'Fast Money' Recap: A Monster Deal for Coca-Cola?

NEW YORK (TheStreet) -- U.S. equities closed near session highs with the S&P 500 climbing 0.43%. 

On CNBC’s “Fast Money” TV show, the trading panel examined Coca-Cola’s (KO) new investment, a 16.7% stake in Monster Beverage (MNST). 

Brian Kelly, founder of Brian Kelly Capital, said big companies like Coca-Cola need to make deals like this in order to obtain growth. He questioned if PepsiCo (PEP) is the next to make a similar move with a different company.

Tim Seymour, managing partner of Triogem Asset Management, pointed out that PepsiCo has been aggressive in its snack business and in emerging markets. He called this a “very smart deal” for Coca-Cola, which has a superb distribution network. 

Guy Adami, managing director of stockmonster.com, suggested that PepsiCo may not feel obligated to make a similar move as Coca-Cola, since its snack business is doing so well. 

Karen Finerman, president of Metropolitan Capital Advisors, said Coca-Cola has the right to nominate two board members for Monster Beverage, which may or may not lead to a larger stake in the future. 

CNBC’s John Jannarone noted that back in April he said a deal between Coca-Cola and Monster Beverage made sense. The deal is logical for Coca-Cola, as it will provide some much needed growth amid declining soda volume. The deal is constructive for Monster Beverage, because it will help with product distribution. Coca-Cola’s stake has the possibility to lead to a larger stake or a complete takeover in the future. 

Nik Modi, managing director at RBC Capital Markets, has a buy rating both Monster Beverage and Coca-Cola. He said Coca-Cola appears to be testing the water with its stake in Monster beverage, and may acquire more of the company if the products perform well in other market. The only other energy drink company it would make sense for PepsiCo to get involved with is Red Bull, which likely isn’t for sale. 

On J.C. Penney (JCP), Finerman said the stock is “not in the death spiral anymore, so that’s a good thing.” The company is improving the balance sheet, but the valuation is still not attractive since investors are pricing in a lot of good news. Kelly said he “wasn’t in a rush” to buy shares of J.C. Penney just because the company didn’t do as bad as investors had expected. 

Seymour saw some value in shares of JCP, pointing out that sentiment can change very quickly in stocks where there are a lot of short-sellers. 

Finerman said the share buyback plan at Nordstrom (JWN) is likely improving the company’s forward guidance. She is still a buyer of Macy’s (M). Adami is also a buyer of Macy’s near current levels, and said investors could buy Nordstrom around $63.50 or $64.

Seymour called General Motors (GM) a long-term investment that has some short-term headwinds. He is long the stock and finds its valuation attractive. 

Adami said he likes the auto derivative plays such as Delphi Automotive (DLPH) and BorgWarner (BWA). He agreed General Motors is a long-term play. 

Seymour remains positive on the global economy, saying Germany’s drop in GDP should be relatively short-lived. 

Kelly suggested that there are “pockets” within the U.S. economy that will do well, regardless of what’s going on in Europe. Adami is a buyer of U.S. Treasury bonds.

Kelly said he is selling short Brent crude oil and he “plans to be in this one for a while.” He sold the December futures contracts. He also suggested investors could sell short the Canadian dollar and/or the iShares MSCI Canada ETF (EWC) because of its dependency on oil prices. 

Seymour said a short position in the Canadian dollar or the CurrencyShares Canadian Dollar Trust ETF (FXC) is one of the best ways to play a long U.S. dollar position. 

Kelly told investors not to bet against hedge fund manager Carl Icahn, who has a new position in Gannett (GCI). However, he said investors who want to buy the stock should wait for a pullback.

Paul Hickey, co-founder of Bespoke Investment Group, said when the most heavily shorted stocks decline, it’s usually because investors are feeling “risk-averse.” He said SunEdison (SUNE) and Conversant (CNVR) could be two stocks that are ripe for a short-squeeze. He added that the last time the S&P 1500 had this high of a short-interest was in November 2012 before equities had a strong rally. 

Adami said sometimes short-squeeze trades work and sometimes they don’t. However, those investors looking for a short squeeze can try GameStop (GME) on the long side. 

Cisco Systems (CSCO) fell 3% and was the first stock on the show’s “Pops & Drops” segment. Adami said the price action suggests the stock could be headed lower. He is a buyer near $22.50. 

E-Commerce China DangDang (DANG) dropped 11%. Seymour is long the stock but said investors should wait for a deeper pullback before considering the stock on the long side. 

Plug Power (PLUG) jumped 4%. Kelly said alternative energy stocks are doing well and he would stay long this stock. 

Rackspace Hosting (RAX) popped 4%. Finerman said Dan Loeb’s investment in the company is likely the cause behind the move.

Kevin O’Leary, co-host of the Shark Tank TV show, discussed dividend stocks, saying 73% of the S&P 500’s return over the previous 40 years are from dividends, not capital appreciation. Stocks like McKesson (MCK), Union Pacific (UNP), EMC (EMC), Halliburton (HAL) and Comcast (CMCSA) all have growing free-cash flows -- one of the most important metrics to observe as an investor -- and will likely grow their dividend payouts over time, he reasoned. 

For their final trades, Seymour is a seller of the CurrencyShares Canadian Dollar Trust ETF and Kelly is a buyer of the iShares MSCI Brazil Capped ETF (EWZ). Finerman is a buyer of Macy’s and Adami is buying the iShares 20+ Year Treasury Bond ETF (TLT). 

 

-- Written by Bret Kenwell in Petoskey, Mich.

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

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