'Fast Money' Recap: How to Play Tech Now

NEW YORK ( TheStreet) -- Stocks failed to recover from the day's losses by the close Wednesday as tech weakness kept the Nasdaq in negative territory.

The Dow Jones Industrial Average finished 4 points higher, or 0.03%, at 12,107, after losing 104 points at the session's low. The index gained 337s point in the previous session. The S&P 500 crept up 2 points, or 0.2%, to 1244 after sinking throughout much of the session.

The Fast Money gang debates: Should Oracle ( ORCL) have taken down tech stocks? Oracle's big earnings miss and weak outlook was the story on Wednesday, even with a minor recovery in its shares off a low at the end of the session. It was no surprise after the poor results and outlook provided in Tuesday's after-hours session; Oracle hit its August low during the Wednesday session.

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

Everyone is shooting first and asking questions later in tech stocks.

Guy Adami says that action means Oracle is a screaming buy, but Steve Grasso adds that you don't want to be the one to catch a falling knife: Wait three days and watch the price action. You can buy 25% of your position now, but don't rush in to Oracle.

Stephen Weiss of Shorthill Capital says the derivative trade off the Oracle action is a tech stock like Qualcomm ( QCOM), which was taken down by Oracle but didn't deserve it. It took down IBM ( IBM), too. "That's where I put my money before Oracle," Weiss said.

Ron Insana says it's overdone in terms of the Oracle reaction and Oracle has quadrupled over the past few years and so this reaction is something that was in store for the stock. "I wouldn't get overly worried," Insana said.

The cloud stocks also saw carnage, with Salesforce.com ( CRM) hitting a 52-week low, and VMware ( VMW), Citrix ( CTXS) and Red Hat ( RHT) all hit hard. Adami says not to rush into Salesforce.com, even after hitting a 52-week low, because its multiple finally has caught up with it.

When it comes to the cloud, though, Stephen Weiss says it is a legitimate concern: There are too many players making it a commoditized market. That's what investors are worried about today and that's what the trading in cloud stocks showed on Wednesday.

Brian Kelly says the real story with Oracle is that it's a bellwether for the whole economy, not just tech, and that should make investors concerned. With CEOs telling Oracle they will hold back on spending, it's a negative for the economy, because these aren't tech CEOs, but S&P 500 CEOs. In that sense, the Oracle report was a negative for everyone, but it was incredibly positive that the market shrugged it off, Kelly says.

Steve Grasso says that among the tech selloff, Intel ( INTC) is a top pick. Grasso says he has fought against investing in Intel for a long time as it's been dead money and that makes his call all the more important.

"I talked to guys in the space, and it wasn't a growth play, but a dividend play, but now it looks like a top pick for the first quarter of 2012, among many." Adami adds that back down at $23, there are few knocks on the stock, and if the tape cooperates, "Intel's a good bet."

Also, there's plenty of bullishness on Apple ( AAPL) from analyst Gene Munster of Piper Jaffray, who sets a $607 price target on Apple and places it among the 12 top picks of Piper Jaffray in 2012. Munster says it's the best of the 12, across all sectors; this big year for Apple will be driven by new product rollouts. Munster says that 2011 had no hardware updates; 2012 will be the year of hardware updates, and Apple TV at the end of the year.

Ron Insana seems to doubt that Apple can really offer something with its TV that Sony and others can't, but Munster says that from cable to Internet to gaming, it's going to be a seamless experience that no one can do, and it being an Apple product, "will look good, too."

Another much-debated driver for Apple shares in 2012 is a dividend, but Steve Grasso says it's a bad idea long term for Apple, in terms of the perception of the company getting away from the Steve Jobs model. Piper Jaffrays' Munster agrees and doesn't expect a reoccurring dividend, but maybe a one-time dividend payment.


Financials are never far from the minds of investors and two big U.S. financials get negative attention from analysts on Wednesday. Meredith Whitney places a hold on Jefferies ( JEF) after its 23% rise this week.

It's notable since Whitney had been one of the most public backers of Jefferies when fears that it was overexposed to Europe almost doomed the company. Whitney's hold call shows that, after its big pop this week, lots of people are questioning the Jefferies move higher. Adami says that Whitney is taking down numbers because the entire financial space is in trouble.

"The move in the stock was short-covering and I don't short the stock at $14, but I understand the hesitation." Ron Insana disagrees, saying you can still make a bullish case for Jefferies at $14, and it was a screaming buy at $10. Stephen Weiss is outright bearish on Jefferies, saying stay away: It's a middle-market player that is getting squeezed.

Todd Hagerman, Sterne Agee analyst, downgraded the darling of the U.S. financials, JPMorgan ( JPM), saying that it's a call on the whole sector really and the fact that investors and banks won't admit the magnitude of reform globally. The five most vulnerable financials are the big broker dealers, and while JPMorgan has earned a following in the next few years, it is quite vulnerable, in the opinion of the Sterne Agee analyst. "To think it can revalue appreciably higher than today is hard to see."

Stephen Weiss says the best and quickest way for European banks to get capital ratios in line is to pull in credit lines, and that means U.S. banks get to steal that share. However, Hagerman says, even after taking share over the course of the year, the bigger problem is that the capital markets and mortgage business remain weak. The off-balance sheet risk of these companies will not end well and may overwhelm incremental market share accumulated in the short term.

Adami says there is no reason to be bullish on financials except U.S. Bancorp ( USB): It won't "go ripping to $35," but if you need to be in financials and want a reasonably safe play, it's a bank to look at.

Secondary Market Darlings

Is the secondary market getting too crowded? Knight Capital got into the secondary market where Facebook is king and that leads to questions of a bubble, but author James Altucher says the Knight Capital move is a positive, bringing more efficiency to what has been an opaque market.

Liquidity has been the issue and the Knight Capital entry means a more efficient, regulated market to handle buying and selling rather than the "wild west" markets of today, which has led to a valuation on Facebook north of $100 billion. Altucher also says it is time to raise the 500 shareholder limit to 2,000 shareholders for these companies trading on the secondary market.

Altucher downplays the negative attention garnered by these secondary market darlings, like Groupon ( GRPN), which is "trading fine at $22," and LinkedIn ( LNKD), "doing fine," and Zynga ( ZYNG), which, even with its problems since it went public, still has $7 billion market cap; for a three-year old company, that's pretty impressive.

"Public markets haven't been that bad for these companies, but companies are being forced to go public because once you have more than 500 shareholders you have to go public at that point. The gun was to their head. Zynga wouldn't have gone public without that," Altucher says.

Do macroeconomic concerns mean that these companies can't do much better? Altucher says the more relevant metric is advertising and it's a half-trillion dollar market and these companies are only getting a fraction of it. Facebook could get 10%, at minimum, and it's ready to go public. Altucher doesn't know if Facebook deserves a $100 billion valuation, but it remains a good candidate for an IPO, regardless of the secondary-market to IPO route concerns. Also, the advertising formula is more important than the macro concerns.

How to Play Holiday Toys

With no clear "hot gift item" this season, is there a retailer who stands to benefit? CNBC business reporter Darren Rovell says that without any hit toys, it's just a question of price. That means, cutting deepest on pricing is the winning strategy and that means Wal-Mart ( WMT), but it's already being reflected in the market action. Wal-Mart shares are near highs not seen since 2008. Leapfrog Enterprises ( LF) is a particular learning gift company near a high, and Mattel ( MAT), the stalwart of the toy industry, continues to be strong, near an all-time high on Wednesday.

Highs and Lows

Starbucks ( SBUX) seems to hit a new 52-week high daily and there is no reason not to stick with it. The trend has been to send the 52-week high stocks higher and the 52-week low stocks lower; that bodes well for Starbucks.

The Fast Money gang also likes IBM ( IBM) over Amazon ( AMZN) in a battle of 52-week high and low tech stocks. IBM has come off its 52-week high, and Amazon remains down near a 52-week low, but Fast Money experts say there is much more visibility for IBM in its market, so choose it over Amazon.

-- Written by Eric Rosenbaum from New York


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