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'Fast Money' Recap: Derivative Plays

NEW YORK ( TheStreet) -- The markets rose Wednesday with the earnings of JPMorgan (JPM - Get Report) taking center stage.

The Dow Jones Industrial Average added 7.41, or 0.06%, to 12,270.99. The S&P 500 edged up 0.25, or 0.02%, to 1,314.41. The Nasdaq gained 16.73, or 0.61%, to 2,761.52.

CNBC's "Fast Money" show started with a report from CNBC reporter Kate Kelly that Universa Investments' Black Swan Funds were up 9% for the quarter. She said Universa attributed the rise to bets on commodities including option trades in crude, grains, coffee and silver.

Shifting to the JP Morgan's (JPM - Get Report) earnings, Finerman said it was disappointing to see its loan growth was anemic for the quarter.

Still, she said the stock is attractively priced, with trading income stronger than expected and credit quality improving.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

Joe Terranova discussed JPMorgan's earnings as a bellwether for the financial sector. He said the 3% decline in consumer loan growth calls into question ownership of Bank of America (BAC - Get Report) and Citigroup (C - Get Report).

He said the rise in consumer card sales volume sets up well for Visa (V - Get Report) and Mastercard (MA - Get Report). And he said the rise in advisory revenue is good for Blackstone (BX - Get Report).

Tim Seymour said JPMorgan was the "best bank to lead off the earnings" because of its strong diversified businesses. "The numbers were fantastic."

The commodities snapped back with silver and gold showing signs of life. Terranova said copper is still trading sideways but was upbeat on the gas refiners trade. He said gasoline demand is back, with an impressive drawdown of 7 million barrels today. He also like the coal and natural gas names.

Looking at the market technically, Adami said the S&P is still moving in the range of 1,325 to 1,350. He said he feels it is heading lower toward 1,300, but he said the index could go higher if it breaks through 1,325.

Melissa Lee brought in Whitney Tilson, managing partner of T2 Partners, to discuss two trades from his value playbook. His first pick was JC Penney (JCP), which he likes for the addition of Bill Ackman and Steve Roth to the board. He said the two investors can be catalysts because they have a strong background in retail and real estate.

Tilson said JC Penny has the opportunity for margin expansion and a lot of real estate. He also said that with no net debt, it can go out and borrow some money and buy back stock.

The second pick was Seagate (STX - Get Report). Tilson said the stock could very well be a value trap because its disk drive technology is getting old.

However, he said the stock is at a level where it can be bought cheaply. He said the company sports a 4% dividend and is buying back "a ton of stock." He said the demise of Seagate is overblown.

The panel discussed some derivative trades off of the jump in the shares of Riverbed Technology (RVBD) on its raised first-quarter outlook.

Weiss said he would go with Akamai (AKAM - Get Report) and EMC (EMC - Get Report). Terranova said he liked Aruba Networks (ARUN) while Adami stuck with Juniper Networks (JNPR).

With Google (GOOG) set to report earnings Wednesday, Colin Gillis, of BGC Partners, said he has a hold rating on the stock with a $625 price target.

He said he is unimpressed with the stock because Google's expenses are growing at a faster clip than its revenues. He said he expects Google to report good numbers but noted that summer may be a better time to get into the stock. He said he would rather be in Apple (AAPL) for growth and Microsoft (MSFT) for value.

Shifting to Berkshire Hathaway (BRK.A), Tilson reaffirmed his confidence in the company despite the controversy over resignation of David Sokol.

Tilson said Berkshire will recover because Buffett said he didn't know about Sokol's dealings with Lubrizol. He also believes Buffett will tighten controls over trading after this episode. However, he said the situation could change if it turns out Buffett knew more than he has said so far.

The call of the day centered on Baidu (BIDU), which was up 3% after Jefferies initiated coverage with a buy rating and a $200 price target.

Despite trading at 63 times earnings, Baidu is delivering, Seymour said. He said 55% of the audience of the Chinese Internet company is not monetized. In addition, he estimates there will be 800 million Internet users in China by 2015 and the company's return on equity is more than 50%. "Anyone shorting this company has gone out of business."

Lee brought in Joe Lavorgna, chief U.S. economist for Deutsche Bank, who cut his GDP forecast for the first quarter to 2.8 percent. He said he made the adjustment because of weaker construction, especially in commercial real estate, lower net exports, and weaker-than-expected business inventory.

Overall, he said the economy is good shape with unemployment dropping and consumers spending at a healthy pace. However, he said inflation could be a ruse for the markets.

Irwin Simon, president and CEO of Hain Celestial Group, came on the show to comment on the impact of food inflation. He told the panel that the board picks by Carl Icahn, who has a 17% stake in the company, have been helpful. He also declined to comment on rumors that it may be a takeover target.

Simon attributed the company's growth to an educated consumer who reads labels and wants healthy foods.

Lee brought in Andrew McOrmond, managing director of WallachBeth Capital, to discuss some ETF strategies to invest in oil. For example, he said both the iShares Dow Jones U.S. Oil Equipment (IEZ) and Oil Service HOLDRs (OIH) ETFs offer 30% exposure to big names.

However, he said IEZ offers exposure to 40 names after that 30% exposure is removed, while OIH offers only 12.

In the final trades, Weiss said he continued to short steel names like U.S. Steel (X) and AK Steel (AKS). Adami liked Blackstone while Finerman said she had puts on Tenet Healthcare (THC). Terranova liked Peabody Energy (BTU).

--Written by David Tong in San Francisco.

To contact the writer of this article, click here: David Tong.

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EMC $26.45 0.00%
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MA $97.77 0.00%


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