tv Fast Money Halftime Report CNBC June 5, 2012 12:00pm-1:00pm EDT
a number of friends sent me an article written by a gentleman behind my shoulder here on the possibility of what it doll for the muni markets. if you like munis, you own them, check this article out. wisconsin election impact on the muni market. >> okay. we'll see you tomorrow, gary. thanks a lot. >> that does it for us. let's get to headquarters and the "fast money halftime report." >> four hours until the close. take a look at the major averages. let's talk about the dow jones industrial average. ism services report came in a touch better than expected. the dow is hanging on. well, it's down just slightly right now. gown .05%. s&p 500 in the red as well. eyes focused on that g-7 emergency conference call as we watch the commodity space today as well. take a look at gold and crude oil. we'll watch the euro as well. that remains in focus. our stories we're watching to day and we'll get to the top ones we're watching on the
halftime show. the next lehman event, john stephenson first asset investment management joins us with his correction protection, trades and why you should be laser focused on spain. social awkwardness, another face plant for facebook today. we're looking for value in that space. and seeking return and then no return world. traders give their top yield picks. welcome to "the fast money halftime report." let's start talking about europe. spain's treasury minister making headlines today saying the country is being shutout of the funding markets. that's only adding to investor stress over the situation over there. michelle joins us on set to break it down. that is the key thing is spain. >> sure. >> greece can still upset the party. >> it's the very immediate concern right now. they need to raise money later on this week. you referenced the president. let's show you his baseball card here. he is one of the finance ministers within spain. he's the minister of finance and public administration of spain. if you're confused, they also
have an economy or a different finance minister who has been out trying to negotiate some kind of deal for spain. in the meantime, mr. montoro is giving a radio interview. he says basically what scott is talking about. let's show you the full quote the right now it is extremely difficult for spain to access the markets. the risk premium says spain doesn't have the market door open. the risk premium says that as a state, we have a problem in accessing markets when we need to refinance our debt. you can't say it any more clearly than that. what's he talking about when he says the risk premium? we talk about ten-year yields. but if you're in europe, you think of yourselves always through the prism of germany. he's talking about the premium between spain and germany right now. let's show what you that looks like. it skyrocketed. it is like a 20-year high. the highest level since the adoption of the euro. so how much does spain have to borrow? maybe if they're lucky, 2.5
billion euros. i'm sure that number is smaller than they originally anticipated. >> it's perfect that you have spain and germany linked not only with their yields and the spread is there. they are linked. germany wants spain to accept a bailout. spain doesn't want to. will it get to that point ultimately because there won't be any other choice? >> spain needs money, that's for sure. they're arguing about how it's going to work. spain is saying our banks need the money. it's not our government that needs the money. no, we're not like greece. we're not calling you up and saying we can't make payroll for government workers. it's the banks need to be recapitalized. why don't you put the money directly in the banks? spain at all cost wants to avoid a program. they don't want to seek a program. they don't want the imf getting in there. >> is that the stigma? that the confidence -- for what? >> all the new austerity measures or the discipline that germany will want to enforce on them even more so. so they've got to get money at some point. they need $150 billion as much
as that in order to recapitalize their banks. where are they going to get it at this point? >> let's hear from the traders. are you trading the market directly related to your worries about what is happening in spain? >> for a while it's been directly about spain. i also think especially today we talk about i think last time we were toegt on halftime where the shorts have gotten ahead of themselves. remember that last thursday halftime we talked about a 14-point rally on the s & p. friday was a disaster. today is setting up for similar. i believe the world is going pear shape. michelle just spoke to that. i think it gets worse before it gets better. i also think you're going to see relief rally here. i think people got a little too ahead of themselves on the short side w that said, we continue to make lower lows and lower highs. i think that will continue. we're going see a rally in the s&p 500. >> pete? >> it is a bold call. i love the fact you're seeing the financial showing some sort of strength at least today. we haven't seen that at all over the last couple of trading sessions.
and we actually see them moving into positive territory. wells fargo and manufacture the names participating. it may be a little bit of a relief rally right now. at least we're seeing the financials. this is not driven by something. it's not an apple driven rally right now. this is not necessarily just a commodity driven rally. you're seeing the financials participate. that's at least sign of something. >> guy, to your point, i'm actually long the euro currency after being shorted all of may and did very well in the short side. i hope i'm not trying to be too cute. i'm long here. one of the reasons, the main reason, in fact, is that spanish equities are actually trading okay. for the first time in forever. they are outperforming germany. the german dax is low five days in a row. that is not the case in italy and spain. so outperformance in the crummier countries tells me that perhaps that money that was trying to stay long has finally that selling has finally been exhausted. i think for a trade, it actually pays here to be counter trend and to embrace risk including even the euro occur sin. >> i do not advocate any trades.
in the last two years, the profitablebly tremendous moments have been when you white knuckled and bought italy at its worst and then the ecb did something and there is rip your face off rally the other direction. there are opportunities there. you have to have a stomach made of steel. >> let me ask you, speaking of the ecb. meeting tomorrow. what are we expecting? >> there is talk they're going to cut rates. but there's got to be something bigger than that, right? i mean we're getting beyond the issue of lowering rates. are you going to somehow gain and restore confidence in the banking system of europe? that's what they got to do right now. >> steve wise, that's what you believe needs to happen, right? >> absolutely. to me, nothing happens of significance to give you confidence in the market until spain accepts a program as we see they're not there yet. i'm 90% in cash. portfolio has no net long equity exposurement i'm long a few core positionsment i'm sure a few global growth names. i agree we're overdue for a
rally. it's not sustained. i don't want to get too cute playing the rally. i did cover the euro short because it's gone so far. but here's the issue. germany is not going to give money to spanish banks. there's no reason why they should. you wouldn't do it. i wouldn't do it. the way it probably plays out is that spain does accept a program at a cross-ice points, obviously they're not there yet. and the ecb will issue a bond, essentially a loan to the spanish government with low interest rates probably a 30-year, maybe even a 40-year term. so it doesn't crowd out the current credit yrz ors of the country. they target that specifically for the banks. that is really the only way out of it. >> michelle, the last word. >> i think it's so funny that the vernacular we use. when they seek a program, they're look forg a bailout. >> give me some money. >> exactly. >> thanks so much. >> see you later. >> as concerns about spain escalate, how should you
position yourself if spain becomes the new lehman? john stephenson, senior vice president and portfolio manager at first asset investment management joins us with his strategy. you called spain the next lehman, right? >> i think absolutely it's going to be the next lehman. i think the debts that spain has outstanding are dwarf that of greece, portugal and ireland combined. getting ahold of this spanish situation and coming out with a clear and resolute answer to it is parra mount for the european leaders. i haven't seen anything to suggest that they're anywhere near getting their hands around this problem. i think the risk is to the down side. i'm very cautious. >> but, you know, we've seen this movie before. right? we saw what can happen when lehman failed and the systemic risk and what happened to the global markets, global economy, et cetera. do you really think that policymakers will let it get to that point even if they haven't come up with anything krconcret
yet. do you think they'll let spain fail? >> i think what people are trying to get their heads around is the european union is 27 countries. the euro-zone is 17 countries. none of them very much like one another and get along. that's apparent when you look at how things are going. what has happened is germany who is the only member of the euro-zone who has a financial capacity to do anything has said nine, nine, nine at every single instance where it had the option to look at euro bonds or anything else that may have help resolved the problem. >> i think gold -- let me ask you a question, john. is there a possibility that they'll monetize their gold positions or is that completely off the table? if it it, i think gold goes significantly higher from here. >> yeah. i think it is off the table, guy. the reason i point to that is if you look at what is happening lately is we've had a shift in purchases from the east and with china's numbers being fairly weak, you don't have the reserves right now to do those
purchases. the same can be true of india and other gold purchasers. i think it's probably off the table. central bank sales or purchases. >> given that you're so cautious, where do you foresee the markets heading from here? we had essentially a 10% correction. how much lower do you think we go? >> i think if you have the worst case situation which is a failed option or essentially the germans walk ago way from the table which is very likely in my view, can you see the markets in north america drop 25% from here. en that could be the catalyst for a great rally. i wouldn't disagree with the other guests saying that market is cheap. it could get a whole lot cheaper. you want to be in cash and dividend paying stocks that pay to wait and particularly in the regulated names that are not impact wld the economy up is, down, or side ways. >> can you give me names that you're specifically talking about? we've been talking really for the last two, three day it's not long better the high dividend payers with the lot of u.s. and north american exposure. >> yeah. well, certainly i think you want
to be north american sen trick. comcast will be a great name. they're a low payout ratio. possibility for a share buybacks and cash directly to share shoulders. i think other names are at&t and verizon. they have a pretty good track record. like the pipeline names. i think ultimately you want to avoid the financials here. you know, this contagious from the sovereign could impact the european banking sector and unfortunately that will impact the world financial sector if it's a worst case situation. >> mr. stephenson, i'm seeing on your list one of the names you didn't mention is norfolk southern. how did you select that name from all the different rails? it is based upon valuation or is it based upon region or proximity, what their moving right now? how did you select that of all the names out there? i know cp is high on many lists. >> yeah. cp certainly could be another one.
you can put in and i think there's a couple reasons. one is it's trade 24% below what it traditionally traded at. so there is a lot of up side. and i think ultimately i'm looking for a little bit of a rebound in the coal sales. that's one of the reasons why i think it will go higher zblment steve wise? >> i disagree with the rails. while it seems like they're domestic, a lot of the product that they transition, that they ship eventually finds way to foreign markets. let's come back to spain. don't you think this is just a massive game of chicken where spain is saying and greece, for that matter, germany, you need us and the euro more than you want to leave the euro. so we're going to push you and push your hand and hope that's the outcome versus germany doing the calculation, okay, what will it mean to trade if we leave the euro instead of spending all this money on these countries? >> well, i think it is a massive game of chicken. i think the problem is
ultimately that germany doesn't have the firepower to address spain and italy and keep in mind po portugal and ireland are going to need a bailout, too. i think germany has to hold the line at greece and hope they can come up with something down the road for spain. >> mr. stephenson, great to you have on the show. thanks so much for sharing your insights with us. >> my pleasure, any time. >> talk you to soon. john stooenson with first asset investment management. about $3 billion under management as well. let's hit our calf the day now. isi reducing eps estimates for jp morgan. citing a $4.2 billion pretax trading loss. also factored in, weaker core trading and investment banking revenue than they had expected. and mark to market private equity losses. isi still maintaining the buy rating on that stock. steve wise, do you maintain your buy rating? >> i haven't been in j.p. morgan for a while. it's not really that much to do with the trade that everybody is
talking about. it's more about concern like john spoke about with the global markets con tnecticut tajon. i'll get my exposure through aig. i feel safer playing that. >> cortez? >> i think even i agree with stephen. even outside of that, i think that outside of the present economic environment, another reason you want to avoid financials or short them on rallies is the political overhang now. one thing j.p. morgan did to the entire street with this whale trade is make certain that regulators are going to be more involved and washington will be more meddlesome going forward. >> blackstone to me is drubed. goldman sachs just put it on the conviction buy list. i think the stock sold off sufficiently enough where if you want exposure to space, blackstone sets up well. the world that we're going to be in soon lends its self to everything that blockstone does. >> coming up, socially awkward social media stocks.
are there any worth buying? plus, can the old guard of gaming take on the new social gamers? we have that trade coming up. sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today
in a world of near zero returns, we're looking for the best high yield trades. pete, you have a stock for us in the in touz day. >> it's not pharma related or telecom. we're talking about dupont. we're in the chemical space. they're giving you a 3.6% yield and earnings projection for the year. 7%, 12% growth from last year. you're also talking about a company that just got done acquiring in the ag space or actually making a very large investment in south africa in the ag space. 12% up on sales. so can you understand why dupont would be a good place to look. >> okay. how will sony compete against up and coming mobile social gamers? julia boorstin is at the video coverage. she joins us with the president of sony computer entertainment of america for a first on cnbc interview. julia? >> thank you so much, scott.
jack joins us off a big presentation last night to 6,000 gamers you said. impressive. now the whole industry, the whole video game industry suffered from five consecutive months of double diblgit declin. the number of ps 3s you sell is going to be down. how can you turn things around? >> the good news is our business is a lot healthier than the numbers would indicate. the numbers you're referring to are disk space sales to a select set of retailers. the overall tree is healthier than. that there is so much consent sold digitally. the best place to look at the success of the games division in sewn ji look at the earning as announcement. you'll see our gaming business is very profitable. last year was our biggest year ever. while we may be down in the six year of a product life cycle, we're looking to do comparable numbers. >> i know we're shifting our attention to the hand held
device, the psv. you're competing a lot with these iphones and smart phones and tablets that people are playing a lot of social and mobile games on for next to nothing. how can you have them compete? >> the portable space is not something new to us. we debuted the play station portable in 2004. as you point out this is only four months old. we i had the play station ecosystem is where gamers need to be. there are people getting into gaming with smoert phones and tablets. we have 163 million gamers in the u.s. alone. that is a real added business for us. we feel we're at the top of the pyram pyramid. so with play station mobile, we bring our games in a more simpler fashion to the smart phones and tablets but ultimately migrate them up the food chain when they get into gaming and get them to buy a machine like this. >> you want to jump in here? >> i do. great to you have on the show. i think even you would admit that the vita has
underperformed. certainly i can't believe that hasn't underperformed to your own expectations but in sony. it seems as though the word that is most centered these days around the company is underperforming. we make a big deal here at cnbc about the stock that the stock has done a round trip. it's back to the levels of 1980. how do you turn the overall ship around at sony, to make it more relevant? >> well, my focus is the games division, scott. we tend to talk in ten year product life cycles. four months into vida, we sold 1.8 million units. it met our expectations in that regard f we had done double or triple the numbers or a third of those numbers, it is sort of like saying we had one batter come to the plate in a baseball game. how do you feel about the fact that you're losing right now? it's early in the game. i think you're talking about the overall sony business. the games division is incredibly profitable and remains one of the three key pillars to our business. as gaming goes and as our effort
goes in the play station group, so will go sony. i feel good about our opportunities there. >> jack, appreciate it very much. julia as well. thanks so much for the conversation. >> regarding sony, i'm too old to know who is going to win the competition for gamers. but i'm also old enough to know that the last time the stock as you mentioned traded that price was 25 years ago. 25 years ago i was still lusting after heather locklear watching t.j. hooker. that is a heck of a long time to wait to get back to even. i think you do not want to be in this company. for that matter, any japanese companies. i know it's a global firm. japan is a country you simply db uninvestable. >> you were watching for shatner, too. >> of course. >> sony seems to be a lot like really manufacture the name that we're talking about even more recently when you look at research in motion and companies where it seems like they are off into the sunset. i realize what you're talking about, return to some of the levels. but right now i just don't see the growth prospect twhint start putting money towards sony.
>> guy? >> i mean if you want to be in the space, microsoft to me is -- especially with the selloff. we've seen $28.50 now. i'm not saying this is going to happen. i remember vividly that sony was taking over the world 25 years ago. the chart looks eriely like the apple move we've seen. i'm not saying it's an apple. i know the way people talked about sony 25 years ago. it will be interesting to see if apple can continue their push towards 1,000. >> it's so difficult to make money in hardware. apple is the only one being able to do it. you have to look to the software. you have to look to the game. the issue there is they're fads. one day you have a great movie, a great game. the next day a movie that bombs at the box office or the next big game. so i think you ought to stay away from the space completely. >> all right. are social media stocks awkward? other names like yelp, zenga and
linkedin have suffered double digit losses what is up with the social media stocks? >> i think people finally starting to look at can they possibly really give you some of what everybody talked about before the release of facebook when they were talking about can they deliver? can they actually deliver on the ads? is the multiple something worth investing in? that's a question that more and more people are bringing up now that you're watching the absolute decimation of facebook from that $38 ipo and now trading well below those levels. people are starting to look and say even at these levels maybe it's a little expensive. >> the last time i was on, i thought groupon would hold $11. it's up 6 o cents today. i mean the space is hard to trade. groupon is straight down. i tried to catch a bottom but not successfully. it may be worth a look again. with that, facebook is still headed lower. >> at some point, do you have to bet that the companies are going to have viable and successful business models. don't you? >> i don't know. >> i think so. >> honestly, scott, i don't know.
we had a guy on yesterday that talked about facebook irrelevant in five years, not unlike of what happened to yahoo. i'm not certain that is the case. >> scott, let me jump in here before cortez professes his love for greg brady. the issue is it is the facebook after effect. people look at their profits in linkedin. no profits in groupon. i don't want be the next facebook from that standpoint. let me get out. it feeds on itself and they keep trading down. by the way, valuations are still excessive. i wouldn't own any of them. >> cortez, i'm going to save from you a bad joke here and go to break. on the halftime report, the apple ipad mini may be coming sooner rather than later. we have the date and the tray. the halftime report will be talking to duncan neederhour. certainly talk about what is happening at the nyse. you also get his first comments since the facebook ipo as well. a lot to talk to duncan about.
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time for our top three trades of halftime. jcpenney shares lower today. ron johnson speaks at a conference and is making some comments about pricing changes. steve weiss, the tok is off 2%. bill ackman still behind this one. you're not. >> i'm still shorting. the strategy is not working out. and johnson as much admitted to it. i listen to the web cast today from the piper conference. he seems to be backtracking. now he's talking about home products. i just think it's just in complete disarray. key vendors that i speak to say that it's a disaster. if you take a look at the credit default swaps, they're now blowing out to where they were near '08 bottoms. so it's not a good situation. you're still paying for a successful turn around. go somewhere else. >> don't you think it's a little too soon to tell though whether the turn around will be successful? >> exactly. so that's why the valuation shouldn't be anywhere near where it is now. nor should the estimates for next year be where they are. so let's see if it takes hold.
my bet is it won't. >> okay. dollar general down nearly 3% today after the deep discount retailer unveiled plans for a secondary offering. the company also reported a jump in profits. revenues i guess were light. >> yeah, if you look at the quarter, you hit the nail on the head. that 25 million share secondary is scaring folks. pete has been all over this. i think these stocks work. every so often this name is an opportunity. just made an all time high i believe last week. i think you buy this selloff in dg. >> all right. markets are struggling for direction. delta airlines is not. the stock is up 4% today. more analysts say airline stocks could get a lift following yesterday's selloff. pete? >> if you look at the price of oil, we always try to gauge some of that off at least the price of oil actually we should be looking at the jet fuel pricing. regardless of that fact, the airlines are showing strength in the efficiencies are that much better. delta is also in the news recently. they have an acquisition in mexico. they're also getting involved in that refining business.
for a lot of reasons right now, as a trade, i still like delta airlines to the upside. >> okay. our next trade, as speculation circulates about the launch of a new iphone and apple tv, one analyst is saying to expect the new ipad mini in september. is this setting up apple for a new high? guy? >> yeah. i mean, listen, we talked about apple last time we were on when it was trading down in the 520s. we thought it would trade to 585. it got to 580. here is a selloff. i think apple is still poised to go higher. again, not unlike dg. every so often this name is an opportunity. nothing changed for me in terms of what is going on with apple. >> this is a topeka call today. cortez, they're the one that have that 1100 price target on apple. >> apple, uncharacteristically has got smen what boring lately in this $550 range. as a trader, that's not the one i want to pick. i am constructive here. again for a trade, i'm not
getting married to any positions. but positions got so trounced and negativity ti so per sahratianive that you want to be long. i think there are better candidates than apple. i would just go tech in general. >> i disagree from the stand point of trader. as a trader, i love the way apple is trading. it goaets to $550 and bounces o that number. with those weekly options, there are opportunities to get in there without actually having to leverage yourself on a $500 plus stock. >> you consider apple a place to hide out amidst the turm lance? >> i wouldn't say hide out. i look at this name at $600 or $550 or $560, they're innovative. i think the mini is one way to get into the student population, get into the schools. parents are going to like the pricing for a lot of reasons. they continue pob innovative. >> you don't like hideout because you think if the overall market has a down draft apple gets pulled down with it. >> as the big hedge funds are hit other places, they start
selling apple as well. absolutely. >> gangsters hide out, traders trade, baby. >> yep. >> leave it on that. >> the focus next week is on the worldwide developors conference. let's not just focus on the apple mini, let's focus on that and bet about maybe there is an apple tv coming out. maybe tim cook will be excited to get them going. i think it's cheap stock. i think it's worth holding. >> okay. coming up, aserenity size pastry may be coming to a starbucks near you. is a buy or sell for investors? plus, we take on doritos tacos and spandex. you won't want to miss this. hopefully no visuals. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language.
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a deal that starbucks founder and ceo howard shultz is talking ambitiously about on the call. look, he's talking about taking this chain, turning it into an international chain. look at the menus for the bakery chain, isn't it going to ultimately impact pa nara? >> they need to be in the food business. the customers have an attachment to food. >> okay. that was herb greenberg and nicole miller regan last night on news that starbucks is
acquiring a san francisco based bakery. shares are taking a hit today. will starbucks get burned by that deal? you sat on this show and repeatedly recommended starbucks. >> i still love it. as a matter of fact, i did rotating to day. i sold some up side calls. i bought them back. the stock dipped down a couple dollars and sold the next to to july 55 calls. trying to collect that dividend. i like this stock. i like what they're doing. i think shultz has done a lot of great moves since taking back over as the ceo. they've become far more efficient. some of the growth prospect they've done overseas and they've done a lot of the right moves. this is another one that is going to add to the bottom line. >> this isn't veering cortez away from the core? starbucks made that mistake in the past. >> it seems like it might be. but this is a tiny deal. i don't mean -- >> $100 million. >> this is not a reason to own it or not to own it. i do give you a good reason to own it and i do. it is falling commodity prices and coffee in general. if you look at jo, it lost half
of the value in the last year. that is fabulous news for stash bucks margins. this world that we've been in lately of a rallying dollar and falling commodities, it's bad for most stocks but very good for some. starbucks is one of those. primarily an importer. i love this have to product. they have a crowd that needs this product. i'm one of them. i like owning the stock. >> let's tack tacos z a dorito shell make the late night favorite even tastier? taco bell announces they sold a whopping 100 million doritos ta tacos. what is the trade on yum brands? >> you're a big taco fan? >> look, without -- let me play it straight. i'm going to play it straight here. yum brands got a downgrade. people concerned about the slowdown in china i don't think there needs to be concern. i think there needs to be concern about a slowdown in china. not necessarily a slowdown in yum brands. i think the stock is a monster.
the ceo has done everything right. they want me to eat this taco. vicinity had one in my life. >> you haven't had one in your life? >> i have never stepped foot in a taco bell. like jack in the box, too. i couldn't get in. there. >> they're as bland as they get. you have this dorito shell on this thing. >> you'll eat it? >> of course i'll eat it. >> you're an animal. >> do you buy yum brands? how concerned do you have to be about the china composure that yum that's has in a dramatic way than other fast food outlets have? they have the biggest composure than any of them. >> they've done a great job. >> they don't have that much exposure in europe. >> yep. >> so china may be slowing a lit. >> slowing and controlled slowing as we know. >> a bit. >> a bit. so you're not worried at all? >> not worried about it forum. i don't know that you're worried about it forum. >> i'm worried about them wanting me to eat the taco. i'm not eating the taco. >> you eat the taco. >> i'm a china bear am i'm not worried about yum there. wagers are going up -- the average chinese worker is
turning the economy to consumption economy versus infrastructure. i think that will help more people broadly. i think yum is okay. i don't think china is okay. >> cortes? >> i'm not a fan. i won't use china as the reason. if you look friday at yum, the range was absolutely massive. it was the biggest range in that stock in years and to the down side. if you back up a little bit and look at a chart that is one or two years out, it looks like a massive head and shoulders option. >> everything was in the can on friday. >> but yum far more than most. i'm generally constructive right here. i think yum is one to avoid. it is so dangerous because of that asia exposure. >> all right. our next trade, lulu lemon reporting first quarter results this thursday. the share prices doubled this year. kit be stretched further? let's bring in ubs retail analyst roxanne mire. you think is growth to come in the stock? >> absolutely. this is an early stage growth story and one in the best in
retailment we're expecting 25% square footage growth annually with the opportunity to triple the u.s. store base plus the opportunity for international growth. and that combined with our assumption of double digit comps for the foreseeable future should mean 30% annual eps growth for the next few years. >> what's the most important met rick you're going to be watching on thursday, margins as we usually watch with these kind of brands? >> you know, margins is certainly important. this is a company that is near peakish margins. they did guide for conservative margin outlook. really, it's the top line, especially given the focus on the health of the consume area broad and in the u.s. we're going to look for the top line momentum to continue. >> so you're fully confident that higher end consumer, right, is going to have that top line performing? we have a little bit concern of late from the higher end names going forward. given their composure. >> absolutely. i would say this isn't a luxury customer. does it cater to higher end consumer. but there say couple of things that they've done in first quarter which should make this a
tremendous quarter. they've increased their inven torrin vestments. they've increased product innovation. they have momentum in the men's business and increased product flows to the stores twice a week from once. we think these things are going to drive significant transaction growth and have higher average retail prices as a result of change in product mix. >> well, roxanne, i love everything you're saying. i believe in this company. i see the growth and on line and all of this. your multiple, however, of using a 42 multiple for your target seems a little bit rich relatively speaking. i know the peak was 47. why you are using such a high multiple to get to that number? >> sure. if you look at the earnings growth over the next few years again, i think we're looking at 30% to 35% earnings growth. if you look at a composite of high growth piers, whether it's michael kors, whole foods, ci cipotle, i think lulu should at
the same level. >> roxanne used to work here. it's safe to say you're not putting the red line on for lululemon. could it be a takeover candidate? could somebody like a nike cruise in here and gobble these guys up? >> i'm sure it's on the radar screen because they're certainly the retailer to emulate. but it's not something that i'm necessarily looking for. >> wouldn't it be dilutive to anybody buying it? take a look at the peg ratio in nike. i mean it's going to be a very, very expensive acquisition for anybody. >> no. it would be absolutely. but, again, they're an early stage grower. >> roxanne, thanks so much. >> thank you. >> can you wait until we go to break to take another bite? >> i love these tacos. big fan. >> he just in hails it. >> coming up on halftime. two traders face off over the housing trade. we have a street fight on our hands next on the "halftime show." [ female announcer ] it's time for the annual shareholders meeting.
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beautiful day in the big town and beautiful day in "power lunch." we're going to weigh in on the issues of the day, fixing europe. is the u.s. the only country strong enough, bold enough to lead europe out of its mess? and managing risk, the portfolio plays you should be making right now to minimize your risks and maximize your growth opportunities. we're going to name some names. see you at the top of the hour, scott. now back to you. >> look forward to that very much. see you soon. home builders getting a boost. home prices rose 2% in april. mike murphy from rosecliff capital joining us with his real time trade. murphy, it's on the builders today the we're getting a nice jump. >> absolutely, judge. how you doing? >> we've been in the the builders for the entire year as you know. and we added to our position in lennar. lennar is another home builder that is a limb differentiated similar to toll brothers. they have a business segment
which is focused on acquiring distressed mortgage that's gives them a bit of a boost in the numbers. they have industry leading margins, very well run company. it pulled back 20% of the highs. we bought lennar at $24.75. we're looking for a push back into the low 30s when they announce at the end of this month. >> guy, couldn't agree less with you right? >> yes, i did cover my housing shorts to day. we did both buy. but mike was buying long, i was buying short. this sector has been decimated over the last week. as you mentioned, 20%. pulte homes off 20% in a week. that is not the kind of price action that is indicative of a sustainable rally in my view. i think it reeks of a mini bubble as the street calls for a housing bottom. >> the bulk of that damage, though, was done on friday. the home builders were down 8%,
9%, 10% based on that ridiculously bad jobs report. >> if you look at it, judge, you have a number that we track is new home sales report. you know this is coming in now at 5.1 months. a normalized market is going to give you six months of inventory. so that tells you have to differentiate between new home sales and existing home sales where you have a lot of forehe closures on the market. we're looking at new home sales here. in a lot of markets, judge, owning is now cheaper -- excuse me, owning is cheaper than renting. so we think that this demand is real. it's going to keep -- >> mike in, terms of new home sales, why it despite record low rates and interest rates we're not seeing a material increase in new home loan demand? we're not seeing applications despite the fact that the price of loans plummet sfld. >> i'll differ there, steve. if you look at when these companies announced earnings last quarter, you saw pretty much orders up across the board. so whether or not the banks are looking to lend right now,
that's a whole other situation. but you can't deny that the home builders have been getting pricing and you have seen demand pick up. if you look at lennar when up. if you look at lennar, you'll see demand has continued to pick up significantly. >> thanks for bringing us the trade. coming up on "half-time" we're trading spains financial pains, next.
rates to currenci currencies, the only winner will be gold p. i'm not a gold bug. it will go significantly higher and do it in a quick period of time. >> our next guest says the n th trade is -- let's bring in todd gordon of aspen trading group with today's money in motion trade. seems like everybody's in the short euro trade, todd. >> yeah. it really seems like it. the imf is coming out and showing record short positions. it's important to keep in mind, guys, that imm futures merck product is not where the money goes. take it with a grain of salt. with that being said i still think risk aversion is on. i play it correlation of the s&p and fx markets. that's the best way to play it. s&p bounce has been rather anemic. i think the path of least resistance is lower. there's better opportunities to be long dollars in a risk
aversion market against sterilelinsteril sterling. they're going to up their purchase of uk gilts. british treasuries by about $50 billion. that's going to pressure the sterling. >> let's talk levels. >> i want to sell a little bit of a bounce. market seems to be bouncing around 1285 resistance. bounce in the s&p is a little anemic. 155 short sterling -- excuse me. 1.54. short 1.55. profit down to 1.51. >> thought quickly on the euro. how low does it go versus the dollar despite you could get the short squeeze, a one day pop the other way? >> here's its opportunity here around 1.24. if we don't hold this 1.24 level, we've go 1.165 in play z. >> how soon? >> i'll take it trade by trade as we get down there. let's call it a year. >> time for pops and drops. midday market movers that might not yet by on your radar. first one today, sandisk popping
5%. >> the street seems to be getting more favorably disposed toward san tis k saying inventories are under control, production is under control. there's new product cycle. i'm a little skeptical. i think it's very cheap. >> amylin popping 3%. >> i like biotech in general. i like the promising new diabetes treatment in a whole world that eats a lot of doritos tacos. >> perfect segue to pete. >> look at the volatility index. into the afternoon yesterday absolute high. 25 calls came out and sold a big portion of those calls. over a third. 50,000 traded of the 150,000 open interest. watch for the vix to maybe go lower. >> guy. fastal? >> reported may sales not good enough. final evaluation is finally catching up to the stock. if it holds 38 on the volume we're seeing today worth a look on the buy side. >> a pop for the queen marks the culmination of festivities honoring queen elizabeth's 60
years on the throne. our celebration is including the serving of traditional eel pie. 100 boat flotilla on the thames. the 86-year-old monarch also rocked out to elson john, stevie wonder and paul mccartney at a special concert. >> she looks great. her hat looks like a cape. >> love the whole thing. >> we should be over there covering this. "fast money" london with the queen. hanging out. come on, judge. >> final trades, next.
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