Stocks rose on Monday, with the Nasdaq hitting a 15-month high buoyed by Internet giant, Amazon. Investors took a shine to the e-tailer, whose shares surged after the Northeast was blanketed with up to two feet of snow just days before Christmas.
Investors are betting the Internet site benefited from the wicked winter weather that left millions snowed in this weekend – and not shopping at their local malls.
One of the advantages of Amazon is that you can shop at any hour, reminds Citigroup analyst Mark Mahaney. Shopping horizons were suddenly shortened by the storm.
But I’m bullish long-term because of conversion of earnings into free cash flow, he says. Although Amazon trades at 35 times earnings, on free cash flow it’s 20-25 times, and that’s the same kind of yield you find on regular retailers. But Amazon's potential for growth is far greater than regular retail. That's the real valuation support.
What's the trade?
Last week Mahaney repeated his Buy rating on the shares and lifted his price target to $170 from $140.
I think $125.50 is support, adds Joe Terranova. I like the fundamentals.
I also like Amazon, even at these levels, says Tim Seymour. The stock looks like it’s breaking out. But I understand why value investors can’t get on board.
Elsewhere in retail, I think another benefactor of the snow storm was CVS , says Joe Terranova. It’s local and people don’t have to travel far and they offer items that people can give as gifts.
If you’re looking for a retail trade, look at Home Depot, says Guy Adami.
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TOPPING THE TAPE: ALCOA
Shares of Alcoa gave the Dow its biggest boost after the company announced a joint venture to build a $10.8 billion aluminum complex in Saudi Arabia.
Meanwhile, Morgan Stanley raised its recommendation on Alcoa's stock to "buy," expecting the company to report increased profitability in its alumina and downstream divisions.
What’s the trade?
I’m a buyer of this stock, says Tim Seymour. I think it goes to $19 before it encounters resistance.
I’m not as bullish, reveals Guy Adami. Personally, I’d be taking some money off the table in this one.
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THE OIL TRADE
Oil prices fell on Monday as a stronger dollar offset cold weather in the United States and Europe and reports of pipeline snags in oil exporters Iraq and Nigeria.
What’s the oil trade?
I’d play energy with the OIH or Hess, counsels Joe Terranova. But not with the spot price of crude.
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SECTOR TRADE: AG NAMES ROCKING
Shares of ag stocks traded higher on Monday after Goldman Sachs upgraded Mosaic and added Potash to its conviction buy list. Goldman said they see the potash industry picking up momentum into 2010.
What’s the trade?
If you’re just establishing positions now I think you’re late, says Guy Adami.
I disagree, counters Tim Seymour. I think Potash is at the bottom of its trading range. I’m a buyer around $105.
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DOLLAR DECOUPLING
It seems a stronger dollar didn’t knock stocks on Monday.
After months of expecting a strong dollar to drag down commodities and the stock market along with them, the relationship may be ending. Both the S&P 500 and Dollar Index ended the session higher.
What’s the trade?
That says to me that investors are expecting an economic recovery, explains Joe Terranova.
Also the historical pattern has been higher dollar, higher stocks, reminds host Melissa Lee.
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NEW LEASE ON LIFE FOR HMOS?
Aetna, UnitedHealth and other health care stocks rose on Monday after a bill to overhaul health care advanced in the Seante; this version is perceived as less damaging to industry profits.
What’s the trade?
HMO stocks were pummeled on fear, explains Karen Finerman. Now we’re learning that health care reform isn’t the death knell that many investors thought it might be. That’s what you’re seeing here.
I think UNH could go higher but the trade was to buy it on the negative rhetoric, adds Guy Adami. You’re late to this trade.
I’d step to the sidelines in the HMO’s, says Joe Terranova but I’d get long medical device makers such as Medtronics.
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CALL OF THE DAY: BARCLAYS BULLISH ON INTEL
Shares of Intel , edged higher Monday after Barclays Capital upgraded the company to "Overweight" from "Equal Weight", citing 1) "solid" market conditions in the computer industry, 2) a cheap share price and 3) the upcoming Consumer Electronics Show as bullish catalysts.
The call sparked a rally in other chip makers and ultimately drove technology shares higher, broadly
What’s the trade?
I think Intel could go to $24, speculates Tim Seymour.
Instead I’d look at Oracle, counsels Guy Adami. I also like Seagate and NTAP.
In the space, I'm watching Qualcomm as well as Dell and HPQ , adds Joe Terranova.
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Trader disclosure: On December 21st, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (AA), (BAC), (ETFC), (INTC); Finerman Owns (AAPL), (GOOG); Finerman's Firm Owns (MSFT), (NDAQ), (SKS), (TGT), (WMT), (BDX), (BCR); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (TLT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spread; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (CVS); Finerman's Firm And Finerman Own (WFC) Preferred
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