Out of the Money - Midday Fast Money (8/12/08)

Recap of CNBC's Fast Money, Tuesday August 12.

Financial Stock Problems Today - Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS)

Dylan Ratigan said that shares of Goldman Sachs were on their way down due to downgrades across the board. Also down today was JPMorgan Chase, due to a $1.5 billion write-down. Joe Terranova said the decline in Goldman Sachs stock offers a “great opportunity.” He said that although short interest has risen, he still believes “the broader market is moving higher.” Next, Jeff Macke said “it is too early to buy Goldman Sachs now,” and that it has broken its 50-day moving average. Macke said he would buy it at $150. Jon Najarian said he likes JPMorgan and agrees that Goldman Sachs is “best-in-breed.” He would wait for more of a pullback on Goldman Sachs. Peter Najarian said to take a look at Morgan Stanley. He said that he likes what they're doing there and that it would be a “great buy” at around $40.  Macke concluded the discussion by saying “this is why we wait,” and emphasized how important discipline is in trading the markets.

Commodity Advice

Moving onto energy, Terranova said to watch oil as it nears the $110-a-barrel mark. The 100-day moving average is just below $110. Jon Najarian said to keep an eye on it because he believes once we get near the “critical levels,” we'll see people get into it. Ratigan said gold was dropping again and trading lower due to the dollar's strength. Macke said the traders in gold were “all emotional,” and that “if you got in early in gold, you're getting the shaft now.” Jon Najarian said that now you want to own those puts, and that it is wise not to get into these commodities. Terranova summed up the mood by saying he “wouldn't touch it.”

Oil Down Trains & Airlines Fly - Union Pacific (UNP), AMR Corp (AMR), Continental Airlines (CAL), US Airlines Group (LCC), Delta Airlines (DAL), Alaska Air (ALK), CSX (CSX), Union Pacific (UNP)

Speaking on airlines, Peter Najarian said that as oil drops there is an upside for the airline names. He said “looking at oil dropping to 110 bodes well [for the airlines].” JP Morgan upgraded AMR Corp, Continental Airlines, US Airlines Group to “overweight” from “underweight”. Delta Airlines and Alaska Air were changed to “overweight” from “neutral.” Northwest Airlines was upgraded to “neutral” from “underweight”. The only downgrade mentioned was Southwest Airlines which was lowered to “underweight” from “neutral.” Macke was concerned that airlines engaged in fuel hedging may have problems. Many airlines who had not become involved in hedging originally may have hedged at $125 or $135 levels, Macke said. Jon Najarian said that “hedging isn't helping them now,” and that oil is coming down. Peter Najarian said that it is wise to “keep an eye on these things,” and that Union Pacific has “started to exceed open interest.” He said that the rails are breaking down and that this is a part of the commodities unraveling. Keep an eye on CSX and Union Pacific counsels Najarian. “I think they are breaking down.”

Dennis Gartman of the Gartman Letter on Commodities

Dennis Gartman of the Gartman Letter discussed commodities plays. He began by observing the “dollar is getting stronger,” and that the game has now been changed. Gartman said that the dollar has broken every trendline in favor of the euro and that “the psychology has changed dramatically.” He continued, saying that the hedgers are on the wrong side and that investors “should be sellers of gold.” The trade that Gartman finds compelling is wheat; he would be a buyer.

Pharmaceuticals - Eli Lilly (LLY)

Ratigan turned to pharmaceuticals observing that although many investors have moved into the safety of drug names, those stocks have not been performing. CEO John Lechleiter of Eli Lilly said the Amex Pharmaceutical Index has outperformed the S&P 500. Lechleiter continued saying that his firm has seen “21% sales growth,” and that there is further growth in the future. He said there are several important dates coming up for Eli Lilly. The company would be interested in smaller acquisitions that would “bring innovation,” if it were looking to acquire.

Technology Stocks - Nvidia (NVDA), Apple (AAPL)

Peter Najarian said that Nvidia has been talking about its solar business. He said that solar is going to become a big part of their business. Moving on to Apple (AAPL), which was moving up 2.3%, Jon Najarian said that Lehman Brothers is saying Apple may be conservative in its recent estimates of sales.

Seeking Alpha is not affiliated with CNBC, or Fast Money

 

Comments

[brewer:]

Apple is way undervalued, no one is seriously accounting for the iPhone revenue that has already been booked, let alone the run rate they are hitting (with lines still at every outlet, and 22 more countries to come online very soon). Also, new product and revisions in the pipeline in time for Christmas.

It will be two years from now before all the money is accounted for from the 3 million iPhone 3Gs sold this month. But that money is Apple's to spend (they already have 20 billion in cash) in the meantime.

2008 Aug 14 09:37 PM