Bulls And Bears Weekly Wrap Up
By Tobin Smith
Stocks took a dive on Friday, Oct.19, exactly 20 years to the day after Black Monday, the worst one-day performance for stocks in market history. But just as it was 20 years ago, that one-day selloff was a great buying opportunity for investors. So, is now the time to buy, and will stocks soar after the decline like they did two decades ago?
I was in the hot seat for this segment, and I say Friday's selloff is part and parcel of a perfectly functioning bull market. In bull markets stocks make higher highs, and higher lows. The important thing to understand is that nothing has changed with respect to the fundamentals.
I want to be a buyer here of technology stocks and other stocks that are riding their own waves of transformational growth. So, don't panic. Rather, put yourself in a position to profit from this current -- and quite natural -- state of ebb and flow in the markets.
Who wouldn't want to earn a decade's worth of wealth in the next two years? Find out how you can ... click here to learn more.
Scott Bleier of Hybrid Investors has been saying for some time that stocks were going to falter, and last week he was correct. He thinks that financial stocks, which have led the market higher for the past several years, are still acting "horribly." He also thinks there is deceleration now in earnings, and that is not good news for the bulls.
Pat Dorsey of Morningstar likes financial stocks at this point, namely the blue-chip big banks. He's a buyer of those stocks, and he thinks going forward the only real unknown for this market is consumer spending. For a value player like Pat, he thinks it's a good time to buy quality companies at a discount.
Bob Olstein of The Olstein Funds says he's been buying "unsuccessfully" in the past couple of weeks. Still, he likes financial stocks here, as well as in many other sectors. "The price earnings ratios are down to very low levels," says Bob, who added that the price of good stocks now is cheap.
Gary B. Smith of Exemplar Capital is always focused on the charts, and he says that particularly when it comes to the tech sector, we are seeing those classic higher highs and lower lows. But Gary thinks the market's next move overall is downward, and that if you are a trader you should either go to cash or sell short.
I say if you are a long-term investor, you really need to calm down and just think about what you own right here. If you own a stock like Apple (AAPL) around $45 and now it's trading above $170, you might want to lighten up on your position and generate some cash for the next buying opportunity. Just remember that if you sell now, before the end of the year, you will have to pay taxes on those big gains. So in order to avoid a big bite from Uncle Sam, stay patient and calm, and don't run for the hills.
Fox 50 Lightening Round
In honor of the new Fox Business Network and its highly praised Fox 50 index, an index of 50 widely-held and well-known stock names, the "Bulls & Bears" decided to present our take on five of the biggest stocks in the Fox 50.
We did one of our famous lightening rounds on all five, with each of us presenting either a bull or bear opinion on each one. Here (listed by cast member and stock) is a matrix of what we think of the "fab five."
Verizon (VZ)
Toby -- Bull
Gary B. -- Bull
Pat -- Bear
Bob -- Bear
Scott -- Bull
Google (GOOG)
Toby -- Bull
Gary B. -- Bull
Pat -- Bear
Bob -- Bear
Scott -- Bear
Yum! Brands (YUM)
Toby -- Bull
Gary B. -- Bear
Pat -- Bear
Bob -- Bear
Scott -- Bear
Johnson & Johnson (JNJ)
Toby -- Bear
Gary B. -- Bull
Pat -- Bull
Bob -- Bull
Scott -- Bull
Exxon Mobil (XOM)
Toby -- Bear
Gary B. -- Bull
Pat -- Bear
Bob -- Bear
Scott -- Bear
As you can see, I really am in the minority when it comes to Yum! Brands and Johnson & Johnson. Hey, being in the minority never bothers me, and if you want to be a successful investor, it shouldn't bother you either.
Dems' Healthcare Failure -- A Big Win for Free Markets?
The Democrats in Congress failed to expand a free government healthcare program last week, but is their failure a big victory for the free market?
I say that the Dem's failure here is fantastic for the free market and for everybody. If you look at RomneyCare in Massachusetts, which is essentially what the Dems wanted to have nationwide, you realize that in the case of that state, every assumption that went into the plan turned out to be wrong. They basically had to stop that government program due to lack of funds. Hey, we just can't solve the healthcare problems in this country by giving services away. It just doesn't work that way.
Joining us for this segment was Dr. Marc Lamont Hill, professor of American Studies at Temple University. Marc thinks that the Dems' defeat was indeed a victory for the free market. The problem though, says Marc, is that "whenever the free market wins, everyday people lose."
Gary B., always the libertarian, totally disagrees with Marc. He says that there really is no free market for healthcare, and that the solution is to unshackle the healthcare market even further than it is now. It's when the government gets itself out of the healthcare equation totally, argues Gary, that things will finally start to improve for everyone.
Bob says that the Dems are going to continue to try and get healthcare legislation through, and although Bob admitted he wasn't an expert on these issues, he prefers free market solutions to issues of need.
And … Predictions
It's arrived once again. Time for the fastest three minutes in financial talk TV, the final flurry we fondly call, Predictions.
Gary B. kicked off the segment by saying that Americans love their pets, and the whole Ellen DeGeneres dog adoption fiasco is proof positive of this. Gary says profiting from our nationwide fondness for Fido is as easy as buying PetSmart (PETM), which he predicts will be 20% higher by the end of the year.
Pat says Pfizer's (PFE) decline this week as a result of pulling its failing insulin control drug off the market is good news for competitor MannKind (MNKD). He predicts the company's shares will double in two years on the Pfizer move.
Scott says toymaker Hasbro (HAS) is the only major toy company not subjected to the Chinese led paint scare. He predicts a nice holiday season for HAS, and thinks their shares will be 30% higher by December.
Bob predicts that infrastructure spending is on its way up, and that means commercial insurance firm MBIA (MBI) will be a big beneficiary. He also thinks the shares will climb 33% in the next 18 months.
I say this whole "superbug" infection scare is going to create a big demand for tests to see if hospitals and medical facilities have been exposed to this antibiotic-resistant strain of disease. The company that makes those tests is Cepheid (CPHD), and I predict the superbug scare is going to send the stock up 50% in the next six months.
See ya next week,
Toby
Tobin Smith is the founder of ChangeWave Research, the editor of ChangeWave Investing and a regular panelist on Fox News Channel's investment roundtable, "Bulls & Bears," which airs Saturdays at 10 a.m. Eastern/7 a.m. Pacific. His market commentary can be found in the ChangeWave WaveWire and he provides more specific recommendations and advice through his ChangeWave Investing service. Click here to sign up for RISK-FREE trial subscription.
