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Halftime Report
Keep Buying the Rally? 12/6/24
00:44:16
Scott Wapner and the Investment Committee discuss rising stocks and whether you should keep buying the rally. Plus, Docusign surging after earnings, it’s our Chart of the Day. And later, the Committee detail their latest portfolio moves. Investment Committee Disclosures
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- [00:01]
Scott Wapner
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, thank you very much. Welcome to the Halftime Report on this Friday. I'm Scott Wapner. Front and center this hour, rising stocks even more records within reach. Now we have new moves to discuss as well and to debate with the committee. Joining me for the hour, Jenny Harrington, Steve Weiss, Jason Snipe, take you to the market, show you what's going on today. Dow is red. Everything else, though, is green. After a pretty strong jobs report. Unemployment ticking up to 4.2 6,100. Within reach from the S and P. Weiss. That's what we are on watch for today. As I hear, more and more people now, especially after the jobs report today, say Goldilocks, that's the term of the day. Is that right?
- [00:50]
Steve Weiss
Yeah. I mean, there's no reason not to believe that. I mean, it's actually been Goldilocks for a while. You've been looking at a soft landing for a long time and looking at a Fed that's, that's accommodative. And we'll see if they are or not at the next meeting on the 17th, 18th. Although, frankly, I don't think it matters to the market in the least where they go into the 25 or stay where they are. I don't even think the commentary matters because what's overshadowing that is the belief that you've got basically a guardian angel looking over the market and business and taxes, everything in the Trump administration. Now, the issues could come up next year and, and it won't be that long next year. Now, I know that I have positions I want to sell, but, or cut back for sure. But I'm not doing it until January because whatever tax is going to be retroactive to the beginning of the year. So you may see a torrent of selling early on, particularly if he gets through some of those, what will drive inflation, you know, initiatives in the market. So, so look, so right now there's no reason to believe, you know, absent something really exogenous coming in, hitting the market, which is always what caused the major market sell offs, knee jerk reactions. I think you go wherever. And what's really what I really like seeing, and obviously I'm vested in this outlook is what's happened with technology, right.
- [02:14]
Scott Wapner
Is, Jenny, are too many people on the same side of the boat? I mean, I know there's good reason that most everybody's positive. I'm not, I don't ask that question suggesting that it's bad. But you know, Ed Yardeni is talking about there may be too many charged up bulls. Is that a risk or not?
- [02:32]
Jenny Harrington
I think it is.
- [02:33]
Scott Wapner
It doesn't have to be.
- [02:34]
Jenny Harrington
I really love that term, too many charged up bulls. And so when I heard that, you know, I'm thinking Goldilocks economy for sure, not a Goldilocks market. A Goldilocks market would say, well, valuations are neither too rich nor too, nor too poor. Earnings growth is neither too frothy nor too benign. I think it's like a frat house party in the market. And so, so that charged up bull like made, made that frat house party pop into my head and I think that's what it's like. Like the market is partying as if it's never going to stop. And if we start to look at strategists estimates for next year, they all presume a 10% up market from now. But the market's already trading at 22 and a half times next year's 10% higher earnings. So does that mean that we're already saying, okay, 2026 is going to be 10% higher? And by the way, 22 and a half times is fantastic. I would love someone to really convince me that 22 times and a half multiple is just wonderful, you know, but there's no room for expansion on that. I don't think the biggest multiple we ever got to before this was 24 and a half times and 24 times. And that was in the com boom prior to 2022. It was where we are now. So there's these real crosscurrents between a very lovely economy and a market that I think is really, really being led by Yardeni's charged up.
- [03:49]
Steve Weiss
Okay.
- [03:49]
Scott Wapner
Michael Hartnett of B of A Jay talks about froth forming that the overshoot is the risk is an overshoot in Q1. What do you think about that? I mean, if you take it into context with Yardeni or maybe as you know, Jenny's thinking about Dean Wormer from Animal House throwing a cold water on all the fun.
- [04:12]
Jason Snipe
Yeah, yeah, yeah.
- [04:14]
Jenny Harrington
Calling the cops on them.
- [04:15]
Jason Snipe
Yeah. So I mean, I think Jenny alludes to a couple of really great points. Obviously, you know, the market multiple expansion obviously has been the story of the year this year. I mean, you know, the, the S and p trading at 22 times forward, you know, we're expecting about 13% earnings growth this quarter. We had a close to 6% earnings growth. We're expecting around 12% earnings growth for the fourth quarter. So clearly earnings have to ring through for this to, for the, the market continue to grow because I do believe that the multiple is obviously rich. I think the market knows that, you know, but there's been margin expansion in various sectors. I mean the, you know, as I, as I mentioned earlier, I mean the earnings have been good this quarter. Sentiment is, is really strong, clearly. But I think as you go into January and Weiss mentioned this earlier, I think you'll see a lot of tax selling. There's some chase too at the end of the year. I mean, that's what portfolio managers are doing. They want to get good report cards, good receipts for year end. But I think, you know, first quarter will be a little bit volatile, you know, and I think that's what we'll see in January.
- [05:15]
Steve Weiss
Can just say one thing. We're talking about charged up bulls. If you take a look at the chart of the S and P over the last year or the Nasdaq, you see a very steady rise. You don't see big spikes. NASDAQ is prone to big spikes and some of them. No.
- [05:31]
Scott Wapner
But if you look from the election to now, though, Right. You see a lot of spikes.
- [05:35]
Jenny Harrington
Or you can say 30% year to.
- [05:37]
Steve Weiss
Date is a big, well, actually there, there are many periods in the market where you've seen multiple 30 year return years successively. So, so I don't think it's out of the question either. We're only into two or three.
- [05:51]
Jenny Harrington
Yeah.
- [05:52]
Scott Wapner
So I mean, you're up for the S and P. You're up almost 6% since the election. It's, it's not just performance of the charge up, it's sentiment. Yeah, almost everybody is bullish.
- [06:06]
Steve Weiss
Yeah.
- [06:06]
Scott Wapner
Probably for the right reason. Is there really a reason to be bearish? I mean, you want to be bearish because the Fed's going to cut fewer or slower, really. Steve Liesman has some breaking news out of the Fed today that plays right into this story because Beth Hammack is talking today. The Cleveland Fed president has some very interesting commentary, Steve.
- [06:27]
Steve Liesman
That is true, Scott, and she is a voter and she is on the hawkish side of things. In fact, kind of hinting at a possible pause. And I'll go through exactly what this language looks like. She says we're at or near a point where it makes sense to slow the pace of rate cuts. She sees one rate cut between now and the end of January with a few cuts in 2025. If her forecast comes to fruition between strong growth, a good labor market and declining inflation. But she says she's looking for further, quote, convincing evidence that inflation is heading back to the 2%. She is, by the way, the new Cleveland Fed president ex of Goldman Sachs. She says monetary policy is only somewhat restrictive right now and we may not be too far from the neutral rate today. So she is not looking, Scott, for a whole lot of rate cuts and even suggest this idea of do one cut but either make it December or January. It looks like, Scott, a little bit of a, of a sell off in stocks and a bit of a decline, very modest though in the December probability. So not really having much effect. But Hammock is a voter. It follows, by the way, some hawkish comments from Michele Bowman, the Fed governor who dissented, maybe hinting at another possible dissent from her. And then Goolsbee saying he expects a series of meetings that will be close calls between cutting and not cutting in between maybe 25 and 50s. He says the funds rate, however, is likely to come down over next year or so. A little bit of a hawkish talk from this jobs number, Scott. I will point to the fact that we have a CPI report next week and we have a retail sales report before the Fed meeting. One thing you may want to pay attention to, maybe not everybody's radar is on Monday. I believe the New York Fed comes out with their inflation expectations survey.
- [08:13]
Scott Wapner
It doesn't seem, maybe there's not a huge reaction in the prediction markets on this because it's, it doesn't seem to be so much of an outlier view when you really dissect it. Okay, so we could get another cut either in December or January. I've been hearing a lot of stuff like that. You know, a pause is in the offing. It may be in December, it may be in January. So she hits on that note and then okay, well maybe we get a few next year. That seems to be a, what is developing to be a relatively consistent view even shared by the market. No, of a few cuts next year.
- [08:49]
Steve Liesman
Maybe it is exactly shared by the market. And you can show that if you put up the December 25th fed funds contract, the guys, I think it's FFZ25Y I think is the code on that. If you put that up, you'll see that we're about 370 or so. So if you think about the idea there, oh, they're so good in the back. How good is that? So there it is, Scott. 370 is the expectation for the funds rate a year from now, and you can do the math on that. What are you talking about? 30, 55. So three or four cuts. Three, three cuts, really? Max between now and a year from now. So the market's already got that priced in. And you're also right, Scott. Somebody came to me and said the Fed needs to stop cutting in December. I wouldn't say they were crazy if they said they were cut again, 25. You can make a case for that. It's very much on the line, although the market is fairly well priced for it. Still, I want to see there's been any additional movement still around 84%, 85% probability of that December cutscap.
- [09:48]
Scott Wapner
Yeah, Expectations have clearly changed in the last four or five, six months. Steve, thank you very much. Steve Liesman, our senior economics reporter. Guys, any, any reaction here? I mean, this is not a great surprise, as we suggest, but it does introduce the fact that the market just has to fully come to grips that we're not going to get as many cuts as we once thought and we're not going to get as large a cuts as maybe we thought, nor are they going to be as quick. But you say it doesn't even matter.
- [10:13]
Steve Weiss
I say the next one doesn't matter. I don't believe it does because that's not where the focus is now. We've been through periods since I've been in the business over three decades where the focus has been on different things. It's gone from jobs, it's gone initially from LBOs, you know, from too much debt with companies, etc. And now here we are, the focus is purely on, on policy next year and the policy is uniformly thought to be positive. When I say uniform, formally, I'd say the majority of investors believe that. But you know, here's why I'd say I just want to talk about the market. For its market performance is actually only up 3% since the prior peak in early October. So this quarter it's up 3%. Despite all the good news we've had, aside from what people receive, is Trump's election being good news. And what we've had is going back full circle to Steve's comments. The economy's in great shape.
- [11:06]
Scott Wapner
So Fed Chair yesterday or two days ago or whatever it was two or three days ago with Andrew, called it remarkable.
- [11:12]
Steve Weiss
It is remarkable. So what's the point? So it's remarkable. The reason why you cut rates is to stimulate the economy because you're economy a restrictive stance.
- [11:23]
Scott Wapner
Well, they are restrictive. They are restrictive. But.
- [11:26]
Steve Weiss
But the restrictive stance typically leads to tighter lending conditions and a slowing economy.
- [11:32]
Steve Liesman
Right.
- [11:32]
Scott Wapner
Where they don't want to risk staying too restrictive, even if it's not as restrictive as they once thought.
- [11:37]
Steve Liesman
Right.
- [11:37]
Scott Wapner
They don't want to stay too restrictive even on the margin to greatly impact the labor market. They're cognizant of that. And they make the point repeatedly.
- [11:44]
Steve Weiss
Yeah, but their hands are tied now because inflation seems to have, you know, sort of steadied. We're not seeing the major gains in inflation. So it's stuck where.
- [11:52]
Scott Wapner
I don't think their hands are tied. You put it that way. I think they have what this. My word, the luxury. Because the economy. I think that because the economy.
- [12:01]
Steve Weiss
Your phrasing is much better.
- [12:02]
Scott Wapner
Is so. It's so strong, they actually have the luxury to wait. They could pause, they could go once or twice, but whatever. The point here is investors continue to put money into the market and they continue to put it into places that, you know, you just find interesting. Certainly since the election, the flow show from bank of America, you have nine straight weeks now of inflows into equities, the largest four week inflow ever into crypto assets. We can hit that because you keep buying bitcoin. And you did it again, as we would show bitcoin again, because we got 200k, we kissed it, then we came back a little bit and we're hovering right below.
- [12:37]
Steve Weiss
Right. Which is unusual. So. So I'm in my office, Chicago, and I see the news of who Trump pointed for the sec.
- [12:48]
Scott Wapner
Yeah, Crypto. Crypto friendly person.
- [12:50]
Steve Weiss
Exactly. So it was trading below. I think it was a 97,000 time immediately bought some more and said this is going to be the catalyst. Get 300 and get 300. Anyway. Now, yesterday we saw a 5% correction. It's not unusual when you go through these psychological points that a resistance to fall back behind it. But I now think 100 is going to be support and that we will keep going once the administration is actually in.
- [13:15]
Scott Wapner
Well, there's some of the commentary yesterday was, if I recall it correctly, overdone, but not over. Right. That might have been Wolf research that said overdone but not over. Then you had other calls of saying, well, yeah, they agree with Weiss. 100,000. Okay. You know, ante up, give me 250. Well next year.
- [13:32]
Steve Weiss
And that's the beauty of investing something that has no intrinsic value because you just can't say it's overvalued or undervalued. It's purely momentum.
- [13:40]
Jenny Harrington
So what are you playing for wise? Like if you Buy money, money, money. Are you playing for 25% return on it?
- [13:49]
Steve Weiss
I don't think I have to define it. I'm playing for the momentum. And when the momentum, when the momentum starts.
- [13:54]
Scott Wapner
Okay, that's a good, That's a good point for the next debate because it doesn't really matter. He's playing the momentum. Do you continue to play the momentum in discretionary? Up 14 and a half percent since the election. Do you continue to play the momentum in financials? Up 7 and a half percent since the election? What do you do? This is a momentum market, and you can see it on a thousand different levels and layers.
- [14:12]
Jenny Harrington
Yeah, but I don't invest for momentum. So what I do is I pick off individual stocks, right? And if I'm looking at a stock, I'm like, okay, I want to earn 8 to 10% a year on average over the next three to five years. So let's say I buy it. I'm like, I expect to earn 50% between the next three and five years.
- [14:28]
Scott Wapner
You're happy to get the moment. You're happy to ride the moment. Momentum. You tell me you're not happy to. You're not happy to ride the DocuSign Momentum. It's our chart of the day today. Why? Because it's surging after earnings. It's up 44% since the election. Yeah, 52 week high, obviously. Highest level since April of 22. You own that stock, Right?
- [14:45]
Jenny Harrington
But, but we own this. Not because we were chasing momentum. We own this. We bought this September of last year when it's trading at $42, trading at 15 times with a 7% free cash flow yield. And we're saying, like, hey, by the way, when we bought it this time, couple of months short of this time last year, it was down almost 90% from its pandemic high. There was no momentum chase there. It was us saying, this is a wildly undervalued stock. And why is it up this much today? Well, it was a great quality quarter. Revenues were up 8%. Billing was up at 9%. International growth was up 14%. But here's the key. What they're doing is they're delivering, delivering extremely profitable growth. So their operating income was up 19%. Their operating margins are up to 30%. When we bought it last year, operating margins were 25%. And that was a big part of the thesis. So it's very different than the Bitcoin. But I also know in this one, I know in this what I'm playing for, what I'm playing for. Is multiple expansion. And by the way, up 25% today. That seems a little crazy.
- [15:43]
Scott Wapner
I'll take it 27, just to be exact.
- [15:46]
Jenny Harrington
Let me just, I want to just make one more point because I know it's. Soon as you talk, we're going to leave this subject here.
- [15:51]
Scott Wapner
No, no, no, we're going to go deeper into it. Just make your point and let. We'll figure it out as we go.
- [15:57]
Jenny Harrington
Undocusigned. Here's the cool thing. And my partner Greg says this all the time. He's like, when the company name becomes a verb, good things are going to happen. Like, you could look at all the numbers and all the metrics, but when you say, hey, I'll docusign that, you don't really know if it's an Adobe thing or whatever it's coming. You're just docusigning it. Like, that's a great company. That's what I want to invest in. I don't really care about the momentum. Although to your point. Yeah, I'm happy to ride the coattails.
- [16:19]
Steve Weiss
So. So here's what I'd say, number one, 80% of my portfolio is bottoms up fundamental. We have different investment styles. You track your clients with 8 to 10% return. So that's what you do.
- [16:32]
Jenny Harrington
That's on the dividend.
- [16:34]
Scott Wapner
I'm not getting.
- [16:35]
Steve Weiss
That's not the point. I look for absolute performance and I will continue to. I do have targets what the valuation. I anticipate most of my portfolio, but I also have 20% where I can trade it. And I'm. Hold on, Jenny. And what I'm trading is momentum, Bitcoin. And I'm very conscious of that. And it will continue to run. So I'm there to make money regardless of where it is. Right. You're there saying, I got to do this, I got to do that, because that's what your clients expect. Mine have a different expectation.
- [17:03]
Jenny Harrington
But I'll tell you why I asked the question because I think it, like, I'm actually curious and I think our viewers are too. Like, I have a client right, through one of the advisors that we work with who just cashed out an enormous portfolio. Right? And not just the one we managed, but the one at one of the major wire. And it was a combination of growth stocks, International Point. What's the point? This is what he bought. He bought Bitcoin, Microstrategy, Palantir, and like another Bitcoin ETF 100% in that. So I'm saying to myself, like, what does he think he's going to get.
- [17:32]
Scott Wapner
And that private jet.
- [17:33]
Jenny Harrington
What do you think? Yeah, right. But you know how much is left on the table?
- [17:37]
Steve Weiss
Here's what I'm thinking about it.
- [17:38]
Jenny Harrington
Does he have 25? If it goes down what I'm thinking about 20.
- [17:41]
Steve Weiss
I don't know the person. I don't know the rationale behind it. I could care less. I'm not thinking about him for any more than this time that you said it. I know what I'm doing. Okay.
- [17:51]
Scott Wapner
That's great. We know, we know you're both strategies. We know both your strategies is great. Jason Snipes, speaking of momentum, you bought more Netflix.
- [18:00]
Jason Snipe
I did, I did.
- [18:01]
Scott Wapner
Plays in it. I mean there's been a ton of momentum behind that name.
- [18:03]
Jason Snipe
So the chart, 100%. I mean, for me, as it relates to Netflix, we've all, we've been talking a lot about their foray into live sports and how great that's been. Obviously The Mike Tyson 5, we got NFL Sports on Christmas on Christmas Day. But really what they've done is focus on profitability. The balance sheet free cash flow continues to grow. Margins continue to grow. The stocks up 90% year to date. So the spread between them and the other players is only growing. So we decided to take the opportunity and add to it.
- [18:32]
Scott Wapner
All roads lead back to the same question. Do you continue to buy into this high momentum market or do you get a little skittish as the momentum starts to get what some would suggest like an Ed Yardeni showing signs of froth? It's a time old question. Yeah, ride the wave before it crests and turns over.
- [18:55]
Jason Snipe
No good. Well, let me say this. I would just say momentum is obviously a real thing and it's extremely powerful. And I think for me in our strategy, we're thematic, so we're looking at investment themes that play out throughout the year. And momentum is a theme whether you like it or not. And I think you have to play it as long as it goes. And it could go the other way. Very rough on the downside, clearly. But I think for now, I think it's a place to be.
- [19:19]
Scott Wapner
Look at it. Look at Amazon, for example. Let's pull up Amazon. Ton of momentum behind that name is part of this resurgence in the mega caps. Apple met Amazon new high up another 2% today. Bank of America. Speaking of playing the momentum, you just continue to, you know, you name it your top pick. That's what, that's what they did.
- [19:37]
Steve Weiss
So, so what I've done and Patty Martell, don't be upset with Me for not disclosing this is that I've added.
- [19:45]
Scott Wapner
Patty's rolling her eyes right now. She's saying again, I know.
- [19:49]
Steve Weiss
Well, she said coming to show what do I expect from any event. I did add to in video for a trading position over above what I own. I did add to Meta over and above what I own. I added slightly to Amazon over and above what I own. So I typically where I trade first in the position I have. Those are purely to capture the momentum, you know, into the year end. But they will be sold, you know, as we get into year end. Not the positions, just the trading positions I added on top to them.
- [20:19]
Scott Wapner
So, you know, Metta is another good one. Jenny, it's, it's up. Gosh, it was up like 7% as of a couple days ago since Zuckerberg went to Mar a Lago and had dinner with the President elect. You had the tick tock ruling today, which Metta gets a bump off of and we're going to have a little more on that later. But it's another almost 3% move week to date matters up near 9%. Right.
- [20:45]
Jenny Harrington
And this is where our kind of new current investment thesis hasn't changed versus a month ago, which is when, when the shares were at 79%. I mean, sorry, $79. Mark Zuckerberg was really focused on efficiency and cost control. When they're at 625, will he run that as tight as ship? Because I think he needs to, to keep, to keep this growth going. So it's just something that we'll need to wait and see. You know, we've trimmed it along the way and that's just taking a little bit of risk off. A little bit of risk off. So we're happy to have it, we're happy to have the momentum. We don't want to sell it right now because the gain is huge. Yeah, we're looking at year end just a few weeks away and like everyone else, we're kicking the can on capital gains for a few more.
- [21:23]
Scott Wapner
It's like Jyoti. Sorry, it's like Jyoti on Applovin, which is can we show Applovin year to date, please? It's up another 8% almost today. It's up 925%. What do you do with that year to date? Well, I mean you hope that the momentum continues just past January. These are the time old questions like if you got into Applovin at the beginning of the year, if you got into Bitcoin when it was much lower than it is now you're like, oh, well, I've done so incredibly well. Now there are tax purposes too to think about, clearly. But it's like, well, if there's a lot of momentum left in these trades, do I really want to sell now?
- [22:04]
Jenny Harrington
What I find is that a lot of people are saying like, just get me to January 1st and then I'll take a little bit off the table. You know, I'll put some of my winnings in my pocket so that I'm curious to see what you've talked about already. Me too.
- [22:15]
Scott Wapner
Applovin's up 21% in this week. So it's crazy. It's just incredible.
- [22:21]
Steve Weiss
The moves all year long haven't made sense. When you see stocks go up 25% because they beat the quarter by a penny, you know, on a base of $4, you know, it's just, you know, it's hyper charged the market.
- [22:34]
Jenny Harrington
Yeah.
- [22:35]
Scott Wapner
All right, let's do this. We'll take a quick break. We're going to come back, we'll talk Uber because it's hit a big speed bump this week. Shares are pacing for their worst week of the year. Both Jenny and Jason own that stock, as probably know, which means we'll debate it next.
- [22:50]
Steve Weiss
Kevin, let me see.
- [23:08]
Scott Wapner
Let's do some stocks on the move. It's been a tough week for O Uber. There it is. It's down. Well, it's up 1% today, but it is pacing for its worst week of the year. It needs to be down more than eight and a half percent this week, in fact, to get that. So we'll keep our eyes there because it's just about there. You've had the Waymo going to Miami. Yep. Musk as close to the White House in the Oval Office, whatever, you know, as he needs to be. Brad Gerstner to remind everybody was as big an Uber supporter as I think we have had on this program until, I don't know, a month ago around the election when he sold it. And here's why. I think the year of 2025 is going to be about Robo Taxi. We were present at the Robo Taxi day.
- [23:56]
Steve Weiss
We were impressed by the Robo Taxi.
- [23:59]
Scott Wapner
And so for Uber, they have to get past this moment right.
- [24:03]
Steve Weiss
Where you know, they have a hugely.
- [24:06]
Scott Wapner
Disruptive force coming in the case of Tesla. All right, stocks down uber 10% since the election. Mentioned the week. What are you doing with your position?
- [24:17]
Jason Snipe
Yeah, so we're still holding it. We're still holding it. I mean the hits keep coming from obviously A headline standpoint, you sweat.
- [24:23]
Scott Wapner
Are you sweating over it now or. No?
- [24:25]
Jason Snipe
No, I'm not. I'm not. Because I think Uber has a tremendous network. It's. I mean, they have really, really huge network. And I think the other thing is, you know, the way more news yesterday, I mean, they're partnering with Waymo, so I'm not terribly concerned about that. If I look at the earnings call, the last call delivery, mobility, EBITDA growth was really strong. You know, and again, I get back to this. This is an event in time. I agree with it. There are concerns potentially going forward. How long does it take for the story to play out? I think Uber can continue to perform.
- [24:57]
Scott Wapner
Going forward, but some. Which is. Yes, I'm sorry to interrupt you, because I want you to go deeper for me. Some say this is not the fact of a story playing out. The goalposts have literally moved, and once they move, they move. Do you feel that at all?
- [25:14]
Jason Snipe
I'm aware, obviously, I'm very aware of it. I don't think necessarily the goalposts have moved. Again, I get back to the network, the Uber, like, there's. There's so many streams to business, their AI capabilities that they're continuing to. To put in force going forward. So I think that they will find ways to get past this storm. And I think Dot Kashakari is a tremendous CEO and he is innovative enough so they'll figure it out. So that's why it remains a core position for me. You know, I added to it earlier in the year. It's been sideways for some time, but I think. I think there's. There will be an opportunity.
- [25:51]
Scott Wapner
What are you thinking about your position here?
- [25:53]
Jenny Harrington
Okay, so I think it's interesting that Gerstner sold when he did because it was at this price where he. Where he challenged me to be more imaginative.
- [26:01]
Scott Wapner
Yeah, that was before the goalposts moved in.
- [26:03]
Jenny Harrington
I don't think that the. In his mind, I don't think the goalposts move. And here's like, an interesting thing to imagine. Imagine the fact that. Well, a couple of things. Imagine the fact that they're built, that they're creating $8 billion a year in freaking cash flow. You know, what if they thought the way to go was to actually own the driverless cars? They could buy 40,000 driverless cars a year, assuming they're about 200,000 pop, and create their own fleet. But I think that they're looking at this as like, hey, our software, our app, our network. Like, that's the better margin. That's where we want to be now. Another thing is Tesla says, okay, this, this is going to be rolled out in 2026. When has Tesla ever delivered on time? So I think if I use my big imagination, I think Uber's got a long way to go. Probably a lot longer than 2026 where they're minting 8 billion a year in free cash flow. 9 billion, $10 billion. They can do a lot with that.
- [26:56]
Steve Weiss
Let me ask you this question. You talk about margins. Right now, the drivers are responsible for their own insurance, their own fuel, their own body work on the car, buying the car, car payment. Once you, once you have Robo Taxis, who's going to pick up those costs?
- [27:13]
Jenny Harrington
Okay, so I'm not suggesting that Uber wants to do that. I'm suggesting they don't. So why wouldn't they just, they won't have Robotaxis. Maybe, maybe the Waymo Robo Taxis, which is already happening.
- [27:22]
Steve Weiss
Well, who's going to work off of the way that was not profitable. Waymo has those issues that prevents profit.
- [27:28]
Jenny Harrington
I think someone will figure it out. And I think that my point was if Uber thought, hey, that's the way to go to own the cars, they'd go there. But you're kind of making the point for me, like, who wants to actually own the car? That's not the profitable part of this, of this ride hailing business.
- [27:43]
Steve Weiss
But, but whether the profitable part, whether way I know you, I do, I.
- [27:47]
Scott Wapner
Want to get to one or more stock.
- [27:48]
Steve Weiss
Waymo owns the cars or Uber owns them. Way more, does not own them and lose money.
- [27:54]
Jenny Harrington
So that Uber, Tesla wants to own.
- [27:55]
Steve Weiss
I don't think it's workable right now. Robo Taxis.
- [27:57]
Jenny Harrington
Okay, that's a great point.
- [27:59]
Scott Wapner
Lululemon surging today after earnings. Please show the chart. A lot of optimism here. Now, stock, is this thing back? It's up 19%. Is it back?
- [28:10]
Steve Weiss
Because you're looking at the stock and I think reports of their demise were greatly exaggerated. So, you know, I regret not buying it. Whenever I see a Lulu as I travel around, around the country, they're always crowded. When I pass an aloe store, which is thought to be the big hoka, so to speak, for them, they're empty. So obviously that's, that's a limited sample size, but, but they continue to be the market leader. And I don't think it's much different, frankly, than your example with Netflix versus the other competitors. At some time, at some point, a brand is just much stronger. So I will buy the stock. I'm hoping it pulls back. But if it doesn't, I don't think it's unreasonably valued for such a unique brand with limited competition.
- [28:58]
Scott Wapner
All right, we'll watch that one more. Dollar General got a double upgrade today. It was from sell to buy. It was bank of America. We don't have ownership on that. But it leads me to a retail related news. New news, retail related news. I tried to say five times for you, you sold Kohl's, right? Okay, take me through that.
- [29:17]
Jenny Harrington
Retail has been so interesting this quarter where there's just big winners and big losers. Like we saw Walmart, great. Target, terrible. Ulta fantastic. Kohl's, which owns Sephora, terrible. A huge part of my investment thesis on Kohl's was that Tom Kingsbury who had turned around Burlington Coat Factory was going to come in there and turn around Kohl's with this past quarter investment thesis is just like full on decimated. So getting back to our kind of.
- [29:40]
Scott Wapner
Like your intel idea.
- [29:42]
Jenny Harrington
Oh, I've got three of them. We can go for B and G Foods right now too if you want.
- [29:45]
Scott Wapner
We'll wait.
- [29:45]
Jenny Harrington
Okay. But yeah, so. So I've had three companies where the investment thesis are just decimated and for different reasons. But you know what, getting to our point about the huge realized cap capital gains that people have, the huge unrealized capital gains like you just sell it. There was no salvation.
- [30:02]
Scott Wapner
Yeah. Down 46% year to date. And just like. All right, I'm out.
- [30:06]
Jenny Harrington
I'm out.
- [30:07]
Scott Wapner
All right, let's get the headlines with Pippa Stevens. Hi, Pippa.
- [30:09]
Jenny Harrington
Hey, Scott.
- [30:10]
Pippa Stevens
President Biden and his staff are debating whether he should issue blanket pardons for some people perceived to be enemies of President elect Trump. That's according to two sources who spoke with NBC News and said the idea would be to preemptively extend clemency to a list of current and former government officials to short circuit a campaign of reprisals from the new administration. And it's a topic likely to come up this weekend when and NBC News Kristen Welker will interview President elect Trump Sunday on Meet the Press. The jury in the Daniel Penny trial sent a note to the judge this morning that it's deadlocked on the top charge of manslaughter. Penny is charged with manslaughter and criminally negligent homicide in the chokehold death of Jordan Neely on a New York City subway. The judge urged the jury to keep deliberating. And Goldman Sachs is leaving a coalition of banks TR trying to align lending and investment with efforts to fight climate change. The investment bank's decision coming against the backdrop of pressure from some Republican lawmakers and state attorneys general who say membership in the Net Zero Banking alliance could violate antitrust laws. Scott?
- [31:15]
Scott Wapner
Okay, Pippa. Thank you, Pippa Stevens. Coming up, we have more moves to get to from the entire desk. Plus, Kevin Simpson just added to one big industrial name. He's going to join us with the update when we come back. All right, we have moves to document more of them. Jenny, you sold B and G Foods. That stock's down 37% year to date.
- [31:53]
Jenny Harrington
Another one of my worst losers.
- [31:55]
Scott Wapner
Why hasn't this worked?
- [31:57]
Jenny Harrington
I don't know. And I think that's part of the problem, is I really don't know. Two quarters ago, it looked like they were back on track. It looked like they'd managed the portfolio well, and it looked like they were returning to a dollar of earnings. Then this quarter, it's like, all off the table with no good reason, with no way to say this is why it hasn't worked. So at that point, I'm just like, all right, I have no investment thesis left. Somehow, by the way, neither them nor Kohl's have cut the dividend. They're both sticking with that. But I'm out. And again, I need the losses. We have huge realized gains this year. So we just got out.
- [32:25]
Scott Wapner
You got out of ConAgra, too?
- [32:26]
Jenny Harrington
No, I added ConAgra.
- [32:27]
Scott Wapner
Oh, I'm sorry. You bought it. My bad, my bad. I read that. I read that wrong.
- [32:30]
Jenny Harrington
You know what's interesting about that? The last time I was on, when we were talking about this and you and Steve and I were saying when we were reading the room, we're seeing chaos. What, what happened was with the RFK nomination to hhs, we saw all the consumer staples stocks just tank, like 8 and 10%. And I've been working on ConAgra all year. So this is the most drama free, plain vanilla stock that I think and hope I'll buy in the next year. Conagra makes food, a lot of frozen food. It's, I think, a healthier portfolio than, say, a Smucker's or a Pepsi or Hershey. And so you've got a company with a 5% dividend yield trading about 9 times, 10 times earnings, 3 to 4% earnings growth ahead. They expect the dividend to grow about 3% on top of that. And I think the multiple is too low. So if you just had earnings growth plus the dividend, I think you get 8, 9% growth in the years ahead, if there's a little bit of multiple expansion where they get back to historical averages for the group, maybe you have a 11, 12, 13 times multiple and you get a nice bump on top of that. But I think this is a really good place to hide out and a drama free spot in a world that may be chaotic.
- [33:35]
Scott Wapner
Okay, you bought Honda.
- [33:37]
Jenny Harrington
Yeah.
- [33:38]
Scott Wapner
You used to own Toyota, which you sold in the spring.
- [33:41]
Jenny Harrington
Right.
- [33:41]
Scott Wapner
Why you buy Honda now?
- [33:43]
Jenny Harrington
Honda is such a cool story. So this is for our international income strategy and I'll go quick on this. Five and a half percent dividend yield. 50% of the market cap of the company is sitting in cash on the balance sheet. That's crazy. So they're buying back shares, but they could if they wanted to, just fund the dividend for the next 10 years. Meanwhile, they get. They. Their main areas are automobiles and motorcycles. In motorcycles, they've got 35% global market share. I think one of the thoughts there is like, oh, tariffs. Well, they have a huge factory in Ohio, a huge factory in Alabama. So things are produced locally. They get out of the tariffs that way. Yes, there's some in Ontario. Motorcycles are produced locally, so there's not tariff issues. And they've got really nice growth. Oh, sorry. And one other thing is as interest rates come down, that drives motor motorcycle growth. So it's just a terrific company that's really safe right now.
- [34:27]
Scott Wapner
Okay, thank you for that. Jason Snipe. You're selling Intuit.
- [34:30]
Jason Snipe
Yeah, sold it. The momentum is obviously not there. It's been a very weak year for the stocks. Only up 4% year this year. Last year was obviously a great year. You know, Doge is considering a lot of things.
- [34:42]
Scott Wapner
Well, show it over the last. I don't know. So what does a one month look like? Yep. Because unit or a. Or even a week or so. This was. I mean, some of the tax filing reforms that are being talked about. That's what you're alluding to?
- [34:58]
Jason Snipe
Yes.
- [34:58]
Scott Wapner
Out of D.C. hit this stock pretty hard the day that that news came out, 100%.
- [35:02]
Jason Snipe
And to your point, obviously Doge is considering. They're considering a free tax filing app, which obviously would run right into TurboTax, which is their play, you know, so who knows if that will happen or not. It's in my opinion, it's unlikely. They had to address it in the earnings call, which makes sense, you know, but for me, they missed on the guy they beat in the top and the bottom in the last quarter. You know, software has obviously run a ton over the last six months it's up 37%. They have not participated in a meaningful way. So that's why we decided to move on and look another.
- [35:35]
Scott Wapner
Yeah, there's kind of like a one month there. Gives you an idea of what was up and then, you know, went through that the valley there. Weiss, you're trimming G X O. Yeah.
- [35:46]
Steve Weiss
So it pains me to do that because I still like the story, but it's going to be dead money. So the stock took a hit. First the stock was lifted when. When there were rumors published by Bloomberg and Reuters that they were up for sale and being approached by buyers. The story came out in the same day the story came out. They were not sales process ended and the CEO Malcolm Wilson, who I've gotten to know fairly well was retiring. So both took the stock down more than 10%. I sold not quite at the lows, but I also had some puts that partially hedged the position when they announced the potential sale Bloomberg that is Jack. So never did so at this point it's dead money. I don't know who the new CEO is going to be. Of course course they retain search for import. Additionally, growth has to pick up and it's a highly competitive space. And if you take a look at FedEx for example, they just signed a deal with Nimble Robotics that fully automates the warehouse. No people and that's going to be their partner in the business. So. So you have to spend a lot of money in technology point.
- [36:54]
Scott Wapner
Don't you have Jack? So you did, didn't you do now.
- [36:57]
Jenny Harrington
We still do in the growth portfolio.
- [36:59]
Scott Wapner
Just called it dead money. Just sat by as if he didn't.
- [37:03]
Jenny Harrington
Say here's where we are in Jack. So that the investment thesis on Jack. So for us is that if you look at the multiple versus Old Dominion, it trades it like half the multiple. So I disagree on dead money. But. But it's predicated on needing multiple expansion. It's not super compelling.
- [37:19]
Scott Wapner
Okay. Kevin Simpson joins us now because he has a new move to document to that didn't go where I thought it might. You know, I mean Kevin Simpson joins us now. You bought more Honeywell. Can you tell me why it. You know, you have Elliot the activist there. Is that why.
- [37:40]
Kevin Simpson
No, we're thrilled that he's here, Scott. And the thesis that the sum of the parts are worth more than the whole is absolutely why we're in it now. Earlier this week they announced a huge deal with a research and development deal with Bombardier. It's an airplane manufacturer out of Canada. That they've done business with for some time. And I think it was just a headline sell off because they did have to downgrade or at least reduce some of their guidance. They showed earnings per share for 2024 probably come in about 5% lower than expected and the stock sold off. But you need to dig a little bit deeper into the, into the data to see why this is going to be accretive long term. It cost a little bit of money to put a deal to together like this, but they're talking about $17 billion in potential revenue over the next few years in the life of this deal. I think that's very powerful. But more importantly, I think it lends itself to the thesis that this breakup is going to happen. Aerospace is absolutely the sweet spot here. Aviation is a close second. Automation is a third. But what we saw with General Electric, from the breakup perspective, if we get half of that out of Honeywell, it'll be awesome.
- [38:48]
Scott Wapner
All right, good stuff. Good weekend to you. We got a bounce. That's Kevin Simpson. Mike Santoli's on the other side. No worries. Senior markets commentator Mike Santoli here at post 9. Hear the Goldilocks word again.
- [39:10]
Mike Santoli
Yes, the jobs number definitely came into that zone. You know, you can certainly look for the softness under the surface just enough to solidify the view of what we're going to get from the Fed. You know, if you look at the gross income, right, all payrolls, number of jobs, hours worked, it's still holding up at a pretty healthy level. So I think you have that combination of, you know, the Fed is doing its orderly thing, but it's not responding to anything particularly scary. I think we're okay with that for now. And then you guys have been talking about, as I have for weeks, the sort of racy end of this market where there's just no, there's kind of like no end to the appetite for some of these momentum plays.
- [39:49]
Scott Wapner
Applovin we were highlighting. You want to, you want to just talk about what you're seeing and what it makes you think about. I mean, it's up another. Now it's, I said earlier it was up like another 7 or 8%. Now it's up almost more. It's more than 9% today, 23% this week, and more than 900, almost 950% this year.
- [40:06]
Mike Santoli
And it's fascinating because it's operating in the meme zone, right? I mean, clearly people feel as if they can just keep piling on top of this, but yet you're also getting the fundamental upward revision case to say that there's a cover story for it. What's again, what I accentuate is it's a subset of this market. It's not really bleeding over into everything else. We'll see if it kind of just burns itself out at some point.
- [40:29]
Scott Wapner
All right. Good stuff. I'll see a little bit a little later. We're back right after this. We're back with some news on Tick Tock some more. Julia Boorstin following that story for us today. Julia.
- [41:00]
Julia Boorstin
Hey, Scott. We just got a statement from Tick Tock saying they plan to appeal this ruling that allows the ban on Tick Tock to go forward saying, quote, the Supreme Court has an established historical record of protecting Americans right to free speech and we expect they will do just that. Going on to say the law was, quote, pushed through based upon inaccurate, flawed and hypothetical information resulting in outright censorship of the American people. The Tick Tock ban, unless stopped, will silence the voices of over 170 million Americans. Now it's worth noting that Meta, Snap and Alphabet are all higher on this news of the TikTok ban going forward.
- [41:36]
Scott Wapner
Back over to you following that Metamove certainly today. Julia, thank you. That's Julia Borson with the very latest from that still developing story. All right, the setup, Jason Snipe is all about you. Oracle earnings on Monday, best year since 99. What do you think?
- [41:49]
Jason Snipe
100%. I mean the stock stocks up 82% year to date. Again, when I, when I think about a company that has endless demand, more demand than they have capacity, they will double their capex in 2025 just to meet that demand. So I think it's going to be a great quarter.
- [42:02]
Scott Wapner
AutoZone on Tuesday, all time high today. You own that too.
- [42:07]
Jason Snipe
Autozone up 26% year to date. They've opened up 213 stores this year. I think that's what's going to continue to grow. Do it yourself business there are also growing commercially which I like here.
- [42:18]
Scott Wapner
All time high for Costco, which reports on Thursday just keeps on pounding.
- [42:23]
Jason Snipe
I mean it's up 50% year to date. You know, I mean the dig on the stock obviously is always the expense. It's trading at 55 times forward. But again, when I, when I see who they cater to, which is a fluent consumer, 50% of consumer spending is done from 20 to 30% of affluent households and that's where Costco resides.
- [42:38]
Scott Wapner
All right, good stuff. We will take a quick break and we'll do finals next on closing bell a couple hours from now. Jeremy Siegel of the Wharton School making another Friday appearance with us. Can't wait for that. Anastasia Amoroso will be with us as well, along with Morgan Stanley. Sherry, Paul, let's do some finals. We got 30 seconds left. Jay, Snipe, your first oracle.
- [43:01]
Jason Snipe
I think it's going to be a strong quarter. Stay long.
- [43:03]
Scott Wapner
All right. Weiss, Verdiv.
- [43:04]
Steve Weiss
I don't know how this stock can ever see a down ticket other than today.
- [43:08]
Scott Wapner
Down almost 3%.
- [43:09]
Steve Weiss
That's why? I don't know. Mystery.
- [43:11]
Scott Wapner
All right, Jenny.
- [43:12]
Jenny Harrington
Glaxo. Down 11% on the RFK nomination. Four and a half percent dividend yield.
- [43:15]
Scott Wapner
Okay, so we're going to watch the market over the final stretch. I'll take you through it. See if we get 6100 on the S&P 500. Not that far away. That'll do it for us. Exchange begins right 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.
- [43:37]
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