an 8 percent dividend, Worldcom (WCOM), one of its competitors, is going out of business, and he thinks AT&T is going to be bought out by Verizon (VZ). Scott and Meredith weren't sold that the stock is a buy.
{{#rendered}} {{/rendered}}Scott said ICOS Corp (ICOS) is ready to start a comeback tour because the company has no debt and has a lot of new drugs in the pipeline. Also, it's cheap because the biotech sector has been destroyed. Toby & Meredith both do not like the stock.