What's Eating Apple? - Fast Money (6/13/08)
Recap of CNBC's Fast Money, Friday June 13.
Relief Rally: Financial Select Sector SPDR (XLF)
Stocks jumped on a drop in oil and hopes about inflation data, which may indicate the Fed will keep rates steady. Jeff Macke said this move was just a relief rally. Narjarian noted the XLF finished the week flat and Finerman thinks the volatility could go both ways.
Offers for Lehman? Lehman Brothers (LEH), USBancorp (USB)Lehman is listening to offers, specifically from Blackstone for a 20 to 30% stake. Adami thinks LEH can be bought, but would put a trailing stop on the trade and would watch out for headlines. He also recommended USB. Karen Finerman thinks Lehman’s quarter will be “horrific” and would short the bank. Macke would sell any rally in the banks.
Regional Disaster: Bank of America (BAC), Fifth Third Bancorp (FITB), Keycorp (KEY)
Regional banks are performing poorly, and Najarian notes bearish option action in FITB and put buying. He would also be concerned about KEY. Najarian predicts BAC will not do well. Macke commented when Goldman Sachs sneezes, the regional banks catch cold.
Go Google (GOOG), Yahoo (YHOO), Microsoft (MSFT)
The beneficiary of Yahoo and Microsoft’s failed merger drama is Google. An internet ad deal between Yahoo and Google may leave Microsoft out in the cold, according to Jeffrey Lindsay, Senior Analyst at Sanford C. Bernstein. Adami comments $540 has been a support level for Google.
What’s Ailing Apple (APPL)?
In spite of the unveiling of its cutting edge iPhone, Apple’s stock dropped 7% last week. Narjarian thinks the drop has more to do with questions concerning CEO Steve Job’s health than with the iPhone, and recommends buying puts for protection. Finerman says Apple denies Jobs is sick, but if this denial is false, Apple could face legal action. Adami would buy on Apple’s dip.
Steel and Coal: Steel Dynamics (STLD), Alpha Natural Resources (ANR), Massey Energy (MEE), Patriot Coal (PCX), Alcoa (AA)
Steel Dynamics rose 4% on its raised profit forecast. Aluminum company Alcoa saw a 4% gain and coal jumped 5%. Narjarian would buy Massey and Alpha Natural Resources on a pullback. He added he would love to buy Patriot Coal, but the price is too high.
Kitchen Sink: Williams –Sonoma (WSM)
Najarian thinks options activity indicates WSM could go higher in the next five days.
The Dollar Also Rises: Wisdom Tree Trust (CYB)
The group discussed whether dollar doldrums may be over due to the biggest week of dollar gains in three years. The Euro closed 2.7 lower against the dollar and made its largest slide since 2005. Tim Seymour thinks the dollar’s recovery will be gradual and the Fed will raise interest rates in the fall to save face. Guy Adami wants to see what will happen at the G-8 Summit and thinks crude will fall if the dollar rises. Finerman thinks multi-nationals will suffer on the dollar’s strength. Tim Seymour suggests buying CYB.
Shipping News: Excel Maritime (EXM)
Lower shipping costs may be a sign of a global slowdown, said Macke. Najarian still believes in the global growth story and is bullish on Excel Maritime.
Beware the Banks: Goldman Sachs (GS), Lehman Brothers (LEH), Morgan Stanley (MS)
The three big investment banks are reporting earnings next week; Lehman recently had a $2.8 billion loss, Goldman Sachs has fared better, but may suffer from a lack of activity in investment banking. Morgan Stanley’s news is expected to be positive. While the regular strategy would be to buy these banks ahead of earnings and to sell them after, Najarian would not play that way this time, and of the three, he would buy Goldman. Guy Adami would buy on a swoosh to the downside and sell on any rise. Finerman says she is still long Goldman, and the group agreed investors should trade at their own risk.
Earnings Nerves: Best Buy (BBY), Garmin (GRMN), Marvell Technologies (MRVL), Activision (ATVI)
Best Buy is reporting earnings next week, and the group was interested to see if the company has benefited from stimulus checks as well as news the company is opening new stores in China. Jon Najarian appeared on Fast Money, and recommended Garmin and Marvell rather than Best Buy. Jeff Macke commented the only product sold by Best Buy worth trading is Activision.
Flooded Fields
With Midwestern floods bringing the price of corn up to $7, Guy Adami would fade the corn trade, which has gone up too far too fast. He wouldn’t short corn, but would get out of long positions. Pete Najarian disagrees and would buy corn on any pullback.
Fast Money Misfires: Excel Maritime (EXM), Big Lots (BIG), Merck (MRK), Pep Boys (PBY)
Although shares of Excel Maritime have sunk 29% since Najarian’s June 6th recommendation, he says he is still behind the stock and sees it going higher. Similarly, Finerman is sticking by her suggestion to short Big Lots because of its insider selling, although the stock has climbed 10% since her initial call. Guy Adami thought Merck seemed cheap on May 29, but the stock has fallen 9%. He still believes in Merck, but not right now. Pep Boys jumped 10% since Macke said it was too high to buy. He added this call was only a few days earlier and it he still believes the stock will drop.
Picks that Paid: Sandridge (SD), Hexcel (HXL), Yahoo (YHOO), Microsoft (MSFT)
Najarian was correct to note insider buying at Sandridge; since his May 30th call, the stock is up 13%. Guy Adami made money both ways with Hexcel; he suggested buying it before a 20% pop and selling before a 15% drop. Macke and Finerman made good calls on the Yahoo/Microsoft drama. Both recommended shorting Yahoo, a move that made 17%. Their suggestion to get long Microsoft yielded 4%.
Fast and Furious: Goldman Sachs, Morgan Stanley, Best Buy, Fed Ex (FDX), Carnival Cruise Lines (CUK)
Finerman called Goldman Sachs and Morgan Stanley’s earnings next week a “wildcard.” Najarian thinks stimulus checks will give Best Buy a tailwind but is concerned about competition from Wal-Mart. On Fed Ex’s report next week, Adami would stay away until the stock reaches $83. Given high oil costs, Macke would sell Carnival, which reports on Tuesday. A 43% foreclosure rate doesn’t mean a bottom in housing yet, said Finerman. On next week’s inflation data, Adami predicted inflation to last until the price of gas dips below $4 at the pump. Najarian is not excited on news that four types of contracts (stock index futures, stock index options, stock options and single stock futures) will expire on the same day.
Seeking Alpha is not affiliated with CNBC, or Fast Money
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