'Fast Money' Recap: Getting Defensive in a Volatile World

NEW YORK (TheStreet) -- U.S. equities sold off early on Friday, due to rumors over heightening geopolitical tensions. However, investors bought the dip and pushed the S&P 500 back to flat for the session. 

On CNBC's "Fast Money" TV show, Tim Seymour, managing partner of Triogem Asset Management, said the selloff isn't surprising given the low trading volume in the equities market. He said investors should try to be as "flat" as possible with their portfolio headed into the weekend, and certainly not short. However, he reasoned that the geopolitical issues seem to be lessening. 

Brian Kelly, founder of Brian Kelly Capital, said geopolitical issues are almost "impossible to trade on." There doesn't seem to be lessening of tensions between Russia and Ukraine. Volatility is likely to come back into the market once the Federal Reserve ends quantitative easing. He is a buyer of gold. 

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Guy Adami, managing director of stockmonster.com, suggested that gold has had trouble rallying, despite all of the geopolitical tension. He continued arguing that the iShares 20+ Year Treasury Bond ETF (TLT) -- which is up 18% year-to-date -- should continue higher. 

Pete Najarian, co-founder of optionmonster.com and trademonster.com, said when the CBOE Volatility Index (VIX.X) falls below $12, it gives investors a chance to buy protection for their portfolios, which allows them to take advantage of dips in the stock market. 

Thomas Vitiello, co-founder and principal at Aurum Options Strategies, said a large sell order around 7:50 a.m. pushed gold prices below $1,300 per ounce, where it stayed until geopolitical news pushed it higher later in the day. However, these rallies are mostly short squeezes that have been fueled by geopolitical headlines. The fundamentals for gold prices, such as rising interest rates and banking and currency fears, are non-existent, he concluded. 

The traders were asked for their "defensive" plays:

Seymour is a buyer of Altria (MO)  because of its large dividend yield, cheap valuation and diversified business.

Najarian is a buyer of Coca-Cola (KO) and Microsoft (MSFT). 

Kelly is a buyer of gold via the Market Vectors Gold Miners ETF (GDX), which pays investors a dividend and provides exposure to gold. 

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Adami is a buyer of Lockheed Martin (LMT) because of its dividend, strong price action and low valuation. 

Najarian reasoned that investors who can handle the risk of being long Tesla Motors (TSLA) should do so via options to limit their downside. Investors looking for stability in the auto sector should buy Ford (F). 

Junk bonds were the featured asset on the show's "Street Fight" segment. Seymour was the bull, arguing that investors are going to continue searching for yield so long as interest rates remain low. He added that more issuers will be returning to the credit market soon.

Kelly was the bear, arguing that investors who are long junk bonds and junk bond funds are exposed to interest rate risk and credit risk, and are not being compensated enough for those risks. Pricing seem to be topping out and if the economy improves significantly, interest rates will move higher and junk bonds will be hurt. 

Adami and Najarian agreed with Kelly, saying the compensation is not high enough for the interest rate and credit risk that is being presented. Adami said he would use the recent rally to sell.

Najarian pointed out the bullish options activity in Southwestern Energy (SWN), specifically in the September $40 call options. 

Autodesk (ADSK) fell 6% and was the first stock on the show's "Pops & Drops" segment. Najarian said he used Friday's selloff to buy the stock, which beat on top- and bottom-line estimates and raised guidance. 

Monster Beverage (MNST) soared 30% after Coca-Cola (KO) announced it is taking a 16.7% stake in the company. Kelly said he would use the move higher to take profits in Monster Beverage. 

J.C. Penney (JCP) fell 2%. Seymour said same-store sales were stronger than expected and the company beat earnings expectations for the third consecutive time. Investors can stay long, he reasoned. 

Gilead Sciences (GILD) popped 3%. Adami said the stock seems likely to continue higher. 

Najarian said there is a lot of excitement mounting for Apple's (AAPL) new iPhone. He cited the September $97/$101 bull call spread as being active. 

Kelly said he is still short Apple, but it only makes up a very small portion of his portfolio. 

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For their final trades, Seymour is a seller of Oracle (ORCL) and Najarian is a buyer of Apple. Kelly is buying the iPath Grains Total Return Sub-Index ETN (JJG) and Adami is a buyer of Hain Celestial Group (HAIN).

-- Written by Bret Kenwell in Petoskey, Mich.

Follow @BretKenwell

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter.

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