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Alcoa Harbinger of Strength Elsewhere: Najarian

Monday, 9 Jul 2012 | 6:16 PM ET

Can you extrapolate Alcoa results to other areas of the market? Pete Najarian, co-founder OptionMonster.com, thinks you can, although the takeaway changes depending on your time horizon.

Takeaway for Long-Term Investors

Although Alcoa posted a second-quarter loss, if you're a long-term investor, Najarian suggests focussing on what CEO Klaus Kleinfeld said about the aerospace and automobile markets in an interview on CNBC.

"Alcoa is successfully capitalizing on accelerating demand in high-growth end markets such as aerospace and automotive," Kleinfeld told CNBC.

Alcoa Reports Earnings Beat
Alcoa kicked off earnings season with an earnings beat. The FMHR traders weigh in on how to play the stock now.

Najarian takes the commentary as confirmation that companies such as Ford and Toyota – Alcoa customers – are experiencing solid demand for their lighter more fuel efficient vehicles.

He also takes it as confirmation of Boeing’s 20-year market forecast. The aviation giant predicted demand for 34,000 new aircraft worth $4.5 trillion.

Those data points suggest to Najarian that although the global economy may be slowing, it’s still growing, just at a slower pace. And in the long-term that's bullish because if the global economy continues to improve, even slowly, he thinks stocks are cheap.

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Takeaway for Short-Term Traders

If you’re a short-term trader like Najarian, perhaps the most important takeaway from Alcoa is that even with the loss – Alcoa beat expectations. In fact, Najarian wouldn’t be surprised if beating expectations emerges as a trend across earnings season.

He thinks expectations have been ratcheted down so much that companies will issue small beats and make optimistic commentary. In turn, that should drive stocks higher.

Trader Steve Grasso, director of institutional sales trading at Stuart Frankel, doesn't agree. Grasso says, “Although estimates have come down, If you want to dive into the market here, you have to ask yourself if estimates have come down enough.

Given headwinds in Europe and China, “I don’t think they have.”

What do you think? We want to know!

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Takeaway for Alcoa Traders

If you’re looking to trade Alcoa, trader Guy Adami, managing director of stockMONSTER.com, thinks the stock is a buy at current levels for a trade. “Typically it bounces between $8 - $12,” he says. “I’d play it long with an $8.50 stop.”

By the numbers, Alcoa posted second-quarter earnings excluding items of 6 cents per share, down from 32 cents a share in the year-earlier period.

The company reported a net loss of $2 million, or 0 cents per share, compared to net income of $322 million, or 28 cents per share, in the year-ago period.

Revenue fell 10 percent to $5.96 billion from $6.59 billion a year ago.

Analysts had expected the company to report earnings excluding items of 5 cents a share on $5.81 billion in revenue, according to a consensus estimate from Thomson Reuters.

(Click here for more: Go to "Alcoa Kicks off Earnings Season with a Slight Beat".)






Posted by CNBC's Lee Brodie

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Trader disclosure: On July 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long VLO; Steve Grasso is long XLU; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long M; Karen Finerman is long MA; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami is long AGU; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long FCX CALLS; Pete Najarian is long TJX CALLS; Pete Najarian is long KEY CALLS; Pete Najarian is long XOM CALLS; Scott Nations is long BAC; Scott Nations is long JPM

For Jamie Townsend
Nothing to Disclose

For Amelia Bourdeau
Nothing to Disclose

For Dennis Gartman
Dennis Gartman is long NatGas

For Nicholas Debenedictis
Nothing to Disclose

For Joe Weisenthal
Pending

For John Williams
The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in WU
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: V
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: WU
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment banking securities-related services are being, or have been, provided.: V
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: MA
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: V
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: WU
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: MA
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: V
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: WU


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