Big Bear Playbook

Tuesday, 14 Oct 2008 | 7:12 PM ET

Last week, investors were uttering Wall Street's dirtiest word, yes there was talk of a market crash. Of course, that was before a 900 point rally. Now, another word is being heard on the floor. It’s capitulation.

After a 44% deep, 12-month long decline in stocks, some are ready to call the bottom. But before you buy, remember the words of philosopher George Santayana. "Those who do not learn from history are doomed to repeat it." The average bear lasts not just one year, but 20 months.

Economists believe this global slowdown may just be picking up speed. Plus, the so-called "weapons of mass financial destruction" -- aka the 60-trillion dollar credit default swaps market-- has yet to work its way through the system.

So, don't blindly chase this bounce... Be smart and know the playbook to battle the bear.

If you’re going to play the stock market Joe Terranova recommends being stock specific and looking at company’s balance sheet very closely. Following are his two favorite picks for clear strong fundamentals.

1. Covance (CVD)

  Price   Change %Change

- Best of breed company with limited exposure to slowing economy
- Business model geared toward reducing costs within the healthcare space
- Solid growth story
- Strong balance sheet
- Big Pharma is outsourcing R&D to reduce costs.

2. Pharmaceutical Product Development (PPDI)

- Growth rate 18%
- P/E 23, DEBT less than 1%
- Clients include pharmaceutical, biotech, and medical device companies.

“These companies are the beneficiary of large health care companies outsourcing R&D drug development, “ explains Terranova. “Take a look at both.”

“He’s talking my language”, adds Pete Najarian. “It makes me interested. I think they both have potential.”

If you’re looking for a more conservative trade Karen Finerman has some ideas. “I like Johnson & Johnson and Merck ,” she says.

Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On Oct. 14, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (MSFT), (BNI), (WMT); Seymour Owns (AAPL), (F), (MER); Najarian Owns (AAPL) And (AAPL) Puts; Najarian Owns (GS) And Is Short (GS) Calls; Najarian Owns (INTC) Call Spread; Najarian Owns (MS), Owns (MS) Puts, Is Short (MS) Calls; Najarian Owns (NCC) Calls; Najarian Owns (RF) And Is Short (RF) Calls; Najarian Owns (UNG) And Is Short (UNG) Calls; Finerman Owns (GS); Finerman's Firm Owns (DNA) Call Spreads; Finerman's Firm Owns (MSFT); Finerman's Firm Is Short (SPG), (IJR), (MDY), (SPY), (IWM), (USO), (BBT), (COF) ; Finerman's Firm Owns (JNJ); Finerman's Firm Owns (MRK)

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW), (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE), (FSMXX); Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.

Charles Schwab Is A Sponsor Of "Fast Money"; GE Is The Parent Company Of CNBC

  Price   Change %Change


Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

  • Scott Wapner is host of the "Fast Money Halftime Report," which airs weekdays from 12 p.m. to 1 p.m. ET.

  • Guy Adami is a contributor on CNBC's "Fast Money." He also is managing director of stockMONSTER.com.

  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

Halftime Report