Georgetown University was the site for Jim’s special show tonight. Five stocks listed on the Dow can make you money and they were the first stocks brought to us. They were Altria Group Inc (MO), McDonald’s Corp (MCD), The Boeing Company (NYSE:BA), American International Group Inc (AIG) and The Hewlett-Packard Company (HPQ). We keep hearing the Dow is near an all time high. Some believe the all time high doesn’t matter, but the chances for people to make money are better now than they have been in the last six years. The last time we saw this kind of high we got crushed. The difference is, now people are going out of their way to criticize, not praise the market. Jim told us “conventional wisdom is wrong” and he “stands a champion of the current market.” The Dow is an index filled with a bunch of stocks, some going up, others going down. The lesson is “it doesn’t pay to look at the index, but individual stocks.” Shortly the individual stocks mentioned:

• Altria Group Inc (MO) – A judge tried to nail MO on a light cigarette case but Jim thinks the case will be overturned on appeal. Our government is “of, by and for the corporations.” When this decision gets overturned the stock will go to $100.
• McDonald’s Corp (MCD) – The stock just raised dividends this week and is an international growth story.
• The Boeing Company (NYSE:BA) – This company has some upside. They make more money by making planes more efficient, also their main competitor can not finish a plane.
• American International Group Inc (AIG) – They benefit from a benign hurricane season after raising premiums. Insurance was called boring but a great way to make money by Jim.
• The Hewlett-Packard Company (NYSE:HPQ) should be bought because it is kicking Dell Inc’s (DELL) butt.

Bullish

Quest Diagnostics Inc (DGX), Continental Airlines (CAL), Advanced Micro Devices Inc (AMD), Kellogg Company (NYSE:K), General Mills Inc (GIS), Corning Inc (GLW), Danaher Corp (DHR), Nabors Industries (NYSE:NBR), Chevron Corp (CVX), BP plc (NYSE:BP) and Microsoft (MSFT).

Bearish
Express Scripts Inc (ESRX), UAL Corp (UAUA), Marsh & Mclennan Companies (MMC), PepsiCo (PEP) and Frontier Oil Corp (FTO)

On Friday, the Senate unanimously approved the Pentagon budget, Jim said. “If you need to make money, you need to know who the big beneficiaries here are,” he said. “It’s my job to tell you where I think the money is going to go.” In this case, viewers were told that he has five defense stocks that he believes “can’t be stopped.” People should think of these as stocks to buy, but they are even “bigger than that,” he said. If Donald Rumsfeld, the U.S. Secretary of Defense, was ever for some reason to get fired, the government could outsource the defense department to any of these companies, he said. The first “stock/replacement for Rumsfeld” is Lockheed Martin Corp (LMT), he said. “Congress just can’t say no to this company,” Jim said, calling the F-35 producer “the air force to the world.” In addition, LMT had a giant dividend boost, he said.
General Dynamics Corp (GD), Jim’s second defense pick, is like LMT in that it makes many defense products. “If you’re smart, you’ll buy it,” he said. He called Raytheon (NYSE:RTN), his third defense stock, “the king of radar” and said it “makes fantastic guided missiles.” The next two defense picks Jim recommended were L-3 Communications (NYSE:LLL) and CACI International Inc (CAI), saying the latter should have “a pretty hard time failing to deliver.”

NBC News Chief White House Correspondent David Gregory was welcomed to his show and said that although he is bullish and believes that the market is not going to get hurt by interest rates, inflation or earnings, Jim is worried about one thing that “could derail” his thesis: a change in the Senate or House. Jim asked Gregory to give him a sense of what could happen. “The Republicans are worried,” Gregory responded. They are the president and they, themselves unpopular, he said. “Republicans are mostly worried about the House,” Gregory went on to say, because the Senate is “much tougher” for the Democrats to gain control of. “A lot of this is focused on the war right now, how we got in it and the war on terrorism, in general,” he said. When Jim asked Gregory why the good points of the current stock market environment don’t translate into good political ratings for the president, Gregory said the Republicans are wondering the same thing. “A lot of political energy is being spent on the war,” he said. “When you have a war like this, it seems to” overshadow other things, Gregory said.

The radio show today was anchored by Gregg Greenberg and Farnoosh Torabi because Jim is doing his “back to school” tour in Georgetown today. If it isn’t Jim’s expertise it is not worth reporting so see you in the TV recap.

When people say that stocks are too expensive they have a lack of rigor according to Jim. The key is to seek out companies with stong growth prospects and then check how expensive they are. We were cautioned to not look at it as the market. ConocoPhillips (NYSE:COP) is trading at five times earnings and we were asked if this is expensive. Steel companies are getting five to six times. Contrasting Coca-Cola (KO) and PepsiCo (NYSE:PEP) look expensive in relation. Bedrock industrials and some successful tech names are cheap. Tech stocks he is bullish on are Cisco Systems (CSCO) and Microsoft (MSFT). Both of these trade at 18 times earnings estimates. He also had bullish feelings on Ford Motor (F) and General Motors Corp (GM). Cost cutting and more vigorous turnaround plans are reasons for these feelings.

Tonight we are talking about retail. When starting you must have something substantial to start with. Do not just rush out and buy, wait until these drop a bit and do a ” ‘mon back.” Some are regional to national plays, some are just well run, some are concept plays and some have to be bought just due to consistency. The Top 10 can make you money and are all best of breed. These do not disappoint as much and they have much more upside surprise. They may be more expensive but they will make you more money.

• Best Buy Co Inc (BBY) – This is the best hard goods retailer in the U.S. and they are going worldwide. They are the dominant retailer in big screen TV’s. Forget Circuit City they are not as good. They sell everything and this gives them a lot they can do. If they stop being number one get out of the stock but it doesn’t look like this will happen anytime soon.
• Lowe’s (NYSE:LOW) – They are king of the hardware stores. Home Depot is king if you look at size but the key to LOW is the room they have to grow. Growth gives LOW the value here.
• Costco Wholesale Corp (COST) – This is the cheapest and best run of the warehouses. People will say Wal-Mart Stores Inc (WMT) because it is the biggest but COST is the best run and has the most room to grow. With your membership you never need to buy a warranty. The parking lot also shows the types of people that shop here, rich and poor. They pay employees well. You can go here to buy birthday cakes, crab meat, books, paintings, electronics, well everything.
• Men’s Wearhouse (NYSE:MW) – This company is one that investors need to take seriously. They continue to be innovative with new concepts that keep them growing. This is managed like a mom and pop business but this may be one of the most creative national chains.
• Federated Department Stores (FD) – They own Macy’s, Bloomingdale’s, Filene’s and Lord & Taylor. Now they have more capacity and the leeway to shut down the store that are doing poorly and keep the winners after buying May Department Stores. This acquisition gives them clout with suppliers. Only WMT beats them out now. The story here is high end, consumers looking for upscale things.
• Sears Holdings Corp (SHLD) – SHLD cannot be treated like any other retailer because of Ed Lampert who was working Wall Street at age 14. All this guy cares about is making the most money possible. SHLD is more a real estate story than a retail story but this will change.
• J.C. Penny (JCP) – Jim hasn’t been to a JCP store in ages but he likes them because they do the only thing that matters for a mature retail company: the stock consistently moves higher. They just added Sephora cosmetics counters to stores also. They carry brands that most consumers want, and if the company drops the ball it could be a buying opportunity for you.
• Coldwater Creek (CWTR) – They are not about consistency. This is a regional to national growth story with a ton of momentum. The growth is what makes this stock attractive.
• Starbucks (SBUX) – They have managed to do the impossible, they can charge $5 for coffee and get away with it. Jim said not to pay these prices for the stock but buy on weakness. SBUX creates ambiance and pays the employees well. These attitudes keep workers happy and in turn people coming back. They aspire to be a big CD retailer also. This is “yuppie heaven” so they may pull it off.
• Commerce Bancorp (CBH) – This isn’t a traditional retailer but a bank. They run the bank like a retailer, even calling branches stores. Performance is judged based on same store sales also. They have survived in good and bad times, even with high interest rates. Jim said they are “ready to rock with earnings.”

Special Frequently Asked Questions
Today on the radio show we were given a special “Frequently Asked Questions” edition. This was a different kind of show where Jim wanted to “loosen the tie, sit at the corner table and take your questions.” He told us that he has held every type of job and seen all kinds of things in the 25 years he has been in the market. We went to some questions that people ask regularly.
Jim is asked regularly about the most he ever lost. He lost close to $300 million in 2000. That same year he made $450 million. The one day loss he remembered was a $15 million loss in one day on Cendant (CD) when he was on vacation. Jim also gets the question about whether or not college courses in business and finance are worth taking often. Most professors haven’t made any money and they believe that stocks are perfectly priced and this is not true. Stock prices come from fundamentals when the money is made but when a stock is down the fundamentals are good so watch for the real stock price. “What does ‘Booyah’ mean?” Is a common question. A caller made a lot of money on Kmart and he responded with “Booyah.” Another popular question is “What are the factors that most affect the price of a stock?” 50% of a move is due to sector and the other 50% is the individual workings of a company Jim said. Fed forces are the reason that sector matters are such a big deal.

Working On Wall Street
Looking back at his years of experience in the market, Jim said he first got into this business by managing his own account, and then he moved on to managing other people’s money. He worked at Goldman Sachs Group Inc (GS). The best job on Wall Street is the job of being a full-time trader, he said. The trader is the guy that makes the meeting of the minds occur. He is the one that brings the seller and the buyer together and negotiates the price. The reasons he believes this is the best job on Wall Street is because: a) you’re paid a fortune and b) you get in at 8:30 a.m. and are out by 4 p.m. The second-best job is that of a broker, he said. This is the person who finds the client that wants to do the stock trade. As a broker, Jim said he got his clients by taking them out to shows and dinner every night. “When I was a trader I entertained four times a week and it made me a lot of money,” he said. Another job one can have on Wall Street is that of an analyst. They would try to find companies that are private and try to convince them to become public. But it was corrupt, and New York State Attorney General Eliot Spitzer found out, Jim said. Now analysts have to actually be good at what they do, since only a few survive, and some of them have gone over to the buy side, which are the hedge funds, he said. A terrible job that used to be great is that of a floor trader. Floor traders used to be able to clip you and take a little extra money from your pocket, but because of wiretaps and cameras and other ways of checking this behavior, this job is no good, he said. “When everybody else is having a great family life, you are working,” he said. “You’re sitting in that linoleum cafeteria and trying to drink a little scotch in between making deals on the weekends.” These people are slaves to their work according to Jim. But at the same time, you make $10 million if you’re bad, and $20 million if you’re good at your job, he said. Another area to work is in mergers and acquisitions. In the end, all jobs have upsides and downsides, he said. Now that you have the menu, maybe you’ll decide to stay away from all these jobs, or maybe you’ll make a move to Wall Street, where there is big money. Either way, he said, he couldn’t blame you.

Find The Best CEO’s
A question Jim gets a lot also is what CEO’s are like and why they are good. CEO’s are like politicians and they have to be able to talk and make you believe in their company. 50% is promoter and 50% is operator. A bad operator is 3M Company (NYSE:MMM) CEO George Buckley and the founder and former CEO James McNerney from The Boeing Company (NYSE:BA) is an example of a good CEO. Can the market crash like it did in 1929? It did crash in 1987 but it is unlikely. A good stock is a stock that barely goes up after good news and when it gets bad news it gets hammered. A bad stock that goes nowhere when everything is going up and when everything is going down it plummets. A bad stock has no buyback in place so when everyone sells it the stock gets annihilated. In these cases you have to sell a little. The most he has made in a day is $18 million. This hurt his family in the past. Sometimes you have to be there and get it right instead of just thinking about work.

A steel glut has investors worried but they need to realize that there are two types of steel stocks. United States Steel (X) is a commodity steel stock but investors should own specialty steel makers like Reliance Steel & Aluminum (RS), Oregon Steel (OS) and Allegheny Technologies Inc (ATI). Demand for structural steel is up 9%. RS said business is great. Nucor (NYSE:NUE) just did a special dividend also. Selling the stocks makes no sense to Jim. Sell X he says but keep the others.
Still bullish on Altria Group Inc (MO), the stock is going to 100 from the recent 77. This is based in large part on a turn around by Kraft Foods Inc (KFT).

Amaranth Advisors the collapsing $9.5 billion Greenwich, Conn., hedge fund – also was a high roller in the crime-infested penny stock market, dumping millions into risky microcap companies and so-called blind pool offerings. In December of last year, Amaranth lent $5 million to a Chinese fertilizer company, Bodisen Biotech, being promoted to investors by a broker named Benjamin Wei, who left the securities industry after being fined and suspended for allegedly conducting side business with his firm’s clients secretly. Last April, Amaranth converted the loan into 133,333 shares of stock at $7.50 per share and Bodisen filed the necessary paperwork to register and sell the block on Amaranth’s behalf. Yet as of last month, no sale had occurred and the shares apparently continue to sit in Amaranth’s portfolio. Until late May, Amaranth was also a controlling 5.6 percent shareholder in an affiliated Bodisen company called China Natural Gas Inc., which trades at about $3 per share on the Over The Counter market. The Chinese company began life as a Canadian penny stock called Bullet Environmental Systems, headed by a man named Ross Wilmot, a longtime investment world associate of a notorious one-time European boiler room operator named Altaf Nazerali. Recent SEC filings show that Amaranth is also a big-time player in the speculative world of blind pool investing. In blind pools, investors buy shares in a startup company that uses the proceeds to invest in something attractive if an opportunity presents itself. At least one of these blind pools – Argyle Security Acquisition Corp. – has recently been delisted by Nasdaq and now trades on the OTC market. SEC filings indicate that Amaranth owned 9.4 percent of its stock until at least last June.

Source New York Post