Word On The Street
Dylan Ratigan hosted CNBC “Fast Money” show Friday night. He kicked the show off with a discussion of some large stock purchase by some well-known “Wall Street Whales.” He explained that hedge fund manager George Soros increased his stake in Wal-Mart (WMT). Jeff Macke says “you can go broke chasing these whales, but when they are following me around it seems awfully smart.”
Whale Watching
Warren Buffet also increased his stakes in ConocoPhillips (COP) and took a new stake in Eaton (ETN). Karen Finerman said Conoco is attractive here. Tim Seymour says “I love Conoco here, at these prices it trades at three and a half times earnings.” Guy Adami pointed out that Buffet bought about 2% of the float in Eaton. He says “this has huge auto exposure, so it’s interesting that he is dipping his toe in here.”
Chart of the Day
The “Chart of the Day” was the S&P 500. The traders pointed out that the S&P 500 looks like it’s making a triple bottom. Seymour said it looks like “technically” the market wants to take it higher next week. Macke said there is no such thing as a triple bottom. He says “we will take out the lows.”
Retail Sector
Ratigan moved the conversation to the retail sector. He told viewers to look at Abercrombie & Fitch (ANF), which plunged 20% today. Finerman said Abercrombie is relatively expensive and people don’t have any money. Macke said everyone knew that Abercrombie’s numbers would be terrible. Adami told viewers to start looking at Dick’s Sporting Goods (DKS) ahead of their earnings because the stock has a big short interest. Finerman mentioned she might entertain getting long American Eagle Outfitters (AEO) and short Abercrombie as a hedge. Seymour said he is short the Retail HOLDRs (RTH) against some emerging market exporters to the U.S. Finerman told viewers she is short Family Dollar Stores (FDO) because it trades a premium to Wal-Mart. Macke says “short Sears Holdings (SHLD), they are the worst merchant on earth.” Seymour explained that retail in emerging markets is a much better place, because wage growth is up 20%. He said you can play it with names such as America Movil (AMX), China Mobile (CHL), Vimpel-Communications (VIP) and Mobile TeleSystems (MBT).
Financial Sector Take
Ratigan switched the discussion to the banking sector. Finerman expressed surprise that Goldman Sachs Group hasn’t felt the need to say something to address the slide in their stock price. Adami says “you have to believe that in conversations with the partners, Goldman is talking about taking the company private.” Macke says “Goldman trades like a stock that is going to zero.”
Yardeni Talk
The traders spoke with Ed Yardeni, president of Yardeni Research about how to invest in this whacky world. Yardeni told viewers that we need to stimulate the economy. He said the government has to do something a little smarter, like bringing mortgage rates down. He says “you don’t get a recovery, without a recovery in housing.” He hopes the Congress doesn’t give the administration another $350 billion. He says “they gave the first TARP tranche to a bunch of banks that didn’t even need it.” Yardeni told viewers that its almost good news the TARP bailout isn’t working.
Obama’s Pick
The traders discussed who could be appointed by President-elect Barack Obama as the new Secretary of the Treasury. Ratigan pointed out that according to the prediction market at Intrade.com, Tim Geithner has a 48% probability, Larry Summers 16% and Jon Corzine 10%. Macke said he likes Corzine because he used to work at Goldman Sachs. Adami said he thinks Geithner will get the job. Finerman told viewers that going with another Goldman Sachs guy isn’t the way to go. She says “Summers is best for the job.” Seymour explained that Geithner is good at getting people together behind the scenes like he did with the Long Term Capital crisis.
Cash Is King
The traders spoke with Frank Aquila, partner at Sullivan & Cromwell about anticipating hostile takeovers. He said right now a lot of companies that want to do hostile bids have a lot of cash on their balance sheets. He says “the credit markets will open up to the companies with investment grade credit.” Aquila told viewers that he anticipates the most hostile activity in sectors such as retail, real estate, homebuilders and travel & leisure. He says “these areas will see the most activity, because their share prices have fallen dramatically.”
CEO Action
The crew spoke with Lon Juricic, president of Streetinsider.com about the increased insider buying activity for corporate CEOs. Juricic said the insider buying action this week is incredible. He says “normally in a week we would track 15 notable buys, this week we saw 47.” He mentioned that CEOs were buying at names such as Citigroup (C), General Electric (GE), Dow Chemical (DOW), Lear (LEA) and Corning (GLW). Adami said Corning is the most interesting one.
POPS&DROPS
Pops- Archer Daniels Midland soared 15% this week. Seymour said they reported big numbers last week and the “ag space” is still alive. McDonald’s traded up 1% this week. Macke said he owns MCD because he likes to buy stocks that go up.
Drops- Citigroup (C) fell 19% this week. Adami gave kudos to Meredith Whitney for telling investors to sell the stock. Morgan Stanley (MS) plunged 25% this week. Macke joked “if any insiders were buying at MS, they will get another chance to buy it at another quarter lower next week.” Talbots (TLB) dropped 46% this week. Finerman said this is what happens when you have a lot of debt. She says “not a good thing, stay away.” Bank of America (BAC) lost 20% this week. Seymour mentioned he owns some BAC in his portfolio. Dell (DELL) traded down 13% this week. Finerman told viewers she doesn’t get how Goldman Sachs can put DELL on their conviction sell list at $10 per share, when they liked it at $24 per share.
Final Trade
Adami recommenced ConocoPhillips (COP). Finerman said short Capital One Financial (COF). Seymour picked Tenaris (TEN). 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!