Word On The Street
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Subprime Slime
KeyCorp (KEY) fell 12% Wednesday after the announced it underestimated its exposure to subprime loans. Is the subprime slime spreading into regional banks? Finerman thinks that is the case. She explained that regional banks were priced out of the single family mortgage business by Countrywide, so they started opening up construction lending, which turned out to be a bad idea. Finerman pointed out it might be to early to start shorting the banks that have exposure to construction loans. Adami said he likes US Bancorp (USB) and he believes the stock will trade higher once the credit crisis is over. Najairan said he likes USB but he doesn’t see much upside in the stock.
Dell Earnings Trade
Dell (DELL) is set to report earnings on Thursday after the market close. What is the trade? Susquehanna chief options strategist Stacey Gilbert joined the traders to discuss the options activity she is seeing in DELL. Gilbert said the options are pricing in a 7% move in either direction. She pointed out the fundamentals for DELL should help move the stock higher, so she thinks it’s okay to buy shares ahead of the report. Gilbert mentioned for the tech sector she prefers Corning (GLW) and Apple Computer Inc. (AAPL). Najarian thinks Gilbert is right on Dell. He mentioned he also likes Akamai (AKAM).
ASCO Biotech Plays
The biotech sector will be in play following this weekend’s annual American Society of Clinical Oncology (ASCO) meeting. CNBC Pharmaceuticals reporter Mike Huckman joined the traders to discuss ASCO. He said look for some major news from ImClone (IMCL), Genentech (DNA), Eli Lilly (LLY) and Celgene (CELG). Najaran recommended investors keep an eye on OSI Pharmaceuticals (OSIP), Biogen (BIIB) and Elan (ELN).
Emerging Markets - Brazil
The trades spoke with Tim Seymour about investing in emerging markets. He explained that Inflation is rising in emerging markets like Russia, India and South Africa. Seymour said the one safety zone from inflation is Brazil because its currency is up 20% year-over-year and they have real rates. He said if you want to play Brazil look at banks like Unibanco (UBB). For a play on the consumer look at food processors like Perdigao (PDA) and Sadia (SDA) and for a service provider he mentioned Companhia de Saneamento Basico (SBS).
POPS&DROPS
POPS-Expedia (EXPE) popped 5%. Najarian said options action in this stock was nuts and could be suggesting the stock has more upside. Shaw Group (SGR) traded up 6% after the company won a contract to build a nuclear power station in South Carolina. Adami said the plant wont be done until 2016. Countrywide Financial (CFC) climbed 9% after the company’s president said he wouldn’t stay with the company once the Bank of America takeover is done. Finerman said the merger with Bank of American (BAC ) appears more likely. Akamai (AKAM) popped 5% after Borders said it would use the company’s products or its new retail website. Najarian said speculation is heating up in AKAM. Darling (DAR) jumped 5% after the company was added to the S&P Smallcap 600. Macke said sell the stock. Daktronics (DAKT) soared 12% after the company topped profit estimates. Adami said the jump was from a short-squeeze and investors should take profits. Smurfit-Stone (SSCC) roared10% on no news. Finerman said the competition is raising prices.
DROPS- Anheuser-Busch (BUD) fell 3%. Finerman said the merger excitement is wearing off. Borders (BGP) dropped 7% after the company reported a larger first-quarter loss then analysts were looking for. Macke reminded viewers he said sell the stock last week.
Trader Radar
Shares of JetBlue (JBLU) were among the most actively traded stocks on the Nasdaq Wednesday.
Final Trade
Adami picked Celgene (CELG). Finerman selected WellPoint (WLP). Najarian said buy Amylin (AMLN). Macke said sell Yahoo! (YHOO).
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