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Pros: Trading Retailers Off Earnings

While consumers may not be confident these days, the stores they shop in appear to be. Retailers’ earnings have been on a roll, and there was more good news on Wednesday when both Target and Staples reported impressive results.

Staples reported its second-quarter net income rose by 36 percent and it gave a full-year forecast that exceeded the Street’s expectations. In fact, the office products company’s CEO said he doesn’t have any worries about a double-dip recession at this point.

Target also forecast a more profitable year than analysts were expecting, and reported a bigger-than-expected rise in quarterly profit.

Instant Insights with the “Fast Money” Traders

Fast traders Karen Finerman and Tim Seymour think Staples is a buy.

Finerman owns Staples and was happy with its earnings.

“I think it is cheap here. It’s attractive,” she said. “It is so much better positioned than either OfficeMax or Office Depot, particularly better than Office Depot. I wouldn’t be in Office Depot at all.”

Finerman also said she could see a situation where either OfficeMax or Office Depot—especially Office Depot—goes out of business, and Staples picks up the slack.

“I don’t think there is anything unique about Office Depot that can’t be replicated by Staples,” she said. “In fact they have a lot of overlapping stores. That’s part of the problem for Office Depot.”

As for talk about Amazon getting into the business and hurting Staples, Finerman doesn’t see it. She thinks the threat is “way overdone” because Staples has a gigantic online business.

Tim Seymour agreed Staples is a value call.

“This was a stock that was thrown out window because suddenly it was a consumer stock when really it is a much more defensive staple stock,” he said.

Both Finerman and Seymour also like Target. Finerman said its earnings were impressive and called it "attractive here."

Seymour noted its same store sales are the best since 2007. He said the company is cutting the bottom line and is actually growing through its groceries and in-house debit cards.

Guy Adami has his eye on another retailer. He’s bullish Home Depot , especially since it recently reported quarterly results that beat analysts’ expectations.

"If you look at Home Depot over the last couple of weeks, it’s had a monster trading volume," he said. "Although it sold off significantly, I still think its in this broader uptrend since bottoming out in '09."



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Trader disclosure: On Aug 17, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman owns (AAPL); Finerman owns (BAC); Finerman owns (JPM); Terranova owns (XOM); Terranova owns (CVI); Terranova owns (CAT); Terranova owns (OXY); Terranova owns (AAPL); Terranova owns (DAR); Terranova owns (FCX); Terranova owns (CACI); Terranova owns (ARUN); Terranova owns (ORCL); Terranova owns (EMC); Terranova owns (NCR); Terranova owns (VMW); Terranova owns (IBM); Terranova owns (AMZN); Terranova owns (LULU); Terranova owns (LTD); Terranova owns (WFM); Terranova owns (JPM); Terranova owns (AXP); Terranova owns (FXA); Terranova owns (VRTS); Terranova owns (LQD); Stutland Owns (DBA) and short (DBA) calls; Stutland Owns (GLD) calls

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