CNBC's "Fast Money" Episode Summary: "Stocks Trim Losses… And The Potential Risks From Bird Flu" (12/30/24)

Release Date: December 30, 2024

Hosted by Melissa Lee alongside a panel of seasoned traders, CNBC's "Fast Money" delves into the year-end stock market trends, examines the emerging threats of bird flu, and explores sector-specific performances. Broadcasting live from the NASDAQ market site in Times Square, New York City, the episode provides investors with actionable insights and comprehensive analyses to navigate the closing year and anticipate the new one.

Market Overview: Year-End Slump and Future Outlook

The episode opens with Brian Sullivan and guest Guy Adami discussing the stock market's retreat in December after a stellar performance throughout the year. The panel debates whether the sluggish month signals the end of the bullish momentum or presents a buying opportunity for savvy investors.

Guy Adami (10:30):
"The market has come to realize that there are a lot of headwinds out there that have been in that for quite some time."

Adami emphasizes that higher interest rates and elevated valuations are significant factors dampening investor enthusiasm. Carter Braxton Worth adds depth to this analysis by highlighting the dichotomy within the market indices.

Carter Braxton Worth (25:45):
"The actual S&P is up 24%, but the equal weight is up half that, 12%, and we're seeing that in sector after sector."

This discrepancy suggests underlying vulnerabilities despite the overall gains, indicating that specific sectors may be struggling even as the broader market remains robust.

Semiconductors Sector: Uneven Performance and Valuation Concerns

The conversation shifts to the semiconductor industry, a critical component of the tech sector that has shown mixed results. While the semiconductor index boasts a 20% increase for the year, the equal-weighted index has experienced a slight decline of 1.2%.

Carter Braxton Worth (30:15):
"It's been a treacherous area, requiring perfect stock picking and not aggregation."

This highlights the challenge investors face in this sector, where success hinges on selecting the right companies rather than relying on broad market trends. Specific stocks like Nvidia, despite facing rumors of AI chip delays, continue to outperform with a 107% year-to-date return.

Julie Beal (46:00):
"If everybody’s coalescing around an idea and that sentiment is bearish, then you probably want to start thinking about moving to the other side."

Beal underscores the importance of contrarian thinking in volatile sectors like semiconductors, where overconfidence can lead to significant losses when market sentiments shift.

MicroStrategy and Bitcoin: Leveraged Risks

A significant portion of the episode is dedicated to MicroStrategy’s aggressive Bitcoin investments. CEO Michael Saylor’s strategy of leveraging debt and equity to purchase Bitcoin is scrutinized by panelist Julie Beal.

Julie Beal (1:25:30):
"It's akin to what we're seeing in GameStop... It's running on the hopes and dreams of a lot of guys."

Beal compares MicroStrategy's approach to speculative trading, suggesting that the company is effectively functioning as a leveraged ETF for Bitcoin. This strategy exposes the company—and its investors—to heightened volatility and risk.

Brian Sullivan (1:25:50):
"MicroStrategy is a very levered way to play Bitcoin. I would probably stick with IBIT instead."

Sullivan advises caution, recommending more stable investment vehicles over MicroStrategy’s high-risk, high-reward model.

Bird Flu: Emerging Threat and Economic Implications

The panel shifts focus to the escalating bird flu (H5N1) outbreak, discussing its potential to disrupt the agricultural sector and broader economy. Dr. Scott Gottlieb, former FDA Commissioner, provides expert insights into the virus's mutations and containment challenges.

Dr. Scott Gottlieb (1:35:20):
"We have a lot of Tamiflu in the national stockpile, but we need the full range of antiviral drugs to effectively combat this virus."

Gottlieb highlights the inadequate preparedness measures, emphasizing the need for a comprehensive antiviral arsenal and updated vaccines. He warns of the significant impact on the dairy industry, where infections could reduce milk production by up to 20%.

Brian Sullivan (1:36:50):
"If this virus continues to spread among dairy cows, we could see a severe impact on milk and meat supplies."

The discussion underscores the urgency of proactive measures to mitigate the virus's spread and protect both public health and economic stability.

U.S. Treasury Cyberattack: Security Breach Concerns

A brief yet alarming segment covers a cyberattack on the U.S. Treasury Department attributed to Chinese hackers. Emily Wilkins reports that the perpetrators accessed unclassified documents through a third-party software provider, Beyond Trust.

Brian Sullivan (1:28:15):
"The Treasury has significantly bolstered its cyber defenses, but the implications of this breach could have long-term impacts on financial security and data integrity."

The panel deliberates the potential ramifications of such breaches on national security and investor confidence, emphasizing the critical need for robust cybersecurity measures.

Housing Market: Decline in Flipping Profits

Diane Olick provides a detailed analysis of the housing market, particularly focusing on the downturn in home flipping profits. Despite a 2.2% month-over-month increase in pending home sales, flip profits have waned significantly.

Diane Olick (1:40:10):
"Flips had an average 28.7% return on investment before additional expenses, down from 31.2% in Q2."

Olick attributes the decline to higher mortgage rates, increased renovation costs, and elevated property taxes, which erode the gross profits from home flipping endeavors.

Brian Sullivan (1:41:00):
"It's hard to say what the net profit is because it depends on where you're operating and the specific costs involved."

The decline in flipping profitability signals potential challenges for investors relying on quick buy-and-sell strategies in the housing market.

Energy Sector: Valuation and Future Prospects

Carter Braxton Worth offers an optimistic take on the energy sector, particularly oil and natural gas markets. He argues that energy stocks are undervalued compared to overhyped sectors like semiconductors.

Carter Braxton Worth (1:45:00):
"We are essentially at the same level as 10 years ago in terms of earnings and sales."

Worth suggests that as other sectors face high valuations and potential bubbles, energy stocks present a valuable opportunity for investors seeking stability and reasonable valuations. He points out that energy companies are trading at attractive multiples with decent yields, making them a defensive play in a potentially turbulent market.

Mike Koh (1:45:30):
"These companies are trading at relatively cheap multiples, have decent yields, and are profitable at oil prices."

Koh reinforces the idea that energy stocks are a prudent choice amid market uncertainties, advocating for their inclusion in diversified portfolios.

Final Trades and Recommendations

In the episode's concluding segment, panelists share their top stock picks and investment strategies for the upcoming year:

• Julie Beal:
  "I think housing inventory is going to continue to be constrained and so Dream Finders Homes and entry-level buyers will benefit here."

• Mike Koh:
  "Alphabet deserves a market multiple more than the market does. At 25 times, that would be a 20% upside from here."

• Carter Braxton Worth:
  "Energy in 2025 makes sense... these energy stocks are undervalued and resilient."

• Devin Energy:
  "I love it."

These recommendations reflect a strategic focus on undervalued sectors and companies with strong growth potential, positioning investors to benefit from emerging opportunities.

Conclusion: Navigating Market Challenges and Opportunities

The episode wraps up by synthesizing the key insights discussed. The market's year-end slowdown reflects broader economic headwinds, but selective sector investments, particularly in energy and undervalued stocks, offer promising opportunities. Additionally, emerging risks like bird flu and cybersecurity threats require vigilant monitoring to safeguard investments and economic stability.

Notable Quotes:

• Guy Adami (10:30):
  "The market has come to realize that there are a lot of headwinds out there that have been in that for quite some time."

• Carter Braxton Worth (25:45):
  "The actual S&P is up 24%, but the equal weight is up half that, 12%, and we're seeing that in sector after sector."

• Julie Beal (1:25:30):
  "It's akin to what we're seeing in GameStop... It's running on the hopes and dreams of a lot of guys."

• Dr. Scott Gottlieb (1:35:20):
  "We have a lot of Tamiflu in the national stockpile, but we need the full range of antiviral drugs to effectively combat this virus."

This comprehensive overview highlights the critical discussions and expert analyses presented on "Fast Money," equipping investors with the knowledge to make informed decisions as they navigate the closing year and anticipate future market dynamics.