Word On The Street
WORD ON VIDEO HERE
Oil Rally Over?
Oil sold off sharply Thurday and many on Wall Street think the uptend in oil could be over. What is the trade? The traders spoke with independent oil trader Joe Terranova about his take on oil. Terranova said he thinks oil will test $120 from the action he is seeing in the farther out oil futures contracts. He said if crude breaks $120 technical selling could pick up dramatically. He mentioend he is shorting Hess (HES) and going long Southwest Airlines (LUV). He is also getting long the Canadian dollar and one of the refiners. Dan Fitzpatrick a contributor to TheStreet.com and master at technical analysis said he thinks the uptrend in oil will stay in tact. He mentioned oil has support at $123.50, but if it breaks below that level he would look for more downside. Najarian said if oil breaks $120 he will turn into an oil bear. Macke said buy oil it trades down another $5.
Restaurant Hedge Trade
Food prices have soared and some smart companies have hedged their costs to protect profits. What’s the trade? Jon Najarian joined the traders to discuss some companies that are doing a great job to hedge against rising food prices. He pointed out that Darden Restaurants (DRI) is doing a great job of hedging against soy, grain and corn prices and the stock caught an upgrade from Merrill Lynch to buy because of it. He also likes Kellogg’s (KO) because the food maker hedges 70% of their grain exposure. He said Starbucks (SBUX) hedged their $320 million 2008 coffee exposure. They also hedge against currency. Najarian pointed out that Bob Evans (BOBE) and Buffalo Wild Wings (BWLD) are doing a poor job of hedging. He said the play could be to short the companies who aren’t doing a good job of hedging, instead of going long the the firms hedging the right way.
Takeover Talk
The traders highlighted three takeover situations that could make you money. First up was the Microsoft (MSFT) takeover of Yahoo! (YHOO). Macke said that MSFT shareholders will win and Yahoo will either come wise up and the merger or end up dead. Next up was Boston Scientific’s (BSX) $27.2 billion deal to buy Guidant back in 2006. Finerman thinks now is the time to look at BSX because she believes the merger has been fully integrated. Najarian agreed. Finally, six years ago Hewlett-Packard (HPQ) merged with Compaq and HP has become a powerhouse personal computer company. Adami reminded viewers that Carly Fiorina lost her job because of the merger.
Oil Speculators
The traders spoke with Bob Hirsch, senior energy advisor at Management Information Services, and former manager of oil exploration for Exxon (XOM), about his thoughts on oil speculators. Hirsch said he doesn’t think speculators are playing a major role in crude prices. He believes the issues with oil prices are more tied to supply and demand and a plateau in worldwide production. He pointed out that demand is strong from China, India and the Middle East. Hirsch said he doesn’t think reserves in Brazil and Iraq will help the problem. He thinks we’re in trouble and it’s not something we can get out of. Finerman stopped short of blaming speculators and Najarian said the media hype about speculators is exaggerated. Adami said he thinks passive index funds are driving up the price of oil but are not removing supply from the market place.
POPS&DROPS
POPS- Heinz (HNZ) popped 3% after the ketchup giant reported a 7% jump in profits. Macke said the HNZ is a good operator. Big Lots (BIG) traded up 8% after the company reported a 20% jump in earnings. Finerman disclosed her hedge fund shorted BIG today. Under Armour (UA) rose 2% after Credit Suisse raised its price target for the sportswear firm. Guy Adami said the company is getting into the athletic shoe business. Trump (TRMP) soared 23% after the company said it sold the Trump Marina Hotel Casino in Atlantic City to Coastal Marina for $316 million. Macke said he wouldn’t play this stock. Genesco (GCO) shot up 6% after the company said it would post higher profits than previously estimated. Finerman said not so bad.
DROPS- Marriott (MAR) dropped 2% after Morgan Stanley cut the stock from over weight to equal weight. Najarian said business travel is getting squeezed.
Fast Messages
Jeff from Missouri writes, “Shouldn’t Dell’s (DELL) sales performance bode well for Microsoft (MSFT)?” Macke said no its a Dell specific event. Matt from California writes, “I bought Amylin AMLN) today. What should I set as my target sell point?” Najarian said sell the July $34 call options in place of setting a sell point. Roger from Indiana writes, “I saw that the CEO of Chesapeake Energy (CHK) bought another 600,000 shares. What does Commander Planet think about CHK?” Najarian said he likes the company and the insider buying sets the price.
Trader Radar
Shares of Men’s Warehouse (MW) were among the most actively traded stocks on the NYSE today.
Final Trade
Macke said buy J. Crew (JCG). Adami selected Tesoro (TSO). Finerman picked Citigroup (C). Najarian recommended Chesapeake Energy (CHK).
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