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Intel-McAfee Deal a Smart Move: Analyst

Thursday, 19 Aug 2010 | 1:49 PM ET

Chip maker Intel said it would buy security technology firm McAfeefor $7.68 billion in an effort to make security technology a strategic focus.

Intel said it would pay $48 per share in cash for McAfee in its biggest acquisition ever. The price is a 60 percent premium to McAfee's Wednesday closing price. McAfee would become a wholly owned subsidiary of Intel's software and services group.

In midday trading Thursday, shares of Intel dropped sharply. The market may not be thrilled about Intel's acquisition, but on the "Fast Money Halftime Report," one analyst called it a smart move.

"Investors have undervalued McAfee and Intel took the opportunity to acquire it at a low entry point," said Carlos Guillen, a top semiconductor analyst at Wall Street Strategies, adding the acquisition enables Intel to now better serve its own processors with McAfee's products and also grow in "cloud computing."

Intel is undervalued, said Guillen. He recommends buying shares of the Santa Clara, Calif.-based company on this weakness.

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THE FEAR TRADE BACK ON

Gold advanced and the 2-Year Treasury Yield hit a record low in midday trading Thursday, as investors ran for cover.

Fast Money Midday Market Check
The Fast Money traders share their market insight and midday trading advice.

Steve Cortes, founder of Veracruz, doesn't like the Treasury trade. Nevertheless, he admits it is "astounding" and persistent. He is fading it and said the best, most consistent way to do so is through crude.

Guy Adami, managing director of Drakon Capital, argued that crude inventories are "extraordinarily bearish." Based on the fundamentals, crude looks vulnerable, Adami said. When looking at the fundamentals of crude alone, Cortes agreed that it doesn't look good, but said most of that has already been priced in. Besides, demand and how the EMs are trading in Asia and Latin America show that other regions are outpacing the US. For that reason, he thinks crude is priced too low.

From the floor, Steve Grasso of Stuart Frankel said the mood is very negative. The poor microdata has been trumped by earnings data, but on Friday, there won't be news on either front. So he wonders what director the market will head: Higher or lower? Below the 1088 level in the S&P, he said investors should be negative. He thinks the next stop is the 1065 level. Note that we traded up to the 1130 level, but couldn't get past it, he said. Right now, he thinks investors should bottom fish because those who bought stocks above the 1100 level will likely add to their positions now.

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FINANCIALS GET HAMMERED

Financials and commodities were clobbered in midday trading Thursday, as investors ratchet down their risk.

There are a lot of fears at play, said Guy Adami, managing director of Drakon Capital. He thinks the banks have downside risk. The only play that makes sense in the financial space is Bank of America , he said, but only for the long-term.

Steve Cortes, founder of Veracruz, is short BAC. If BAC breaks $13 a share, he said there's not much that will stop it from going down further.

Cortes is short BAC and banks overall because of housing. He said there is a "lingering housing exposure" that is important to consider. There is also a yield curve for banks, where they could take out 0% money and go out and buy tenures to get on the long-end of the curve at 3% or more. Now, that profit-making leg is no longer there for these financial institutions, he said.

Patty Edwards, principal at Storehouse Partners, said there is a lot of concern over the new financial regulatory reform laws. She is not interested in this sector.

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TRADING AGRICULTURE

Wheat rallied Thursday following a report indicating that drought-stricken Russia may boost grain imports.

Steve Cortes, founder of Veracruz, likes the agriculture trade. With cattle having hit a new high, he recommends buying Smithfield Foods .

Guy Adami, managing director of Drakon Capital, is concerned that rising wheat prices may hurt General Mills .

Steve Grasso of Stuart Frankel recommends taking profits in the ag space. Sell into strength, he said.

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CALL TO THE FLOOR

Aqua America CEO on the Record
Nicholas DeBenedictis, CEO of Aqua America, goes on the record with the Fast Money traders.

Nick Debenedictis, CEO of Aqua America , appeared on Thursday's Fast Money Halftime Report to talk about his water utilities company.

Watch the video to see the full interview.

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CALL THE CLOSE

"Hedge them if you got them," said Patty Edwards, principal at Storehouse Partners.

"Buy agriculture," said Steve Cortes, founder of Veracruz.

"it's against my better judgement, but I say buy them here," said Steve Grasso of Stuart Frankel. "I think we've held. I think it's overdone to the sell side. I think you're OK to buy them."

Guy Adami, managing director of Drakon Capital, thinks the market could close around the 1074 level in the S&P, but is not bullish in the long-term.

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Trader discloures for Aug. 19, 2010:

Guy Adami
Adami owns (AGU)
Adami owns (BTU)
Adami owns (NUE)
Adami owns (C)
Adami owns (GS)
Adami owns (INTC)
Adami owns (MSFT)
Adami’s wife works at Merck

Patty Edwards
Edwards owns (INTC) for clients
Edwards owns (GLD) for clients
Edwards owns (LQD) for clients
Edwards owns (JNK) for clients
Edwards owns (AA) for clients
Edwards owns (FCX) for clients
Edwards owns (GOOG) for clients
Edwards owns (RIMM) for clients
Edwards owns (NOK) for clients
Edwards owns (CSCO) for clients
Edwards owns (HPQ) for clients
Edwards owns (VXX) for clients

Steve Grasso
Grasso owns (ASTM)
Grasso owns (BA)
Grasso owns (BAC)
Grasso owns (C)
Grasso owns (CSCO)
Grasso owns (JPM)
Grasso owns (LPX)
Grasso owns (MO)
Grasso owns (MOT)
Grasso owns (NDAQ)
Grasso owns (PFE)
Grasso owns (PRST)

Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

Steve Cortes
Cortes is long (FCX)
Cortes is long the S&P 500
Cortes is long Canadian Dollars
Cortes is long Australian Dollars
Cortes is long Crude oil
Cortes is short (XLF)
Cortes is short the Japanese Yen
Cortes is short the British Pound
Cortes is short U.S. Treasuries

Carlos Guillen
***No Disclosures***

Aaron Rakers
***No Disclosures***

—Reuters contributed to this story

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