Oil Takes a Breather - Fast Money Recap (5/22/08)

Recap of CNBC's Fast Money, Thursday May 22.

Oil Backs Down: Exxon Mobil (XOM), Petrobras (PBR), PowerShares DB Commodity Index (DBC)

With oil heading back down to $130, Jeff Macke would not call a top in oil and thinks the commodity will resume its upward climb. Guy Adami thinks investors will be afraid of holding long positions in oil over the long weekend, and while he doesn’t see a large number of shorts, he expects selling. Tim Seymour observes U.S. consumption is down, there are internal problems with XOM and the chart is unstable. John Najarian says a top can be called when a stock fails to rise on good news, and notes oil was down in spite of predictions of a further rise. He discussed aggressive put activity in DBC which is 60% comprised of oil. However, given the fact that oil is mainly driven by rising demand, he would not short oil.

Not Affordable: Ford (F) and UAL (UAUA), AMR (AMR)

Ford says oil prices will prevent it from making a profit for 2009, and Guy Adami is no longer bullish on the company, although he thinks the long-term story for Ford is still good. With rising commodities, Ford also suffers from high steel prices, Tim Seymour observed. Macke concluded Ford is selling the wrong products at the wrong time and Najarian agrees that consumers simply aren’t interested in SUVs right now. AMA, on the other hand, wants to increase its profits by charging $15 for the first checked bag. Adami called the airline stocks “trading vehicles” and says it is possible to be long AMA with a stop at a close below $6. Macke would short these stocks on rallies.

High-Powered Merger: NRG Energy (NRG), Calpine (CPN), Dynegy (DYN)

On news of NRG’s $9.1 billion bid for Calpine, Najarian thinks investors can buy both companies, and Tim Seymour thinks the news is great for CPN, which is likely to receive other offers. He thinks DYN is also worth watching. Macke thinks NRG is a great investment for nuclear power bulls, since the company is trying to get a nuclear power plant built in the U.S.

The Game Stops Here: GameStop (GME)

GME fell on good earnings. Macke said the gaming industry can’t grow at a 25% pace forever, and he would sell. Adami says gaming companies aren’t producing anything really new except for the wii fit. Those who want to buy should wait do so before the Consumer Electronics Show next January, Jon Najarian said.

Retail Rise: Limited Brands (LTD), Children’s Place (PLCE)

Both LTD and PLCE rose after surprisingly good quarters and Macke said expectations for retailers are “rock-bottom.” He added shorts were hurt by the 16% move in PLCE. While other retailers may be bought, they should be thought of as “trading vehicles.”

Dick’s Sporting Goods (DKS) Fumbles

After DKS took a hit, CEO Ed Stack explained the causes are rising oil prices and the skittish consumer. He expects DKS will continue to perform because of its exclusive products and stable brands like Nike and Under Armour. While very specialized areas such as camping and fishing are hurting, essential areas like children’s sports are doing well.

Oil’s Biggest Losers: PetroChina (PTR), Ruth’s Chris Steakhouse (RUTH), Morton’s (MRT), Hertz (HTZ)

on Najarian thinks all bets are off for the gambling industry, which will lose big on oil’s rise as consumers rethink their trips to Vegas. He would also avoid airline stocks. Seymour says PTR, since it produces a refined product which has to be subsidized, will feel the pain as oil goes up. Guy Adami doesn’t see why people would drive to RUTH or MRT when the trip may cost as much as the steaks. Jeff Macke agrees that the summer travel season will be “abysmal” and adds if no one is going to fly, they are not going to rent cars. He is bearish on HTZ.

OPEC’s Grasp

Hedge fund and private equity consultant John d’Agostino told investors that Saudi Arabia, which has its own investors to worry about, may not act like an ally at the pump. Only a global slowdown and significant development of alternative energy resources can bring down the price. OPEC is still the main producer of oil and will have a tight grasp on production and prices for the foreseeable future.

Emerging Surging Markets: Dryships (DRYS), Eagle Bulk Shippers (EGLE), Genesee and Wyoming (GWR)

In spite of oil’s rise, emerging markets keep growing with shipping and rails leading the way. Seymour would look at GWR and DRYS. Adami would invest in steel as China constructs brand new cities. Najarian adds the Baltic dry shipping rates are increasing, but Macke can’t make sense of the shippers’ pricing model because cheaper retailers like Wal-Mart won’t be able to buy shipped goods if prices rise.

Trader Radar: Micron Technologies (MU) traded on unusual volume on Thursday.

Stay at Home or Get Away: Wal-Mart (WMT), Disney (DIS), Priceline.com (PCLN), Marriott (MAR)

Exotic far away places may be lacking tourists this summer as consumers stay closer to home. Macke would buy WMT and DIS on this trend. Adami would buy PCLN, but on a 5 million share volume day when the stock flushes to the downside. Seymour says MAR in Asia and Eastern Europe is attracting upscale customers and Najarian would buy cruise lines on dips because they are able to pass on high energy costs.

Final Trade: Macke: U.S. Oil Fund (USO), Adami: AMR

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Comments

[var]

Ford... Ford.... Ford.... They are so out of touch with the consumer it blows my mind. Finally in 07-08 they are now making cars that at least are not an embarrassment to drive. The cars look quite nice. However, they need to be on the same bang wagon as GM with making everything Flexfuel. Its only an additional $1100 and could save a family $2000/yr in fuel. If they want to sell some cars one good marketing idea would be to offer free flex fuel conversions (its mostly labor). Sales would sky-rocket... and I would purchase that Ford Edge and drop my long-term affair with Honda/Acura.

[dsrtwriter]

I agree.I have a couple of Mercedes, and rented a Ford Fusion "SEL" this weekend. I was impressed with the style, fit,finish and driveability.The Edge also looks unique and quality.

I think flex fuel/hybrids would be a great idea for Ford.Japanese cars are reliable, but Ford has an "edge" (pun intended) now in styling and getting closer in quality finish to the Japanese competition.

[investorslive]

SINO - DRYS
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