The first contestant is Wes from the Kelley School of Business at Indiana University.
The scenario: The unemployment rate jumps from its six-year low of 4.4 percent in the next year to 6.5 percent as economic growth slows more than expected and inflation remains high. What stocks/ETFs are you selling and what are you buying?
Wes’ answer: “I’d start off with a short of Starbucks (SBUX). It’s going to be hard to sell $4 coffee. Next I want to move into a Labor Ready (LRW) short. They have exposure to construction market as a temporary staffing company. We also have Countrywide Financial (CFC). The subprime meltdown ill spread throughout the mortgages. For the long, lets go with Colgate (CL), a stable company with a nice dividend, and people, I hope, will still buy toothpaste. Also go long Cash America (CSH). This is a pawn shop business which should do well when there’s stagflation.”
Guy is grading Wes’ trade. He says it’s “hot” and he’s giving the Hoosier an A-.
Next up is Steve from the Villanova Business School.
The scenario: Apple's iPhone proves to be even more popular than the iPod and despite being released in June, becomes the top selling phone of 2007. What stocks/ETFs are you selling and what are you buying?
Steve’s answer: “The first stock I’d buy is AT&T (T) because Cingular has the exclusive rights to sell the iPhone in the U.S. It’ll only be sold in Cingular stores so Cingular’s largest agent, RadioShack (RSH), could get shut out and I’d be selling that stock. The buzz on the iPhone will spark consumer demand for new phones and handsets, which will benefit Nokia (NOK) and Motorola (MOT) in a ‘rising tide lift all ships’ scenario. And finally with the iPod jacks becoming standard in new cars, I’d sell Sirius (SIRI) which would see its sales growth slow.”
“Great job,” Jon says, “especially with nailing AT&T right at the top.” An A+ for Steve.
Justin from MIT's Sloan School of Business is our third contestant.
The scenario: The dollar extends its loss to a 5-year low against the euro and yen as China begins selling some of its dollar assets. What stocks/ETFs are you selling and what are you buying?
Justin’s answer: “...I think you’ll do much better in equities here. I’d avoid obvious names like Procter & Gamble (PG), Exxon Mobil (XOM) and Altria (MO). These are great companies but they are expert hedgers and they’re getting even better. More importantly … Additionally, there is a lot of idiosyncratic risk in purchasing individual securities here.” Justin likes ADRD which is made up of developed countries ADRs. “ADRD will do expectionally well if the U.S. dollar continues to decline.”
Jeff gives him an A-, but says that just because the trade is crowded, doesn’t necessarily mean it’s wrong. He would be long some of the multinationals in this scenario.
Our final contestant is Kerrisha from USC's Marshall School of Business.
The scenario: Viacom wins it's $1 billion lawsuit against Google's video-sharing site YouTube. Google is forced to pay the $1 billion in damages and fees on all future use of Viacom properties. What stocks/ETFs are you selling and what are you buying?
Kerrisha’s answer: “If Viacom (VIA) wins, I like the major content producers and distributors. In particular, I like Sony (SNE), Lion’s Gate (LGF), and Apple (AAPL). I like Sony and Lion’s Gate for their access to large content libraries, and I like Apple beccause it’s the premiere electronic distribution channel. I would sell the internet content providers C Net (CNET) and Ciena Corp. (CIEN), because, at a minimum, they are going to have increased costs related to copyright infringement.”
A good answer, but not good enough for an A, Tim says. He’s giving it a B+ because Kerrisha left off some of the mainstream media companies like Gannett (GCI), Tribune (TRB), CBS (CBS) and News Corp. (NWS). They would all be huge benefactors of this precedent being set and you can’t leave those off this trade, he says.
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On APR 13 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:
Najarian Owns (AAPL), (BRCM), (BNI), (EBAY), (EMC), (FAST), (MRK), (MON), (MOS), (NDAQ), (POT), (STM), (STP), (WFT), (PKI), (HAL), (TRA), (T)
Strazzini Owns (SNDK), (STM), (USG), (WMT), (YHOO)
For the record:
Najarian Owned (STP) On 3/9/07
GE Is The Parent Company Of CNBC