'Fast Money' Recap: Rotating Into Underperforming Financial Stocks


NEW YORK (TheStreet) -- The S&P 500 slid 0.60% on Friday and WTI crude oil fell 0.66%. 

On CNBC's "Fast Money" TV show, Pete Najarian, co-founder of optionmonster.com and trademonster.com, said investors are rotating out of outperforming sectors and into underperforming sectors such as financials. 

Tim Seymour, managing partner of Triogem Asset Management, said bank stocks and online brokerage stocks are two solid investments for exposure to climbing interest rates. The Federal Reserve's meeting next week could come across more hawkish than previously anticipated. 

Read More: 7 Stocks Warren Buffett Is Selling in 2014

Brian Kelly, founder of Brian Kelly Capital, said it concerns him the market is not rallying despite the strong labor market, temporary peace between Russia and Ukraine and easing monetary policies from Japan and Europe. The Russell 2000 should be performing better too, he added. 

Guy Adami, managing director of stockmonster.com, said there are several conflicting situations going on: The stock market is selling off while financials break out toward new highs and the iShares Russell 2000 ETF (IWM) is breaking lower while the Dow Transports are still near all-time highs. The IWM seems likely to decline to $108, he said.

Seymour said WTI crude oil and refining stocks seem likely to decline even further. Cheaper gasoline is better for the consumer. 

The trading panel was asked for their "Dash To Trash" trade: 

Seymour is a buyer of Target (TGT) , of which he says investors' expectations are "too low." The company is improving margins and the stock is worth owning. Kelly agreed. Najarian said Target should resume buying back stock soon, while shares seem likely to go back toward $70 by the end of 2014. 

For Kelly's "Dash To Trash" trade, he is buying a basket of 3-D printing stocks, including Stratasys (SSYS) , 3D Systems (DDD) and ExOne (XONE) . It'll be a volatile position but he wants exposure to the industry over the next one to two years. 

Najarian's "Dash To Trash" trade is to buy Coach (COH) . The stock has been slammed but on a P/E basis, has become too cheap. 

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Adami's "Dash To Trash" trade is a long position in Alpha Natural Resources (ANR) , which may see some upside action next week.

Najarian pointed out the bullish options activity in shares of Staples (SPLS) , specifically the December $14 call options. He is long. 

Gil Luria, managing director at Wedbush Securities, has an outperform rating on Alibaba and an $80 price target. The stock is scheduled to go public next week. He said the price target is based on an earnings multiple of 26 times 2016 earnings per share estimates. 

This is a conservative estimate and the valuation could go much higher once the company goes public, he said. Alibaba has strong growth and is very profitable, which is appealing to investors. It's "such a rare investment," which has 80% of the Chinese e-commerce market that could grow at a 30% rate for several more years, he concluded. 

Adami said Yahoo! (YHOO) appears to be fairly valued in the $42 to $45 range. He suggested that investors take some profits if they have been long. Kelly agreed, saying he would also take some profits. There is a lot of hype around Alibaba, he warned. 

Seymour said investors should take profits in Weibo (WB) , which has climbed some 25% in the past four trading sessions. However, Sina (SINA) , which owns roughly 50% of Weibo, hasn't reacted much to the move. He is a buyer of Sina. 

Najarian still likes Yahoo!, saying the stock should move into the $45 to $50 range, but is likely to end up near the higher end of that range. He also likes Baidu (BIDU) .

Trina Solar (TSL) climbed 4% and was the first stock on the show's "Pops & Drops" segment. Seymour said the stock has a large short-interest but he is long and expects shares to go higher. 

eBay (EBAY) popped 3%. Kelly said investors can go long the stock with a stop-loss at $50. 

Newmont Mining (NEM) dropped 2%. Adami said the stock is likely to struggle so long as the U.S. dollar moves higher and gold moves lower. 

Take-Two Interactive Software (TTWO) fell 3%. Najarian said investors should wait for a pullback before buying the stock.

Despite Darden Restaurants (DRI) still looking expensive based on valuation and having "awful" price action, investors can buy the stock because of its "decent dividend" and use $45 as their stop-loss. 

Read More: What Today's Retail Sales Report Tells You About the Economy

For their final trades, Adami is a buyer of Wells Fargo (WFC) and Kelly is buying BlackBerry (BBRY) . Najarian is a buyer of Goldman Sachs (GS) and Seymour is buying the ProShares UltraShort 20+ Year Treasury ETF (TBT) .

-- 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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