Word On The Street
Dylan Ratigan hosted CNBC’s “Fast Money” show Thursday night. He started the show with a discussion of Microsoft (MSFT). He explained that the tech giant beat earnings by a penny, but issued weaker guidance driving the stock down in after hours trading. Jeff Macke joked “America’s lust for the Microsoft Zune will not abate.” He pointed out that Microsoft has $40 billion in cash. Guy Adami said it’s a “valuation play” at eleven times earnings. Tim Seymour said Microsoft is very cheap and their business is diversified. Pete Najarian explained that Microsoft has been cheap the entire year. He says “Microsoft is a mature company that needs to show growth.” Najarian said he loves Yahoo! (YHOO) at this level and he hopes Microsoft goes after them.
Crude Oil Take
Ratigan mentioned that the market saw a push back up in crude oil today in anticipation of an OPEC set for Austria on Friday. Adami said oil has to bounce at some point especially ahead of the meeting. He says “the Exxon Mobil move shows that value guys are getting into the sector at these levels.” Najarian said if you want to play oil look at the airlines names like Continental. He explained that Continental (CAL) is leveraged to oil with almost no hedges.
Adami said railroads will benefit the most from the drop in energy prices. He pointed out that Burlington Northern Santa Fe (BNI) and Norfolk Southern (NSC) reported huge numbers this week. Najarian says “if you decide to go into the rails make sure you have some protection.” He also pointed out that Warren Buffet has been selling the 75 puts on BNI, which is another way of saying he would be willing to own the stock at a lower price.
Hedge Fund Trade
Ratigan moved the discussion to the possibility that 25% to 35% of all hedge funds in America could be gone by the end of this year. He asked the traders for a name that they think is cheap due to the artificial selling pressure from hedge funds. Adami said look at Gap (GAP) its valuation is “ridiculous.” Macke says “if you have to play this game look at Starbucks (SBUX). Seymour picked Vale (RIO) which he says “trades at around 3 times next year’s earnings.” Najarian told viewers to go with Chesapeake Energy (CHK).
Argentina Risk
Ratigan brought up how the stress of the credit crisis has caused systemic failure in Pakistan and Argentina. Seymour said he’s very concerned that Argentina will have a run on the banks which will cause a “crisis of confidence.” He says “Argentina is going to nationalize the pensions, which is socially unpopular.” He mentioned that a lot of hedge funds around the world are trapped in the “Argentina trade.”
Microsoft Analysis
Heather Bellini, a software analyst at UBS joined the crew to discuss Microsoft’s earnings report. She said the street was looking for earnings guidance to come in between $2.00 to $2.08. She says “Microsoft isn’t immune to what’s going on in the economy, but they should be able to perform better than others.” She told viewers to expect estimates and profits to come down. Bellini mentioned that Microsoft (MSFT) will have margin pressure at the low end. She mentioned their mini-computer “net books” could cannibalize their Windows revenues.
OPEC Bailout
Addison Armstrong of Tradition Energy joined the crew to discuss OPEC’s meeting set for Friday. He said if OPEC cuts too much they could spike oil up and prolong the recession, and if they don’t cut enough we could see a supply gut going into next year. He says “tomorrow will be one of the biggest tests OPEC has faced in the past 10 years.” Macke told viewers that OPEC means nothing just follow the trend in oil.
Fight The Bear
The traders discussed ways to batter the bear market. Ratigan mentioned the strength today in drug and biotech names like Amgen (AMGN), Celgene (CELG) and Eli Lilly (LLY). Najarian said Amgen’ put up a huge numbers and beat by fifteen cents per share. He said Celgene is building themselves into a mega-type Genentech-type company. Adami said Celgene should be trading with a 68-handle, but don’t buy the stock up 9%.
POPS&DROPS
Pops- National-Oilwell Varco (NOV) soared 9% after the company said its quarterly net income soared around 50%. Seymour said at five times earnings the stock is cheap and worth it. Amazon.com (AMZN) rose 1%. The online retailer said its profits climbed 48%, but the firm lowered its full-year sales outlook. Macke said respect the price action. Chipotle Mexican Grill (CMG) surged 7% after the operator of Mexican food restaurants announced it plans to buy back $100 million worth of its stock. Najarian says “they have 19% sales growth, so you have to like them.”
Drops- Hewlett-Packard (HPQ) fell 6%. Adami mentioned that Goldman Sachs removed HPQ from its favorite list. He says “HPQ here is a value here, but it could get cheaper.”
Final Trade
Adam recommenced Potash (POT). Seymour picked iShares MSCI South Korea Index (EWY). Najarian selected Continental Airlines (CAL). Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!