Word On The Street
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Oil at $135: Who Wins And Loses
With oil trading over $135 for the time in history certain companies will benefit and some will lose. What is the trade. Seymour said it’s ironic that a company like PetroChina (PTR) will have a tough time with oil at $135. He explained that PTR pumps out refined oil which is subsidized to local dealers. Adami said Morton’s (MRT) and Ruth’s Chris (RUTH) will be hurt because nobody will drive to eat at high-end steakhouses with gas prices soo high. Macke thinks rental car king Hertz (HTZ) will suffer with oil at $135. “The summer travel season is going to be worse than people think,” he said. “If no one is flying, certainly no one is renting cars.”
Saudi Oil Take
The traders then discussed the power of OPEC to potentially bring down the price of oil. They welcomed John d’Agostino, hedge fund and private equity consultant, to discuss the matter. He said that the Saudis have shareholders, and they act on the behalf of those people. He said people shouldn’t be surprised that they are maximizing value. Seymour pointed out that there isn’t much supply in non-OPEC producers like Russia and Kazakhstan. He said that OPEC pumps 40% of daily production but controls 80% of the swing supply of oil. For this reason, he said, OPEC is the only entity that has the power to provide oil to the market at this point. On global infrastructure, Seymour said that the companies are able to pass on price increases. He said this story will continue to be strong and pointed out that rails have been “ripping.” Adami pointed to enormous buildout in China. He said the country is building entire cities across the country. He said steel names still have pricing power.
Emerging Market Oil Trade
Emerging markets demand oil to drive their growth, but with oil hitting record highs can the economic growth continue? Seymour said there appears to be no end in sight for oil demand in the developing world. He pointed out the the shippers and rails are seeing booming demand in emerging markets. He recommended Genesee & Wyoming (GWR) which transports grains from Australia to China. Najarian picked DryShips (DRYS).
Summer Trades
All week long the “Fast Money” traders have been highlighting stocks that benefit from the summer season sales. Tonight the traders looked at companies that could benefit from summer travel. Macke said he likes Disney (DIS) and Wal-Mart (WMT) for obvious reasons. Adami picked Priceline.com (PCLN), but he said wait for the stock to trade down on 5 million in volume before buying. Seymour selected Marriott (MAR) for luxury travel demand in Eastern Europe and Asia. Najarian said buy cruise lines on dips because they’ve figured out how to pass along fuel costs. He also picked American Airlines (AMR) and United (UAUA).
POPS&DROPS
POPS- Wendy’s (WEN) traded up 6% after hedge fund manager Bill Ackman said the stock could be worth $42 if it sells stores and some real estate. Macke said stay away. WellPoint (WLP) added 3% as options activity heated up in the name Thursday. Najarian disclosed he is long WLP. Dell (DELL) popped 4%. Adami said the stock traded up on the news the CFO resigned. Salesforece.com (CRM) jumped 6% after Jefferies upgraded the stock from hold to buy following the company’s strong first-quarter earnings report. Najarian said some analysts have $80 price targets for CRM. Taser International (TASR) spiked 1% after the stun gun maker received new orders for its products. Ternium (TX) popped 6% after the stock was upgraded by Goldman Sachs Group. Seymour said it’s a buy.
DROPS- Jackson Hewitt (JTX) plunged 10%. Seymour said the company missed guidance because tax preparation services are down. Moody’s (MCO) dropped 7%. The stock was down for the second day in a row following news a computer problem maybe have improperly rated securities “AAA.” Warren Buffett said Moody’s should fire the people responsible. BCE (BCE) lost 13%. Seymour said the company won’t be bought out. Under Armour (UA) dropped 9% after an analyst at Thomas Weisel Partners made bearish comments on the sporting-goods apparel maker. Macke advised investors to not try and pick a bottom in UA shares.
Trader Radar
Shares of Micron Technologies (MU) were among the most actively traded on the NYSE Thursday.
Fast Messages
Jim writes, “Guy, per your recommendation I shorted Hess (HES) at $135.75 and now it’s down $8. How far lower can it go? Adami sees more downside. He told Jim to use a trailing stop. Gene from Georgia writes, “Research In Motion (RIMM) and Apple (AAPL) have been pummeled over the last few days. Is the run over for them?” Macke said for investors who aren’t in these stocks, now could be a good time to initiate positions. Helen from Massachusetts writes, “I’ve owned a gas station for 26 years and for the first time ever our gas sales are down 35% since the begging of the year. People are hurting.” Seymour said unfortunately its a trend that could continue.
Final Trade
Macke picked the U.S. Oil Fund (USO). Adami said buy AMR Corporation (AMR).