Big Bear Playbook
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)
- 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.
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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.
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