tv Fast Money CNBC June 30, 2016 5:00pm-6:01pm EDT
nike is probably right behind. >> i want sneakers that tell me how far i've worked. >> see you tomorrow. stephanie, enjoy the college world series. >> private joke. >> now that i know the answer. i don't know what's coming here, but that is "closing bell." it's time for "fast money" with a very special host tonight. let's see who it is. surprise. "fast money" starts right now. live from the nasdaq market site overlooking new york city's times square and also partially from ec headquarters, don't adjust your screen. i'm sue herera making my "fast money" debut. melissa lee is stuck in mean traffic in new york, but she will be here in just a few minutes. our traders on the desk are tim seymour. >> hi, sue. >> hey, tim. karen finerman, steve grasso and guy adami. >> hi, sue. >> hey, be gentle. tonight on "fast," hersheys to monday lease, kiss off, but another consumer staple giant could soon be taken out. we'll give you the name the traders are betting on, plus, tesla plunging after hours on
news of a fatal car crash. phil lebeau will join us-ins moments with all the deal on that and the international monetary fund says it's identified the most dangerous stock in the world. we'll tell you what that one is and what has traders so they are vows. first, we'll start with another third straight day of gains. dow ending higher by 235 points and the s&p gained more than 1% on the day, but we were looking at the internals, and it's pretty curious. it's defense that's leading the way, like telecom and utilities and staples. they are trading like growth stocks, so what's with that, guy adalai lama, what do you think? >> first of all, sue, thanks for filling in, yeoman's work and great effort by you. i've got to tell you, that melissa lee, dove clock. >> i used to have to run for blocks to get down to the new york stock exchange when traffic is back and the poor thing has been sitting there like sweating. she will be here in a second. >> the irony, sue, is last night
i slipped on to the set about 20 seconds late for the second time in the nine and a half years that i've actually pulled this stunt. melissa thought it was such a good move. >> she copied you. >> probably got me by more than 20 seconds. >> she will be along in just a little bit. >> thanks for being here, sue. steve grasso has been here for a while in terms of telecoms and utilities and why they have been going higher so steve can speak to that. i think one of the biggest problems with this market though is that those names are outperforming to the upside. you take a look at verizon and you take a look at at&t over the last month, month and a half. two stocks going sideways for the last four years and magic over the last month and a half. they have both broken out to the upside in a significant way. now, you can argue that maybe at&t is reinventing themselves a little bit. that's worth an argument. i would submit though people are chasing, is that a good sign. well, it has been a good sign for a broader market and at some point i think valuation matters. >> tim, weigh in on this.
if you look at where we've stood sunday night going into monday morning. >> right. >> it looks like we were really going to have a rough week and here we are doing pretty darn well and the growth stocks like facebook and google you say are not participating more in this rally. does that worry you? >> not necessarily. i mean, what's interesting is we've got this bifurcation where values are working. the stocks we're talking about are not value countries so like the food stocks with the news on the monday lease hershey bid has put a continued bid into a part of the market that also has been very defensive, high dividend-paying consumer staples, food, stocks, beverages, et cetera. the value has been in some of the bombed out commodities plays and resource plays and even some of the industrials which some have caught a bit, but ultimately this is not a surprise when you consider what's going on with global yields. everybody has been upset that the bond market has continued to rally or that the ten-year is still around 150, even though the stock market is back up to the highs. why are we surprised by this?
you know, to me this is where we're supposed to be in this current central bank environment. >> do you agree, karen? >> you know, i've got to say i'm very confused by the market's reaction if you look at, you know, as we've said, we've made back almost all the way down and in fact there was a few days of upmarket in the pre-remain euphoria that there was, so i'm very surprises. in fact, yesterday i bought more puts and we'll see a lot more volatility and i can't imagine from this very big event that there was a very brief ripple and then that's it, and steve has been all over the utilities for so long and been so long on that trade. it's interesting that they are leading an up market as opposed to hanging on in a downmarket. i don't know what to make of the whole thing. >> we've had utilities run, and had staples run and had gold run. >> right. >> all the way from basically the december rate hike. everyone thought gold was going to sell off. everyone thought basically the dollar was going to rally. the dollar ultimately sold off,
and utilities ran aggressively. gdx, we talked about it may be three weeks ago or so. it was up 85%. i said believe it or not i think it's going to rally more. it's up 95%. i don't think they are going to turn around. it's xlu and the staples. it's gold. >> you know, what about, steve, to karen's point though, that, you know, we've had this market come almost all the way back, yet we still have the almost record lows in interest rates, especially if you look at the ten-year, and that doesn't really jive. >> well, if you look at -- when you talk about negative yields globally, that number of 11.6 trillion in negative yields is going to come back to us in some way, shape or form, and i don't care what the fed does. the fed is most likely not going to do anything. >> i don't think the fed is going to do anything for a while. >> even if they do, we have to talk more about multiple expansion and yes, xlu on an rsi, relative strength index is
overbought, and when you look at the search for yield, you're not finding it anywhere else, so people have been burned with let's get out of them, but people still drive the market higher, and believe it or not, as we started the show, growth has gone and the new defense is basically defense and growth. >> yeah. one of the other elements of what's going on here, you think about the ecb and what they are doing. they may now be buying emerging market debt. we've got 12 or 13 emerging markets and central banks around the world cutting rates, so a lot of people have thought that em was a credit bubble that was going to be another black swan event. if you think that we've taken the fed to the sidelines. i know brexit is not positive for global growth, but on some level we're addressing or dealing with it and pushed that off to the side and will continue to deal with it. now created an environment where the fed is absolutely sidelined. we've got earnings coming up around the corner and a rationale where people can look and focus on equities and have to allocate to equities.
>> sue, quick, i'm sorry to interrupt. i think earnings are going to matter and you've got your week, week and a half away from an earnings period where they absolutely have to matter. i'm sure most of these companies will talk down growth given what's going on in europe and i use this word at 4:00 and i'll use it with you now. the chas many between ep growth and revenue growth has widened out and revenue growth has to catch up. it hasn't for a while and needs to soon. >> the comps are getting interesting, kind of easy, so i realize we're in a world where we're talking 120 on the s&p, is it 115, you know, again, i'm sure you can make an argument of 110 but the bottom line is comps are not terribly bad. the dollar, depending on what cross you're looking at and this is the thing that people make the mistake on. year over year the dollar is down and on some of the important crosses the dollar has
rallied and there's a lot of places where there is growth in the world and the dollar is substantially weaker against those currencies so i think you have tail winds from multi-nationals and very good comps. >> today, too, we had month end so i'd be leery jumping back into the market. we had month end. tomorrow is the first day of the new month and wait to see how it reacts. next week is a shortened week. wait another couple of days or so to see where it all shakes out. >> where are you guys -- where are you putting money to work? karen, i'll turn to you. you were on one of our specials earlier this week and you were lightening up on some of your financials, right, because they had the most exposure directly anyway to brexit, right? >> i do like only u.s.-focused financials, but i did lighten up. i like names like facebook and google. they have bounced back and were down about 8% which i thought was just way overdone. we'll see, as guy said, earnings coming up.
you know, i -- i'm optimistic about facebook earnings. i think brexit will really not be a big issue for them. that's where i'm comfortable having money. i don't know what the market is going to do. i try to hedge around t.bought some s&p puts yesterday. a lot cheaper today than yesterday, but i'll probably buy some more because i'm very surprised at this market action. >> all right. just because stocks rallied again today doesn't mean the u.s. is out of the woods. we were just talking about that. bank of america warning that companies will soon reveal how brexit is affecting them, and it could get ugly as we head into the next quarter and earnings season. joining us is the head of u.s. equity and quantitative strategy for b of a merrill lynch. i've been a fan for a long time. >> oh, thanks. >> but never had the chance to talk with you so it's a pleasure. >> likewise, thanks. >> so we have seen stocks come back quite nicely which nobody really predicted this week, but you still remain quite bearish longer term. why? >> well, i think it's kind of surprising that we've seen gains retraced in a matter of two days
so our expectation is that if we got a leave vote, if brexit actually happened, we would see about a 7% knee-jerk reaction from the market. that's basically what we saw, but then it quickly just rose right back to pre-brexit level so it's almost like the brexit never happened. you know, i think a little bit of it is the month end effect and quarter end effect and we need to look past and take a closer look at what happens in the next few trading days, but i also think, you know, if you look at leadership that you were talking about earlier, the fact that utilities and telecom and high dividend yield is leading isn't surprising, you know. i think it's really we're back to that -- where is the alternative for yield type of market? there's no place to get yield. >> right. >> and if you look at the s&p 500, 60% of stocks in the market offer a dividend that is higher than the ten-year which is pretty remarkable. >> it is. >> but that's been the case for quite a while. that's not really new. >> it just keeps getting worse though. that's the kicker is that yields
keep going lower and dividends on s&p stocks look that much more attractive as we sort of follow yields lower and lower. >> what about steve grasso's point earlier and it was guy's point as well that, yes, we're coming into an earnings season that's going to be important to the market. however, comps may look pretty darn's they time around. >> sure, yeah, i agree. i think this earnings season is actually going to look a little bit better because you're coming off the strong dollar impact, you know, lower oil prices so all the macro trends are improving, but what i think is going to be important is commentary from corporations because what's kind of unnerving to me is that if you look at last quarter's commentary and companies' outlooks only 26 companies in the s&p 500 even mentioned brexit. 26 companies, a very small proportion of companies even had this on their radar. now all of a sudden you've got
potential for weaker growth in europe and potential for a recession in the uk. >> but is it too soon for that. i mean, would you expect them to comment on that at this point because we don't even know how long it's going to take until article 50 which makes the whole thing official. >> we don't know anything until october, you're right. there's a bunch of time that goes by before we even know anything and do i think that they are going to get questions from the street, you know, on how are you thinking about your european division or your european sales exposure given what's going on and that's where they real very to think hard about, you know, their exposure. >> okay. >> i think the problem is with this that, you know, a decent chunk of u.s. company sales come from europe, 20% or more, and that's going to be the risk. where our economists have actually taken down the forecast on european gdp growth pretty aggressively. >> thank you so much. appreciate it the. >> thank you very much. >> guide me through this. let's trade it. >> so let me just ask you a
quick question. when you look at savita's theory on the market, you see the market sold off, and when we trade it down to 1810 on the s&p, only down there between 50 and 60 did is basically and then we're right back to those pre-selloff levels. this time it was a week. isn't it starting to be -- i agree with everything that you said. i don't have any fight with anything that you just said. i agree with everything, but the problem is the market is extremely resilient. you said it. it pushes money back into the equity market and it just seems like the chairs might have changed, but the equity markets still can continue to go higher. >> sure. i mean, i think that there is upside risk. here's the problem though. not only is there brexit. we're heading into a seasonally weak period. we've got -- i think the big problem right now is that two channels of liquidity are slowly shutting down. if you look at senior loan officers standard, lending standards are getting tighter for corporations.
activities have been de minimus. companies are having a tougher year raising capital than they were a year ago, two years ago. that's a late cycle phenomenon and we're back to leverage raichos that were akin to back where we were in 2007. it feels like we're getting longer and longer in this bull market and exerted all the levers that we can to extract values from corporations based on cheap financing and seen tons of m & a and lots of share buybacks and all sorts of financial mechanisms to generation earnings growth and nothing real and that's what wore ice me is you've had this exogenous shock happen in a fragile market, late cycle. that's what feels a little bit less resilient. >> it's been a pleasure. thank you so much. appreciate it. >> thanks for having me. >> coming up next, we'll find out where melissa is. she was on 34th street last time we checked. hershey's soaring after rejecting a buyout offer from monday lease, but is an even sweeter deal right around the corner?
>> and tesla tanking after hours on reports of a probe into a fatal crash during its self-driving mode. phil lebeau will join us with all the details and a bit later the one stock that some are say, could be, get this, the world's most dangerous stock. yeah, pretty darn scary. we'll give you the name when "fast money" returns.
welcome back . we eve got some news . mel is a lee is at the nads damage . she made it through . hi , miss y . >> hi , sue . thanks so much for covering . you did a great job . >> i've got to tell you . >> sue rocked it . >> that is the worst feeling in the world . you're sit ing in the car going please go fast er , please go fast er . >> >> somebody get mel is a a cook tail . have a great show , guys .
we're getting a little more information about this investigation being conducted by the national highway traffic safety administration. it has to do with a tesla model "s" that on may 7 was involved in a fatal accident on a highway in florida. let me set the scene for you. you basically had a tesla model "s" that hit a tractor trailer that was turning in front of the model "s" so you had basically al truly their turns in front of it. because of the height of the tractor trailer the model "s" slid underneath the tractor trailer and that's when the fatality happened and the driver of the model "s" was killed. it's based on the design of the autopilot system. within the last half hour tesla released a statement regarding the circumstances of this accident saying either ault pilot nor the driver noticed the white side of the tractor
trailer against a brightly lit sky so the brake was not applied. understandably shares of tesla have been under pressure ever since the news broke about 45 minutes ago this. brings up the question, guys, people will say, well, what exactly happened in this accident and how will they know if the autopilot failed? well, there is a data reporter in all vehicles including the model "s. request the "they will no doubt take that data recorder and look at it and analyze it and if possible, i don't know if this is possible or not. they will get some determination about what did the auto pilot radar, cameras. what did they see? did they send any type of a sensor for a warning at all? way too early to know if in fact this is a case where the system out and out failed and didn't see anything at all. did it alert the driver and slow everything down? interesting when all those details come out.
we'll see if the head of nhtsa or the head of the u.s. transportation department, anthony foxx, issue any more statements over the next couple of days in terms of while we investigate this, people should or should not use their autopilot features in their tesla vehicles. again, this investigation just beginning. the accident on may 7, a lot of details that we still need to learn. >> all right, phil, thank you. phil lebeau in chicago for us. if you read the tesla log it makes clear when you use an autopilot the driver acknowledges essentially he or she must be alert at the wheel and must be ready to put both hands back on the wheel and regain control. this is not autonomous driving. it's an autopilot feature. how much damage do you think this will cost the stock which has rallied over the past several sessions initially. >> i think there's a lot of reasons to sell tesla. andrew has talked about many of them on this show. i don't think it's tragic but not one of the reasons to sell it.
you just mentioned the huge run. had a substantial lunn up to the 180 level that we flagged a number of times. mobile had a huge state to the upside and it's given a percentage of that back. the way to trade it, in my opinion, by the weakness in mobile. that to me is the most interesting going forward. >> you like that. i have liked it, but you're not really sure about the technology. it's so early right now and this stands to reason with tesla. no one knows where the technology is going to be. is it going to be infrared? going to be cameras or some sort of a sensor or all of the above and no one knows where to place the bets just yet so i think it's really early there, but i agree with guy. a host of reasons to sell tesla. i would still be a seller of tesla. >> yeah. every time we've had one of these batteries blow up or had fires in tesla over the years. these have been effectively non-events. the event here is tesla should not be priced as an auto company.
it should not be priced as a software company. it should probably be priced as a battery company and there's a lot of risk around the solar city tesla merger. one of the reasons why the stock has bounced back because i think there's been some ebb in terms of the expectations. this goes through. >> i agree. as sad as it is, i do think it's a blip in the evolution. tesla story. >> okay. still ahead, are biotech stocks on sale? we've got a back of the envelope analysis and why this space may be looking cheaper than ever before. i'm melissa lee finally at the nasdaq. you're watching "fast money" on cnbc, first in business worldwide. meantime, here's what else is coming up. >> let's make a deal. >> you nknow that the imf says one company could be the most dangerous stock in the world and here's a hint. we'll tell you the name and why investors are so they are vows
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welcome back to "fast money." hershey rejecting monday lease's take over bid saying, quote, it sees no basis for further discussion pretty much shutting them down so if they do decide to sweeten to marry the deal they would marry two of the biggest chocolate brands in the world. what do you think, grasso? >> hershey is up 27% year to date and dan nathan did an options action flagging this below $100. that was very prescient, as god would call it. >> good word. >> and this has been a long rumored deal. a lot of chatter has been around this, but the hershey company has always resisted and given any suitors the heisman, so to speak so at this point it's a
matter of talking around it. when you look at the price action it seems like it's more of a price and details and eventually it does happen. >> there's a reason why it's still trading above 100. >> yeah. a couple of reasons. i don't think it happens though because given the her think trust. >> this is not easy, right? it's come out there without them on board, right. i think there's some sort of impasse here and go back, i don't know, 15 years. hershey was this close to a deal and they said thank you. wrigley's, right. i think that we would have seen this as a deal announce federal there was one to be had, not a letter and some back and forth. >> so hershey shareholders should look in their gains. >> i wouldn't buy it for this takeover, no way. >> i think they can get more than this and i think the higher bid is coming and if you look at synergies of the company and monday lease globally is
everywhere. they need this more domestically even though they rejected more company to be offshore. bottom line it makes tons of sen. 14 times ebitda is where this deal probably gets done. cadbury deal with 13 times, so i think there's going to be -- i think there's going to be a fire alarm in the nasdaq. >> what else can go wrong today, honestly. >> boom. >> they make rollos? i mean, this is fantastic. i didn't realize. >> the fire alarm goes off. i don't know what else to expect. sprinklers maybe. >> have a huge candy thing here. i didn't realize they made rollos. we've got rollos and they are awful. >> anyway. >> i think hershey's is very expensive. talking about 26 times. lock it in. >> lock it in! >> as we head to break a live look at the yahoo annual
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welcome back to "fast money." here's what's coming up in the second half of the show. yahoo ceo marissa mayer may be making what could be her last shareholder meeting. she's speaking right now and we will eel bring you the very latest headlines as they cross. despite the run in biotech this week, some of these names could be a screaming buy. we've got a special report with the one and only meg tirrell later this hour. we start with the very rough quarter there was and here with those names is seema mody. >> reporter: quite the volatile quarter for european banks. trading nearly at a four and a
half year low. the brunt of the selloff, of course, happening towards the end of june right around the brexit vote which heightened concerns around the asset quality and fears that earnings will be hurt by a rise in back loans. take a look at the price action and some of the big names, barclays and 12% a quarter and deutsche bank down 19 and ubs off by 20 and credit suisse fearing the worse out of the pack down 24%. most of these european majors have come off their lows as the brexit fears ease, but many analysts say substantial risks remain for the european banking sector leading to further price adjustments and the big talker today, melissa, whether we'll see further regulation on the european banks which could potentially cut into profitability. >> seema, thank you. >> where does the biggest post-brexit danger now lie according to the imf, germany's biggest back. rich ross is going off the charts for all the details. rich? >> how are you? you don't need to be a technician to see how bad this
chart is. i'm going to tell you, this is a terrible chart and keep in mind where the imf says this is the world's most dangerous chart, flash back to the financial crisis. no one really talked about lehman brothers being the most stock in the world until it was the most dangerous stock in the world and this reduces the likelihood that this is the most dangerous tock. this is very bad for the world and on the next beige this is the european bank and bkx. they have the metric system so they don't know what the bkx is. break to a new low low these levels would really bring us into a brave new world here that no one is going to like. now, we're going to look at the ten-year yields and talk about the most dangerous stock in the world. this is probably the most dangerous bond in the world. broken below the neck line and testing new lows and one of the few yields that's positive and why is this so dangerous and here's why. this is the ten-year yield
versus the euro stock banks. basically the exact same chart and all of the policies and easing mofaz are actually exacerbating the situation by driving the yields lower so what happens there? the banks go lower along with the yields and the spread continues to flatten so once again we're in a really tough bind and stocks surged and yields are going lower and banks lower along with them and that's a very dangerous game to be playing. melissa? >> we've seen how globalization of banking has really become problematic. i'm very surprised that we've had the divergence in the last few days. i know we had -- mike the other day mcdonald. >> larry mcdonald. >> i'm sorry, talking about -- >> he was actually with the doobie brothers. >> i'm sure that's what karen was thinking of. >> anyway, larry mcdonald. >> right. talking about them as a bounceback candidate and did
risk-reward for me, i don't see it. i don't see it. >> i think when people look at deutsche bank following the secar or fast events. a lot of people knew they would fail. it's necessary for risk management stress testing. it doesn't change the way that they were last week so i'm not here to defend deutsche bank. rich's charts are unbelievably relevant, and i think that tells you something. i think a lot of these banks may not earn what they are earning two, three, four years ago, but are they going out of business, and that's where you start to get to on price to book level? >> i don't know. it's an i don't know as opposed to no. >> if somebody would definitively say they know deutsche bank or credit suisse, i think they are making it up. listen, what's going on. i thought the reason why deutsche bank was a lousy stock at the beginning of the year was the energy exposure and here we
are with deutsche bank below the levels. rich ross at the apex doing things. >> he's the pinnacle guy? >> anyway, we get the point. >> he is a genius. he just sort of got that metric system in there and went right over your head and i'll give you a pass because you're still trying to get here from 34th street. that said. at a certain point what's going on in european banks will have huge ramifications for the rest of the banking global system globally. >> we call banks utilities. everyone said they will trade like utilities and the problem is they have no yields. if you want to buy regional banks, they would have been under more pressure than the larger banks and citigroup is down 18% and bank of america down 20% and jpmorgan, the one karen makes. jpmorgan is only down 5%. so if you want safety and if you want that name, i guess you could jp morgan.
>> rich, good to see you. >> i got it. >> i don't think that was michael mcdonald taking it to the street. i think it's the other lead singer. >> i don't know what's going on. ahead, yahoo ceo marissa mayer speaking at the annual shareholder meeting which is now under way. we'll hear what she has to say. more "fast money" right after this.
seema mody with williams board. >> reporter: 6 of the 13 directors have reportedly designed after a failed effort to out of their ceo allen armstrong, that according to dow jones quoting sources. chairman frank mcginnis, activist investor from corvex capital are among the directors who resigned. keep in mind resignations follow the collapse of the williams planned merger with energy transfer equity for $33 billion which, of course, did come as a big disappointment to the shareholders of williams. we're looking at the stock down just about 1%. back to you, melissa. >> seema, thank you. karen, what do you make of this? >> this has been one of the
strangest takeovers in a long, long time. maestro was, i thought, sort of the architect behind the strategy to try to get ete to go forward with their deal. that seems to be unsuccessful. they probably have one last chance of an appeal. maybe just, you know, taking his lumps and going away. six directors resigning is a lot. >> that's a lot. >> all right. >> let's talk about ya. hosting its annual share holding meeting with ceo marissa mayer fielding questions and ceo josh lipton with the details. hi, josh. >> the vote going according to plan. the board of directors elected executive compensation approved and, of course, investors want to know about that ongoing sale process and that's a subject. marissa mayer spoke about that immediately at this meeting. take a listen. >> in february we announced that we've received strategic alternatives including the possible sale of our operating business. we believe this is the right transaction because
strategically it alliance well with our business while efficiently separating our equity stakes ultimately unlockie value. >> she's leading a row best well-run process and yahoo is moving, she says, expeditiously, of course. remember earlier this month our own david faber reported that yahoo had received bids at 5 billion or higher for that core business, that verizon specifically had bid 3.5 billion. a final round of bidding is expected to conclude here in mid-july. melissa, back for you. >> josh, thank you. >> mid-july, final bids. where do you stand on yahoo at this point? >> stocks up 13% year to date as long as they are arguing over how much it's worth. still a viable event that's happening and i would assume you play it through options. tim could probably talk to the sum of the parts or what things are valued at but i don't think it's that sexy. >> about a 35% discount to the
summit of parts and that's where they fully tax some of the parts and if you look at what they are going to throw at the core, let's not do that and make that free, they had a $42 stock. i'm long the name and kind of like to see some changes at the top. >> yeah. guy? >> alli back has been in this band since march and probably going to see the price level he's looking for. however, if alibaba throws you a curveball, which has happened before and breaks down below that 75, i think all bets are off. sum of the parts makes sense as long as alibaba stays between 75 and 80. >> would you henly out some of your alibaba exposure if you want to make a bet if you seem to want to on the risk of the business because you're making two bets, the rest of business and alibaba? >> i'm actually making a turbo charged alibaba bet and i'm long alibaba and yahoo. i'm encouraged by alibaba for south bank shares. i think there's some interesting
things going on in the entire corporate structure. i think alibaba is being i think assumed guilty on a lot of fronts in term of their core business and i actually they are they are trying to clean up the fraud and i think there's good things going on. i think the valuation is very interesting, but i'm not hedging and i'm making a call that i think this is one of the great consumption ways to play china. >> texas long. >> how do you know. >> i'm shocked. >> from texas. >> texas hedge. >> trade school. >> see, we've got the graphic up just in time. still ahead, some of the biggest fire tech stocks have been on sale and there could still be a bargain. we'll explain right after the break and monday lease's bid for hershey setting off talk of a lot of other names. we'll tell you who right after the break when "fast" continues
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if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. welcome back to "fast money." motorcycle ron plunging on earnings. let's get to seema with more. seema? >> big mover here. the stock down about 7%. the memory chip-maker says it will implement a restructuring plan to lower costs by focusing on fewer projects, job cuts and other measures as it continues to face challenging market conditions.
the company did not specify how many jobs it was cutting but said the cost-savings program would save over $300 million in fiscal year 2017. mike ron also reported about a 25% fall in third-quarter net sales and a drop of prices due to the ongoing weak demand for personal computers, plus that competition from samsung. you can see the stock down, yeah, 8% after hours. melissa? >> thanks so much, seema mody. it's interesting. there's so much optimism over a couple of weeks where a lot of analysts came out and upgraded the stock and ran up to 14 and now what? >> i'm still long the stock, and i've been one of those guys that have actually averaged on the way down, which i hate doing. it's always wrong and couldn't help myself from doing it because every time you look at mike ron. if you get it below "x" price it's a bargain or get it below this price you've got to really love it. i've been averaging and waiting for this turnaround-type story and maybe you see a pop from it for positive headlines going forward. >> from 9.5 to 14 in a month, month and a half. >> amazing. >> the stock trades down.
it has to hold $12. 12 is your boeingy. >> now to a little dose of stock therapy. biotech is down nearly 4% since monday but the biggest names in the sector could be a steal right now according to the street. our resident stock therapist meg tirrell is here to explain. >> earlier this week on all the brexit concerns we saw biotech and a lot of other things get hit hard and rbc came out with an interesting note on monday essentially saying the big biotech names are trading basically at zero pipeline value so that translates into the assumption that these companies are never going to develop another successful drug ever again so you can look at how rbc basically values these companies at zero pipeline so for amgen, biogen, ce lg ene and the four big biotech names they were trading close to the zero pipeline value before and this is essentially a steal because
these companies have track records and will develop successful drugs and this is potentially a time to buy in hand what will bring biotech back? generalists have to come back into the space and the specialists aren't going to believe biotech and three pillars that will bring biotech back, good data and fda decisions and m & a which people expect to start heating up and then the macro with the election. that will will continue and in terms of data that's why we've seen biotech be beaten down in reesent weeks, biogen having the bad phase two data and lexion the bad phase three data. we did see tesaro doubling yesterday and that's the news biotech news and getting updates from the fda at some point could be a cat life. one of the biggest cat lifts that could completely turn sentiment around for sentiment is eli lilly's alzheimer's data that will come in the fall. it will completely change
sentiment if these data is good. however, the jury south how that will turn out. >> let me push back on that had a little bit. i do believe there's babies in the bath water. there are gore value. >> if we see further pressure on drug pricing, for example, if there's more competition, especially when you look at a biogen, more competition among multiple sclerosis drug, especially on pricing, i mean, that could further degrade confidence in that name and their earnings power so that's why people are expecting these names like biogen and gilad to buy something. they need to buy growth and i think people are waiting for whether there can be a transformative deal for biogen and giladed. >> if i'm a bear to your point, i would think the core value is something that's deteriorating every single day because the value of what that core business does deteriorate as the patents
get closer to competition and then your pipeline is just an option on that declining core value so the picture overall, i mean, just to lay out a bear case is not great. >> it depends on how much degradation you think there is in the core and that's exactly what i was wondering, how much is in there? >> but meg is basically making a commentary on where there's value in the sector and if you look at the big four, you know, look at gilad especially, i mean, the thing is trading at seven times, so it gets to a place where that core is pretty darn cheap relative. >> to me it's a relative value trade, and i think that's the best way to play the sector. >> you go first. >> when you talk about all the names, that's the ivb which is down 25% so there could be value there and if the market doesn't perceive value there and looking with just healed then you've got to stay with the pfizer stocks, the 3.5% yield which i've been long forever.
if you want to nibble a little bit, i think you buy the ibb because you could have one that outperforms, one that does terrible and you just mute your risk across the board. >> talked about this on monday or tuesday. we talked about ibb, potential to trade up to 285 and failed. guess what? traded up to 285 and failed. we said look for 240 on the downside which is exactly where it traded down to on monday so what's the point? the point is now -- and we said this on monday or tuesday, the risk/reward in biotech now sets up really well against 249 ibb and guess what, none of the politicians have been talking about biotech now for a couple of weeks and if not in the last couple of months. >> you just wait. >> yes, you've got a window is my point. other fish to fry so i think you've got a window to stay long the ibb. >> where the market is going is where the ibb is going. >> it's a measure of risk. i mean, it's -- it's the extra beta that people are layering on to their portfolio. >> i don't know the word correlation. >> not a good haiku word. >> we're running out of time.
>> it's an hour show. >> thank you. >> meg, thank you. let's talk m & a here. hershey's, of course, rejecting a takeover bid from mondo le se. hey, mike. >> half, it's not chinese food. general mills is seeing a lot of activity and early in the day we're seeing most of the activity in the july calls. if you followed the stock it continued to rally as the day went along. 3,500 august coles trading at 1.35 and the stock could be up another $5 after a very strong rally in about 50 days, but i would say, if you are long this stock, vol is higher and the
premiums are pretty high along with the prices of them so i would consider selling those calls against the stock if you happen to open it. >> you know, in terms of the complexity or the situation that we have today, what's interesting is that people thought that perhaps m ho ndo le se could be a takeout target and the companies all seem to be in play and there's no done deal. >> they are all in play. >> yeah. >> candidates. >> i bone pin cal and pinnacle was going to buy hillshire and tyson came in and bought hillshire. all of the food guys, it's a very predatory environment. they are trading at multiple tsz. the synergies are such that they think they can squeeze more profitability out of these same companies. i think more is going on. >> it gets too expensive after a while. for some of them, like white way we've seen forever. >> mike still there? >> yeah. >> mike? >> i think he went to go put on
sunglasses. >> where were you today, on the yacht today, gilligan? what's going on? maybe you can get ginger and mary anne to help you out with sunscreen. not a good look for you. we've got to be careful. >> he knows. >> you're right. >> melanoma, the whole thing. >> always should wear sunscreen, that's the bottom line. "options action" and school all rolled up into one. catch the show tomorrow at 5:30 p.m. eastern time. up next, the final trade. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement.
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