Word On The Street
WORD VIDEO HERE
China Trade
The trades spoke with Steve Cortes, Veracruz LLC CEO, about how to play China. Cortes said his research shows that China’s growth is unsustainable without the American consumer. He believes the U.S. consumer is in trouble and this in effect will hurt China’s stock market. Cortes also thinks the U.S. dollar is going to get stronger which will also hurt China. He suggested shorting iShares FTSE China (FXI) and PetroChina (PTR) and buying the SPDR Trust (SPY) for a hedge against those short positions. He also likes Humana (HUM), Wal-Mart (WMT) and Costco (COST) for a hedge against he short positions.
Google Trade
The traders discussed how to play Google (GOOG) ahead of its developer’s conference set for Wednesday. Piper Jaffray senior research analyst Gene Munster joined the traders to discuss Google’s “cloud computing” initiative. Munster said he is bullish on Google’s new developments and he called the company the “Oxygen” of the Internet. He explained that Google is looking to introduce real-time comparison shopping, via the camera on your cellphone, by using photos of barcodes on consumer products and using an online caddy with a consumer’s cellphone to help people select the right clubs. He said one potential trade is Adobe (ADBE) which is coming out with a similar applications. Adami said Google is cheap on a valuation basis and he likes the stock at current prices.
CHECK OUT THE NEW YORK TIMES ARTICLE ON GOOGLE’s CLOUD COMPUTING HERE
Coal Trade
The traders discussed the coal sector after news broke today that a coal train was bombed in Colombia disrupting BHP Billiton’s (BHP) and Xstrata’s (XTA) coal mining operations. The company said exports wont be affected. Najarian said the best plays on coal are Bucyrus (BUCY) and Greenbrier (GBX).
Comfort Trade
The “Fast Money” tradres spoke with CNBC’s Donny Deutsch, the host of “The Big Idea” about how consumers are dealing with higher gasoline prices when it comes to spending on fun activities. Deutsch explained that consumers are trending towards the comfort zone with retro-ism, cocooning and staycations. Retro-ism is where consumers stay at home and buy products and do things that were fun when economic times were better, cocooning is using products you can use at home to feel better and staycations is when consumers avoid traveling far and instead find things much closer to home. Macke said play Wal-Mart (WMT). Najarian said Home Depot (HD) could work and the stock is trading at a low valuation. Finerman picked cable companies like Comcast (CMSCA) and Time Warner (TWC) as consumers watch more TV instead of going out. Adami thinks Six Flags (SIX) could win as consumers turn towards cheaper entertainment that is closer to home.
Ethanol Boondoogle Trade
The traders talked about the best stocks to play if ethanol is phased out. Finerman said if she was in a position of power, like the president, she would get rid of ethanol subsidies. She thinks McCain will would phase out ethanol if he were to be elected president. Finerman’s favorite stock play is Tyson (TSN) because their feed costs would go down in the absence of the government’s ethanol program. Macke picked Pepsi (PEP) because the company uses a lot of corn in its products and the removal of ethanol would help lower corn costs. Adami said play natural gas with Clean Energy Fuels (CLNE). Najarian went with oil refiners because he believes their margins would improve.
Fast Messages
Kristie from North Dakota writes, “My husband has retired from the Air Force and we are looking to invest in the stock market for the first time. What would be your suggestion for companies that are more patriotic and companies that benefit the area we live in, which is in the middle of an oil production ramp-up?” Adami said look at MDU Resources (MDU) for a play on energy. He said let the stock pullback before getting in. Scott from Florida writes, “What would you say is the best beer stock to buy?” Macke said he likes Molson Coors (TAP). John from Texas writes, “With a 10 year horizon what are the best energy sectors to buy?” Finerman said she likes the wind sector the best. Najarian said he likes everything about wind, natural gas and solar.
POPS&DROPS
POPS- Hershey (HSY) traded up 9% after speculation swirled around Wall Street that the company might merge with Nestle. Najarian said the options action in HSY could be signaling a merger is in the cards, but he cautioned investors to be careful. Darden Restaurants (DRI) tacked on 5% after Merrill Lynch upgraded the stock to buy and slapped a $39 price target on the shares. Macke thinks it’s too early to get into casual dining stocks. Flowserve (FLS) popped 4% after the company signed a multimillion dollar contract with a Chinese nuclear power plant. Finerman disclosed she hedged her long position in FLS today. Children’s Place (PLCE) added 4%. Macke thinks PLCE is going higher. Polaris Industries (PII) soared 10% after FTN Midwest upgraded the stock from sell to neutral. Finerman explained there’s a lot of short interest in this name.
DROPS- The streetTracks Gold (GLD) slipped 2%. Adami said he would be scared to go long gold. China Mobile (CHL) shed 6% after Goldman Sachs Group downgraded the stock and added it to their conviction sell list. Najarian said the stock might bottom soon. Archer Daniels Midland (ADM) dropped 3% on no news. Adami said avoid it. DryShips (DRYS) fell 5%. Najarian pointed out that DRYS is volatile but could be worth a look at current levels.
Trader Radar
Shares of Darden Restaurants (DRI) were among the most actively traded on the NYSE Tuesday.
Final Trade
The traders selected stocks they think are good candidates for CNBC’s “Million Dollar Portfolio Challenge.” Adami picked Charter Communications (CHTR). Finerman went with Alliance One (AOI) but said the stock has a lot of risk. Najarian said buy Washington Mutual (WM). Macke recommended Border’s Group (BGP).
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