On "Grade the Trade" we test the trading prowess of some of the most promising business students in the nation. This week they’re from Boston College, William and Mary, Marquette and Wake Forest.
Get ready – school’s in session.
Our business school students have been given the questions in advance, and have 30 seconds to answer.
Grad #1: John from Boston College’s Carroll School of Management
John has raised over $10,000 for the Doug Flutie Foundation for Autism and also received the Anne C. Murphy Award for Leadership and Service.
Here’s the scenario: After the frustrating meetings this week, Senator Chuck Schumer gets his way and Congress passes legislation imposing a 28% tariff on all Chinese imports to punish the country for keeping controls on their currency. What are you buying, what are you serlling as this scenario unfolds?
John is selling electronic retailers such as Radio Shack (RSH) and also Wal-Mart (WMT) because they import from China. He’s buying Cypress Semiconductor (CY) which manufactures chips in the US.
Jon Najarian gives John a B- because “The Monster” doesn’t agree with the Radio Shack trade.
Grad #2: Will from the Mason School of Business at the College of William & Mary
Will is a member of the student-managed Investment Fund Team and proud father of three daughters, the youngest born last Saturday.
Here’s the scenario: Jet fuel prices continue to surge through the summer and demand for air travel slows as well. Airlines decide to join forces to survive with the first deal being a Delta (DAL) takeover of JetBlue (JBLU). What are you buying, what are you selling as this scenario unfolds?
Will is shorting Delta (DAL) and going long Southwest (LUV) or AirTran (AAI) believing they are other likely take out candidates and shorting Marriott (MAR) for less travel. He also thinks less travel means more video conferencing which is good for Cisco (CSCO) and Polycom (PLCM). In addition, Will is buying credit default swap options to round out the trades.
Pete Najarian gives Will an A+ and adds Tesoro (TSO) would also be a buy in this scenario.
Grad #3: Luke from the Marquette University Graduate School of Management
Luke has two children, Jackson and Grace, and played in the Wisconsin State Amateur Gold Championship in 2006.
Here’s the scenario: The housing market does in fact rebound with sales of new homes growing at an adjusted annual rate above 1 million units for the next six months. What are you buying, what are you selling as this scenario unfolds?
Luke is buying Toll Brothers (TOL) and M/I Homes (MHO) because he thinks luxury home buyers will benefit. He’s selling 10 and 30 year US treasuries.
Guy Adami gives Luke a B+ and adds American Standard (ASD) and Home Depot (HD) would also benefit in the scenario.
Grad #4: John from the Babcock Graduate School of Management at Wake Forest University
John is a candidate for Level 2 C.F.A. and has an internship this summer at Wachovia Securities.
Here’s the scenario: Your Memorial Day barbecue is really ruined as a case of Mad Cow disease is discovered in Montana. What are you buying, what are you selling as this scenario unfolds?
John is shorting beef companies and buying chicken makers such as Pilgrim’s Pride (PPC).
Jeff Macke gives John a “C” because he didn’t have a lot of trades.
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Trader disclosure: On May 25, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Pete Najarian Owns (BIIB), (ELN), (OXPS); Jon Najarian Owns (AAPL), (BIIB), (BOT), (CLF), (ELN), (INTC), (MSFT), (OXPS), (TRA), (TXN).