'Fast Money' Recap: Dell's Dubious Dubai Deal
Downbeat earnings forecasts brought a sense of gloom to U.S. stocks Tuesday. Chipmakers' stocks took a tumble, Washington politicians talked about a bailout for the homebuilders, Procter & Gamble boosted its dividend, and Dell (DELL) - Get Report announced it may take an investment from Dubai. The Dow slipped 0.3%, the S&P 500 lost 0.5%, and the Nasdaq was down 0.7%.
On
CNBC's
"Fast Money" TV show, Pete Najarian said that he was happy to see the market largely rebound from an early open in negative territory. He said that agriculture, oil and natural gas were the sectors responsible for the recovery. He noted that
Washington Mutual
(WM) - Get Report
gave back yesterday's gains today and that there was a broader pullback in the financials. Commodities are driving the market, and without them, the market would have closed farther to the downside, he said.
Jeff Macke pointed out that
Federal Reserve
members past and present were carping at one another over the state of the economy. The market could have sold off harder on the news, but didn't, he said.
Apple
(AAPL) - Get Report
and other momentum names got a break, he said, and that's just fine.
3 Stocks I Saw on TV |
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Dell shares spiked on news that it might take an investment from Dubai. Karen Finerman expressed puzzlement, saying the balance sheet looks rock-solid. She speculated that Dubai wants to do an equity investment and that Dell is simply agreeing to the idea.
Guy Adami said he wouldn't join in alongside Dubai because of its dubious track record. He pointed out disappointing investments in
MGM
(MGM) - Get Report
and
Citigroup
(C) - Get Report
as examples of Dubai's lack of stock-picking ability.
Najarian said that along with Dell,
Intel
(INTC) - Get Report
has yet to rebound after being beaten up this year. He said that Dubai is probably investing over the long term. He said he likes the stock over the long term as well.
Macke said the Dubai investment is ambiguous news. It could mean that Dell is making a secondary offering, which will be very bad for the stock, he said.
Procter & Gamble raised its dividend today. Najarian said he'd rather be in
Church & Dwight
(CHD) - Get Report
or
Johnson & Johnson
(JNJ) - Get Report
. Johnson & Johnson is better on a valuation basis, he said.
Jeff Macke said that it's clutch time for consumer staples, and it's good to see Procter breaking out. He said he still likes defensive plays.
Chip stocks got hit today. Najarian said to keep an eye on
Hewlett-Packard
(HPQ) - Get Report
, which is talking about introducing a small, cheap Compaq for students. He said it's a good way to challenge Apple in the education space.
Adami said
Western Digital
(WDC) - Get Report
is another good play in the tech space. He said to set up a trade long Western Digital with a stop out below $26.93.
Najarian explained that a Morgan Keegan downgrade for Apple isn't bearish on the company overall but merely indicates that investors should wait for the stock to pull back before getting long.
AMR
(AMR)
, American Airlines' parent company, announced it was halting several hundred flights because of maintenance issues. Najarian said he likes the airlines here because mergers and shutdowns in the sector are alleviating competition and giving pricing power to the remaining companies. He said he likes
Northwest
(NWA)
,
Delta
(DAL) - Get Report
and others on a pullback.
Najarian also noted heavy call activity in
Boeing
(BA) - Get Report
. Finerman said that news about the Dreamliner could move
Kaiser Aluminum
(KALU) - Get Report
, which supplies aluminum to build the new plane. She said that she would buy more Kaiser Aluminum on a dip.
Macke said that when Boeing whined about losing a contract with the U.S. government, it showed signs of weakness. He said the stock will react positively when Boeing comes up with a firmer time frame for the Dreamliner.
Najarian also observed put activity in
Tyson
(TSN) - Get Report
. He said the company is heavily reliant on feed prices. He said if the stock can't break through its 200-day moving average, where it is now, then he'd avoid it.
For the "Chart of the Day," the traders took a look at the
DJ Wilshire REIT ETF
(RWR) - Get Report
. The ETF is on an uptrend. Adami said he didn't know what was going on there, but he suggested it could be a short-covering rally. He counseled against getting long the fund. Finerman agreed.
On reports of a 17% year-over-year increase in online spending, Macke said that he's not impressed with the report. He said the news meant little to the broader economy, given bearish outlook from brick-and-mortar retailers. Adami suggested
Corning
(GLW) - Get Report
as a good play with retail exposure.
New York Mayor Michael Bloomberg announced plans to install solar panels on every city-owned building. Adami recommended
MEMC
(WFR)
on the news. He said he believes the stock has put in a bottom after issuing lowered guidance.
Najarian said that it's a worldwide trend for governments to support solar power. He said the U.S. Congress is still working on an initiative.
Myriad Genetics
(MYGN) - Get Report
has developed genetic tests for diabetes and other diseases. Najarian said the stock is a buy.
UPS
(UPS) - Get Report
lowered guidance after hours today. Adami said that
FedEx
(FDX) - Get Report
, which also declined on the news, had had a nice run on its earnings, but this news doesn't bode well.
Najarian speculated that higher oil prices were cutting into margins. Macke said that he doubted it because UPS was citing economic conditions as the reason for lowering guidance.
In Washington, the White House said it would not back a Senate proposal to bail out the housing sector. Finerman said that anytime the government puts a plan together on the fly like this, nothing good can come of it. She said that the homebuilders should issue equity if they need funding. She said that
Wells Fargo
(WFC) - Get Report
,
Fannie Mae
(FNM)
and
Freddie Mac
(FRE)
will benefit.
Macke agreed with Finerman, saying that Fannie Mae was a good trade off the news. Adami suggested that
Home Depot
(HD) - Get Report
could be another winner.
Oil continued its climb toward $110 today.
CNBC
contributor Addison Armstrong joined the show to talk commodities. He said the dollar was the leader in the commodities trade. He said it's consolidating right now, which means oil is as well. He said that if oil breaks out above $110, it will likely move up to $120. He said to wait for a breakout before getting long oil.
The
U.S. Oil Fund
(USO) - Get Report
is the best way for viewers to play oil, he said.
Adami said that
Apache
(APA) - Get Report
put in another 52-week high today. He suggested buying the stock on a dip.
Armstrong said that either crude will go down or natural gas will go up. Because he believes that crude prices won't decrease, he said he is bullish on natural gas.
Publicly traded asset-management firms
Legg Mason
(LM) - Get Report
and
Pzena
(PZN) - Get Report
are seeing hard times, despite once having a very impressive track record.
Finerman said she's long Pzena, which is run by Richard Pzena, and believes that the heads of both funds are very impressive. She said she doesn't own Legg Mason.
Adami warned viewers that Pzena has made some wrong calls over the past year, including downplaying problems at Citigroup, which has been hurting because of subprime exposure.
Trader Radar
NutriSystem
(NTRI) - Get Report
traded at seven times its average daily volume today.
As part of a "Triage Trades" segment, the "Fast Money" crew looked at once-great companies that are now ailing. Today, the show featured
Starbucks
(SBUX) - Get Report
. Jeff Macke said he's bullish on the company provided it follows four steps. They are: cut the menu in half, remove clutter from the stores, talk like hippies but act like capitalists, and ignore competition from
Burger King
(BKC)
and
McDonald's
(MCD) - Get Report
. He said that the fast-food companies define the downside from the Starbucks customer experience.
Adami said that a trade on Starbucks on the long side has been working. Finerman said her fund bought some Starbucks shares today and that the company looks attractive on a valuation basis. Najarian said he likes McDonald's and Burger King.
Reports indicated that Citigroup is poised to unload $12 billion in leveraged loans to a private-equity firm. Finerman said that the deal appears to be an outgrowth of an abundance of capital. Macke said the news is very bullish for the financials. The crew noted that private-equity firms
Blackstone
(BX) - Get Report
and TPG would be buying up one-fourth of Citi's total loan portfolio.
According to pricing data, the company would pay just under 90 cents on the dollar for Citigroup's portfolio. Finerman guessed that the portfolio consisted of bank debt for LBOs. She said if the portfolio has mortgage-backed securities then 90 cents on the dollar is well above fair-market value.
Final Trade
Macke picked the
Financial Select SPDR
(XLF) - Get Report
. Adami selected
USBancorp
(USB) - Get Report
. Finerman chose the XLF as well. Najarian went with Myriad Genetics.