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Pro Traders: 4 Stock Mini-Basket & Other Inflation Plays

The S&P traded lower on Tuesday, with chatter on the Street suggesting that inflation was quickly creeping back into the picture.

The Fast Money traders were among the many investors examining the latest data in an attempt to determine just how serious inflation may become.

Here’s what they’re looking at:
- A gauge of manufacturing in New York State climbed to its highest level in eight months in February.
- U.S. import prices jumped at nearly double the forecast rate.
- In China price pressures, excluding food, were their strongest in at least a decade.
- Spiking inflation in the UK hit 4 percent —double the Bank of England's target.

What should you make of these data points? How should you position now?

Instant Insights with the Fast Money traders

Jon Najarian isn’t terribly concerned by the data or surprised by Tuesday’s profit taking. He considers it more of a healthy sign. However, it you’re concerned by the potential of inflation he suggests gaming energy. “I like Transocean and Diamond Offhshore as a bet on increased demand. Also as derivative plays I like Schlumberger and Halliburn – that’s my 4 stock mini-basket,” he says.

Steve Cortes agrees that the play is long energy. But for him it’s not just an inflation play. He also thinks unrest in Iran is bullish for oil. (As you may know, clashes broke out on the streets of Tehran between security forces and protesters when thousands of opposition supporters rallied in sympathy for popular uprisings in Egypt and Tunisia on Monday. Click here for more on the spreading unrest.)

“It’s an important and wealthy country," says Cortes. " I covered my short in oil. I fear Iran. I'm not involved in oil right now but if I were I'd be involved on the long side."

Brian Kelly is inclined to play inflation with a long position in gold . He reminds the desk that Wall Street whales such as George Soros remain bullish. And he believes that China may be putting money to work in gold. “I’m long gold with a price target of $1500,” he says.

Patty Edwards suggsets gaming inflation with industrial metals. I’m long platinum and silver, she says. “Inflation is a sign that economic activity is heating up and they’re both used in economic activity.”

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DEUTSCHE BOERSE /NYSE EURONEXT

It’s hardly unexpected but on Tuesday the Deutsche Borse formally announced its intentions to buy the NYSE. Meanwhile, the Fast traders were closely watching the patterns in the charts of exchange stocks. Over the past year the NYSE EuroNext has pretty much moved in tandem with the Nasdaq. Take a look:

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Will the deal move the needle?

What’s the trade?

I think the trade is long brokers such as Jefferies or Morgan Stanley, says Brian Kelly because exchanges are still struggling with some of the dark pools.

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CALL OF THE DAY: NETFLIX

In Fast Money’s Call Of The Day the desk looks at call made by Morgan Stanley. The firm downgraded Netflix to 'Equal Weight' from 'Overweight' citing valuations.

But just one day ago Caris & Co increased its price target on the company to $316 from $224, saying growing revenues will offset increasing costs of goods.

What’s the trade?

I don't think the Neflix story is over but I’d rather own Akamai or F5 ; companies that provide the technology used by Netflix, says Patty Edwards.

You can also look at L3 , says Jon Najarian.




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Trader disclosure: On Feb 15, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian owns (BP), is short (BP) calls; Jon Najarian owns (GS), is short (GS) calls; Jon Najarian owns (AMD), is short (AMD) calls; Jon Najarian owns (WMT), is short (WMT) calls; Jon Najarian owns (JNPR), is short (JNPR) calls; Jon Najarian owns (X), is short (X) calls; Jon Najarian owns (RIMM), is short (RIMM) calls; Jon Najarian owns (CBOE), is short (CBOE) calls; Jon Najarian owns (CME), is short (CME) calls; Jon Najarian owns (NYX), is short (NYX) calls; Jon Najarian owns (NWL) calls; Jon Najarian owns (CHS) calls; Cortes is short (LVS); Cortes is short the Australian Dollar; Cortes is short Nasdaq futures; Cortes is short (CBOE); Cortes owns (SVU); Cortes owns (SWY); Cortes owns (PM); Cortes owns (MO); Cortes owns (K)

Comcast is the parent company of CNBC
Comcast is the parent company of NBCUniversal
GE owns 49% of NBCUniversal
GE owns 49% of CNBC

For Brian Kelly
Accounts Managed by Kanundrum Capital Own (FCX)
Accounts Managed by Kanundrum Capital Own (IAU)
Accounts Managed by Kanundrum Capital Own (SLV)
Accounts Managed by Kanundrum Capital Own (AMD)
Accounts Managed by Kanundrum Capital Own (EBAY)
Accounts Managed by Kanundrum Capital Own (BAC)
Accounts Managed by Kanundrum Capital Own (INTC)
Accounts Managed by Kanundrum Capital Own (DAL)
Accounts Managed by Kanundrum Capital Own (UAL)
Accounts Managed by Kanundrum Capital Own (MS)
Accounts Managed by Kanundrum Capital Own (DBA)
Accounts Managed by Kanundrum Capital Own (JJG)
Accounts Managed by Kanundrum Capital Own The U.S. Dollar
Accounts Managed by Kanundrum Capital Are Short The Yen

For Patty Edwards
Edwards owns (SPY) for clients
Edwards owns (XLB) for clients
Edwards owns (PGM) for clients
Edwards owns (GLD) for clients
Edwards owns (SLV) for clients
Edwards owns (AMZN) for clients
Edwards owns (V) for clients
Edwards owns (JNJ) for clients
Edwards owns (AAPL) for clients
Edwards owns (VZ) for clients
Edwards owns (MSFT) for clients
Edwards owns (C) for clients
Edwards owns (GE) for clients
Edwards owns (TGT) for clients
Edwards owns (CME) for clients
Edwards owns (FXI) for clients




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