Bail-out Buys - Fast Money Recap (10/1/08)

by: Joan Wickham

Recap of CNBC's Fast Money, Wednesday October 1.

Bail-out Buys - Financial Select Sector SPDR (NYSEARCA:XLF), MasterCard (NYSE:MA), JPMorgan Chase (NYSE:JPM), U.S. Bancorp (NYSE:USB), Goldman Sachs Group (NYSE:GS), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Nasdaq OMX Group (NASDAQ:NDAQ)

Dylan Ratigan started the show with a discussion of the opportunities and decisions to be made in the stock market right now. Pete Najarian said he likes the Financial Select Sector SPDR because the financials will react positively to the bailout plan. Joe Terranova said he bought MasterCard today because the company has a small debt profile, global exposure and long-term double digit profit growth. Jeff Macke says he has no fundamental justification for owning the U.S. dollar. "The rest of the world is more screwed up than we are, but at least we know we’re screwed up," he added. Macke says the financials are a buy here because what the senators and Congress are really just voting on a suspension of reality. Guy Adami mentioned that JPMorgan Chase hit a 52-week high today and U.S. Bancorp traded higher. "The banking industry will survive, and the good banks will do better, and the bad banks will be taken out back to the woodshed," he added. Macke said the good banks like Goldman Sachs Group, Wells Fargo and Citigroup are buys. Adami said JPMorgan could potentially become the biggest bank in the world. Najarain says that if you are looking for another processor, take a look at Nasdaq OMX Group. He says the stock continues to go higher and says its numbers are "unbelievable."

Hutchison to Vote Yes

Texas Senator Kay Bailey Hutchison joined the traders to discuss the Senate vote on the bailout plan. She said she plans on voting for the plan to help stabilize the markets. "We need transparency and accountability. This business where we made loans and packaged them up to be sold to somebody else, is just not the way mortgages have worked throughout this country's history," she said. Adami pointed out that people should be mad at themselves for taking on loans they knew they weren't going to be able to pay back. "There is blame everywhere, and we must try to do what we must do now," Bailey responded.

Buffett Buying In – General Electric (NYSE:GE), Honeywell (NYSE:HON), 3M Company (NYSE:MMM)

Ratigan brought up the news that legendary investor Warren Buffett took a position in General Electric in a similar deal to the one he made with Goldman Sachs. "Frankly these markets are offering opportunities that weren't available six months or a year ago," Buffett told us, “so we're putting money to work," said Buffett. "General Electric is the backbone of American industry," he added. “They’ve got some marvelous businesses... They’re going to be around 5 or 10 or 100 years from now.” Macke said it's a good deal for Buffett. Adami says that if Buffett really likes GE, he should look at Honeywell which is trading at a 52-week low due to hedge fund liquidation. Najarian told viewers to look at 3M Company which is trading near a 52-week low.

Weakness in Commodities

Ratigan moved the talk to the commodity complex. Commodities? That five years of fun is over. Oil is breaking down, slipping under $100 on Monday. Terranova said the weakness in the sector today was off of the bearish ISM number. Macke says the parade has gone by for the agriculture and steel names. "I don't want to touch these names," he said.

Mystery Bidder - ImClone (IMCL), Eli Lilly (NYSE:LLY), Pfizer (NYSE:PFE), Novartis (NYSE:NVS)

Ratigan told the traders that the Wall Street Journal is reporting the mystery bidder for ImClone is Eli Lilly. Najarian said to keep an eye on Pfizer, because it has $26 billion in cash for acquisitions. Adami says to watch Novartis, because by 2012 60% of its revenue will be non-pharmaceutical.

Off the Rails - Burlington Northern Santa Fe (BNI), Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC), J.B. Hunt Transport Services (NASDAQ:JBHT), Ryder Systems (NYSE:R), United Parcel Service (NYSE:UPS), Federal Express (NYSE:FDX), AstraZeneca (NYSE:AZN), Novartis (NVS)

Carter Worth, chief market technician at Oppenheimer, joined the traders to discuss the technical outlook for the stock market. Worth said the huge volatility the market is experiencing right now never happens at the middle. "It happens at tops or bottoms, and this isn't the top," he said. Worth told viewers to lean off the "short pedal" a little bit. He said one sector that looks bad is the transports. He says the transports technically have more room to fall. Worth says investors should be out of rails like Burlington Northern Santa Fe, Union Pacific and Norfolk Southern, and big trucking stocks like J.B. Hunt Transport Services and Ryder Systems plus package haulers like United Parcel Service and Federal Express. Najarian said he agrees in the short-term with Worth. Some stocks Worth likes technically here are AstraZeneca and Novartis.

Poor Market – Wal-Mart (NYSE:WMT), McDonald (NYSE:MCD) Procter & Gamble (NYSE:PG), Nike (NYSE:NKE), Kraft (KFT), Johnson & Johnson (NYSE:JNJ), Church & Dwight (NYSE:CHD)

The traders discussed some plays for a market with poor returns. Macke said he likes Wal-Mart, McDonald's and Procter & Gamble. Najarian said Nike continues to outperform and it has $2 billion in cash on its books. Terranova said to take a look at Kraft. Adami likes Johnson & Johnson and Church & Dwight.

Final Trade – Your First Move for Thursday October 2.

Guy Adami recommends Novartis (NVS).
Joe Terranova recommends keeping an eye on the ECB because “it doesn’t look like they’re going to lower rates.”
Jeff Macke says “Buy the vultures not the meat.” In other words, look at Berkshire Hathaway (NYSE:BRK.A).
Pete Najarian likes playing regional banks for a short-term trade. His favorite is National City (NCC).

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