Word On The Street
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Sell Media
Anthony Diclemente, analyst of Lehman Brothers, joined the traders to discuss media stocks. Diclemente told the traders he cut his ratings on Disney (DIS), Time Warner (TWX), CBS (CBS) and Viacom (VIA) because he’s worried that the TV and film industry is going to face the same problems the music industry went through. “We think the cycle is going to get worse and that it’s going to impact the ’09 numbers. We’re cautious on big media. We think the national advertising cycle get worse,” he said. Diclemente said that Disney is trading at a premium to its peers and the stock should be avoided.
Trade Off Merrill Lynch
Charlie Gasparino joined the traders to discuss Merrill Lynch (MER). He explained that Merrill announced its raising a lot capital after they said they didn’t need to. The company said Singapore-based Temasek Holdings agreed to buy $3.4 billion of new Merrill shares and Merrill’s management plans to buy 750,000 shares of common stock. Gasparino said the move will dilute shareholders and it goes against what John Thain said he would do a year ago if the brokerage needed to raise money. He pointed out that Doug Kass wrote a column that said sell Merrill Monday. Finerman said she is interested in Merrill stock here. Najairan said the trade is to buy puts on the Financial Select Sector SPDR (XLF), or get long the ProShares UltraShort Financials ProShares (SKF). Macke mentioned that this goes to show you don’t know what you’re buying if you buy financial stocks, because they don’t even know.
Economic Numbers Trade
Zachary Karabell, president of Rivertwice Research told the traders that the Consumer Confidence numbers will likely be better-than-expected on Tuesday. He explained that consumer discretionary stocks have sold off big and now might be the time to consider those stocks ahead of an economic turnaround. Karabell recommended strong consumer players like Apple Computer (AAPL), Corning (GLW) and Disney (DIS). He also likes Google (GOOG) and said another way to play is with a pairs trade of long a solid consumer stock and short the SPDR S&P Retail (XRT).
Exxon Earnings Report
Exxon (XOM) is set to report earnings on Thursday. Najarian said watch the production numbers, which he thinks will be lower. He thinks the integrated oil stocks should be sold and the profits rolled into the oil service stocks. Finerman agreed. She said play Transocean (RIG) and Pride International (PDE), which will benefit if Exxon increases spending on exploration. Adami likes shares of Exxon from a valuation perspective. Macke said avoid all oil the trend is broken.
Whale Watch – John Paulson
John Paulson is famous on Wall Street for making billions of dollars betting against subprime-backed securities before the housing market blew up. Paulson made the most in a year on Wall Street at $3.7 billion, but now he is changing his strategy and buying the beaten-down banks. Finerman said she would get long anything that Paulson is in. Macke wasn’t so sure. He said he wants to see more out of Paulson because his major success came from one large bet that was right. Paulson’s top five holdings are Yahoo! (YHOO), Boston Scientific (BSX), Mirant (MIR), Navteq (NVT) and Kinross Gold (KGC).
Trader Radar
Shares of Clorox (CLX) were among the most actively traded stocks on the NYSE Monday.
Final Trade
Macke said buy the Financial Select Sector SPDR (XLF). Adami picked Becton, Dickston and Company (BDX). Finerman likes Transocean (RIG). Najarian said buy the Financial Select Sector SPDR (XLF) under $17.50. 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!