Shares of Cisco Systems were crushed in after-hours trading Wednesday after the technology company posted disappointing earnings results and CEO John Chambers expressed frustration in his inability to tell where the economy is right now.
The sell-off jives with the overall sentiment of money managers right now, says Joe Terranova of Vitrus Investment Partners. That is, 'sell first, ask questions later.' When Cisco started to trade lower, so did the entire technology space. So how do you trade this sector in the wake of Cisco's earnings?
Gary Kaminsky, a contributing editor at CNBC, wonders if Chambers has "flip-flopped" on his take on the economy. Not too long ago, notes Kaminsky, Chambers was "euphoric." Now Chambers sounds concerned.
With the Federal Reserve having expressed doubts about the growth of the US economy and hesistation from Cisco, Kaminsky says there is a lot of uncertainity out there. Kaminsky is certain, though, that interest rates will remain low in the US for a "long, long time." For that reason, he recommends getting into equity income securities, like real estate investment trusts.
Terranova takes a different view on how to trade post-Cisco's earnings report.
"You want to avoid owning domestic, cyclical stocks right now in this environment," says Joe Terranova of Vitrus Investment Partners. "You want to own things that are tethered to China, the emerging world."
It hasn't been smooth sailing for the technology stocks lately, as shares of Hewlett-Packard traded lower Friday following the resignation of CEO Mark Hurd due to a sexual harassment probe. When that dip happened, Jon Najarian of optionMONSTER.com says a lot of people made some money. He thinks Cisco presents a similar opportunity and recommends taking advantage of the panic here.
When investors got out of Hewlett-Packard Friday, many bought shares of IBM . With the technology company down sharply Wednesday, Adami thinks those new investors of IBM will get out of the stock. He likes IBM, but thinks it could trade down to $125 a share.
With many tech stocks trading lower, Karken Finerman of Metropolitan Capital Advisors is concerned about value plays versus value traps. With business investments strong last quarter, she wonders if they stole sales from future quarters. She is concerned about this.
Looking at Wednesday's sell-off more broadly, Terranova says it can be explained, in part, because companies are tied to China and recent economic data from the People's Republic lately is "not encouraging."
Guy Adami of Drakon Capital doesn't think China's numbers were "that bad," but cautions investors. If they think this is the start of a slowdown in China, Adami says they should be careful with multi-nationals.
Tomorrow's Trades - Capital Ideas Into Year's End
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Trader disclosure: On Aug 11, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova owns (AKAM), (BAX), (FCX), (MOS), (PFE), (SU), (XBI); Terranova owns (GLD) Calls; Adami owns (AGU), (BTU),. (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman and Finerman’s Firm owns (BAC); Finerman and Finerman’s Firm owns (JPM); Finerman & Finerman's firm owns (RIMM); Finerman owns (AAPL); Finerman's firm owns (ARM); Finerman’s firm owns (BBY); Finerman's firm owns (LEA); Finerman’s firm owns (KFT); Finerman’s firm owns (TSX); Finerman’s firm owns (GYMB); Finerman’s firm owns (PLCE); Finerman's firm owns (WMT); Finerman's firm owns (DAN); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Jon Najarian owns (AKAM) short calls
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