Financials Lead the Rally; How to Play Twitter, Netflix and Alibaba

NEW YORK (TheStreet) -- While concerns of a broader market pullback were beginning to take hold, U.S. stocks surprised many investors with a big rally on Wednesday as the S&P 500 climbed 1.26%. 

On CNBC's "Fast Money Halftime Report" show, Stephanie Link, portfolio manager at TIAA-CREF, said investors should keep their portfolio allocations in foreign stocks, as central banks around the world continue to ease monetary policies and economies begin to improve. 

That's not to say investors should ignore the U.S., though, Link added. Investors just need to be more specific and choose certain sectors or stocks when it comes to buying stocks. Economic data and housing numbers continue to improve and she believes cyclical stocks like financials and energy will outperform more defensive sectors.  

One possible roadblock ahead? Link said if bond yields "explode higher," this could weigh on equities for a while. 

Josh Brown, CEO and co-founder of Ritholtz Wealth Management, and Dan Greenhaus, chief global strategist at BTIG, both like financial stocks, saying the sector's outperformance is more important than the apparent breakdown in the transport sector. 

Greenhaus said he remains overweight in financial stocks and expects the sector to continue outpacing the broader market. Concerning the overall market, he made the case that a correction doesn't necessarily have to be a pullback. Instead, it can come in the form of the market trading sideways for an extended period of time, much like how the previous six months have been. 

Although transport sector stocks have been underperforming, Pete Najarian, co-founder of Optionmonster.com and Trademonster.com, did point to a recent rally in airline stocks, which started on Tuesday. 

But like Greenhaus and Brown, he, too, was enthusiastic about the rally in financial stocks. "This is a great, broad participation with all the financials," Najarian said, adding that recent options activity has also been bullish for many of the banks. 

Stocks are also catching a boost on Wednesday on news that a deal between the European Central Bank and Greece may be close, according to Jon Najarian, co-founder of Optionmonster.com and Trademonster.com. While a deal would be great for Greece's June payment, the same issues will continue to plague the country each month when a new payment is due, he said. 

The conversation turned to tech, as Mark Mahaney, managing director and lead Internet analyst at RBC Capital Markets, explained the rationale behind lowering his price target on Alibaba (BABA) to $105 from $110, while maintaining an outperform rating. 

The company will see a 2% to 3% hit to revenues, as it needs to stop its online lottery business in China, he explained. The company's price cuts on its group buying platforms will also contribute to lower revenues. While his forecasts are lower than those of many analysts, Mahaney remains bullish on the stock overall. The valuation is attractive, given the top and bottom line growth Alibaba has over the next several years. 

Mahaney also remains bullish on Netflix (NFLX), saying he expects the company to add more U.S. subscribers in 2015 than it did in 2014, despite raising its prices. Netflix also continues to expand overseas, while a stock split seems likely. "You want to be long Netflix; it's one of the most disruptive companies in the Internet space and valuation is still reasonable," he said.

Yet Mahaney wasn't so bullish on Twitter (TWTR), however, saying, "We're on the sidelines on this one." The stock looks to have support for a price the low $30s, but advertisers aren't finding the company's platform as valuable as other online platforms. Likewise, user growth continues to stall and until it regains some momentum, investors should avoid the stock, he concluded. 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Jim Cramer

Ceasefire in Trade War: Cramer's 'Mad Money' Recap (Monday 5/21/18)

Ceasefire in Trade War: Cramer's 'Mad Money' Recap (Monday 5/21/18)

Royal Caribbean, Allergan, Tyson Foods: 'Mad Money' Lightning Round

Royal Caribbean, Allergan, Tyson Foods: 'Mad Money' Lightning Round

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

All 2018 Graduates Must Watch Jim Cramer's Bucknell Commencement Speech

All 2018 Graduates Must Watch Jim Cramer's Bucknell Commencement Speech

Jim Cramer: It's Okay to Fail, but It's Not Okay to Quit

Jim Cramer: It's Okay to Fail, but It's Not Okay to Quit