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Halftime: The Better of the 2 Motorola Spinoffs

Tuesday, 4 Jan 2011 | 1:48 PM ET

Motorola's official separation into two publicly traded companies began on Tuesday with Motorola Mobility focusing on the smartphone and TV set-top business while Motorola Solutions concentrates on the barcode scanner and two-way radio businesses.

While shares of both companies were rising through midday trading, one analyst isn't particularly excited about either name.

At current levels, Motorola Mobility's stock is fully valued at best, said James Faucette, a senior research analyst at Pacific Crest. The stock may actually be overvalued, he added, adding that there's a lot of pricing pressure on Android smartphone players going into 2011. Therefore, he thinks will be difficult to grow earnings and deliver the margins they need to.

Auto Trades, Bank Bets & What's Next for Motorola
The "Fast Money" pros share their auto trades, their outlook on banks and discuss how to play Motorola after the split. They're joined by James Faucette, senior research analyst at Pacific Crest.

Asked by CNBC's Melissa Lee if Motorola Solutions has the financial stability needed to move forward without a mobile business, Faucette said he isn't concerned. Motorola Solutions started with enough cash and have core positions to be sustainable, he said. Faucette praised the company's management, but said it will be difficult for them to grow earnings and justify their valuation.

Faucette himself recommends Qualcomm, which designs and markets wireless technologies. He thinks Qualcomm will continue to benefit from the trend toward mobile devices.

Watch the video to see the full conversation with Faucette—it starts at 1:55.

Nearly two weeks ago, "Fast Money" trader Brian Kelly said he would buy shares of Motorola Mobility as a bet on the Android platform. Steve Grasso of Stuart Frankel, another "Fast Money" trader, said he will place his bets after seeing how the two stocks perform following the official seperation.

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UNUSUAL ACTIVITY: FOCUS MEDIA

Rumors of a possible takeover sent Focus Media shares higher on Tuesday. At the same time, there has been increased options activity in the Hong Kong-based advertising agency, reports options trader Jon Najarian.

By midday trading, the Chinese company saw three times the volume at the Jan. 24 strike, noted Najarian, co-founder of optionMONSTER.com. The open interest is just 487 contracts. Najarian said he's in this name and looking to set up long call spreads.

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POPS & DROPS

Despite a strong start to the new year on Monday and a robust rally through the end of 2010, stocks struggled by midday trading on Tuesday. There were many market movers that caught the traders' attention, but they found these to be the most notable:

Pops (stocks that rose)

Carnival (CCL) popped 2%: Deutsche Bank raised the world's largest cruise line to 'buy' from 'hold.' Joe Terranova, chief market strategist at Virtus Investment Partners, thinks Carnival could continue to go higher, "defying logic."

DryShips (DRYS) popped 1.5%: The Athens, Greece-based shipper said it secured short-term contracts worth $237 million for two rigs. Najarian noted there was unusual options activity leading up to this news.

Drops (stocks that fell)

Borders (BGP) drops 9%: On Monday, the bookseller said two executives have left the company, including D. Scott Laverty, the retailer's chief information officer and Thomas D. Carney, general counsel and secretary. Borders did not give a reason for their departure.

"This is just a trainwreck," said Patty Edwards, chief investment officer at Trutina Financial. "I'm happy to watch from the sidelines."

SuperValu (SVU) dropped 7.75%: On worries that rising food costs will sap supermarket profits, Morgan Stanley on Tuesday cut the Eden Prairie, Minn.-based grocer to 'underweight.' Veracruz founder Steve Cortes, on the other hand, doesn't expect food costs to climb. He likes this stock's 3.6 percent dividend yield and said it's "very attractive" at current levels.

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CALL THE CLOSE

At the conclusion of Tuesday's brodcast, the traders guessed where they think the market could go and what trades they plan to make:

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

Cortes reiterated that he likes grocery stores right now, including SuperValu.

Edwards thinks the market could go higher. Najarian agreed, adding that there has been little reaction to the downside.

Terranova recommends health care names Abbott Laboratories,Amgen and Pfizer.

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Trader disclosure: On Jan. 4, 2011, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes is short Gold. Cortes is short Corn. Cortes is long USD vs. the Yen. Cortes is short (LVS). Cortes is short (BCS). Cortes owns (TSN). Cortes owns (EXC). Cortes is short (XRT) vs. the S&P. Cortes is short (XHB) vs. the S&P. Joe Terranova owns (GM), (C), (VRTS), (UPL), (PEP), (OXY) and (GS). Joe Terranova owns (SLW) puts. Joe Terranova owns (GLD) puts. Jon Najarian owns (AAPL), is short (AAPL) calls. Jon Najarian owns (AA), is short (AA) calls. Jon Najarian owns (BP), is short (BP) calls. Jon Najarian owns (BBY), is short (BBY) calls. Jon Najarian owns (BAC), is short (BAC) calls. Jon Najarian owns (GS), is short (GS) calls. Jon Najarian owns (GM), is short (GM) calls. Jon Najarian owns (MSFT), is short (MSFT) calls. Jon Najarian owns (V), is short (V) calls. Jon Najarian owns (CSCO), is short (CSCO) calls. Jon Najarian owns (WMT), is short (WMT) calls. Jon Najarian owns (VZ), is short (VZ) calls. Jon Najarian owns (FMCN).

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JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (CLB)

PATTY EDWARDS
Edwards owns (SPY) for clients
Edwards owns (GLD) for clients
Edwards owns (SLV) for clients
Edwards owns (AMZN) for clients
Edwards owns (SBUX) for clients
Edwards owns (MCD) for clients
Edwards owns (F) for clients
Edwards owns (TTM) for clients
Edwards owns (TSLA) for clients
Edwards owns (V) for clients
Edwards owns (JNJ) for clients
Edwards owns (AAPL) for clients
Edwards owns (MSFT) for clients
Edwards owns (GS) for clients
Edwards owns (WFC) for clients
Edwards owns (C) for clients
Edwards owns (FXI) for clients

JAMES FAUCETTE
Pacific Crest Is A Market Maker In (MMI)
Pacific Crest Is A Market Maker In (MOT)
Pacific Crest Is A Market Maker In (MSI)
Pacific Crest Is A Market Maker In (QCOM)
Pacific Crest Is A Market Maker In (AAPL)
Pacific Crest Is A Market Maker In (SWKS)
Pacific Crest Is A Market Maker In (TQNT)

DENNIS GARTMAN
Funds managed by Dennis Gartman are long gold
Funds managed by Dennis Gartman are short yen
Funds managed by Dennis Gartman are short dollars
Funds managed by Dennis Gartman are long oil
Funds managed by Dennis Gartman are long the Australian Dollar

CNBC.com with wires.

  Price   Change %Change
ABT
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AMGN
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CCL
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DRYS
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FMCNN
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MSI
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PFE
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QCOM
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SVU
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