tv Fast Money CNBC May 7, 2012 5:00pm-6:00pm EDT
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do not miss that tomorrow here on the closing bell. >> with taxes towards the end of the year. >> very critical issues this week. >> fast money starts now. fast money tonight from tragedy to winning trade, a crazy day to confound the most seasoned investors. >> i don't know how to make money. maybe if i did, i wouldn't be so negative. >> we will explain how the stock led to higher stocks. >> the mason, people talk about stocks this. should be more of a phenomenon monand you want to lock back at probably just shut the door for a little while. >> at least someone come back enough to wear their sweats. are you contrarian? this is fast money.
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this is fast money. quite an amazing day on wall street when you figure they were down 180 points overnight when the election results were hitting investors and we managed to end the day higher. >> you watch what the futures are trading and you have to be careful f. it's an overnights market, they have done the analysis and the people are going-over the fundamentals knowing where they want to buy it. they staggered the book on the buy side. it's not as much pressure as you would think. we were buying a lot of financials across the floor. you saw the names pop. i was most shocked at the financials. >> it was being telegraphed in the middle of the day when the stocks moved higher. the spanish and the french banks. that gives you the indication they wanted to go higher. >> the action if you just looked at it off of friday, it wasn't
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particularly great. it's great in the context that the s&p was down overnight, but in the context of the stuff we saw on friday, not particularly great. this 1370 level continues to hold. the financials at work continue to be the names we talked about. that continues to defy logic here. i wasn't -- although impressed we were able to bounce like we did, it was not that awe-inspiring. >> you are concerned about the markets at this point. >> the summer offers opportunities. weaver not looking to be bearish for being bearish. it's important to recognize the industrials who are in a downtrend since the first week of march, the basic materials were in a downtrend since february. all these along the way are not getting us anywhere. we are in key sectors and energy too. today's action can be respected from a dance.
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we are pretty well off at this moment in time and nothing enticing that would make me feel like i have to be invested. >> the lowest net long positions of the year as of may 1st. >> we went to 100% etfs and core accounts about 40 to 50% net long. we like the space and the dividends. there is nothing about 1% or 2% growth that makes me feel like i have to go into a u.s. deal. it's not what's working. i have to be where there is a semblance of a return. it happens to be in defenses and dividends and health care, etc. >> the value in the standpoint, are you concerned about what happened? the vote that swept europe and how do you dove tail that being in the market and he sees opportunities and he actually went to the market on friday and bought a bunch of stock.
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>> i didn't buy a binch of stocks on friday, but i do agree with the philosophy. i know i am never ever going to be able to pick the bottom and know i will have to get comfortable with the companies i own. i am not delighted to step into european exposure. that gives me pause. there industrials and other names that i like and would be buying here. you can buy them and the calls instead of the comments. i know what the downside is. i was shocked going to bet last night. i thought wow, that is good. up for that. >> you can have the shopping list ready. >> i have my list ready and i didn't get to a lot of these. >> the look at the numbers, you want to look at the recent lows.
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1357 and then 1359. i can see and err on the short side even if we are somewhat quasi-range. >> below the 50-day moving average and we know the sellers are in control in terms of raw skpli demand. forget about the earnings estimates and you can make the case that q1 was in hindsight not a great earnings quarter. they have been cutting estimates going into it. all things considered, it is not horrible for stocks and not a great environment. the key is to focus on what you can own and stay liquid to some extent. this summer chances are we see more turbulence and not less. >> they want to pick a fight with both of you. >> no,i don't. i can agree with some of what they were saying. in particular as i said on halftime, i was looking for the big wash to be a buyer today.
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that was going to be my catalyst. by the way, 15 handles was not what i was anticipating on this. especially with the chatter on twitter yesterday. i would have thought more like 35 or 40 points. >> we didn't get any of that. that's why i didn't jump into the market and in after hours tonight to the point as far as people like karen sit there and analyze where they want to get in. that's to her credit. i take the spur of the moment trades like i think you do, josh and you do, grasso. we jump on them. for instance if i get a maco down $11 or get a wynn casino down $7. they were down really big in after hours. maco has not rebounded, but wynn rebounded dramatically and that is where you put your mind to work and take advantage and be the contrarian and make money on
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the oversold or overbought conditions. it was overbought when coin star heard this they told us they were going to have a blowout quarter. it continued to filter down. >> let's check in with the options desk. did you see what would have led you to turn to the market as they did today? >> i thought what was interesting, the vicks did not sell off late in the day. i was stunned it held unchanged at lunchtime. so many times they work hard to get back and using all of its energy and buying power, that didn't happen. you look at the vicks and people are holding their breath. they are not racing in to get
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their protective positions accident but from noon, i would have been stunned given that both of these election expectations were in the market. i would have been stunned by down 30 or 35. >> let's get after hours actions. two stocks that two traders are buying in the session. kicking it off, take a look at the downward movement we are seeing down by about 11.5% they are seeing. rack space reporting better than expected revenues and eps fell short. this is the transition. that is hurting results. i believe this is the one you are picking up. >> i am long on the stock and i didn't expect to see it down nine points. the story is very simple. they grew revenue by 31% year over year. earnings took a bit of a hit and came in a penny light. it seems like they are cutting the stock's head off and you are seeing investment by the company
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and this transition to cloud. a once in a lifetime opportunity to cut 85,000 servers and they continued to build that and if they put that off. they have to scale up and that's what we are seeing them do. that's around $50 or $51. >> this is when valuation catch up on an inline quarter. this is what happens. if you don't think it can overshoot to the downside further, go back to july and august when the stock went basically from $45 in july down to $31 in august. we saw some rally and the charters look great, but this stock moved. although we are down $8 or $9, i would look for further downside over the next week. >> google and amazon talk about the price cuts and how do they
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compare? is this better or more expensive? >> that's a great question. it's an expensive thing to build out. the infrastructure component of it. if you don't, you get left behind. if you do, you are in a rarified circumstance. not many can compete at this level. the key is to understand it's not exactly the same market that google is playing into and microsoft is playing into. there different r different segments. rack space has a competitive advantage and the people who use the service are fanatical about it. that's the key to why this company has been able to grow. on the earnings side, you have to wait for them. >> let's move on to the next. facebook with ceo mark zuckerberg to pitch to potential investors with a $96 billion price tag.
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is the social media giant overhyped? a legendary investor in start ups and companies bike aol and apple, buyer beware. it's not because he is only wearing a hoodie. a director at llc, it's a pleasure to have you with us. you had written on one of the blog posts that facebook is like a utility and that never is necessarily a good thing. it doesn't sound good. >> what i imply side it is part of our life as i was referring to a television or anything else. facebook is so indem nick. 900 million people. you can't find many service or devices and what happens apple maybe. we have to accept that as facebook becomes part of the
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system. >> if you were an early investor, would you look to sell your stake in. >> a lot of early investors have taken and have the market have less inflation as we go out to next week. i think that we have got a concern about the overexuberance from the public because this thing has been so -- i don't use the word hyped, but it's part of every news media including cnbc. what i like to think about is what you need to make facebook worth the kind of money is a casicate of miracles. everything has to work right. the revenues and the high rate. the ebitda has to go to high rate. the average revenue has to keep
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going up. at a growth rate that is hard to maintain as you get to higher and higher levels. >> you have seen a lot of these before. the media darylings. when do you see the peak of sentiment and how does it change? >> aol's case or apple, they didn't have this kind of overexuberance. facebook has been in the news for the last year anticipating this particular event. you see what happens. we have seen groupon and zynga and pan dora that had not quite the same excitement. these were all consumer applications. they are not a to b and b to c. the public gets excite and groupon was as high as 31 and now it's 10 on friday. it doesn't go one way. one has to be concerned maybe
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less by the ipo price and purchasing on the ipo itself as the aftermarket exuberance that may go to excess and a lot of people can find themselves disappointed, i think. >> what are changes your mind. >> you look at the environment, an apple or a google created. what changes your mind and are you waiting for that train to stop. >> face back is going to talk about the price. google sells it at five or six times. every stock you talk about. >> what are about in amazon and people try to place a valuation on that. >> it's related to earnings and growth rate. they would depend on how the june or the september quarter goes.
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if they are disappointed and if they drop, they are excited. if they stay the same or go up. they will compare against the other companies. when you are out in the public, that's one of the others. >> if you had to put however much money to work right now and huh to excuse between facebook or the offering price or another company, what would you do? >> that's a tough question. you are subjecting yourself to vulnerability and initial offering towards the lower end of the range and comes in on the basis that is a little more attractive and that initial pop might be and your viewers get in
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because i had myself several calls saying should i buy facebook? who knows. those people should i means they will be buying in the aftermarket. >> great to have you with us. hope to see you again soon. we are continuing to trade the fallout of europe's elections this past weekend. what is next for crude, the euro and much more. patrick doyle on a pioneering new product. find out what the company is serving up right now. much more fast money ahead.
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clearing with his take on the sell off and the commodities that were hit the hardest with the french and greek elections. will they go away as commodity prices keep falling? we saw the trade happen last year and a lot of things that happened are similar to what happened at this time of year last year. >> certain people you should listen to in certain spaces. a guy that was historically facing the bull side, if he sees continued weakness, i would listen to him. stocks are trying to tell you the story. you get the natural gas space if you want proof positive, but we tried to warn you to stay away from those. both push towards 30 and now trading on either side of 21. they tell the story and they say everything that the markets are over to the upside and the downsi downside. >> bob pisani was saying he was expecting in the next few days
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that the estimates are expected to be raise and each more favorable given the pull back we have seen. do you see the same coming? >> instead of commenting on that, what he thought the value was to buy and it mirrored the conference call. he said i would probably play airlines. when you are dealing with the airlines, he would rather play the quick trade. airlines mean to me that he has not seen anything worth value just yet. with slowing growth, he is probably holding a little bit on the itchy trigger finger. >> we did have that positive article on united continental this weekend. >> the airlines have been a great trade. i am with grasso on that. as far as the pets we are seeing in the options, most are out in september in the energy stocks that. is not talking about a quick bang in june for instance.
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a move to the upside. another quarter. they are bullish, but bullish longer term which again is a slow climb for the v-shaped bottom and speaks to what guy was saying. we are not to that sell off area yet in energy. >> let's move on to the next shares of video game maker electronics arts. tumbling and reporting disappointing forecasts and a drop in active subscribers for the "star wars" video game. anybody tracking that? >> i am. they are constantly on the radar and it's as recent as last month. they are kicking the tires and it was a guy that was atrocious. you look at the guidance and that came in line. giving these guys a pass and saying this was the kitchen sink quarter. you will have a huge volume day
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and it will be on monster volume. >> let's go to monitor the ea conference call. julia, what are they saying? >> the eps is in line for will put it year, but the guidance is light. the main thing talking about recently is the fact that the "star wars" numbers are light. "star wars," the new pe rub lick and the new online game lost 400,000 subscribers. the numbers are huge. on the conference call. the casual gamers and people trying it out on the free trial and not paying. they have been saying that they think that this game is stable. trying to remind investor that is the 1.3 million subscribers that they have is very much in line with what they predicted earlier. 400,000 player drop and it's
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massive. they have been trying to reassure investors and heavy hitting the fact that they will be a digital content business saying they are diversifying and moving away from the reliance on the physical gain. trying to send that message and saying their numbers in terms of revenues coming from digital is bigger than ever. >> thanks a lot for the update. any indications that people believe they are a possible take out candidate or people are willing to take the flyer with the stock and the options? >> they are definitely willing to take the flyer. there was no buying out of the money calls in particular. the signs that we have looked for to his point is get that washout volume tomorrow and see speculation on the june or july options. if it is opening around 1380 or $14, i would look for the 15s and 16s to be the most active.
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if i get that, they will try to ease call on that. >> 400,000 "star wars" subscribers. i didn't even know that that mean people loved it enough to play. how do you think they would enforce it? >> like hans solo. >> maybe they have jobs. >> in the meantime, you were watching the euro rebounding from a-month low to the election results in france and greece. what is the reason for the rally. the foreign exchange from the institutional bank. >> the bounce basically had two factors. one was people were short euro. i had a payroll thinking it could be a weak number. they were short from 132 and euro overnight on the greek election results moves up to 130. that's a good area for people to
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take profit on. that's what they started taking profits on on that area. in addition, it was a uk holiday. when london trade was open, there was not a group there to a new wave of fresh euro selling on the holiday. that allowed it as well. >> i never understood the gold story, but i thought part was the end of currencies would be a good thing for gold and i wonder if they destabilized through the euro and why is that not good for gold? >> i think they haven't been destabilizing enough. you are correct that people use gold as a currency, but the events we are seeing over the weekend were not as risk often to get gold to really. the french election results were expected and even though greece is not happy and they will not form a coalition government ahead. people are waiting to see what happens. in terms of ozzy over the past
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week, those two moved down a lot against the dollar. that's not a global risk, not for aversion reasons and they moved down for specific reasons, notably the reserve bank warned against the strength of the currency. >> your trade is euro yen? >> yes. i would like to short euro against the yen because shorting against the dollar has been a frustrating trade. let's look at it against the yen. i would like to enter a short position around where we are trading now. i look for a move down to 101.85 and they put a stock there. >> thanks a lot for the trade. good to see you. we have more strategies on "money in motion" every friday. we are setting up for one of the most crucial reports for the week. stick around for the trade.
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> it's very unlikely that apple will ever find an acquisition that is in the tens of millions of dollars. there is no sense sitting with the cash overtime. i guess they will do both now. >> that was berkshire hathaway and weighing in on apple's large cash board. we already said he was paying a dividend. there was no acquisition and it
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would make sense that they were accretive. >> i can't think of one. and it's not like there is that would preclude them from having a cash board which they would have. particularly if it were a foreign one. they absolutely should be capex. it has been horrible if they bought back stock all along. it would be dplatically higher. they could buy back at 14 times earnings and highly accretive. it's just math. i wish they would. >> would you agree? >> i'm torn. i would rather see the bigger dividend. i think the thing with apple is they could do everything. they can do buy backs and dividends and that's a big one. it's a question of what the shareholder base would like to see and if they care that much. they march to the beat of their own drummer.
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if they announced the buy back, people would snipe at it, but it makes sense mathematically. i wouldn't be shocked. >> shares today after the cystic fibrosis drug led to improvement of lung function in adults. they top more than 55% on the news. you talked about a lot of these biotechs and it's a binary trade. it will come out better or worse. >> no doubt. with the names, we talked about buying etf and it's obviously been a great trade. i like individual names and i continue to go to jpmorgan and weakness is relative in this stock because it has been a monster. human genome that made a play for. from 7 to 14 and typically i say get out at 14. there is another round for this. the two nails i continue to look
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at is sell gene and human genome. >> most people don't. when i am buying high risk, i know the downside. i have no idea. i would go the same way. with the xbi etf. they are cap weighted. 15% to one stock. they make up half the etf and if you look at the xbi, it's equal weighted. you have 40 different names and each worth about 2% or 2.5%. it matters because you are in the smaller ones. i think that there is a lot of different ways to win here, but the sector is in a leadership role because growth is endowed. they don't need a strong story to continue to grow. what they need is science. they got it in spades. >> i don't have the stomach or expertise to figure out.
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i don't want to wake up with a stock down 40 or 50%. you don't have that expertise and there is a great way to play it as well as consolidation in space. they are look to buy. >> you won't get the pop, but the tragic trial. >> next is shares of cisco wednesday after the bell. scott, what are you looking for the stock to do in terms of earnings. what is the trade you have on? >> the expected move for cisco is about 5%. in technology in general, it has been a jumble. some names have done well and some not so well. they tread water. it's an important level. 19 was resistance last year and has been supported this year. they can make money if the stock goes nowhere or up. i can buy the stock if it gets
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below 19. i would consider it a barring et. the way to do it is a put spread. the way to do it with cisco is a weekly put spread. $17 or $19 put spread for about 40 cents. the interesting thing is here is you don't want to buy the stock at $18.60. if it rallies, you make that 40 cents. >> the level of 19. >> it's a clear defined up trend and the stock has broken down and i hope it misses and you get a move down to 18. i would look to buy it again. that's a washout. 5:00, follow the show on twitter. comingly up next, noted investor
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whitney tillson reveals his next big idea. what he is betting big on when we can am back. i went to a small high school. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number.
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>> welcome back to fast money. new york's time square calls it the super bowl of value investo investors. joining us with his next big idea from the meeting is whitney tillson, cofounder and a cnbc contributor. whitney, let's get to it. what's your next big idea. >> aig. we love tainted businesses and it's hard to find one that is more tainted after a $100 billion bailout and the businesses really completely transformed to one of the most complex businesses in the world to one that is quite simple. it's easy to value and the trading at a 41% discount and buying back the bucket loads and shares and we think that they
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will -- u.s. taxpayers have no government ownership and to two years of those stocks got 50 to 100% upside in the next year or two. >> for that's the case that the government won't own it, that means 63% of the company to go in the next year or two. why would you step in front of that? >> that's the main reason. you have a motivated seller and the government is down in today's $6 billion offer. the government will continue and they are a motivated seller which is their break even. the question is we think we win either way. either the stock goes up closer to intrinsic value or the stock stays here a little bit above where the government is willing to sell in this case the company
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is buying back mountains of stock and that means while the stock may not move in the short-term, it gives that much more upside in the long-term. the company will buy back a huge discount to the book value. >> you have seen enough secondaries and they priced 165 or so million shares. $30.50 a share. do you think it went off well and are you impressed by that? people have 30.5 as the bogey. >> the fact that it was above 29 is good. it closed above the offering price were strong indicators and as the company reports strong earnings and each time they sell major assets, they have a lane and their stake in the insurance company and they have large transactions that combine over the next year.
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has each of the transactions signed off and buying back more stock and the government will be taking down their stake. i can't tell you at what point where they stop worriying about the government overhang and focus on the great underlying business that is super cheap. once that happens, this stock can move quickly. i wish i could pick that day, but i can't. >> you got a question? >> whitney mentioned about the aircraft leasing business and in particular, that's one of the crown jewels. it doesn't electric lick they are going to. the logical sale is of course if i can bring it out through an ipo. how far out do you think that is for the leasing business? >> it's hard to know. i think they made preliminary filings on it and it's a great environment to sell right now. there have been a couple of large peer transactions that have gone off at about 1.1 times
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book value. this is a good business and the business is doing well. it should not be hard for them to either sell or spin off this business. i can't give you a precise date, but they have that and selling the stake and getting liquidity and they are all in process. if the whole world starts to fall apart, that will put the brakes on this for sure. right now all systems are go. >> first of all, barnes and noble. you turn it around into a long. the partners sold a million shares. >> we are still hanging in there. very cleverly sold the write on the open when the stock popped, but keep in mind they are holding 85 or so percent of the position. they only took a small part of their stake off the table.
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we think it's conservatively worth $30 a share and they think it's worth 37 to $40 a share. we are not inclined to sell. it's about the fifth largest position and we think good things are likely to happen. we are holing on to a good sized stake. >> good to speak with you. thanks for sharing the next big ideas here. whitney is joining us from omaha. if you had to pick one insurance company, would you pick aig with an overhang whatever gets above 29 or so? >> wouldn't pick aig. maybe a met life or a different ball game. you look at a bank holding company and shed that status, maybe that can be accumulated, but for me it's way too much unknown. >> value investor to value investor. when would you say? good idea or not? >> it's interesting. the discount to book is intriguing. >> i don't own it.
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>> he will probably be right. >> dominos is unveiling a new product that many think could be a game changer. patrick doyle is up next to tell us what is now on the menu. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. and somebody asks me a question about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful.
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you can say that of the nation's largest pizza chains is taking a queue from the traders. it was sent out a year ago to answer the demand for gluten-free products. if you are a regular viewer, you will hear steve talking about it as well. our next guest is doing just that. patrick doyle is president and ceo of domino's pizza. fess up. wasn't he the inspiration for the gluten free-pizza? >> we were asking, be a father to four children, do i get a discount? where is the pay back? >> shameless. >> we can arrange for that. you talk to me on the floor and we listened to all the customers. >> wow. >> the truth is, my wife has
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se cell yack. are you getting to the point where a person with seal yack can eat this pizza. it's gluten sensitivity, but will you get them up to speck some. >> that's right. no, it is not for her and definitely is not. it's a gluten-free crust. our pizza sauce and the cheese is all gluten-free. but there is wheat in the stores so there could be traces there. we can't get to that point because it will go through the same oven. for people with gluten sensitivities, it works. with celiac it does not. we worked with the awareness to design this and we have a great solution for about the 7% of people who have sensitivities, but for celiac it will still not work. >> i read 18 million americans are gluten-sensitive.
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it doesn't sound like a big market. you can give us color as to what uptick you are anticipate and who you are catering to? >> for those people, it is very important. we are not only catering to them, but we are catering to their families. right now unless they want to order dominos for their house or competitors and make the person who has the sensitivities eat something else, they haven't been able to order from the competitors. we are the first to do it. we are addressing the 18 million people with the gluten sensitivities and their families so they can all enjoy delivered pizza. >> your stock has been a monster and you can't take that away. the last quarter was a bit gluten-free. the comps were not great. were you disappointed? >> it was right in the middle of our long-term guidance, one to
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3%. came in at 2%. expectations on the domestic side got ahead of that. it was right in where we have been guiding for the long-term and the international business continued to be incredibly strong. overall happy with the quarter. clearly the expectations on the domestic part was higher. >> always good to see you and thanks a lot for the gluten-free pies. guy only eats gluten so this will be a change. >> appreciate it. >> coming up, we are checking in on a big after hours mover. we will name names after this. the world needs more energy. where's it going to come from? ♪ that's why right here, in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's it going to do to the planet? natural gas is the cleanest conventional fuel there is.
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any sw is >> is doctor jay nuts? he is in the market buying this stock which is now 30% on earnings. why? >> because it's down 30% and i am playing the contrarian. it's exactly what we were talking about with josh brown and at the top of the show. when you expect something to move and you have already got it mapped out and everybody is there waiting for it.
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in this case these guys gave guidance that was less than expect and they mixed down revenue and stock is being taken out to the wood shed. at the 29 or $30 level, it's a good speck. same with wynn and same with rack space. i jumped into all three of those and the big mover that i haven't traded. i haven't decided when that will settle. >> thanks for the update. we have the first move tomorrow when we come back. stay tuned. ♪ [ piano chords ] [ man announcing ] what we created here. what we achieved here. what we learned here.
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