On "Grade the Trade" we test the trading prowess of some of the most promising business students in the nation. This week they’re from Penn State, the University of Illinois, Ohio State and Washington University.
Get ready – school’s in session.
Our business school students have been given the questions in advance, and have 30 seconds to answer.
Grad #1: Tom from the Smeal College of Business at Penn State
Tom is a surface warfare officer in the U.S. Navy and he’s also Director of Investor Relations for the Nittany Lion Fund.
Here’s the scenario: The strong employment report proves to be the trend and the economy rebounds in the second half of the year to above-average growth. This, however, causes the Federal Reserve to raise rates by a quarter percentage point before the end of the year. What are you buying, what are you selling as this scenario unfolds?
Tom says he’s long the brokers and is buying names such as Goldman Sachs (GS) and Bear Stearns (BSC). He’s selling utilities such as Exelon (EXC), and Chesapeake (CHK) and he’s also selling consumer discretionary stocks.
Guy Adami gives Tom an "A".
Grad #2: TJ from the College of Business at the University of Illinois Urbana-Champaign
TJ worked at a hedge fund in New York and has appeared in BusinessWeek and on CNN.
Here’s the scenario: A glitch is found in the new iPhone, so Apple (AAPL) pushes out the release date for the device to August 20 from June 20. What are you buying, what are you selling as this scenario unfolds?
TJ is selling Apple (AAPL) and AT&T (T) as well as iShares MSCI Taiwan Index (EWT) because iPhone manufacturers are based out of Taiwan. He is buying iPhone competitors such as Samsung.
Pete Najarian gives TJ a “B” because he thinks the scenario presents better longs.
Grad #3: Dimitar from the Fisher College of Business at Ohio State
Dimitar represented his school at the Rotman International Trading Competition in 2007.
Here’s the scenario: U.S. auto sales have only increased once in 2007, in March. As gas prices plateau and the 2008 models roll out, U.S. automakers start to gain traction. What are you buying, what are you selling as this scenario unfolds?
Dimitar says he’s buying auto suppliers such as Delphi (DPHIQ) domestically, as well as auto suppliers abroad. He’s also buying General Motors (GM).
Karen Finerman gives Dimitar an “A-“
Grad #4: Emma from the Olin School of Business at Washington University in St. Louis
Emma is a graduate representative to the Washington University Board of Trustees and -– a professional harpist.
Here’s the scenario: Wal-Mart (WMT) fires Lee Scott and installs Allen Questrom of J.C. Penney (JCP), who focuses on retail and soft goods. What are you buying, what are you selling as this scenario unfolds?
Emma is buying Wal-Mart and licensing firms such as Iconix Brands (ICON) and Jones Apparel (JNY). She’s selling JC Penney, as well as Target (TGT), Kohl’s (KSS) and TJ Max (TJX) believing they would get squeezed.
Jeff Macke gives Emma “B+” but says stay long Target.
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Trader disclosure: On June 1, 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 (MU), (BTU), (AAPL),(KR), (SWY) Macke Owns (SWY) Finerman Owns (AAPL), (CAT), (HOV) Finerman's Firm Owns (DJ), (TOL), (USG), (WMT), (BJ); S&P Puts, Finerman's Firm & Finerman Own (TYC), (HD), (FLS)