The stock market plunged on Thursday as investors now are coming to the realization that the economy is in a recession. The Dow closed down 306 points and the NASDAQ fell 47 points. The crew at CNBC's "Fast Money" discussed the generally dismal state of the market and then tried to find potentially profitable trades for inveators.
Jeff Macke thinks Thursday was the begging of fear for the markets. Guy Adami now feels that market is getting close to capitulation. Karen Finerman agreed with Adami. Pete Najarian says fear is back, but we won't be at a panic until the CBOE Volatility Index reaches 30. He feels once the panic comes in, market players will get comfortable with buying stocks again.
Volatility on the Rise
Volatility is rising and the "Fast Money" traders put together some stock ideas that can make you money off the wild swings. Najarian says look at
Charles Schwab(SCHW Quote - Cramer on SCHW - Stock Picks),
TD Ameritrade(AMTD Quote - Cramer on AMTD - Stock Picks) and
Knight Capital(NITE Quote - Cramer on NITE - Stock Picks). He likes all three stocks as long as the overall stock market doesn't decline for more than a few months. Adami favors
Goldman Sachs Group(GS Quote - Cramer on GS - Stock Picks) which he doesn't think will have big problems with write-downs as others in the sector have. He thinks Goldman's next quarter will be great.
(Here's a professionally managed portfolio that addresses volatility on Stockpickr.com
SEI Managed Volatility Fund.)
Business Empire Strategy
On Thursday two key economic indicators were released the results weren't pretty. The rate of new home starts fell 14% and the Philly manufacturing index fell to its lowest levels in six years. Adami thinks the U.S. is in a recession, but investors can still make money buying business empire stocks. Empire stocks represent diversified conglomerate companies that sell products and tools to developing countries. Adami likes
Danaher(DHR Quote - Cramer on DHR - Stock Picks) which trades at P/E of 20. He feels DHR is well insulated from an economic slowdown. Finerman thinks DHR is getting attractive at current levels.
Adami also likes
Honeywell(HON Quote - Cramer on HON - Stock Picks) which trades at P/E of 17. He pointed out that HON has outperformed the overall market in the last 4 out of 6 recessions. According to Adami, a few more to look at are
3M Company(MMM Quote - Cramer on MMM - Stock Picks),
General Electric(GE Quote - Cramer on GE - Stock Picks) and
Illinois Tool Works(ITW Quote - Cramer on ITW - Stock Picks). Finerman also suggested looking at
United Technologies(UTX Quote - Cramer on UTX - Stock Picks) which has a big aerospace and HVAC business.
Beaten up Stocks on the Pro's Radar
The "Fast Money" traders highlighted four stocks that have caught their attention the most in this falling market. These four stocks have come down enough in price that the crew thinks they warrant a look. Adami says keep an eye on
BorgWarner(BWA Quote - Cramer on BWA - Stock Picks) which traded up 7% Thursday after the firm reported a strong 2008 profit forecast. He thinks BWA is positioned to take global market share. Finerman mentioned that
Macy's(M Quote - Cramer on M - Stock Picks) is interesting at current levels. She was surprised that the stock wasn't down on Thursday and that might indicate it is done trading lower.
Macke highlighted
Under Armour(UA Quote - Cramer on UA - Stock Picks) which traded lower Thursday off of rumors the company was going to advertise during the Super Bowl. He says UA is yesterday's darling trading at today's prices. Najarian thinks it's time to buy the oil refiners. He says he is getting close to buying
Tesoro(TSO Quote - Cramer on TSO - Stock Picks) and
Valero(VLO Quote - Cramer on VLO - Stock Picks).
(This is one version of a portfolio of undervalued stocks on Stockpickr.com
Tru Empire Investment Value Fund.)
Drug Studies
Investors are worried about big pharmaceutical firms that sell antidepressants and cholesterol drugs after some studies came out that questioned the effectiveness of some of those drugs. One study from the New England Journal of Medicine questioned the effectiveness of some of the antidepressant drugs.
Pfizer(PFE Quote - Cramer on PFE - Stock Picks) and
Wyeth(WYE Quote - Cramer on WYE - Stock Picks) took a hit Thursday off that study.
Jon Najarian explained that Merrill Lynch took
Merck(MRK Quote - Cramer on MRK - Stock Picks) off of its "focus 1" list on Thursday. He also explained that
Schering-Plough(SGP Quote - Cramer on SGP - Stock Picks) and Merck were hit with a class action lawsuit and that weighed on the stocks. Najarian is seeing massive put buying activity in both names. He thinks these stocks have a lot more room to the downside. Adami mentioned he likes
Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks) going into earnings. Macke mentioned he would add to positions in Pfizer and Wyeth on the dips.
Stockpickr Staff
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