Stockpickr

Return to Article

'Fast Money' Recap: What Would Warren Do?

Stockpickr Staff

Pete Najarian suggested the market took a pounding because the Fed disappointed the street by not lowering the discount rate by 50 basis points. Jeff Macke declares there is no reason to buy stocks with the Fed being so passive. He also mentioned that the S&P 500 took out support levels and he sold his position in Coach(COH Quote). On the other hand, Karen Finerman doesn't pay that much attention to what the Fed does. Guy Adami recommended making a laundry list of stocks investors might want to buy on days like Tuesday.

Warren Buffett's Take on the US Economy

Warren Buffett thinks it's possible that the US economy could be heading for a recession. He mentioned that if unemployment picks up, it could cause some strain on the economy and possibly push the US into recession. Buffett explained that inflation has to be a real worry for the Fed when you see the dollar falling the way it is. He went on to express that he is worried that people around the world are losing confidence in the dollar and even he isn't sure he could do a better job then the Fed is on interest rates. Lastly, Buffett mentioned he told both Hillary Clinton and Barack Obama he would support them for a presidential run before either one declared they were running.

(For a look at Buffett's portfolio, go to Stockpickr.com at Warren Buffett.)

Lehman Preview

Lehman Brothers Holdings(LEH Quote) is set to release quarterly earnings on Thursday before the bell. Finerman mentioned that she did some digging on the Lehman Brother's 10-Q. What she found was that Lehman moved $11 billion from "Tier 2" to "Tier 3"assets which implies that Lehman doesn't think there is a market to sell those assets in. Lehman's "Tier 3" asset pool now makes up $34 billion and that would make for a $2 hit to their book value. Finerman mentioned she is still short Lehman going into earnings. Najarian says he hasn't seen any options activity in Lehman that makes him want to put a trade on.

Tech Survivors

Tech stocks took a beating Tuesday, but a few names bucked the trend like AT&T(T Quote), Cisco Systems(CSCO Quote), Texas Instruments(TXN Quote) and Juniper Networks(JNPR Quote). Najarian favors AT&T's $13 billion stock buy back and its recent dividend hike. He thinks the networking stocks like Cisco and Juniper will benefit from the gadget revolution. Macke also liked the price action in AT&T and he recommended buying the stock on weakness. However, Najarian isn't excited about chipmakers, especially names like Micron(MU Quote) and Rambus(RMBS Quote).

Switzerland based STMicroelectronics(STM Quote) agreed to buy Genesis Microchip(GNSS Quote) for $336 million. In Najarian's opinion, the foreign buyers will continue to come and buy American firms on the cheap with the weak dollar.

Let's Make a Deal

Biogen(BIIB Quote) trades up in a down market on no news. Finerman speculated that both Merck(MRK Quote) and Pfizer(PFE Quote) are looking to buy Biogen. Najarian mentioned he saw options traders buying December options and selling July options. This action indicates to him that a deal will get done for Biogen between $85 and $90 per share. Najarian thinks a foreign buyer will takeover Biogen and Macke mentioned he doesn't think the buyer will be Merck.

ArcelorMittal(MT Quote) agreed to buy steel distributor M.T. Majdalani for an undisclosed amount. Adami continues to think that United States Steel(X Quote) is a takeover target.

POPS&DROPS

Pops - MasterCard(MA Quote) traded up 1% after Keefe, Bryette & Woods upgraded the credit card firm. Adami feels MA is a secular growth story that he likes.

Blockbuster(BBI Quote) traded up 7% after BMO Capital issued some bullish comments on the video rental chain. Finerman thinks traders weren't focused and were selling other stocks instead.

McDonald's(MCD Quote) traded up 2%. For Macke, this is one stock that is working and next month they will beat sales expectations.

FuelCell Energy(FCEL Quote) traded up 16% after the firm said its fourth-quarter loss was smaller than expected. Najarian maintains everyone around the globe wants to go green.

Drops - H&R Block(HRB Quote) fell 3% after the tax preparer saw second-quarter losses soar. Finerman wasn't surprised that this financial stock took a hit on a day like Tuesday.

Boeing(BA Quote) fell 4% after the aerospace giant said 787 production is on track. Adami likes the stock, but unfortunately his call has been wrong.

Medarex(MEDX Quote) plunged 21% after news came out that the biotech's experimental skin care drug failed in clinical trials. Najarian explained that this is the risk with biotech stocks when they miss.

Echostar(DISH Quote) fell 3% after AT&T said it will put off its decision on a satellite partner until 2008. The lesson here (according to Macke) is not to buy stocks that gap higher because Barron's told you so

Wyndham Worldwide(WYN Quote) fell 10% after the hotel operator guided lower for 2008. Finerman remarked that this was a hard drop.

Starbucks(SBUX Quote) fell 4% after Goldman Sachs dropped its rating to Neutral on the coffee chain. Adami predicts that SBUX is going to $18.

Kroger(KR Quote) fell 6% after the grocery store chain said third-quarter margins were lower then expected. Macke explained that wheat and cheese prices hurt KR.

Final Trade

The team shares their best ideas for trades with viewers.

• Finerman reiterated her long Goldman Sachs Group(GS Quote) and short Lehman Brothers Holdings(LEH Quote) position.
• Macke would purchase McDonald's(MCD Quote) and AT&T(T Quote) on any dips.
• Adami recommended Cisco Systems(CSCO Quote).
• Najarian prefers Juniper Networks(JNPR Quote).