Lehman Talk
The traders spoke with analyst Dick Bove about Lehman Brothers after he upgraded the stock to a buy saying the firm could be a target for a hostile bid. Bove explained that if you remove Neuberger Bergman, which he thinks is worth $9 billion, from Lehman’s market cap – you get the rest of the company for nothing. Ratigan questioned that take, saying that Lehman has a ton of liabilities in the mortgage arm. “But let’s assume the buyer is a bank,” Love said. “There’s no need for them to sell these assets on a fire sale basis. They can hold onto them until they mature. The vast majority of the assets are cash flowing. So if you can sell Neuberger Bergman for more than you pay for all of Lehman you would get Lehman for nothing.” Macke doesn’t buy it. He said the market is selling Lehman every day and even Goldman Sachs Group (GS) is getting hit.
Oil Chat
The crew discussed the move in oil Thursday that saw crude rally over $5 a barrel. Some investors suggested that crude was running because the dollar was trading down. Terranova said the move was due to short covering. Makce said don’t chase oil. He thinks crude oil is experiencing a counter-trend rally and the United States Oil Fund (USO) will run into resistance at $100. Adami said take profits in Schlumberger (SLB). Jon Najarian mentioned that he’s short the Consumer Discretionary SPDR (XLY). He said he saw lots of put buying on the ETF and high oil will be bad for the the XLY because it holds retailers and auto manufacturers.
Research In Motion Talk
The crew discussed Research In Motion (RIMM) after the company said it will release its new BlackBeery Bold. Najarian thinks the product will be big. He explained that RIMM traded above its 100-day moving average, and 8 out of the last 9 times RIMM has done that the stock soared 49% over the next 50 days in front of a new product release.
Chipotle Mexican Grill CFO Interview
The traders spoke with Chipotle CFO John Hartung. Hartung told the traders that food inflation is probably going higher but it wont hurt the company – Chipotle passes higher costs along to its customers. He said Chipotle has the highest margins in the industry at 22%. “During these tough times customers get a great value at Chipotle because they come in and have a meal made from very high quality ingredients that typically you’d have to go to a high end restaurant to find,” he said. Macke, Terranova and Adami all said they wouldn’t buy the stock. Najarian suggested Darden (DRI) for a trade in the sector. He said Darden does a great job of hedging commodity costs.
Options Action
Stacey Gilbert of Susquehanna joined the traders to talk about some options activity. She told the crew that she noticed unusual call options action in Southern Copper (PCU). She also likes Freeport McMoRan (FCX) for a play on the copper and coal sectors and calls on the name are out trading the puts. Terranova said he also likes copper play FCX. He mentioned he is long copper and short gold for a play on dollar strength.
Commodity Take
Coal stocks and metals stocks were in play Thursday after UBS upgraded Massey Energy (MME). Adami said he likes Freeport McMoRan (FCX) for a play on the copper sector. Terranova disclosed he is long US Steel (X) but he’s thinking about selling because the stock isn’t working. He told viewers to look at National-Oilwell Varco (NOV) instead. Najarian said keep an eye on Joy Global (JOYG) because he is seeing lots of call buying on the name. Chat and share ideas with the best small cap traders LIVE each day free at Stocknetworkonline.com