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Halftime Report
Are Mega-Cap Expectations too High? 1/29/26
00:44:01
Scott Wapner and the Investment Committee debate Microsoft sinking the tech sector and whether mega-cap expectations are too high. Plus, the Committee share their latest portfolio moves. And later, Josh Brown spotlights Nucor in his "Best Stocks in the Market." Investment Committee Disclosures
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- [00:00]
A
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. Edward Jones Member, SIPC At Strayer University, we help students like you go from is it possible? To anything is possible by offering access to up to 10 no cost gen Ed courses so you can reach your goals affordably and fast. Visit Strayer. Edu to learn more. No cost Gen Ed is provided by Strayer University affiliate sophia. Eligibility rules apply. Connect with us for details. Strayer University is certified to operate in Virginia by Chev and has many campuses, including at 2121 15th Street north in Arlington, Virginia.
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B
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, plunging Microsoft, the stock suffering its worst day in some six years. We're trading that and the rest of tech with the investment committee. And joining me for the hour today, Josh Brown, Jim Leventhal, Malcolm Ridge and Rob Seachin. Let's take you to the markets. It is a tech and NASDAQ story today, down about 2%. So we're obviously watching the dramatic moves that we continue to see in metals and copper and gold and silver and we will get to all of that. However, Microsoft, as we said, on pace for its worst day since March 2020. That is when it was down 14%. We will track it throughout this day to see if it eclipses that. Why is this happening? Well, earnings season for the mega caps was all about the spend versus revenue growth, right? Strong revenue growth shows that you get the ROI on the spend that everybody's clamoring for. Microsoft had a higher than expected spend. The problem is they had a slower than expected cloud revenue growth. And Malcolm, that seems to be the issue in the market today. Jim. Malcolm, Rob own that stock. What do you make of the report? What do you make of the price action and what you should do now?
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C
I knew you were going to come to me first.
- [02:30]
D
Yeah, yeah.
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C
So I was on with you yesterday closing bell and my focus was entirely on Microsoft figuring out a way to signal to the street this is their first opportunity since the restructuring of the deal with OpenAI to say something, to tell a story that lets us know just how little they rely now on that relationship with OpenAI. They had taken steps in November, built a new partnership with Anthropic, the direct competitor of OpenAI. All seemed to be going well. And then all of a sudden, to your point, at the same time, capex is going up, revenue has come down, even if ever so slightly. And that was just enough for the street to say thanks, but no thanks. Separately from that, though, I think what also needs to be part of the story is the additional $200 billion worth of RPOs that came into the conversation later on are from Open Air. So just as I was saying, it's time to start talking about how you're better off without them following the separation. Here we go. We're even more reliant. And I think both of those things taken together. The street just said enough's enough.
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B
What's your take?
- [03:35]
D
This, to me seems well overblown. If we measure it by market cap, Microsoft has lost about $400 billion of microcap Mike, excuse me, market cap today. And why is that? That's because Azure, at least in part because Azure disappointed by about 1 to 2 percentage points relative to what was expected. Now, the expectations, they said 39.5% growth, but the whisper numbers above 40, 41% came in around 38%. So we're going to take $400 billion of market cap off of Microsoft because the Azure revenue growth was 38% and some of that disappointment came from supply constraints. We know that they can't get as many GPUs as they want. They're trying to parcel these out between the Copilot business and Azure. Again, I put this all together. I use those numbers specifically to say this seems overblown to me.
- [04:26]
B
I mean, I think you oversimplify it a little bit. It's suggesting that the stock is only down because revenue growth for Azure was just down slightly. You missed the fact that spending was greater than expected. And how can you have one versus the other and not have a reaction like you're having now? We've been talking nonstop about the tremendous spend that these companies have and the return on investment that they are going to see. So if your spend is increasing and your revenue growth is decreasing in terms of where the estimates are or not meeting what the estimates are, therein lies the rub.
- [05:07]
D
Yeah, I mentioned Azure specifically because I was thinking about what you said, Scott, about return on investment ROI and we need to see it. We didn't see what the street was looking for in terms of the whisper number in terms of Azure growth. But again, to me, what I'm looking at here is there's a supply constraint issue going on here. Supply constraints have happened many times over the last three and a half years since I became a thing. They will happen from time to time and then they work themselves out and I think once they do that that ROI will pick back up. But I do want to use these numbers again. 38% year over year growth in Azure revenue. I find it hard to say that I'm disappointed. Even if the street wanted 40, 41%.
- [05:48]
C
I think, Jim, the reason that that's not good enough is simply because people like me have been making the argument for some time now that the thing that really matters to the Microsoft story right now is Azure cloud credits and their ability to sell those regardless of whether they can monetize Copilot or any of the other enterprise tools that are AI based and that buys them some Runway with Azure growth stalling or slowing. That tears that thesis up and it says that we need to show a way to monetize that spend sooner than later.
- [06:19]
D
Down 12% today and with the stock now trading in the mid to low teens, excuse me, mid to low 20s on a forward multiple depending on whose earnings estimates you use. I'm going to say to you that your point is well made but because I think it's temporary and it's generated by supply constraints that this is overdone. It will take some time. I'm not rushing out to add to my Microsoft today, but I think by the time we're in the summer and the supply constraints have eased, you're going to see this. Snap back. This is just over.
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B
Rob. Morgan Stanley removes it as its top pick. It still likes it. It's firmly overweight, it says. But it is no longer a top pick. Bernstein says solid quarter end guide but not good enough to Malcolm's point. Trims target to 641 from 645. Yes, they are still outperform. But what's your take? Because you own the stock too.
- [07:05]
E
We own the stock big. I don't think we can change that. We've been in the name for a very long time.
- [07:10]
B
We can.
- [07:11]
E
True. No, no, no. I think we, we could trim it at the margin. We have not. We've chosen not to do that. I think our view more aligns with what Jim saying. There's no doubt that there was some tactical pressure on the name and that just shows you that when you disappoint, even at the margin, even though everything else was solid, the room for disappointment is about this big. And can you monetize AI? That's another question for some other names. Some are showing that they can, others are showing that they can't. Yet it doesn't mean they never will. You're seeing all the SaaS businesses you know getting killed in the last several.
- [07:51]
B
Years to those coming up too, we will.
- [07:52]
E
Right. But the reality of it is with Microsoft, we're in a stay a holder. We tend to be in Jim's camp. We're a little worried near term, but we're not jettisoning in the position. They have consistently benefited from their role in the ecosystem which is not only great across endemic across every business, but continues to expand. Whether that's expanding at a rapid pace like Azure or it's expanding at a slower pace like some of the other businesses they're in.
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B
You have a real knack, I think at taking a big picture view you and assessing what certain things and price action means to you as to how investors broadly should think about moves like this. After a report like we got, what do you think?
- [08:36]
F
I agree with the point that Rob made where you were in a situation now where there's just no room for even the slightest disappointment and that corrects itself through price and now maybe there's a little bit more room but you certainly don't want to see Microsoft have another quarter where they don't quite hit walls. Street's expectation. So you got a 90 day, I think you're in the cooler for 90 days long. The stock which is perfectly fine and if you've been in it for years, you've made a lot of money and you could afford that. New traders who came into it buying ahead of the print are pissed off. But I think they didn't recognize we are in this environment where even a narrow miss gets punished as though it's the end of the world. That's a reflection of where valuations have been. It's also a reflection of a lot of the fear around things like can OpenAI pay its bills. I don't think that that's going to change quite frankly. I think throughout the balance of the year that remains where the land mines are. But I think there's a bigger point here that's more important for everybody whether they're long Microsoft or not. This is a really healthy market environment where the Max 7 are not trading as a monolithic thing and you've got massive separation. I want to share a stat with you from my team. Microsoft down 12% while Meta up 8%. That is a 20% spread. If they close here, it would be the second largest daily spread between those two stocks since Metta came public. And the only greater spread was on a day in 2013 where matter was up 30% on the session with Microsoft down 1%. So we really have never seen an earnings season where these two names have diverged to the degree that they are. And I think this flies in the face of the people who have been complaining about, oh, it's about index funds, it's ETFs, there's no price discovery, the market's being manipulated by Vanguard and blackrock and the flows. No, actually people are making rational buy and sell decisions on results. And we'll do Matter in a second. As narrow as Microsoft's miss was and let's face it, was pretty, pretty narrow. Meta was not like a blockbuster.
- [10:41]
E
They all came into this this week, down for the year.
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F
So results matter. That's right.
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C
So Software is up 7% since last Friday.
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F
This is the take. This is the takeaway for me, though. This is the takeaway for me though. That's good news. It doesn't take much of a beat to get an outsized reaction like we're seeing in the up to the upside. Doesn't take much in either direction, which is good for investing, I think.
- [11:05]
B
So, yes, the stocks to your point, Rob, were still down on the year, which is obviously very young. However, over the last week they were all, all up. They were all running into the, into the print. Now, Josh says that Microsoft's going to be his words in the cooler for 90 days. Microsoft is last quarter's matter because if you look at the drop in Meta last quarter, it looks exactly like that because there were the same questions. You're spending like crazy and we're not.
- [11:39]
F
Convinced met a guy on spending.
- [11:41]
B
We're not convinced that you're going to see the ROI fast enough to justify what you're spending. This time around, however, is different. Yes, they showed a big pickup in spend bigger than expected. They showed a bigger than expected pickup in revenue growth too. And that is the story. That is why that chart looks like that. After looking at the far left like it did last quarter, they seem to be answering some of the most serious questions about what is happening there. Rob, you own this name too. It really is like Microsoft was Meta last quarter. Metta seems to have answered the call.
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E
So to Speak different to where they are in the hierarchy of monetizing AI Though. If I look at Google and Meadow, which are our largest overweights of the MAG7 versus any of the other MAG7, they are really at the front lines of using advertising and marketing to see an enormous. If you looked at the meta numbers, there was an enormous pickup in adoption. Right. So if you're able to monetize quickly, which is really where it resides, you will have the ability to have an earnings report that looks like you're healthy.
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F
That his revenue is 97% average advertising. Correct. So it's very different from, from Microsoft.
- [13:07]
E
Totally. But when you think about the progression of who's been monetizing it the fastest, Metta has seen rapid acceleration there. Google Alphabet has seen massive acceleration there. Some of the others are not seeing. And it gets back to your original question is, can the spend be justified? And it is there.
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B
So Bernstein comments on Metta says nine upgrades all. Yeah, all, all the core does is win, win, win, no matter what. They raise their target to $900. They were at 870. So they were already really bullish, but they go to 900. They reiterate their outperform rating. What Jimmy did. What did you want to say earlier? When you look at this, the difference of what these, these companies are doing, and it's so striking that Metta was, you know, last, last quarter's egg all over the suit stock and here it's Microsoft this time.
- [14:02]
D
So we're obviously seeing, and we've talked about for quite some time that this is not the monolith, the Mag 7 that it was. And I think, I think, Josh, that's what you were saying. I just wanted to extend it one step further, which is to say, you know, the market overall is not getting killed by this. Yes, yes, the NASDAQ is down big. But many of us, I think all of us have wondered over the last year or two how this concentration at the top of the S&P 500 would resolve itself. And there's been a worry that Microsoft down 12% would create a cratering effect for the rest of the market and bring it down. You know, the RSP, the equal weight S&P 500 is flat. Small caps are down only 3.10of a percent. And it's showing, to use your word, a healthiness in the market that we can have this correction in the concentration with, without an absolute bloodbath. I think this is healthy.
- [14:49]
B
I think the points have been made. And this is. Stocks have, have proven this out More, more recently than over the longer period that there are idiosyncratic things that are going to be punished.
- [14:59]
F
Well, look, Matter is a user of AI to improve its algorithm so that it keeps you addicted to Instagram longer. Microsoft is selling other companies the ability to utilize AI in their cloud environment. So right off the bat, these are not, these are not comparable other than the fact that we've all decided, oh, they're hyperscalers or, oh, they're in the max seven or the great eight or whatever we're calling it these days. But like, every one of these names has its own cons, pros, different drivers. Like, is there really a lot of similarity between Meta and Microsoft in real life other than size and scale? Not much. And I think that this bears that, that idea out. The thing that's interesting About Meta though, 2026 is still an important year for them to actually deliver on the model front because they've spent too much money not to. And so they've made this big investment in scale AI. It brought on Alexander Wang. They're talking about like the next generation of language models, etc. Etc. They do at some point have to be able to show, yes, $135 billion in capital this year, but we have a new product that's revenue generating in and of itself and it's not just, hey, look, cooler Instagram, we. So they have to do it at some point this year.
- [16:19]
B
We do have a problem in software, I mean, quite obviously. And Microsoft is making it worse, undoubtedly today, the IGV that is the software etf and we show it to you a lot. Let's take a look at that instead of that worst day since April 4th of 2025. And it's not just Microsoft. You got ServiceNow, Malcolm, which is down after its report. They did raise their guidance, but this one and CRM Salesforce have been really in the eye of the storm where conversations are taking place about AI allegedly, quote, unquote, killing software. And I don't know what reverses that. The commentary on NOW was good, but not good enough. And that is the overriding factor in all of this. Good report. Okay, fine. Not good enough. Not now, not with these questions being asked.
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C
I picked the wrong day to be here, obviously.
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B
Well, we need your insight. So it's actually, it's the right day.
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C
So I jumped into service now, down 30% over three months or something. And I said out of my mouth on this show, this represents peak pessimism to me. I thought that the sell off following the Armis Deal announcement was probably as bad as it got. I thought it was also overblown because I can see where Armis would be accretive and now we're down another 12 or so percent depending on where the tail there it is 11% right now. So it doesn't look great. However, I will say Bill McDermott did everything he could. He directly addressed we're done making acquisitions for the foreseeable future. I am done with M and A right now and please give us back our market cap. And the street did not care. And so I think that it has a lot more to do with sentiment related to them trying to acquire their way into being a AI competitor versus growing it organically. And I think eventually a narrative has to change to I don't think there's.
- [18:14]
F
Anything different that they could have done. The stock would probably look the same. Oracle is in a 55,0% drawdown. So much for all the bubble talk. Hard to have a bubble when Oracles cut in half.
- [18:26]
B
Look at CRM.
- [18:27]
F
CRM is at a 42% drawdown. It's a worst drawdown since 2022 and that's with activists re engaging.
- [18:34]
B
Broaden that out. You can see a straight line of nothing. I think if you back it out for a year, look at a one year chart.
- [18:40]
E
That is a slope we've skied, by the way. I mean it's a core business. There's high switching.
- [18:47]
B
Well, you came down that. That's slow in the downhill and your helmets all in your skis are all over the place.
- [18:53]
E
I don't know.
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B
You're in the netting on the side.
- [18:56]
E
I don't know if it was a total yard sale like that but I got to tell you, we've experienced it, we haven't lost faith in it. We probably should have a while ago but the reality of it is is it's core to our ecosystem and everything we do. It's core to a lot of ecosystems out there. There's enormous switching costs and if you're thinking about a hedge to the new way of doing things, those hedges generally are in the form of price and businesses that are important. And by the way, if the narrative pivots, these are going to be benefits that benefit in addition. Scott, just one more quick thing I want to they are, they are trying to embrace AI. We're seeing it through our ecosystem. It's not as effective yet. There's some tip of the spear companies like Google in Meta, but there's others that are going to take a little longer.
- [19:46]
B
I want to show you IBM today, too. And let's just look at the intraday for a moment. So there's the 6% move today, which is dramatic in and of itself, but pull this back out to. Let's try five years. Let's do five years. Because this, to me, more than so many other names, is a. We will show you.
- [20:08]
F
You.
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B
We will show you. After doing nothing in 22, doing nothing in 23, they're like, we, we got this. We know how to integrate Red Hat. We know how to do AI better than most. And the Street, I don't think, was sold on that until the last few years when that move. Credit to Stephanie Link, who's been in this name for a long time. Rob Malcolm, now you feel better, Malcolm blowing you up a little bit on this one, but, man, they've delivered. They've delivered. What do you guys say about this?
- [20:48]
E
I got to tell you, we added it on the show last year because we thought it was a cheap way to get this exposure. And by the way, it really was. And it's up, I think, 47% since we've talked about it. The PE is obviously expanded, but it's another company that is not being disrupted as much by. They're embracing it and well positioned to benefit from it. And it's starting to be reflected in their numbers. And we think today it justifies the valuation. Their conservative guidance is not too surprising. That seems to be a little bit of their history, right in the way they do things. But they've pretty consistently been delivering.
- [21:26]
B
Didn't they go through quarter after quarter after quarter after quarter of no revenue growth? Disappointing, at the very least. And that's why the stock looked like that for a few years. And then Arvind Christa, the CEO, has just done. I don't think you can say anything less than a masterful job. But if people don't talk about him as much as they try and blow up some of these other CEOs, but you better put them on your wall of fame, given what the stock has done.
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C
What I thought was attractive about this one, when I jumped into it, their AI book at that point was about $2 billion. And it made sense to me that as we were getting excited, talking about all the hyperscalers, spending all this money to build out data centers and everything else, to run AI, you needed someone to come alongside you as an enterprise and teach you how to actually use the thing that you were deploying within your company. And so that, to me, was where it made sense for IBM to come into the picture, fast forward. They jumped from seven and a half billion in the book to about nine and a half billion. Previous quarter 12 and change this last one they just reported. So they're more than double from last year where their book of business was. That to me is where the growth story is in IBM.
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F
All right.
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B
I'll come back to this in a moment. We have breaking news down in Washington on the Hill. Emily Wilkins has that for us. Tell us more.
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G
SCOTT well, the Senate has now failed to advance a measure that would keep a good chunk of the government funded after Friday at midnight. But we do know that there is a Plan B in the works. We know that Senate Democrats have been meeting with Trump's White House to try to figure out a path forward. We've heard one potential thing to do might be to move there. Remember, there are six funding bills in this package. Move the five with strong bipartisan support and then just do a very short term bill that would just fund the DHS maybe for only a couple of weeks while lawmakers tried to work out longer term reforms. Now, that's not official at this point, but we do know that discussion, discussions and negotiations are ongoing. Of course, timers ticking down. At this point. You've got less than 48 hours until we would officially be in a shutdown. There is hope that if we're in a shutdown position over the weekend that it would be very short lived. But of course that's going to require the White House and Democrats to to get on the same page. And while there is some optimism around that, we haven't seen a deal yet.
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B
SCOTT all right, Emily, thank you. Emily wilkins, clock ticking clearly we do have more breaking news. Eamon Javers has that for us also from Washington. Eamon SCOTT, that's right.
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D
President Trump is having a Cabinet meeting right now and just moments ago he gave us a new window into his thinking on Fed share. The president said he'll announce a new Fed chair next week sometime. He didn't put a precise date on that. We don't have any indication of anybody he's favoring or not favoring. But the president said a short time ago that he'll be announcing the head of the Fed, who will be a person that I think will do a good job. That doesn't give us much to work with, SCOTT in terms of who are the remaining four candidates he might be thinking of. But it looks like that deadline, which had initially been set as sort of January, sometime is now looking like it's going to be February Sometimes.
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B
All right, well, we'll see Reader, Waller, Hassett and worse and we'll see who, who gets the lucky golden ticket. Eamon. Yeah. Amen.
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H
Thanks.
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B
It's amen, Jabbers. All right, let's turn our attention before we get out of here for this break to Apple because that is the biggie tonight. How about this? J.P. morgan's retail radar. Retail investors turn the most positive on Apple for the first time in three months. That's interesting considering the stock has been, I think in an eight week in a row drawdown, which has been painful to watch. Steve Kovach is always in Cupertino on this big day and he is yet again, what do we need to watch out for most of all?
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H
Steve? Hey there, Scott. Yeah, most of all, first of all, we know it's going to be a blockbuster quarter for that iPhone business, the iPhone 17, double digit top line revenue growth that's going to contribute to that. It's been a really long time since we've seen that kind of growth come out of Apple, especially in that super important December quarter. And then we turn our focus over to AI now that we know the iPhone picture and that new partnership with Google's Gemini service that is going to be moving forward, powering a lot of the Apple intelligence features, including that delayed version of Siri that's been delayed at least a year now. That's going to be launching, we expect within a few weeks. So hopefully some more details on that. You guys have been talking so much on the show so far about monetizing AI that is still unclear how that works over here at Apple because they're going to be giving the system away for free. Apple intelligence comes included in our new phones. So at the end of the day, whatever comes out of this new Gemini relationship is going to have to move. New phone sales just like we thought was going to happen last year. And then finally on the tariff front, we are expecting a, or Apple said to expect at least a $1.4 billion tariff bill. That's on top of the several billion they've already paid. So far. No SCOTUS decision yet that's going to really impact that. And then also just one more thing to look at is these memory prices we've been talking. Samsung reported last night how memory prices going through the roof. We're watching SanDisk earnings and so many others. There have been some consternation on the street lately about how that might press Apple margins. So we'll be paying attention to that. To you, Scott.
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B
Yeah, I mean, some Pain. Someone's pain has been microns gain. That's for sure, because that stock's been ripping too. All right, Steve, we'll see you later. Thank you. Steve Kovac. Cupertino, as always. You want to comment on this one for us?
- [26:55]
F
Yeah. I think the thing with Apple is last year's problem is this year's benefit. So last year Apple's under pressure. What's their AI strategy, by the way? I'm not making fun of everyone. I was saying the same thing over and over again and I'm a shareholder. But like that was, was the story last year. What's wrong with Apple? Why can't they do this? Why can't. Okay, fast forward a year later and now all of the spending they did not engage in looks like sort of wise. And let's not forget, in the end, they are the gateway. For every one of these AI apps and products and services, they're getting paid on anyone that wants to work with consumers via the iOS ecosystem. Ecosystem. They're sitting there like the world's gatekeeper to the wealthiest consumers all over the world. And that hasn't changed. And some of the, some of the pressure's off. They're going to work with Google. It's a partner they've worked with for 20 years. And quite frankly, I don't know when the Siri upgrade will come. The street doesn't seem to be as worried about that. They got an iPhone sales cycle, they got record services sales, record margins on the services business. And whenever they get around to figuring out their own internal AI strategy, at this point it looks like it'll be good enough for everyone.
- [28:10]
C
Reading.
- [28:12]
D
I'm taking what he's saying a little further. All right. It is a great company. You often hear us on this, really.
- [28:17]
F
Going out on no capital.
- [28:19]
D
Just hang on. Just because we don't have much time.
- [28:21]
B
How long did you think about working that one up?
- [28:23]
D
Just. Okay, hilarious.
- [28:26]
B
How many donuts on the tractor in the snow? How many it takes you to come up with that?
- [28:30]
D
For those people who don't own Apple, just consider this. All right? And if we could put up a 20 year logarithmic chart, that might ask too much. But I'm telling you, this stock goes up over time. It's a great company. You hold it over long periods of time and you don't worry about, hey, it's 34 times and it has to come down to 29 times earnings. That's irrelevant. The 20 year annualized stock return is 27% annualized over the last 20 years. The S&P 500 is 11%. I see no reason that doesn't continue given what you were just saying about it. Josh. 20 years. 20 years.
- [29:03]
B
Did you. Did you consume another Red Bull before the show?
- [29:07]
D
I did not. I only had one espresso because last time I thought maybe the red.
- [29:11]
E
Maybe get that back to but here's.
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C
What it comes down to. IPhone real quick.
- [29:16]
B
I got to bounce.
- [29:17]
C
IPhone sales have been stronger than we expected them to the last four quarters quarters. And that's kept the Apple story alive.
- [29:22]
E
That's really what is a premium valuation relative to the growth.
- [29:28]
F
We're going to have to leave it there.
- [29:29]
B
Rob, Josh has a move. We want to tell you about that and we got to pay some bills in the interim. So we'll come back. Josh making a move. I've got some committee stocks on the move. I got some calls of the day. I've got Josh's best stocks in the market. The list is long and we'll get to all of it.
- [29:47]
A
Not every sale happens at the register. Before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time. Sometimes.
- [30:12]
B
AT&T business Wireless Connecting changes Everything.
- [30:18]
E
At.
- [30:18]
A
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- [30:47]
G
What do the steam engine, electricity and AI have in common?
- [30:51]
A
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- [31:07]
G
From agriculture to medicine to manufacturing, data.
- [31:10]
A
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- [31:29]
B
Busy day of breaking news and we have even more to our Leslie Picker.
- [31:33]
F
Leslie hi Scott.
- [31:34]
G
Yes, we have obtained a statement from the former CEO of First Brands following the indictment against him and his brother, who was an executive at the now bankrupt First Brands. He says, according to a spokesperson, Patrick James is presumed innocent and denies these charges. He built First Brands from nothing into a global industry leader and has always been devoted to the success of the company. Mr. James looks forward to presenting his case in court. The indictment, of course, filed in the United States District Court, the Southern District of New York. It alleges a bunch of different counts, about nine counts total, among them that he and his brother yielded billions of dollars in financing to First Brands and reaped millions of dollars in proceeds derived from fraud. And a lot of that related to allegedly fake and false inflated invoices for accounts receivable and payable, double and triple pledged loan collateral and falsified corporate financial statements and concealed substantial liabilities from lenders. Now, if you recall, Scott, this whole bankruptcy kind of unleashed the concerns around credit, private credit, as well as syndicated credit as well back in the fall. So this is just the latest development here with the indictment. And now a response from the former CEO of First Brands. I'll send back to you.
- [32:56]
C
All right.
- [32:57]
B
Yeah. I appreciate you following that story for us, Leslie. Thank you. That's Leslie Picker. I mentioned some moves. Take a look at Joby Aviation today. The stock, at least earlier, was what we would consider to be tanking. I mean, it's down like 18%, right? They're doing a share sale. Josh Brown owns the name, and he has looked at that and said, I'm going to buy more. Right.
- [33:20]
F
So this is where I originally bought it. It ran up to 20. I didn't sell any because I'm not that smart. But this is not a trade for me. I've talked about this as a very, very, very speculative situation, but an investment, because I do believe we are going to see a thriving EVTOL business probably by the end of the decade. So what Joby is doing now is they're taking advantage of this opportunity to raise capital while they can. The terms are fairly favorable. Unfortunately, it's dilutive when they do that, and I have no crystal ball about how many more times they'll have to do it. But I would say they've raised more money than any of the other pure plays in the space. They actually have revenue because they bought the blade helicopter business. And the proceeds from this sale are being used. It's a convertible and a share sale. The proceeds are being used to actually commercialize their EVTOL and get the service up and running within 60 days. We're going to see these things in the sky. Supplies over the deserts in the Middle East. Won't be long before we'll see them here in the United States. And I think Joby is in the best possible position because they're vertically integrated. They're not making these to sell them to somebody else. They are themselves going to operate the taxi business. And it'll take a while before you get on one as somebody who's watching this. But a speculative investment like this, I think when you get an opportunity down 50% percent from recent highs, you got to add to the position. That's what I did.
- [34:45]
B
You sold Planet Labs Completely.
- [34:48]
F
So yeah. So that was a double from where I brought it, bought it, and I talked about it on the show as sort of like an ancillary play to the low altitude economy. It made a new record high two days ago. I looked at it coming in today with the overall market and I just said, you know what, let me reallocate and add some more Joby here. I can revisit this. Planet last. Who knows, maybe they do a secondary crush their own stock. Maybe that'll be another entry point for me. But the stock worked out really well in a short period of time. And I'm just saying au revoir.
- [35:19]
B
All right, well, thank you for that. Merci beaucoup.
- [35:22]
H
Okay.
- [35:23]
B
Lockheed Martin just trying to play along with it. Lockheed Martin Razor Outlook. Jimmy, this is you. Rob owns it too.
- [35:31]
D
Jimmy Quick.
- [35:32]
B
And then Rob.
- [35:33]
D
Yeah. Raise their out outlook and they entered a new production scheme with the government where they're going to quadruple their missile production. I mean, this, this is the stock to own. It's up about 25% year to date. It had a terrible 2024 which it's snapping back from. Excuse me. A terrible 2025. Rob, you want to take it?
- [35:50]
E
Yeah. I mean, names like this, names like Carmen holdings, which is a newer higher beta way to. To play this. KRM in it Krman are just absolutely benefiting from increased defense spend. A lot of these came into the year. We increased in December on this show with much more reasonable valuations. Deliveries were accelerating. They were working through some of their supply chain issues with the F35 fighter jet. They're a pure play on this. It's a great way to continue to play this space.
- [36:24]
B
What about Lilly? Target gets it's bumped from 960 at Cowen to 1250. They reiterate their buy. What about this name yet?
- [36:33]
E
Tough year so far. But the good news is that it's rerated quite a bit. You know, last year Willie got Lilly, Willie Lilly got all the way up to 53 times earnings were back in the 33 and change range. And they have great gross margins, healthy operating margins. We're neutral right now, but we continue to expect them to be a frontrunner in GLP1 on an ongoing basis.
- [36:58]
B
All right. Let's get the headlines now with Seema Modi. Hi, Sima.
- [37:00]
G
Here's what we're watching, Scott. The U.S. navy sent an additional warship to the Middle east as tensions rise with Iran over nuclear negotiations and its deadly anti government protest crackdown. Now an official telling Reuters that USS Delver Black has entered the region in the past 48 hours. This brings the number of destroyers in the Middle east to 6 along with an aircraft carrier. The Associated Press is reporting President Trump is considering locating his Board of Peace at the Washington, D.C. building that formerly housed the U.S. institute of Peace. It comes as former employees and executives fight the Trump administration's takeover of the nonprofit in court. 27 countries have signed up as founding members to the board. President Trump says its first task will be overseeing the Gaza peace plan. And the CDC said today the US life expectancy hit a record high in 2024. According to the report, the age has risen to 79 years old, which is up half a year from 2023. Women are still expected to live longer than men with life expectancy increasing to 81.4 years compared to the 76.5 years for males. How about that, Scott?
- [38:04]
B
All right, Seema, thank you. That's Seema Modi. Coming up, Josh Brown's best stocks in the market doubling down on a name that got crushed on earnings. The details are next.
- [38:14]
A
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- [38:44]
G
This is a Monday.com ad, the same.
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A
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- [39:29]
B
All right, let's do best stocks in the market according to Josh Brown. We are in the material materials area today and it is ticker symbol nue.
- [39:38]
F
Yeah, materials have been on fire for a minute and this name on the best stocks in the market list. And I feel like you learn a lot from watching the reaction to earnings in a name like this because it gapped down 6% the day they reported a quote unquote disappointing number for last quarter. But that's algorithms. What happened later that day is the buyers looked at the commentary about backlog and 2026 business and they snapped it right back up. I think it ended up closing only down 1% on the day. And when you see action like that in a company that allegedly missed, you have to pay attention to what the buyers and sellers are telling you. I really like that price action. And I think the story here, the steel mill segment, they operate in three segments. The steel mill segment is talking about a 40% backlog growth number year over year and the steel product backlog grew 15%. All three of their businesses are going to post growth this year after many, many years of very spotty, variable type of growth. And it's just basically a company that's in the right sector, has the right technical setup. So I do think you're going to get a new high here in the name. I think it'll run through that 180 resistance like a hot knife through butter. And if and when it does, this name's going to land on a lot of people's best stocks list, not just mine. And I think you'll see follow through in that accumulation.
- [41:03]
B
This is like catnip for Jim. I mean he loves this kind of stock. I know all he like squeaks.
- [41:09]
F
You love this, right? This is your, this is your whole thing.
- [41:12]
D
I feel like it's simple to understand. It's costs that you pay to produce the method metals and the prices that you receive when you sell them. And prices that you receive have been going up. Whether that's due to tariffs or not, they're going up. You're seeing demand slowly pick up and you're seeing that in some of the commentary from Nucor Cliffs now 40% over.
- [41:30]
B
The last year, I'm sure it's, I think it's down a bunch over a longer period of time.
- [41:35]
D
But I'm going to give you some cat, what's the point?
- [41:38]
B
Looking at it 40%. It's up 40%.
- [41:40]
D
And you know what look at a bigger, bigger from here to the year end you're going to see more gains. But, but catnip for you. I'm gone next week. You know that. I'm skiing in the Alps. I come back on Monday. I'm with you and Cliff's reports on the Monday I'm back. Okay. So do you think it's going to be a happy welcome or a sad welcome?
- [41:57]
F
Lorenzo, surprised you didn't extend the trip.
- [42:00]
D
Just in case. I have faith. I have faith actually.
- [42:04]
F
In all seriousness, we'll get you via remote.
- [42:06]
D
In all seriousness, they're controlling costs. There's been a lot of lot that's been holding them back over the last year and I think they're going to shine through.
- [42:12]
B
Okay, so I know where you're going. So you need your passport and we need our passports today for ETF Edge. We'll explain coming up.
- [42:24]
H
Welcome back to the Halftime Report. I'm Dominic Chu with your ETF Edge. While some have called recent outperformance of international markets just a catch up trade, there's a case for more fundamental investing changes afoot. Joining me now is John Mayer, the chief ETF strategist over at JP Morgan. So John, let's talk a little bit about what is driving that international outperformance. Is it just dollar weakness or can we count on more momentum?
- [42:48]
E
Thanks for having me. I think that international markets are going to continue on their trend going forward. There's certainly the dollar story that you mentioned a moment ago and we're projecting that dollar will decline about devalue about 1% annually over the next decade. Also valuations remain really strong. International equities traded at 32% discount to the US versus an average of 19% discount over the past the last 20 years. We see opportunities in financials, energy, materials and select industries and value valuations or international value remain very, very compelling and we think that will continue going forward.
- [43:33]
H
John, just a few moments left here. Are there any specific ETFs that you are keying in on this time around?
- [43:39]
E
Yeah, we have International Value Fund. The ticker is jive J I V E. This was one of our top performing funds last year. We believe that Internet value in the international space has a low correlation to US Large cap growth. So that's a nice pairing. And it had about $1 billion of inflows last year. So we're expecting that to continue. The ticker is J I V. Gotcha.
- [44:09]
H
All right, perfect. Thank you so much John mayer over at JP Morgan. This conversation continues over at ETF edge.cnbc.com where you can get more insights from John along with Tim Seymour over at Seymour Asset Management and tune in again Monday for our next installment. Scott, I'll send things back over to you guys.
- [44:25]
B
I will do that. Dom, thanks so much. Santoli is next with his MIDDAY Word. All right, welcome back. Senior markets commentator and overtime co anchor Mike Santoli joining us now with his Midday Word. It really is interesting how we're suggesting that Microsoft is last quarter's metta. Just the way that these things have reacted is really similar for sure.
- [44:48]
D
And I think, I just think it reinforced the inclination of the market to.
- [44:52]
E
Just be suspect of, you know, the.
- [44:54]
D
Open air, kind of voracious capital consumer buying hardware at a massive upcharge. Right. Which is kind of what you're seeing in the memory chips. And so it's one of those things that I think feeds the anxieties of the market. To me. The key is it was a tremor, kind of a warning shot. Maybe this is how the big one starts. But the rotation kicked back in so it looked like a couple hours ago it could have been more of an across the board selling event.
- [45:16]
E
The equal weighted S and P is.
- [45:18]
D
About flat right now. Gold and silver crack briefly.
- [45:21]
E
They try to get their footing.
- [45:22]
D
So I don't know, I think it's a little bit of a preview of, of maybe how we ultimately get an actual correction. But for now it just seems more like the rotational churn.
- [45:30]
B
Yeah. We'll see how the day progresses. It also is interesting too. It's not, you know, Microsoft is not necessarily, I get that it's down, but the market is, it's hanging in a. Okay. You know, it is.
- [45:42]
E
Without a doubt.
- [45:43]
H
Yeah.
- [45:43]
B
All right. I'll see you later. That's Mike Santoli. We'll do finals next. Got Apple. Those earnings in overtime, obviously. We'll count you right down to it. Dan Ives, Alex Cantrowicz, Anka Crawford and Kevin Simpson. I hope you'll join me then at 3 o' clock Eastern Time for the closing bell and the final stretch. Rob Seachens, good to have you back, man. It's been a minute. What do you got?
- [46:06]
E
Let's go with Black Stone. Great results and the exit environments improving only trades at 22 times.
- [46:12]
B
Okay.
- [46:13]
C
Malcolm, I got IBM software and AI consulting. That represents more than 40% of their revenues. Go blue.
- [46:19]
B
Figure you'd focus on the one that looks nice and green today.
- [46:23]
F
You learned that from me, Judge.
- [46:25]
E
That is the trick.
- [46:26]
D
Farmer Jim, Cisco Systems, no matter what the ROI for Microsoft and meta. Cisco Systems will benefit from that cap.
- [46:33]
F
Okay, Xom, Exxon Mobil. This is our last impression on the show. Never leave the viewers with your face next to a red stop. What's wrong with you?
- [46:41]
D
It's your first time.
- [46:43]
B
All right, that does it for us. I'll see you on the bell. The Exchanges now you've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:58]
A
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Half Time Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer Prime One.
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B
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A
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