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Pros Trade Market Moving Developments at JC Penney, Talbots

Wednesday, 7 Dec 2011 | 12:50 PM ET

Developments in retail are coming at a fast and furious pace. What must you know about JCPenney and Talbots and how should you trade the changes?

JC Penney

On Wednesday J.C. Penney said it had taken a 16.6% percent stake in Martha Stewart Living - a deal that will bring a unique line of Martha Stewart products to J.C. Penney stores.

In addition JC Penney will build mini-stores under the Martha Steward brand. The company’s new CEO Ron Johnson called the deal "a key centerpiece" in the company's transformation. (As you may know, Johnson is celebrated for created the world renowned Apple stores.)

What’s the trade?

”Ron Johnson is a retail genius,” says Steve Cortes. “He probably knows what he’s doing but I wouldn’t buy the stock on this news. However, I wouldn’t bet against it, either.”

Looking at retail broadly, Cortes says “I’m short the XRT against the S&P. I’m betting on disappointment into Christmas. Last year we saw retailers badly underperform into Christmas.”

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> NEW SLIDESHOW: Slo-o-o-w Money, 10 Top Stocks for the Long-Term Investor

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Talbots

Private equity firm Sycamore Partners, which owns 9.9 percent of retailer Talbots , offered to buy the ailing women's retailer for about $212 million.

Shopping List Amid Uncertainty
The Fast Money crew discuss what's on their shopping lists; Dennis Gartman, the Gartman Letter shares his outlook on gold; and the Fast Money traders share their next trades on Talbots and Dollar General.

The $3-a-share cash offer values the women's clothing retailer at a 92 percent premium to the stock's Tuesday close of $1.56. Sycamore said it might consider increasing its offer if it had access to Talbots' private financial records.

What’s the trade?

”This is a chart I’d sell into versus buy into,” says Steve Grasso.

”Karen Finerman told me there’s no reason to chase this name,” adds Pete Najarian. "I'm listening to Karen."


Dollar General

Top Deutsche analyst Charles Grom upgraded Dollar General and raised his price target saying that the state of the low-end consumer and a “relatively benign” Wal-Mart could be positive factors for the discount chain store.

What else must you know?

Check out our exclusive conversation with Grom. Watch the video now!

* You'll find Grom about 12 minutes into the video clip


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Trader disclosure: On Dec 7, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL; Najarian is long C; Najarian is long JPM calls; Najarian is long WFC calls; Najarian is long MSFT; Najarian is long INTC; Najarian is long YHOO; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Lindzon is long LPSN; Lindzon is long AMZN; Lindzon is long INTU; Lindzon is long ARBA; Cortes is long Treasuries; Cortes is long INTC; Cortes is long KR; Cortes is long TSN; Cortes is short EUR; Cortes is short DB; Cortes is short XRT vs. S&P long

For Steve Grasso
Stuart Frankel & Co and it’s partners own CSCO
Stuart Frankel & Co and it’s partners own CUBA
Stuart Frankel & Co and it’s partners own GERN
Stuart Frankel & Co and it’s partners own HPQ
Stuart Frankel & Co and it’s partners own HSP
Stuart Frankel & Co and it’s partners own HSPO
Stuart Frankel & Co and it’s partners own MET
Stuart Frankel & Co and it’s partners own MSFT
Stuart Frankel & Co and it’s partners own MU
Stuart Frankel & Co and it’s partners own NYX
Stuart Frankel & Co and it’s partners own PRST
Stuart Frankel & Co and it’s partners own UAL
Stuart Frankel & Co and it’s partners own XRX

For Charles Grom
DOLLAR GENERAL (DG) is an investment banking client of DBSI and has received non-investment banking related compensation from this company in the past year.

For Alexandra Lebenthal
Lebenthal & Co has positions in CA municipal bonds

For Gene Munster
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: ACOM, DANG, DRIV, MOBI, YNDX, YOKU

Other material conflicts of interest for Gene Munster or Piper Jaffray regarding companies in my universe for which I am aware include: ACOM, DANG, MOBI, YNDX, YOKU: underwriting

Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: ACOM, DRIV

Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis:

AAPL, ACOM, AMZN, BIDU, DANG, DRIV, EBAY, GOOG, IACI, LOGM, MCHX, MELI, MOBI, PRTS, RLOC, SINA, SOHU, VCLK, WWWW, YHOO, YNDX, YOKU


CNBC.com with wires.

  Price   Change %Change
DG
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JCP
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MSO
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SPDR SPRET
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