Bulls And Bears Weekly Wrap Up
By Tobin Smith
The bull is back, and in one week we went from stunning sell-off to big-time comeback. But, could word of a new housing market "fix" -- i.e., a plan to freeze adjustable mortgage rates on subprime loans -- be the heavy foot that puts the brakes on this market's rally?
Scott Bleier of Hybrid Investors thinks in the long term, this so-called fix is "bad, bad, bad." He does, however, acknowledge that it will help some people hold on to their homes. The problem is that it's setting a terrible precedent, because the government is basically strong-arming private businesses to "fix" the subprime loans they've already issued.
Eric Bolling of the Independent Trader points out that financial stocks were up last week, and he thinks you can attribute that, in part, to word of this fix for subprime loans. This "soft" bail out in the subprime space, says Eric, is something Wall Street views as good for financial stocks.
Gary B. Smith of Exemplar Capital thinks that whatever the situation with the subprime loan freeze, the market may have run out of steam here -- at least for the short run. He doesn't suspect that stocks will gain too much more upside, especially after the last week's "gap up" in equity prices.
Pat Dorsey of Morningstar argues that what we are seeing in the financial sector is a number of factors that constitute the "all clear signal" when it comes to getting back into the most beaten-up financial stocks. The subprime loan freeze is just part of a number of positives for the financials going forward, according to Pat.
My take on this is that about every 10 years or so, Wall Street creates a "hot" investment product that everybody floods into. The latest one is subprime loans, and what happens is that inevitably, these things bubble up and then burst. The solution then, is that the vultures come in and clean up the dead bodies, and that is what's going on here with the beaten-down financial stocks. So, is the subprime freeze a market killer? Not a chance.
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Lightning Round Bargain Buys
This time of year we could all use a few good bargain buys, so. here at "Bulls & Bears," we won't let you down. In this segment, each of us offers up our favorite bargain stock for the holiday season. Here's a quick rundown on each of our bargain buys:
Gary B.'s favorite bargain is battered home lender Countrywide Financial (CFC). He thinks the stock is going to double in price during the next year.
Eric's bargain basement gem is options exchange NYMEX (NMX). He argues that the growth of the company's competitors combined with NYMEX's own organic growth rate of about 40% per year, makes it a very real takeover target for the New York Stock Exchange -- and according to Eric, that means it's a great bargain for you right now.
Pat's bargain pick also comes from the financial sector. He likes Synovus Financial (SNV), because he says it's avery efficient regional bank operator with a very strong balance sheet and a great dividend yield.
Scott moved away from financials and over to the tech sector with his pick of SanDisk (SNDK). He says the flash memory maker is the place to be, especially when solid-state computers start becoming all the rage. Hey, I don't normally agree with Scott, but he's dead on with this pick.
My bargain pick is also from the tech space. It's Synchronoss Technologies (SNCR), a company that's developed software technology that greatly improves the quality and reduces the cost of the initiation and upgrades of cell phone and VoIP services. They've sold off big here during the November correction, but that just means you have the opportunity to get this great company at a real bargain.
Google Gets It: Why Not Congress?
You probably know Google (GOOG) as the Internet search engine and/or the stock that just keeps going up. But how about Google as a model for Congress? Well, that's what the company wants to be with its new alternative energy plan, which invites corporate America and everyone else to come up with solutions to the world's energy problems.
I think this idea is great in theory, but keep in mind that in order to work at Google, you have to take an IQ test, and if we gave that test to members of Congress, well, I don't think the results would be quite the same as they are over at Google. But all humor aside, Google is a private business designed to make money, and the likelihood that this could serve as a model for Congress is slim to none.
Gary B. wants Congress to do less, and that means they shouldn't follow the Google model. Gary says that it's up to private companies to fix problems, and the government should stick to providing only the essentials, such as national defense, building roads and administering justice.
Eric says Google is going to have about the same level of success weaning us off of oil as the government (or anyone else) has, which is not much at all. He says Google should stick to setting advertising rates and stay away from trying to set an example for Congress.
Great point, Eric.
And … Predictions
It's time once again for the closing segment, the pithy panoply of poignant prognostications we affectionately call, Predictions.
I was up first this week, and you know that's when I like to go. My prediction is that this season's lack of hurricanes is great news for hotel operator Marriott (MAR). The stock is currently priced as if we are going to have big hurricanes into January, and folks, that just ain't going to happen! I say MAR shares will climb from their current price in the mid-$30s to $50 by summer 2008.
Pat says that natural gas pipeline and processing firm Cheniere Energy (LNG) has already locked in a series of contracts that make the stock worth a lot more than it's currently trading at. He predicts LNG shares will surge 30% in the next 12 months.
Gary B. loves financials, but he loves housing stocks even more. He predicts that beaten-down homebuilder Pulte Homes (PHM) is going to make a big comeback, with the stock climbing 50% in 2008.
Scott says credit score company Equifax (EFX) is going to be the real beneficiary of new, stricter lending laws. He predicts EFX shares will jump 30% by the spring.
Eric closed out the show with his prediction that agricultural giant Monsanto (MON) is heading up big as we enter into the new year.
I think the stock was a good buy six months ago, but in 2008 there are a lot of bigger, better ideas out there. Sorry, Eric.
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 a RISK-FREE trial subscription.
