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Week Ahead: Sell the Leaders or Buy High?

Friday, 12 Apr 2013 | 1:09 PM ET
Kick the Winners to the Curb?
Friday, 12 Apr 2013 | 12:05 PM ET
Sell what's working? Thomas Digenan, UBS Global Asset Management, explains why now may be the time.

On Friday the Fast Money pros were wondering where money would flow next, as the stock market pulled back from all time highs.

Although both the S&P 500 and Dow Jones Industrial Average slipped on Friday, the decline came after the best 4-day run of the year.

What should you expect next week?

Trader Stephen Weiss, managing partner at Short Hills Capital, is worried by the sharp advance in consumer staples. In the past 3 months the sector has advanced more than 13%. "The multiples on these stock are getting ridiculous," he said.

His comments suggest that next week, Weiss wouldn't be surprised to see this area of the market pullback. However, that's not to say he'd go short broadly. "Short the S&P at your own peril," he said. "It took the market 5 years to get back to these levels. The foundation of the rally, broadly, looks firm." (Read More: Fast Pros Reveal Favorite Dividend Yielding Stocks)


Thomas Digenan UBS Global Asset Management Head of U.S. Equities thinks it's time to sell leaders and buy laggards. He expects to see a rotation in the market. He agrees with Weiss that consumer staples are expensive and probably overbought. "Consumer staples have low growth expectations and high multiples – that doesn't seem appealing to me," he said. He'd avoid them as well as utilities – another sector that's attracted buyers. Instead he prefers laggards such as semiconductors and US multinationals.

Paul Taylor | Stone | Getty Images

Joe Terranova, chief market strategist for Virtus sees the market differently. He sees a fundamental catalyst for consumer staples and utilities too. That is, the recent advance has been generated by a quest for yield and as long as interest rates remain low, he thinks these sectors attract new buyers. He says stick with what's working – in other words, buy the leaders. (Read More: Do Bulls Have History on Their Side?)

Mike Murphy, founder and managing partner at Rosecliff Capital shares Terranova's outlook. Price is truth and the truth is that utilities and consumer staples are performing well. "I too think you have to stick with what's working; that is buy high and sell higher.

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Trader disclosure: On April 12, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders; Steve Weiss is long SODA; Steve Weiss is long BAC; Steve Weiss is long C; Steve Weiss is long JNJ; Steve Weiss is long ORCL; Steve Weiss is short BHP; Mike Murphy is long AAPL; Mike Murphy is long JPM; Mike Murphy is long IP; Mike Murphy is long LEN; Jon Najarian is long GRPN CALLS; Jon Najarian is long WAC; Jon Najarian is long CLHX; Jon Najarian is long LPS; Jon Najarian is long NSM; Jon Najarian sold puts in GLD; Jon Najarian sold puts in JPM; Jon Najarian sold puts in JCP; Jon Najarian sold puts in MSFT; Joe Terranova is long VRTS; Joe Terranova is long SJM; Joe Terranova is long AXP; Joe Terranova is long IBM; Joe Terranova is long SPLK; Joe Terranova is long PANW; Joe Terranova is long KORS; Joe Terranova is long GS; Joe Terranova is long BBG; Joe Terranova is long TUMI; Joe Terranova is long BK; Joe Terranova is long SWN; Joe Terranova is short Mini SP Futures; Joe Terranova is long Nat Gas Futures



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