Halftime: Goldman Pulling the Rug out from Under Tech Bulls?
Again, on Friday pro traders were talking about whether the S&P could make further gains if the technology sector stalled out.
Those concerns were largely triggered by a note from Goldman Sachs which smacked chip stocks with a downgrade of the entire semiconductor sector to ‘Cautious’ from ‘Neutral’ citing a likely glut in processors and increased competition.
Goldman also said it expects shipments of chips to slow over the course of the year -- they believe processors out-shipped PCs by about 10 percent in the first quarter of 2011.
Looking at individual names in the space, Goldman singled out 3 stocks. They downgraded chip titan Intel to ‘Sell.’ The firm also downgraded Applied Materials and KLA-Tencor by a notch each on looming excess supplies. Take a look:
|Applied Materials||“Neutral” From “Buy”||$14 From $16|
|Intel||“Sell” From “Neutral”||$20 From $21|
|KLA-Tencor||“Sell” From “Neutral”||$37 From $43|
Considering Intel shares have surged 18% over the past month, is Goldman right - is the space overbought?
Instant Insights with the Fast Money traders
Trader Guy Adami thinks Goldman’s call is timely and suggest recent gains in Intel may have been a one-off. “At $23.50 I’d take money off the table,” he counsels and if you think the S&P will top out around 1350, maybe think about going short.”
Trader Patty Edwards reminds the desk that “Intel has a fabulous dividend yield.” Although she concedes that there will probably be no growth in the stock for the next 3-6 months the dividend yield is comparable to the yield on the 10-year, reason enough to find it attractive.
Trader Steve Cortes also thinks Intel is attractive for its dividend yield. And he thinks Goldman may be remiss for throwing out the entire chip sector. Cortes suggests looking at each name individually.
Steve Grasso isn’t having any of it. “I wouldn’t be in the chip space,” he says. And he calls anyone buying tech for dividends “lost souls.” If you want to play tech Grasso also says “buy Apple and close your eyes.”
What do you think? We want to know!
TOPPING THE TAPE: FOOD
Food glorious food! Both McDonald's and Yum! hit all time highs on Thursday. Also, Pepsiand General Mills hit 52 week highs.
What’s the trade?
Trader Patty Edwards suggests long McDonald’s. "I think it’s going higher," she says " as people trade down."
Guy Adami agrees with Edwards. "No reason to get out of McDonald’s or Yum! I’d own both, here," he says.
Steve Cortes is bullish on Kraft and Kellogg . He points to recent action in food commodities which are ways off their highs for the year. "Despite the scary headlines, input food prices should go lower," he speculates, and that would be positive for the names mentioned above.
Steve Grasso is on the side side: "If you feel the S&P is coming in – I wouldn’t aggressively buy these stocks at 52-week highs," he says.
ALPHA NATURAL RESOURCES
The traders have Alpha Natural Resources on the radar Thursday after an independent commission concluded that Massey Energy was responsible for the “Upper Big Branch” coal mine explosion that killed 29. As you may remember Massey agreed to be acquired by Alpha.
What’s the trade?
Guy Adami suggests keeping ANR on the radar. Long-term he's bullish and expects all the negatives to soon be priced into the stock. "Not today, but I think there will soon be an opportunity in ANR - around $48." And Adami also suggests looking at Walter Energy.
Steve Grasso is also bullish long-term because coal is in short supply. He's a buyer of dips.
BIRTH OF A NEW BUBBLE?
It seems everyone on Wall Street is talking about the LinkedIn IPO - shares surged 95% shortly after debuting this morning, giving the professional social networking company a market cap of about $9 billion.
To put that valuation in context, Linkedin earned about $15 million last year and expects to lose money this year as it invests in the business.
Is this the birth of a new tech bubble?
Get the latest from Paul Bard of Renaissance Capital who says “this is viewed as a must own stock for many money managers”.
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Trader disclosure: On May 19, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Cortes owns (SO), (EXC), (KFT), (K), (GS), (MS) and (TGT). Steve Cortes is short Nikkei. Steve Cortes is Short EEM vs. S&P long. Steve Cortes is Short Aussie Dollar. Steve Cortes is Short British Pound. Guy Adami owns (AGU), (C), (GS), (MSFT), (NUE) and (BTU). Patty Edwards is long canadian dollar. Steve Grasso owns (AKS), (AMD), (ASTM), (BA), (BAC), (C), (D), (HOV), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE) and (PRST).
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