Strategy Session with the Fast Money traders
All this M&A says to me valuations in certain sectors are attractive, says Tim Seymour. That's my takeaway.
If you think M&A will continue I’d keep a close eye on the insurance sector, counsels Joe Terranova. They’ve lagged in M&A and I think they catch up.
Also keep on eye on the potential deal between United and US Airways, Terranova adds. I'd play it short US Airways because I think these developments might force Continental to make a counter offer so they can merger with United.
Don't forget about BHP , reminds Steve Grasso. They're rumored to be looking to make an acquistion in ag. My clients think Mosaic is in play.
I don’t like speculating about where there’s smoke, I like playing where there’s fire, says Karen Finerman. In other words why play market rumor when you can buy stocks that have 'actual bids'. I think those risk-rewards are better. I’m much more interested in Casey as well as Alcon , she explains. Both companies have suitors.
3 BIG IPO'S
Also, IPO activity appears to be picking up.
U.S. private equity firms KKR and Bain Capital are preparing for initial public offerings of Toys "R" Us and NXP SemiConductors.
And Tennessee-based hospital chain HCA Inc., is preparing for re-entry into public life via an initial public offering that could raise more than $3 billion.
The timing of these clever IPOs is interesting.
Is it the beginning or is it a result of a very frothy market?
I don’t think it’s a sign of the top, says Karen Finerman. I think it’s a sign of the beginning.
I agree with Karen, says veteran trader Gary Kaminksy. I think it’s a healthy situation. And it just re-reinforces my belief that the market will continue to melt-up.
I’m concerned about the HCA IPO , counters Steve Grasso. The activity in the health care sector makes me think it’s frothy. In this case I think it's a sign of the top.
If you’re looking for a trade look at Blackstone or Morgan Stanley, says Brian Kelly. They both benefit from an increased M&A environment.
Or look at Lazard and Greenhill , reminds Karen Finerman.
HOW TO TRADE OIL?
Although oil appears to be stuck in a trading range around $80, there are plenty of single stock stories in the sector that are making big moves.
What names should you be watching?
I’d move away from high beta plays such as the USO or OIH, counsels Joe Terranova. With the front of the board under pressure I’d look at integrated names. Check out the following:
Joe's Likes Joe's Dislikes
Hess Oil Futures
With oil above $85 I’d go for the more levered plays in the oil space, says Tim Seymour. But I’m a little negative on refiners.
Tim's Likes Tim's Dislikes
THE STEEL TRADE
The steel names really under-performed this week. Is this trade dead money or should you get back in?
It seems to me US Steel is exhausted, says Tim Seymour. I don't like seeing Letter X closing lower on a day when we saw commodities rally.
I’d short AK Steel, counsels Steve Grasso. Technically steel is a little over-bought.
If you want a low beta play I’d look at Steel Dynamics, counsels Joe Terranova.
UNDER THE RADAR: VULCAN MATERIALS
Brian Kelly has spotted a stealth signal which may be bullish for housing.
In an exclusive post for CNBC, Kelly writes “One of our favorite leading economic indicators is rail-car loadings — simply put, before a product is consumed it must get to the retailer and rail is major part of that supply chain. In the first quarter, intermodal traffic experienced a large increase as inventories were replenished.”
What’s the trade?
My favorite play on the emerging trend in the construction industry is Vulcan Materials, he says, Click here for Kelly’s in-depth analysis.
GREECE FACING HIGH DRAMA THIS WEEKEND
Worries about Greece's debt problems, which have weighed on stocks for weeks, eased after a European Union source said policy-makers had reached an agreement on terms of possible emergency loans for Athens.