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tv   Fast Money Halftime Report  CNBC  October 8, 2012 12:00pm-1:00pm EDT

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i'm surprised now you're seeing issuance of equities you're not seeing more buy backs. the bears will like this and stay on top of this. >> they got a few things to work with. gary thanks for coming down. does it for us here on "squawk on the street". carl, thanks so much. four hours to go before the close. modestly in the red. dow industrials, s&p 500, nasdaq behind me in the red today here's what we're following on halftime. apple's breakdown. the stock is down 9% in two weeks and falling again today. should you be buying or worrying? splitsville for hp. first our top story, judgment week for the rally. wall street's bracing for the worst earnings season insurance
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'09 and if warnings are any indication it will be ugly. will the numbers be that bad and how should you play it? let's get some answers from steve woois, simon and stephanie. how about it, steve, how are you playing it? >> first of all, scott, i have to pay off a debt to dave. he kicked my butt on the golf course. he rallied big. i'll get him next week. as far as the market goes, though, here's what i would say. earnings for the third quarter everybody knows they are going to be terrible. my daughters know they will be terrible, my dogs know it's going to be terrible. that's discounted in the market which will drive the market from here is the fourth quarter guidance and guides for 2013 and those are still very robust numbers in the s&p if they don't the major companies report don't take a hatchet to those earnings forecasts. so i think they will be okay. spain is the big issue. they will come in and ask for a
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bailout which is why a lot of credit funds are working today because maybe it was today. >> you're nothing if not a name dropper, right? i'm glad you don't throw out the names of the high rollers that you roll with. >> you judge by the company you keep. which is why i'm sitting as far away from you as possible. >> you've done that. david any time you want to call into halftime we're happy to take the call. >> best round of golf. >> couple of things. three names you want to focus on. yum brands come out with earnings. jpmorgan and wells fargo. you want to look at the actual sectors and see where the opportunity is. technology is important here going forward. when you look at the expectations for eps growth still seeing somewhere around 10%. however look at what you've seen in terms are of negative earnings revisions over the last month. collectively technology is down 10%. so i'm going focus on
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technology. any weakness it's an area i want to buy on the weakness. the other side of that is energy and materials. the expectations here, eps growth, sharp contraction, 15% to 25%. even on a weak take, further weakness i don't want to buy them. >> expectations couldn't be any lower going into earnings season. what happens if we surprise to the upside. >> i think that expectations are low. i do think people expect that numbers for 4 kansas g and 2013 will come down. there's no question in my mind. this has been a very hated rally and i think if we see better than expected numbers from any of the companies this week we go a lot higher. alcoa particularly is very interesting because of their subsegment, auto, aero, packaging, truck, all of these are very, very important data points we'll get tomorrow and i think -- kyle does an amazing job of giving detail.
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that's the conference call you want to listen to. >> alcoa set the tone for this past earning season, came in better than expected, earnings ended up being pretty strong. so it really does have a huge impact, guys, simon baker how do you read this >> i was listening to steve. hit it just past the women's team. the companies pre-announced disappointing earnings. it's an opportunity to joe's point to select a certain sectors. we like cyclicals. you have a good opportunity to going. safeway is a good example, report earnings on thursday, 30% short. it's overdone. you can buy safeway going inattorney general's. >> do you think earnings will be better than people think?
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>> so disappointing right now, it might surprise you on the upside. wall street has done a great of down playing the expectations so much we could be seeing a surprise to the upside. to that point, definitely a big dump of cash on the sidelines. >> what does jack vogel think? on this eve of earnings season and with the election less than a month way. let's ask him. jack, welcome back to halftime. great to get entrepreneur sights especially with so much in front of us. set the stage for us, if you would. >> sure. first of all, you know, i think if we're investing on a daily or monthly or yearly basis we ought to examine what the heck we're doing because that's more like speculating than investing. that's what i wrote about in my
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new book. but i don't have much of an opinion. broadly speaking i would say the s&p 500, for example, should earn i think around 100 bucks with low pay out, low dividend pay out, 35% or something in that range, and so i don't see that the market is terribly overvalued or terribly undervalued and i think we should take our ideas about asset allocation only change those views once we do what suits us and fits our profile. change those a lllocations if there's extreme evaluation and extreme under valuation. i wouldn't make huge changes. if you're a 50-50 bond/stock investor be a minimum of 30% in stocks and minimum of 30% in bonds no matter what. don't try to guess too much.
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>> mr. vogel, i know you can't call things week to week or month to month but you wake up every morning and see the same headlines we do. by and large do you feel pretty good about where we are right now in the stock market? since we talked to you last the fed has embarked on qe3. a lot has happened. >> yeah. let me say, i look at things in ten year chunks, and i think the odds that stocks will give a higher return than bonds over the next decade are, you know, probably 85 to 90%. the fundamentals are that bonds are yielding maybe 2.5%, 3% if you throw in corp operates and stocks are yesterdaying 2.2% in the s&p and yet the s&p stocks are going to have earnings growth. nothing extra the government can do other than pay the bond issuer can do other than pay the agreed upon coupon and most bonds are in good shape credit
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wise. so stocks have earnings growth, which i suspect will be something like 5% over the next decade. some years away head of that, some years down, some years behind that. so that should be a 7% real return, fundamental return on stocks not counting any change in the market's evaluations, pe multiples and so on. so 7.5% likely will be better than 2.5%. that's where the odds come from. i would say 85%, maybe even higher that stocks will do better. >> where does the election factor into all this? we had some strategist on the streets who have raised their own targets based on the fact mr. romney could win the election, if that happens it would be more bullish for the stock market at least in their minds. does the election really matter? >> well, it matters greatly to the united states of america. the issue you're saying does the election north the stock market and in my lone experience the
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stock market usually gets it wrong. how an election comes out is really definitive in terms of what future economic growth will be, that kind of thing. and it's very hard, particularly right now with a new administration, possibly a romney administration will do because they've gone back and forth from the far left to almost the middle in the last debate and so maybe what we expect to be an extreme republican position will be a very moderate republican position. we just don't know that yet. we don't know how much is a noise of politicians, sound bites and momentary attempts to appease the crowd on both sides. i don't think that one would make a market forecast based on one's prediction on whether romney comes into president or obama remains in. >> mr. vogel, let's go back here on the expectations of real returns for investors because i
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think you're talking about something that could be incredibly important. there's been tremendous concern regarding pension funds and their expected rates of returns on a yearly basis of around 8%. some said that's unrealistic. do you believe that's now fair? >> it's ridiculous. it's a numbers game in which the bested interest of the pension managers are to offer high returns and bested interest of the pension funds themselves are not impair the company's earnings by telling the truth. the reality is those numbers, by the way that i gave you before 7% for stocks, 2.5% to 3% for bonds are nominal numbers not real numbers. the real numbers we'll take 2%, 2.5% off of them. as to the 8% pension fund returns, i have a big section in the new book showing what companies would have to do to earn that 8% and the returns are off the chart. you have to have a very high
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stock market return, very high bond market return which we won't have. managers that can out perform and then hedge funds and private equity positions that many pension funds have that would be off the charts from anything that's known in history, on the assumption that all of these private equity hedge fund managers will be above average. i can tell you they are not above average. >> jack, i would love to talk about the op-ed that you recently penned a couple of weeks back in the "financial times," saying fund managers must break their silence. a few very large fund managers tone lion's share of stocks but reticent to take any activist position or exert any sort of influence over companies whose stock they own. why do you think that is? >> well, two reasons. one is a huge portion of what these managers do is more or less speculation. they will run 100% portfolio turnover and if you're a spe
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speculator you don't care about corporate governance and shouldn't care. change in corporate governance doesn't affect the stock's movement it's a long term thing so it should be the investment segment, long term investors in this institutional group who should be playing a much bigger role and that may be half, maybe a little more than half of this investment volume out there, this roughly $10 trillion run by institutions in america. and so a lot of them shouldn't but those that should the long term investors and i would argue particularly the index fund investors. think about an index fund manager. he tone like the way the company is being run. but he can't sell them. what is he going to do or should do logically? fix the management. if the management isn't doing the job fix the management, communicate with the management, change the management. that's out of benjamin grand long time ago his ideas are with us forever.
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so we don't do that, i think in part because we're running with big guys are running all the pension and 401(k) money for these plans. and i have a quote in the book that says there are only two kinds of clients that these institutionat managers don't want to offense, actual and potential. that's an awful lot of clients. >> yep. mr. vogel, it would only be fair if i asked you whether fund managers at vanguard, where you have a long history are encouraged to take some of the positions you say too often aren't taken. >> well, our present management position is that we're a lot better off, we can do a much better job by talking to management rather than being activist and voting or proxy proposals and things of that nature. and so we are very low in the scale of active voters, even among the large mutual fund groups. and that's the way the management plans it and it will be much more effective, in their opinion, which i accept at face value by talking to these
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managements and going a little bit behind-the-scenes and making changes from within rather than changes from without. not much is happening at the moment to anybody, but the fact of the matter is these institutional investors control corporate america and if they want to get corporate america fixed, in the interest much its own stock holders not it's own management they have to speak up and exert their guidance power. >> mr. vogel, we're grateful as always for your time today, sir. thanks so much. >> great to be with you. >> jack vogel. later on the 5:00 p.m. show big head winds for big money. strategy from pension and endowment managers. "fast money" hears from bruce zimmerman and derek young. certainly want to stay tuned for both of those gentlemen. on the way shares of apple trading below 650. a look at whether this is a rare buying opportunity or a bad sign. the analyst who is calling for computer giant hewlett-packard
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welcome back. shares of apple falling today, down more than 8% since the iphone 5 went on sale september 21st. technically the chart is forming a textbook head and shoulders pattern breaking its neck line which is allegedly bearish for the stock. so this a breakdown or a buying opportunity? i mean i know there's a lot paid to these technical things, head and shoulders, double top. bottom line, do you buy the stock or are your really worried? >> you hope that the continuance in the price decline is with it until earnings and then you buy it after earnings. there's been a change technically and fundamentally with apple. fundamentally the expectations have been lowered. i was wrong. i said 50 million iphones were going to be sold looking forward
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to the next couple of quarters. expectations have been lowered. apple tv where is it? where is the conversation regarding apple tv. >> they are going to sell as many iphone 5s as they can make. >> 50 million. apple was up at 700 bucks. expectation we were going north of 50 million. if we're going to sell 8 million less than that that's problematic. fundamentally in the near term i still think you wait until earnings, in the midst of a correction and also the fact that google has gotten a little momentum behind it, large cap technology players are allocating to google coming out of apple. >> you talk about the performance over the last three months and it's google. year-to-date it's a different story. google has had this great stealth rally. your saying if you had money to put to work in one of these names right now that you would pick google over april signal >> let me be incredibly specific in answering your question. >> please.
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>> i got out of apple as you know, got out of it relatively well. we're not is going self-promote opinion but if i had right now sitting with you known put into this marketplace i would put the money into google. after earnings be very quick to get back into apple. >> sdo you agree? >> you want to own it ahead of the quarter. this stock got hammer. it went from thereof hate and no one understands that. it's more of a supply issue, i think. i would say people understand it. but the point is that if you go to the apple stores, if you go to the online towards they just don't haste. when they do have it they are going sell it. so i think you got to take a little bit longer term approach to it like we do and you do want to watch it carefully. take a little bit of position and watch it and into earnings you can own it. >> steve you buy it? >> i like it. i'm short puts which means
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positively disposed to it. i don't think on a technical analyst call and i see some call for 557 as the final stop on it that's you pay attention to it. i think it goes higher. it's a core holding until proven otherwise and there's still lots of steve jobs products to come out of the pipeline. so, yes, i would buy it. contrary to what joe said, i wouldn't buy google because it has done so well and their quarters can be suspect as well. it's an ad driven model. >> his call is the talk of wall street. ubs analyst says hewlett-packard should break up. hp stock has been on a steady decline all year and has fallen 15% since it rattled the markets by cutting guidance again last week. former hp chairman was on "squawk" this morning. >> there are potentially some way of restructuring the business, you know. the pc spinoff i did not support at the time and they pulled that back. now you have to start to look at
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things like that. i would just argue, you have to consider everything. >> let's welcome the senior hardware tech on ubs with more on his note. welcome back to halftime. it's the talk of the street today. >> thank you. good to know ten years later carlisle and i are on the same page. >> up raised an interesting point in the kind of note you put out today is nothing new. you've been calling for this company to break up for the better part of a decade. >> i have. and the number of analysts have point this out. we're trying to put a staying ground and saying it's increasingly making too much sense. we updated some of our parts analysis. investors today are getting pcs and printers for free. the reason that we think it makes a lot of sense is we call it the fallacy of dependency.
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corporate board hasn't done well. management is a problem. eroding brand. worst parts. business are dragging the better ones down. while there's no silver bullet we still think at the end. day it will be worth more broken up than whole. >> stephanie? >> do you think meg whitman has a sense of your again? -- urgency? what do you think the timeline is and can she get this done >> to her credit there's two steps. one improving the individual business units and she did an incredible job of talking about that. second step is break up and they give no indication of interest in doing that. do you have an activist on the board but legally chained for two years in terms of doing anything too dramatic. frankly i think she thinks she has some time because the company does not want to have another ceo come in any time soon.
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she probably has one to two years. inevitably they have to look at structural changes. >> steve, does meg have any credibility left on the street? guys like you? >> i think so. i mean she's got fairly good past. you could argue was she the best person to pick for the job? hard to say. she did a credible job. the area they are hurting themselves is they seem to be optimistic about pcs and printers. they are not worth zero either. she has credibility but have to use that to take bolder steps over time or risk lotion it. >> the four to five years of a turn around time frame that seems to be more realistic than not, four to five years to turn something like that, like turning the "titanic" around. it's such a big issue to try to turn around. >> it is. she's made the analogy to ibm. saying hp was not as bad as ibm.
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ibm is not the format to follow. ibm was right to keep things together. so four or five years might be right in terms ever turning the individual business units around but things are moving much faster. tablets are coming up. she done have that much time. within the next two years they have to do something bolder. >> steve, thanks so much. would either of you guys buy this stock on a continued pull back? there was a time where you loved hp and it wasn't that long ago. >> loved hp up at 27 bucks. got out around 23. that looks good. when you look at the outlook services is really why the market right now is selling off hp. that outlook is horrible. i think there's a little bit of optimism in hp's outlook for pc growth. it's up 0 to 1%. that's really unrealistic. >> if you look at the trading volume in the stock last year it was the most trading volume in years and i think the
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capitulation, there's some smart value investors that loyalist. the capitulation in trading last week you can see a good buy. >> buy or not? >> i don't think it's a buy. to me comparing to ibm is not credible. when pearson came to ibm it was a different environment. >> look -- >> pc business. nobody buying. >> but he's not saying they should be more like ibm, right. ibm didn't break apart. >> that was meg whitman's -- they did get rid they got lenovo to take them out of their pc business. it's like an eastman kodak. >> coming up, last word there >> ibm sold the future. that's why investors are rewarding ibm. hp they can't even see the price. >> meg whitman is not lou.
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>> credit card companies hitting all time highs. did you miss the boat? we'll get some answers plus shares of netflix up nearly 30% in the past week alone and now an up where grade by morgan stanley driving shares even higher. who wins the election versus earnings season. we'll examine what will have a bigger impact on the markets. [ male announcer ] this is joe woods' first day of work. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early,
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welcome back. it's time for our top three trades. morgan stanley upgrading net flirks to overweight. ama stone isn't a direct threat. the stock up 30% in one week. the one week since whitney and he looks pretty good when he looks at this one. came on the show and said he was long it again. >> up and i talked about it last week. we said 75 before 50. let me freshen that up. i see 80 before i see 64. i think a lot of the fundamental turn you saw it in the customer satisfaction, that's present but additionally we talked at the beginning of the show about negative revisions. in the last month there's bean 21% overall negative revision
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for netflix for the second quarter 71%. folks are chasing the fundamental story. kind of turning a little bit higher. >> blackrock, getting an upgrade to buy from neutral at citi. >> this is really a valuation call. the analysts sees an earnings surprise coming up which is an interesting kind of bold. but the asset managers in general should do pretty well because of higher equity markets. these guys have the global platform and biggest in the industry. i like this call especially if larry fink stays on. >> facebook cut to sell over at btig. the stock is down 6% or more over the past week. simon, this one had some pretty good momentum. i'm wondering if that's all gone now? >> btig are saying nothing no one has been talking about before. that concerns basically on mobile monetarization. >> all right.
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all day cnbc is look at the stocks that have powered the s&p 500 to multiyear highs. is there still time to get in or have you missed the boat. mary thompson is here with a look at the credit card companies. how are you? >> good. a lot of analysts saying in this space jump on board, the water is fine. these companies helped in part by rising market. credit infused and u.s. economy shows signs of life. after two big acquisitions this year analysts say capital one's outlook should be clearing up and discover is expanding in to the payment space. two major players in that space mastercard and visa off all time highs but franchise names to own. revenue from credit card transactions moving up thanks to higher volumes and larger than average purchases.
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fserve growing. >> secular move in using cash instead of credit card. they went through new regulations. so, you know, the fundamentals are very strong. they are not terribly expensive. >> joe give me the best play. mastercard or visa or american express or discover. >> i like all of the above. throw in capital. >> it's not too late to jump in. >> not too late to jump in. capital one throw into the mix. fundamentals are turning there also. i think there's a lot of money own the sidelines in the financials that's pointed particularly in that direction, is going stay there. >> stephanie? >> that quarter was very strong last week and i think that the fact it's trading at a significant discount its peers gives you more upside as this company continues to improve. >> simon?
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>> we love them. all of those names bridge a gap between technology and consumer spending. discover is our favorite name. >> thanks so much. >> in the next hour on "power lunch" cnbc's boar boar takes stock of the media sector. and what's more for the markets. election outcome or earnings season. rolling dice on casino stocks as more states look to gambling to boost budget short falls. we'll be right back. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪
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whatever your business challenge, dell has the technology and services to help you solve it.
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welcome back to "fast money". we're looking at shares of disney down about a percent and a half to 52.18 on the back of a downgrade. the reason for the downgrade was we told you to buy the stock a year ago. it was up 40%. we reduced our weight. now up 64%. says that there's no more room left to run the valuation is full and that it's right in line with historical eps growth back all the way to the 1996 abc capital cities merger.
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i'll let the traders decide. >> i heard cramer say this morning you guys got out of this one last week. >> it hit our target price. still like it very much for the long term. 2013, there's margin upside as this company has gone through all of their expenses. you'll see some margin leverage. what we did do, those is we took the money and actually put it into newscorp. split up of the publishing businesslike the balance sheet. management has this go get them attitude. valuation at 12.5 times forward estimates long term average is 14 versus disney 14.8 times right in line with its long term average. a valuation call on our side. >> what would it take for you to buy disney back >> a little bit of weakness. under 50. 48 or 50 better valuation. i like the 2013 story for the company. i see some upside there. >> we got less than one month to
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go until election day and wells fargo market strategist thinks the outcome could have a historic impact on stocks. welcome to the show. >> thank you. >> that's a big call. >> yeah. well -- >> trying to get some attention. >> not at all. it's a really interesting climate for investors. you're headed into earnings seasons why earnings will decline for the first time since 2009. then we head into the teeth of the election season. this election can have pretty historic consequences. we're talking about an $800 billion fiscal cliff. 6.7% hit to personal disposable income. biggest debt and deficits as a share of gdp facing the country since world war ii. this election will have particularly rofund consequences on text market next year. >> you're looking for a profound pull back in the s&p. we're talking 100 points.
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1360 is where your target is. what's that predicated on? >> a lot is the election and earnings environment. if we take the election and set it aside for now the earnings environment is deteriorating more than investors are willing to cop to at this point. first, fourth quarter of this year, we're supposed to see a remarkable recovery in earnings which i think is highly unlikely considering the macro economic climate. then an earnings kbroet in 2014. so with this fiscal uncertainty, investors have gotten a little bit ahead of themselves in terms of optimism. >> your overstating the election's impact on what the stock market will do? we had jack vogel on at the top of the show that said the market will get it wrong. >> that's possible the market gets it wrong depending on the outcome of the election. clearly this is a very tight election. the reason why i don't think
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we're overstating the potential impact is just the sheer numbers. this election has an impact in a few ways. first sheer size. like i said we're talking about debt and deficits larger than at any point since world war ii and the next president will have to contend with those debt and deficits at least through the $800 billion fiscal cliff. second is breadth. we did a cross capital structure report on how the election is likely to impact the stocks over the near term and we found 40 industries hit our screens as potentially impacted. it's really difficult to find a sector in industry in the index that's not impacted by this election in the near term. of course it's timing. economy is weakening. weakened to a snails pace in the second quarter. i do think you're at a critical turning point. you can see a major positive shift with the romney administration election, i think but the market could really suffer under the uncertainties in the fourth quarter due to the fiscal contraction.
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>> let's take that for a moment. romney wins the election in your mind financials, energy, traditional energy we should say and discretionary which has done quite well continues to do well? >> probably. you've seen that one leg of discretionary lose a lot of share over recent weeks, the luxury component has started to suffer under the dual weights of national growth slowing down and american luxury consumer to turn over with potential tax increases into next year. the energy call is pretty customary. clearly the obama administration would like to pursue more regulatory policies towards traditional energies where the romney administration would certainly be more friendly towards traditional energy which is a bigger part of the s&p 500 index. financials would benefit under a romney administration due to the perception that some of the more onerous components of dodd-frank may not come to light. >> the financials have had many, many months to prepare for
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dodd-frank. they know what's coming down the pike. so is it going to make that much of a difference in an obama administration even in an environment where the overall health of the market improves, the economy improves, so financials may do better regardless of who is president next? >> may but i think financials are going to struggle in an environment where investment sensitivity is -- investment spending is starting to deteriorate. one of the other big key takeaways from our survey was just the impact of the current administration on business activity. 75% of executives that we surveyed responded that they've seen a strong or even just minimal impact to the negative of the regulatory policies pursued by this administration. two-thirds of respondents suggest they will spend more. to the extent financials are levered to the economy which i think is the underlying tenet here, financials would improve
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under a romney administration may sufficienter along with the rest of the economy under an obama administration. >> ceos will spend money if they view the economy has improved, if they view the fiscal cliff being solved regardless of who is in the white house. that's the bottom line. >> the one thing that's rather confusing to me mitt romney said he'll fire ben bernanke on spot is the actual term. this is a market that loves qe. doesn't that in essence mean the removal of qe if we lose bernanke, we get some one in there that romney picks that's not in favor of that. >> depends on who he pibs. that that's still up in the air. >> he won't pick somebody like ben bernanke. he disagrees with his policy. >> he won't go the other extreme. that's an assumption we can't leap to. nonetheless you're spot on, the monetary policy environment does change. first we got to contend with the
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fiscal policy environment. face facts. 0.5% potential hits the gdp. we very well could see a major fiscal contraction in the first quarter. then we got to move on to monetary policy. i completely think you're spot on. monetary policy has been a big part of optimism. what happens in the next few years. >> thanks. still to come healthy trade for your portfolio and betting on casino stocks. cnbc's brian schactman has more from the table. >> people think of gambling think of las vegas not columbus, ohio. some companies are betting big on columbus, cleveland, to less do. we'll have the names and trades next on "fast money".
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universal. we're looking at stories that impact your personal and financial well being. we're kicking things off with united health deal this morning to buy most of brazilian health care company amil for under $5 billion. smart move for the newest dow component >> brilliant. less than 5% of their earnings. gives them a window into a whole new area of growth. i would buy all the stocks in the group. they are all cheap. they will do well in any market. so, yes, great deal. look for towers follow. >> you don't like one over another? >> i do. >> cigna was talked up. >> i own cigna, wellpoint. i'm out of it at this point. they are in the best position to benefit from individual plans. cheapest group in the market. >> coverage of healthy week continues at healthy week and @cnbc u. up next, getting ready to reveal
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your best tweets. sima?
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you asked questions, our traders have answered. seema mody joins us now with your tweets. >> i'm here. let's get to the first one, scott. our first tweeter wants to know -- shain celestial has pulled back recently. is now the time to buy back more
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shares. the ceo said healthy eating was not a fad. you were at the desk when he came by. >> we talked that evening about buying hain. it was $72 the beginning of september. the organic food trade is still on, whether it be whole foods, hain celestial, annie's or smart balance, they all work. the organic foods play. next tweeter was excited to hear stephanie link was on the show today and wanted to know, stephanie, what's your top idea? >> bed bath beyond. we've been buying it for the fun today. last couple of weeks. stocks down 9%, posted a quarter that was mixed. it is a cheap housing play. it is headed into the holiday season. >> bed, bath and beyond. next one from ryan -- is it time to get into home builders? he noticed a strong residential and commercial demand. >> i wouldn't be buying home builders right here. i think they're all overly extended. we like the suppliers. home depots, even the drif plays
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like wells fargo that owns 33% of the mortgage market. clearly the housing game is in play but not the toll brothers. go with the derivative plays. >> seema, thanks. catch strapped state and local governments across america are increasingly betting on casinos to help raise revenue. which stocks are cashing in on that trend, we'll turn to cnbc's brian schactman live at ohio at the opening of the hollywood columbus casino. not a bad assignment for the day, brian. >> reporter: not bad, although i only get to watch right now. we got to wait until i get off the clock. this had is a huge deal for ohio. they get jobs, they get tax revenue and they have a casino on a property that was actually abandoned. the question we want to ask on "fast money," what's in it for pen national gaming, ticker pnn. they had had to pay a $50 million license fee. $400 million to get in here. 53% of their revenues, that's their tax rate, yet they're here
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and they're happy about it. >> we think we're going to make a nice living here in central ohio. as i said before, there are only two casinos here serving 1.5 million people. as we look at the metrics and do the market analysis, we think this is going to be a very good return for our shareholders. >> reporter: this is the third ohio casino open in the last year. penn owns one, caesars owns another and will open one in cincinnati next spring. pen market cap around $3 billion. czr, one-third of that size. they're obviously competing for these non-traditional markets in this country. if you think vegas and macao are positive trades, take a look. there's valley technologies and wms industries, third is aristocrat out of australia. he he said that space is so
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competitive that actually penn national has huge pricing power and control over those guys in terms what have they buy. when you have to buy 3,000, which they bought here, that's a big deal. so they made good money on buying from those four companies and spreading it around. back to you. >> brian schactman, thanks so much. what's the best casino pick? >> to me the left is lvs still. caesars has issues with balance sheets. i stay away from the slot manufacturers. >> why not penn? >> penn of i've been in and out of over the years. local markets are great markets. i just don't know enough about penn at this point to recommend it. >> i actually don't like what i heard on those earnings conference calls from aska and frb penn and from boyd. coming up, the new cold war. a congressional investigation says major chinese tech firms pose a national security threat. final trades next. smart comes with 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons.
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