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Analysts Argue: Play The Market Or Value Invest?

Tuesday, 5 Dec 2006 | 12:29 PM ET

Good labor unit costs numbers this morning pushed the markets up. But the question remains: how long the good news will last? Some analysts seem positive on the future. But John Caldwell of McDonald Financial Group quotes the adage: "When people say they’re happy about the market, investors shouldn’t be buying in." He was on “Morning Call” with Liz Claman – as was Jim Huguet of Great Companies.

Economic Data & the Markets
This morning's economic data is helping to give the markets a boost. John Caldwell, McDonald Financial Group Chief Investment Strategist; Jim Huguet, Great Companies CIO; and CNBC's Liz Claman talk about how long the market rally can last.

Caldwell notes corporate profitability, the liquidity from stock purchases and other good market fundamentals as positive signs for the market. Investors can get around a weaker U.S. dollar by finding the right foreign investment – whether that is through an overseas company that largely sells here or a U.S. firm that sells largely overseas. Stay diversified to escape any dollar exposure, he says.

Huguet looks for the value play. His firm watches earnings growth over time and projected earnings for the next four to five years. His buys have solid growth potential and trade at a discount. That’s classic Warren Buffet-style investing. He also takes into account the strength of a CEO, corporate governance and global competition.

While value investing may seem the safer path for some – Caldwell warns that these stocks are trading at a discount for a reason. Value investors have to see something in a stock that maybe the market doesn’t like. “If you’re going to call yourself a value investor” – he says – “you have to be comfortable trading in those areas.”