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Yahoo! Needs to Acquire Hulu: Analyst

Friday, 20 Aug 2010 | 7:00 PM ET

Some shareholders have asked technology companies to spend the cash on their books. It seems Intel heard the call and on Thursday, said it would purchase security software provider McAfee for $7.7 billion.

The Intel-McAfee deal sent shockwaves around the market, prompting many investors to wonder which company would splurge on a buyout next. One analyst thinks he has the answer.

Going Long
Why markets are tipping towards attractive, with Doug Kass, and Jordan Rohan, Stifel Nicolaus.

Yahoo! should buy a big stake in Hulu, said Jordan Rohan, an analyst at Stifel Nicolous. The Sunnyvale, Calif.-based company needs to make this acquisition because he thinks their growth is "cyclical" and the growth in earnings is due to cost-cutting.

"Investors don't trust the cycle and you can't do cost-cutting forever," said Rohan. "They need to do something in the world of Internet to bring them into the next boom."

The biggest opportunities are in video, mobile and social, he said. With the latter being dominated by Facebook, Rohan said Yahoo! needs to grow in the other two areas. At the same time, Rohan said advertisers love Hulu because of its popularity, so YHOO's advertising revenues would grow tremendously if they owned the Web site.

With reports earlier this week indicating that Hulu is interested in filing for an initial public offering, Rohan thinks Yahoo! should act quickly.

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TRADING M&A ACTIVITY

There has been a slew of mergers and acquisitions this week and it seems as though the trend will only continue. To determine who the next takeover candidate might be, the 'Fast Money' desk looked to the options markets.

There was "huge buying" in Akamai Technologies Friday, noted Pete Najarian, co-founder of optionMONSTER.com. The stock traded through $48 a share and continues to get "hotter and hotter," he said. Najarian owned shares of AKAM, but took everything off the table with Friday's pop.

Patty Edwards, principal of Storehouse Partners, also owns AKAM. She thought about selling shares Friday, but hasn't yet. She'll wait until Monday.

As a second derivative play, Karen Finerman of Metropolitan Capital Advisors suggests Greenhill or Goldman Sachs . Both companies are getting a lot of business thanks to the flurry of M&A activity. She thinks it's too hard to try and guess which companies are going to be acquired, so this is the best way to play the M&A action.

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FINDING SOLID RETURNS IN AN 'UNYIELDING' MARKET

Shorting stocks is the best way to generate alpha right now, said Michael Block, chief equities strategist at Phoenix Partners Group.

Generating Alpha
How to make money in a low return environment, with Michael Block, Phoenix Partners Group.

Intrepid Potash is the first name on his list of stocks to short. It caught a bid right after the Potash deal hit the tape, he said. The stock has slowly slid down and is now trading at a lower level than when the deal was announced.

Block is also looking at Symantec , a Mountain View, Calif.-based security software company. He's also seeking out "crowded value trades," like Comcast .

Watch the video to see Block's full comments.

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Trader disclosures for Aug. 20, 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

Karen Finerman
Finerman owns (AAPL)
Finerman & Finerman's firm owns (BAC)
Finerman’s firm owns (KFT)
Finerman’s firm owns (HPQ)
Finerman’s firm owns (JCG)
Finerman & Finerman's firm owns (JPM)
Finerman’s firm owns (POT)
Finerman's firm is short (IJR)
Finerman's firm is short (MDY)
Finerman's firm is short (SPY)
Finerman's firm is short (IWM)
Finerman’s firm owns S&P 500 puts
Finerman’s firm owns Russell 2000 puts

Jon Najarian
***No Disclosures***

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)

Patty Edwards
Patty Edwards owns (PM)
Patty Edwards owns (PM) for clients
Patty Edwards owns (INTC) for clients
Patty Edwards owns (HPQ) for clients
Patty Edwards owns (XOM) for clients
Patty Edwards owns (COP) for clients
Patty Edwards owns (CVX) for clients
Patty Edwards owns (AKAM) for clients
Patty Edwards owns (GE) for clients
Patty Edwards owns (AA) for clients
Patty Edwards owns (ALK) for clients
Patty Edwards owns (LEG) for clients

Doug Kass
***No Disclosures***

Jordan Rohan
Stifel, Nicolaus & Company, Inc. makes a market in the securities of Google Inc.
Stifel, Nicolaus & Company, Inc. or an affiliate managed or co-managed a public offering of securities for Google Inc. in the past 12 months.
Google Inc. is provided with investment banking services by Stifel, Nicolaus & Company, Inc. or was provided with investment banking services by Stifel Nicolaus or an affiliate within the past 12 months.
Google Inc. is a client of Stifel, Nicolaus & Company, Inc. or an affiliate or was a client of Stifel Nicolaus or an affiliate within the past 12 months.
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from Google Inc. in the next 3 months.
Stifel, Nicolaus & Company, Inc or an affiliate has received compensation for investment banking services from Google Inc. in the past 12 months

Michael Block
***No Disclosures***

Comcast seeks to acquire NBC Universal, which operates CNBC.

  Price   Change %Change
AKAM
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CMCSA
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GHL
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GS
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INTC
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IPI
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SYMC
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YHOO
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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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