An Eye on Gustav - Fast Money Recap (8/28/08)
Recap of CNBC's Fast Money, Thursday August 28.
Gustav Downgrade Helps Markets – Aflac (AFL)
Melissa Lee started the program on a positive note. All three major indices closed higher after brushing off fears over Hurricane Gustav. Jon Najarian said “GDP being revised up was the key for today,” referring to the rally in the major indices. He said there was “a lot of short-covering and program trading” that contributed to the rally, which he finds bullish. Joe Terranova is keeping an eye on natural gas, stating that it is interesting to learn inventories have been building up. Karen Finerman went on to talk about the financials. She said she is “skeptical on the financials” and is currently shorting some banks in her fund, since she does not believe the rally in the sector is sustainable. Bill Kevins came on the program and relayed the latest forecasts on Hurricane Gustav. Terranova said “the story is not over yet with Hurricane Gustav.” He went on to say that he is long formulated gas-o-line and sees “no trade for crude oil.” Najarian feels a stock ripe to benefit from the Hurricane Gustav if it causes severe destruction, is the insurance firm he recommended yesterday, Aflac.
Earnings Disappoint - Dell (DELL), Hewlett-Packard (HPQ), Intel (INTC)
Lee mentioned that Dell “dived” after-hours by 10% to $22.60 after reporting earning results below analysts' expectations. Adami mentioned that Najarian was right yesterday, when Najarian said to wait to buy Dell until it reaches $22-$23. Adami said he was wrong for liking Dell into the earnings but said “I still like Dell here.” Najarian said it was “a lucky call.” He said the reason he was nervous about Dell yesterday was that he noticed a lot of puts being sold. He went on to say, “I didn't like Dell at $25 but I like it here.” Lee mentioned that Hewlett-Packard and Intel are trading fractionally lower in after-hours trading because of Dell's earnings. Najarian and Terranova say that Hewlett-Packard is a great company and should continue operating with strong results.
Financials Revisited - Freddie Mac (FRE), Fannie Mae (FNM)
Lee mentioned that Freddie Mac and Fannie Mae continued their rallies today. Freddie rose by 11% to $5.28, and Fannie surged 23% to $7.95. Najarian said, “I saw huge call option activity in Financial Sector SPDR (XLF).” He said the “extraordinary volume” in call options makes him very enthusiastic for the financial sector.
Retail Action - Sears Holdings (SHLD), Tiffany (TIF)
Retailers rose up today, Lee pointed out. She brought up how Sears Holdings rose 4% to $90.62 and that Tiffany traded higher as well, up by 11% to $43.85. Adami warned that investors “can't rush into Tiffany at these levels.” He said the stock's movement had a lot to do with shorts covering their positions. He mentioned that Karen Finerman recommended the stock a couple of weeks ago at much lower levels.
An Eye on Gustav
Paul Corby, Senior Vice President of Planalytics, came to discuss Hurricane Gustav. He feels Hurricane Gustav will be a Category 3 hurricane. Also, Corby said he agrees with Terranova that investors should “stay out of the natural gas markets.”
Afterward, Zachary Karabell, president of RiverTwice Research, mentioned that the upward revision in GDP was boosted by “strong exports.” However, he warned that “negative GDP does not necessarily mean negative corporate earnings, and positive GDP does not necessarily mean positive corporate earnings.” Therefore, he said, investors should be careful when reading such data numbers. However, he does feel positive about the economy and believes it is doing better than many have expected.
Going for Brokers - Lehman Brothers (LEH), Goldman Sachs (GS)
David Trone, Analyst of Foxx-Pitt Kelton, discussed Lehman Brothers (LEH). He said that if the stock continues to underperform, then management might want to try and take the company “private at $13.” In order for the company to raise most of its money to enable it to go public, he said, it will have to sell Neuberger Berman. It could prove difficult to convince shareholders to approve such a tender, said Trone. Terranova brought up Goldman Sachs. Morgan Stanley downgraded third quarter estimates on Goldman Sachs to $1.65. He said that at a certain point you begin to downgrade a little too much. He said he believes Goldman will come in “north of $2.00” and he is bullish on the stock. Finerman said Goldman is a “premium franchise.” She currently owns the stock and remains bullish on the stock despite its recent performance.
Dennis Gartman, president of The Gartman Letter, said he remains bullish on the dollar and sees it continuing its rise as the months progress. He said he is bearish on the euro and currently has a short position on that currency.
Final Trade – Your First Move for Friday August 29.
Guy Adami likes Lockheed-Martin (LMT).Karen Finerman reiterated her recommendation of Goldman Sachs (GS).Jon Najarian suggests buying Aflac (AFL).Joe Terranova likes Amazon (AMZN) and sees the stock going to $100.
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