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Halftime Report
Momentum’s Miserable Week 2/21/25
00:44:15
Scott Wapner and the Investment Committee discuss the miserable week for momentum stocks and what it means for the broader market. Plus, multiple committee members making some major portfolio moves, they reveal them all. And later, a Call of the Day on Defense stocks, the Committee debate the sector. 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 IQ thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the week that momentum cracked from Palantir to Robinhood, Wal Mart and so many other stocks. We will debate what that means for the bull market's next leg. Joining me for the hour today, Steve Weiss, Jenny Harrington, Jim Leventh in talking to him, we will check the markets here we are red across the board, as you see. Yes, UnitedHealth is a huge story. We'll get to that. There are many stories that we will get to. I do want to start though, Bryn, with Momentum's miserable week because we've really been focused on the run up in these stocks and how in many respects it carried the bull market. And we have had a considerable rollover in some of these names, including Palantir. Hadn't heard from you yet on that stock, down 10% this week. There are others. The Cyber ETF is having its worst week since mid December. Got some names in there. So how are you thinking about the Palantirs, the world Momentum is a factor. A lot of investors got into those names. What do they do?
- [01:19]
Bryn Talkington
Let's start with momentum as a factor. I think that investors need to understand that gravity is immutable, that law is immutable and it applies to stocks as well. And when you see Palantir hims grab Robinhood way over even their 20 day moving average, which think about that, the very short term indicator, it just shows you it's so overstretched. And like we experience gravity on earth, these stocks needed to come down at least to this 20 day moving average, which across the board, that's what they've done. And I think where investors with Palantir specifically, you know, I bought this stock last year, I haven't even held it for a year and the stock is up 350%. I think that it's really dangerous to chase these names because with Palantir, I bought it really specifically three quarters ago when Alex Karp was saying we are pivoting, pivoting, we are rebuilding this company to focus on commercial. They already have a big government building business, but it was lumpy. And I think people didn't believe that it would actually monetize. And it is with a company with what's the market cap? $250 billion market cap. And maybe they do 4 billion in sales. I think at this point there's so much priced into the name and now this name. I think over the next, probably this year is going to trade off headlines. So I won't be adding to the position. I told you, you know, I sold a big chunk of it in December. I have calls on it right now, the 120 calls. And so I think investors need to understand gravity exists. Don't chase these names and let them come in. But I do think they're different. Like I'll be a buyer of Robinhood if it gets into the 40s. But volunteer to me you'll be Robinhood.
- [03:08]
Scott Wapner
Because I want to ask you about that too. It's on the list. I mean, it's down 14% this week. What's the differentiation for you?
- [03:16]
Bryn Talkington
Well, one of them is trading, let's say I'm not a big fan of pe, but I know that a lot of people look at it. One of them maybe has a 500 p. E and one has a 47. And so I think Robinhood, I can make the. I can make the case that there's so much not priced in. I feel like with their growing options are growing crypto, they're growing trading and what Vlad and his team have been doing and really matured. I feel like these are early days for this company. They crushed earnings. And so I just think that this company will continue to have a lot of momentum and stickiness as they're, you know, they're paying what, 2 to 3% if you move over your IRA, doing a lot more education. And so to me, I'll be a buyer in this name. 46 is the 50 day. And that's where I would step in to buy more of the position. And there's also some nice call premium on this. So as an investor, if it feels expensive to you, you can also buy it and sell some calls and get, you know, 5 or 6% for just a couple of months.
- [04:16]
Scott Wapner
Weiss B of A calls the momentum unwind. Painful says if retail investors don't step back in as dip buyers, we could see continued weakness in that as a factor. I mean, the market has obviously had a little bit of trouble since these stocks started to roll. We can take you back to the wall and show you the palantirs, the Robinhoods, the Applovins, down 15% this week. The Walmart, by the way, which is in the MTUM, had a great run, down 8% this week. Vertiv, your stock down 7% this week. Concerned about this, this rollover in some of these names.
- [04:51]
Jim Lebenthal
I'm concerned about the rollover. I think it's actually symptomatic of a bigger malaise that's, that's affecting the market. Look, these stocks all went up based upon momentum in fundamentals and not based upon momentum in earnings. Now there was positive earnings growth, that's undeniable. But it was also multiple expansion that really drove it. And multiple expansion really only happens in very friendly, low risk, low interest rate environments. So we stayed, stayed over, you know, stayed past our welcome. Now there are certain things you can't. I'm not doing here. While I didn't think a 20 day run in Meta was deserved because there's really no news on it, same time, my gains are so significant that for me it's a question of timing. So I got the stock got ahead of itself on the timing. It'll recoup that loss over time and I think it'll be fine. In terms of others where there was where the emperor had no clothes or the clothes were a skimpy thong instead of a full outfit, those are more troubling because I don't think those.
- [06:02]
Scott Wapner
I can't unsee that now.
- [06:04]
Jenny Harrington
You know, interesting analogy.
- [06:06]
Scott Wapner
I'm going to divert you away from, away from that as quickly as I possibly can. You buy. You would, would you buy more Vertiv.
- [06:13]
Jim Lebenthal
Not here. Not here. Vertical is not one of my largest positions but it's, it's a size well I'd say mid level position. I'm not buying it here. I'm not putting any money to work in the US market. We'll talk about things later because you don't know what the rules of the road are. So you don't know who, who's going to succeed. We're 30 days into Trump presidency and we're supposed to be the golden age of investing and a new dawn for, for companies with deregulation and stimulus and all that has turned just the opposite as a stock. It's not political. That's looking at the stock performance now. So until that clears up and that's not clearing up anytime soon, I'd rather hoard cash and stay there because the risk is much too great. I echo what Ken Griffith said and I'm very concerned about the market.
- [06:58]
Scott Wapner
All right, well since you, since you referenced that Citadel's Ken Griffin has been speaking out bunch lately in the appearances that he has had on a big stage both figuratively and literally at events and he did it again down at FII in Miami where he talked about the defensive nature of investing right now because tariff talk is taking a toll. The geopolitical tensions between the Trump administration, Europe and Ukraine is taking a toll. All, all of it leading to uncertainty. Listen, it's a very difficult time to invest because of the policy uncertainty that goes with this transformation. And one of the most difficult areas that we're all trying to navigate is not just the status of tariffs around the world, but who will be an important ally to America going forward and with whom are we, Are we breaking down longstanding relationships? Okay, so that's Ken Griffin in Miami. The question, Jenny, is do you listen to what Mr. Griffin had to say and say some of this uncertainty, whether it's talk about tariffs, whether we're breaking, you know, decades long alliances with certain partners of ours is starting to weigh on the consumer to some degree. Walmart this week. I mean, there are many themes this week, the momo sort of rollovers. One, Walmart's guidance has us thinking about the consumer. Griffin talking about tariffs, alliances and things like that, which are sort of throwing the global order out of whack. Consumer sentiment today. 15 month low. Restaurants like Texas Roadhouse have talked about a slow start to the year. By the way, the CEO is on Mad Money tonight with Jim. You'll hear more from him there. January retail sales was weak. Consumer discretionary is the worst sector of the year. It is not just from a market cap level of the Amazons and the Teslas. It's a bunch of other stocks. To put all that together for me.
- [09:01]
Jenny Harrington
I would be happy to. So I've had two kind of formative things in the last two days leading up to this that really helped me answer it. On Wednesday night, I taught a behavioral investing class at Baruch and I was asked kind of that same question, like, how do you invest in this environment? How do you go forward? And then yesterday I worked with a client who has a new portfolio. It's like $6 million sitting in cash. What do you do? And what my partner Greg and I say when we're in these times of like massive disruption, you really don't know what's, what ends up. Steve, you phrased it really well. You said you don't know the rules of the road. And so what Greg and I do in these time periods is very simple. We follow the process and the process is twofold. One is to look at every company and see how that company fares. And the other is to keep marching forward. And so I'll tell you exactly what we decided to do with this with this all cash portfolio that came in. So what we're doing with that is we put a normal asset allocation in place, some us, some international, a little bit of small, a little bit of mid. And what we're doing to accommodate this dislocated, weird environment is not changing the asset allocation that we would choose because that's very long term. But instead what we're going to do is play around a little bit with the pace of timing. So rather than getting it invested maybe over three to six months, maybe it gets invested over six to 18 months. And I think about that, and I think about everything you just said, Scott, and how, you know, consumer spending was terrible and, and retail is not so great, blah, blah, blah. Yet here we have the market hitting all time high.
- [10:26]
Scott Wapner
Yeah, resilient. The market's been resilient in the face of pretty much everything thing.
- [10:29]
Jenny Harrington
But why. And then this is, this is what kind of I keep coming back to. Well, the reality is, is earnings on balance are still coming in. Well, earnings are still growing. Interest rates are still predisposed to heading in a downward direction. If you, if you go back to first principles and look at each individual company, most of the individual companies in our portfolios, and I'm going to guess in yours too, don't really get terribly impacted by the incredible amount of noise that that's out there. And right now I'm thinking myself as nice, you know, as my job as a portfolio manager. I almost think of myself like a sieve, right. And there's all this noise coming in and the noise is the noise is the Middle east and the noise is tariffs and the noise is taxes. And then it's my job to shake that sieve and see the few pieces that actually impact our portfolio. And one of the things is tariffs. But we did a really deep study on that going into year end. And our guess is that the worst case on tariffs, the most likely worst cases, it carves out half a percent of gdp. And then you can pick and choose companies around that that aren't terribly, let's.
- [11:26]
Scott Wapner
Also, you know, as Wells Fargo is the, their investment institute is talking about today, why has the market remained resilient in the face of everything that we've talked about and all the things that you as investors are worried about because they suggest that deregulation and tax cuts are going to outweigh tariffs. And there is a belief that, that the bull market is still intact as a result of that, that deregulation isn't priced in as bank of America suggested earlier. This week and that the trend is still up. That's the prevailing thought from investors.
- [12:00]
Steve Weiss
So deregulation, Scott, leads to higher earnings. And this is what Jenny was just talking about. Earnings growth by the way, for this year. 2025 is projected to be 13% year over year. And if that happens, that is enough to support this market, get it going a little bit higher. I don't think we'll have another 25% year but still a positive year from here that deregulation is real. We can talk about the societal impact on a different channel from an economic and market point of view. When we talk about the CPFB getting disbanded, that is good for profits in the financial sector. Again, not talking about the societal aspects of it. And you think about deregulation further occurring in things like energy. This is good for profits and is at least a counterbalance to the tariffs that we're talking about. There is also one other thing that we should talk about. It's a little bit esoteric, but it actually matters a lot and that is liquidity coming into the markets right now. As the treasury is forced to spend down its treasury general account at the Federal Reserve. It can't issue any more debt securities right now. Is anybody wondering why the 10 year is at 4.45% after the inflation reports we had last week? The answer is because the supply of Treasuries is down right now as the treasury cannot issue any more securities and the commercial banking system is getting more deposits as the treasury spends down its TGA. Dan Clifton @ Strategics has done a lot of work on this. It's excellent. I have to give him credit. I'm telling you this sounds esoteric. It really matters.
- [13:26]
Scott Wapner
The other thing to consider too is sort of if there's money coming into the market lately where that money has been going, right? And it's been going to, you know, more bond sensitive names and staples, right? Staples are up 6% in the past month. Health care is the third best performing sector of the past month, up 3%. The bank of America flows that they track tell this very story. They talk about tailwinds of a wealth effect and job growth tailing off that inflation is nagging consumer confidence. Like we just discussed. The government heading into recession slowdown starting to be flagged by outperformance of bond sensitives and defensive stocks. So you do have a little bit more of a defensive posture of what is still a bull market and one that just this week hit new closing highs in the face of all the noise.
- [14:19]
Jim Lebenthal
Right? So let me unpack that one by one. First of all, as to the bond market, it's not all attributable to a lack of supply. It's also attributable it still have a nice yield there. And if you want to wait out what's going on in policy, why not, why not pick up two years or pick up a year or pick up five year or ten year bonds. So it's a flight to safety, number one. Number two for others, it's, it's looking at okay, rates will come down, down, but they may come down because of recession. So you never know what, just like with stocks, you never know what the cause is. All that, that was a great shout out, Jim. In terms of health care right now, you know, being part of investing in some private companies, the FDA has a moratorium on meetings. They've canceled their meeting schedules. So if you're owning health care and you've seen a shrinking of the research teams, of the approval team teams, you know, putting it very quaintly, it's going to be a while. The backup which already existed into new drugs coming on the market is existing. So regulation, you know, is, it's an interesting, it's an interesting debate because as Trump consolidates power, as we're seeing with the fcc, with the SEC and with other agencies, that affects American, the things you're talking about, you know, then who knows what he's going to do? It's not like he gives a lot of forethought to it. So the cuts have been made. There's been no strategy. When I was at Lehman running a fairly sizable department or at Salomon doing the same, and budgets got cut. They came to us and said, pick who you want to cut, who's least important to your business. They didn't say we're cutting these people for you because they had no idea here. And that's what's happening. So we don't know the damage that's going to be done. So that's why I say the best place to be is either in cash, maintaining your portfolio and even a matter can be impacted if the economy does go down, goes, doesn't go, does go lower, we'll see ad spending decline.
- [16:21]
Scott Wapner
Well, you're, you're taking, you know, some, some more health care positioning. You bought more UnitedHealth this morning, which is certainly the biggest stock story of the day. It's our chart of the day. As the Journal reports, the DOJ is investigating the company's Medicare billing practices. So I'd like to get your thought process on it and show you what the hedge fund manager Bill Ackman posted on X within the last few hours says, quote, my psychological short here is paying off and I would avoid this stock when you find two cockroaches. It is almost a certainty that there will be many more. And a half a trillion market cap for a health insurer makes no sense in the context of this story and all of the activity around this name over the last three or four months, you continue to buy more. Why?
- [17:12]
Jim Lebenthal
Well, first of all, Bill's obviously a brilliant investor, but take that for what it's worth. It's worth a tweet that is reactionary. And if he truly had conviction, it wouldn't be a psychological short, it'd be a short in his books because he is a hedge fund.
- [17:27]
Scott Wapner
No, no, I know, but, but, but, but the point is, in fairness though, before you say that, I mean he has.
- [17:32]
Jim Lebenthal
Accurate.
- [17:33]
Scott Wapner
He has. Well, no, not necessarily.
- [17:35]
Jim Lebenthal
Why could he.
- [17:35]
Scott Wapner
Well, because his strategy has evolved and he has said that straight up that he doesn't short stocks.
- [17:41]
Jim Lebenthal
I don't believe he should change his documents. He can say what he wants, but trust me, if something comes out that's.
- [17:45]
Scott Wapner
Well, I mean, his actions speak louder than words. Words. Hang on, Jenny, go ahead.
- [17:48]
Jim Lebenthal
But, but the point is, is that it's not necessarily true what he's saying now, why I did it.
- [17:54]
Scott Wapner
Well, there's a lot of risk around this name.
- [17:56]
Jim Lebenthal
I think you've taken out a lot of the risk right now. Near term stock traded down over 60 bucks earlier. I bought it down about, you know, I guess about 55 or so. It's been a great trade so far, hurting from the position I had on. But this is a permanent compounder. This is the leading health care company in the world. That's why it's at half a trillion dollars, number one. Number two, I mean if you take a look at what's going on here and just here's, here's a 30 second summary. The government, Medicaid and Medicare are pushing to value based care. So that means they don't want to own the risk. So they're pushing that risk to practitioners and they say the practitioners and they figure it out with them, tell me what, what this patient will cost you to keep in good health and that's going to drive better outcomes. It's been proven to do that in studies that have been done and to the extent that you are right in how you're applying care and the medical loss ratio is lower, can't go below 75% typically run mid-80s. You can keep the difference to the extent it goes above that 100%, then you pay that out of your pocket. So that's what's behind this. You've incentivized Dr. To go ahead and operate this way. It's been a failed experiment with a lot like Hanoi went out of business because of it. But the overall point here is that you've got this arms race in terms of coding, how you code these, and that's still very early days. So will there be offenses in coding? Yes. Do I think that this is an endemic issue that the board came out and said to the management team, find ways to rip off the government? Absolutely not. Are there bad players who are incentivized in terms of the individual practices that Optum owns? Sure. No different than what you'd see a regional manager in a bank, in an auto company, anywhere else. So to say this is a, this company is just evil to its core is really, really asinine. So that's my view.
- [19:51]
Jenny Harrington
All right, here's a quick one thing.
- [19:53]
Scott Wapner
On it real quick.
- [19:54]
Jenny Harrington
Okay. I want to get behind Bill's psychological short because that's where I sit too, you know, and I can't short and I don't run a hedge fund. But as I've mentioned before on unh, I frequently inherit portfolios with a large low cost basis, UNH position. And the first thing I do is cut it back. And that's been for years. Because for years I've said at some point this is going to come into the government's crosshairs. Everyone I know hates, everyone I know who uses it like hates UNH whether they should or shouldn't. They do. And it trades at too rich a multiple. I think for what it's future growth rates really are. It's an above market multiple. It's decent growth, but it's not extraordinary. And I think it's always been in those crosshairs.
- [20:28]
Steve Weiss
Not above market multiple anymore, just actually 15 times this year's earnings, which is, well, exactly.
- [20:33]
Jim Lebenthal
Very cheap.
- [20:34]
Jenny Harrington
Okay, sorry on that one.
- [20:36]
Jim Lebenthal
Historically, it's Coca Cola, their growth is very slow. Pepsi, they're very slow. You know, you take some of those other consumer companies, they traded a multiple that's a premium of the market for perennially slow.
- [20:49]
Jenny Harrington
But I think you're talking dominant. I think until, until RFK came in for hhs, I don't think that Coke and Pepsi have been in what I've seen for a long time as like, right for government crosshairs of like of looking at the right.
- [21:01]
Jim Lebenthal
That's why you don't invest in health care, because you don't know what are. You invest in any pocket of health care because of him, because of Trump.
- [21:07]
Jenny Harrington
I disagree with that completely.
- [21:10]
Jim Lebenthal
Where are you safe?
- [21:11]
Jenny Harrington
It's been for years.
- [21:12]
Jim Lebenthal
Where are you safe? Investing in healthcare. Where are you going?
- [21:14]
Jenny Harrington
Like Organon. Okay. Which is a spin off from Merck, which is long legacy. Legacy. What am I saying? Like off patent drugs and. And like women's health care. Okay. You can be there. Earnings.
- [21:27]
Jim Lebenthal
It says three times earnings.
- [21:28]
Jenny Harrington
Okay. But like, let's. Let's not go here now. I'm specifically talking for years, every time I get a new portfolio and it has a big, unh, physician, one of the first things I do is down to size or sell it.
- [21:39]
Jim Lebenthal
Okay.
- [21:40]
Jenny Harrington
That's all I'm saying. Hold on. I hear Bill's.
- [21:42]
Jim Lebenthal
Hold on. Psychological question when you say you cut it back is because it's an oversized position in the portfolio.
- [21:48]
Steve Weiss
Both.
- [21:48]
Jim Lebenthal
Okay.
- [21:49]
Jenny Harrington
If it's super big and the capital gains are too big, then I cut it back. If I can punt the whole position. I punted the whole position.
- [21:55]
Jim Lebenthal
You can go back for years. Why punted the whole position, given what you think, by the way?
- [21:58]
Jenny Harrington
Because I've always thought that there's. That there's government risk in it, that there's political risk in that stock.
- [22:02]
Scott Wapner
Okay. I'm glad you mentioned Coca Cola, because it's a good segue to the person who is arguably the most famous Coca Cola investor of all time. Who's that? Warren Buffett. Okay. And Berkshire Reports on Saturday. So here's a question. Okay. It brings it to full circle where we started the program. Momentum's rolling. Is the consumer rolling? Is this still a really strong bull market? If it is, why is Berkshire sitting on so much cash? 300 billion in the third quarter, the highest percentage of the firm's assets going at least back to 1998. Why?
- [22:40]
Jim Lebenthal
He's worried.
- [22:41]
Steve Weiss
He's waiting for an elephant. Maybe he's worried. I mean, he has been selling for over a year, whether it's Apple or Bank of America. Maybe he's worried, but I think it's more. He just doesn't like the prices. Now, look, I don't know. I don't have the hotline to him. Steve, I don't think you do either. Maybe you do, but he's not coming out and saying, hey, I think there's a real problem in the economy. I think there's a real problem in the market. He has said with the amount of cash that he has, there are very few targets that he can functionally, mathematically invest in. And if he looks at the prices of those companies, he's not likely to be too appetized. So I think he just waits for a good washout, a correction in the markets, and puts things to work.
- [23:18]
Scott Wapner
I mean, he sold a lot of Apple. He sold a lot of bank of America. America. It's never a great idea to speculate too hard on what Berkshire's doing, but it is peculiar that he has been sitting on a mountain of cash for a long time.
- [23:36]
Steve Weiss
You know what?
- [23:36]
Scott Wapner
For a long time.
- [23:37]
Steve Weiss
Give me one second on this. Because we know that over the last year, year and a half, he's invested in various Japanese trading companies. We also know that Europe has been very cheap a long time. We see the remarkable recovery this year in Europe and in the banks in particular, which is something that Warren knows about. I wonder if. I wonder if he's taken a position, maybe even a toehold in European banks. I am not saying for one second that European is out of the desert, that it's been in for quite some time, but it has gotten so ridiculously cheap. And the sizes of the companies in Europe may be something that he's taking.
- [24:10]
Jim Lebenthal
A nibble at.2 points. First of all, Europe is perennially cheap to the US Market. There's lots of reasons for that.
- [24:16]
Steve Weiss
I'm not getting invested.
- [24:17]
Jim Lebenthal
Number two, you're like, the Europe market has recovered, but the. But the countries, the member nations of the EU and those that aren't like the UK have not had that recovery. So it's only the stocks, and that's because it's looking for a home from the US in terms of Buffett, why does nobody say this? The guys in his mid-90s, you've said it. But some health. And I'm the only one. Maybe he's giving all of his wealth to charities and to foundations. Maybe he knows that when he passes that all the shorts can be targeting his companies and saying they're going to have to sell these major positions.
- [24:52]
Jenny Harrington
I don't think so.
- [24:53]
Jim Lebenthal
And he wants to. Of course, you're in tile top view. Let me finish. Let me finish. And he wants to give these foundations, these nonprofits, their choice is to what they want to do with the capital rather than continue on the stocks and have to sell them at lower levels. That's pretty easy.
- [25:09]
Jenny Harrington
Can I tell you good advice?
- [25:10]
Steve Weiss
Give me a quick second on this, because you gave good advice that it's too hard to speculate.
- [25:13]
Jim Lebenthal
You might be right.
- [25:14]
Steve Weiss
Who knows?
- [25:14]
Jim Lebenthal
Exactly.
- [25:15]
Steve Weiss
I honestly look at this, I don't.
- [25:16]
Jim Lebenthal
Know if I'm right.
- [25:17]
Steve Weiss
I look at this exercise as finding shapes in the cloud. You want to see the shape you see? You want to see the shape I see you can do whatever you want. Because he's not talking about what's undeniable, though.
- [25:25]
Jim Lebenthal
He has lightened up and whatever the reason is for a long time. He has lightning up and he's been the market oracle for a reason.
- [25:32]
Jenny Harrington
The reason I don't think that's why is because I think he's always run it for the shareholders, not for himself. And I think I'll give him a lot of credit for setting his own interests aside and running that for the shareholders.
- [25:41]
Scott Wapner
Okay, all right, good. I'm sorry I got to cut you off because we got to go. We're overboard and we're going to sink if we don't. So we're going to come back after this quick break. I have several moves that I have to get to. Everybody up here on the the desk has something going on in their portfolios that we need to tell you about. We'll do it next. All right, here we go. Let's do some moves. Jenny Harrington, new buy, 6th street specialty lending TSL X.
- [26:24]
Jenny Harrington
Right. Hot off the presses. Just sent the right up to my clients on this. So this is a business development company, a bdc. What it is is basically a private credit company. And they've packaged up for individual investors to buy. In the BDC TSLX form, it's got an 8% dividend yield. They generally pay a supplemental dividend on top of that, so your yield will probably be higher. They've grown that dividend at an annualized rate of 3.4% over the last four years. And this is an interesting process for us. We really started with the whole BTC universe, everything out there. And quickly two rose to the top for us as potentials. For us, it was Aries and tslx. We already own Hercules. And so we, as we looked at them, we're like, okay, tslx. The way their portfolio structured, the kinds of loans they offer is very complementary, not overlapping anything else we do. One of the other things was whether we spoke to rich research analysts, competitors. Everyone kept saying this is the best management team out there. And by being the best management team out there, they have access to some of the best deals. You can look back the dividends uninterrupted during terrible times like the pandemic, like 2018, probably more so 53 today, by the way too. I know. That's a good point though. Don't expect a lot of capital appreciation.
- [27:36]
Scott Wapner
Don't buy a 52 week high now.
- [27:38]
Jenny Harrington
I know, but don't buy it for the capital appreciation. Buy it for the dividend yield. And you can hold this hopefully for, I don't know, 10 years, 20 years. It's one of those kinds of stocks if you just want the income.
- [27:49]
Scott Wapner
Give me this Paris trade that you have in real estate. We'll get to a tech thing in a minute. So you sold the NNN REIT and you bought Realty Income.
- [27:59]
Jenny Harrington
Right.
- [28:00]
Scott Wapner
Why?
- [28:00]
Jenny Harrington
As many of you know, I've owned Triple N for years, almost decades at this point. And it is a great company. But what they do is they lend to all sorts of like 7 11. Sorry, they don't lend. They have real estate for all sorts of things like 7 11, as does realty Income. The difference is Realty Income only holds properties or only rents properties to credit worth to. What am I saying? Like companies that have a credit rating. Right. So historically, because it's a bigger Market cap of $50 billion. Market cap, because their tenants are higher on the credit spectrum, they've always traded with a discount at a premium valuation and a discounted yield. So I really don't know why. There's no good reason. But REITs have gotten shaken up and these two stocks are trading at parity. So for the first time in decades, I've had the opportunity to actually improve the quality of the portfolio. Now I have a bigger company, a higher quality portfolio. They both have a 5.6% yield. So I, I swapped them out and just used it as the portfolio manager.
- [28:58]
Scott Wapner
Out of triple N into letter O. Sorry, triple N. The other one is you sold Skyworks.
- [29:05]
Jenny Harrington
Right. And I was on last week. I mean, it was the week before, after they had that terrible earnings report. I said, we're going to catch our breath, we're going to see what we can do. We're going to watch to see if the stock bounces a little bit, see if there's any redemption. But there wasn't. We came away saying, no, the growth thesis on this is completely broken and tossed it out.
- [29:20]
Scott Wapner
All right, Jimmy, let's go through some things here. You bought more Exxon and you bought more Win.
- [29:25]
Steve Weiss
Yes. So companies that I believe in that maybe haven't performed as well as other sectors of the market or other names in my portfolio, but I still very much believe in them. This is routine housekeeping. This is if a stock is in your portfolio, you believe in it, but the rest of the portfolio grows bigger around it. Then you've got to add to it. That's what I believe very strongly in. ExxonMobil and win. Win had great results a week ago and it responded. The stock was down at 80. Now it's at $92 a share. Scott, if I may, I'd like to talk about where I sourced the funds for this.
- [29:55]
Scott Wapner
Let me key you into that. You trim Citi.
- [29:58]
Steve Weiss
Yes.
- [29:59]
Scott Wapner
Which is kind of surprising to me. Yes, it's been a bad week for the banks, but this is the bank that you've liked the most. And I still believe in Jane Frazier more than almost any other financial CEO. Because this is the stock that you bet the house on.
- [30:14]
Steve Weiss
Yeah. And everything you just said still stands, is still applicable. So if you think about Citi and Scott, you know this, the timing on this has been far from perfect. It has languished for many years. But during that time frame, apropos of what I was just saying about win and ExxonMobil, I have added to it over the years as it has not done well versus the rest of the portfolio. You get to a point where now it's up 52% over the last year and it was a very big position a year ago.
- [30:39]
Jim Lebenthal
Ago.
- [30:40]
Steve Weiss
It's simply too large. So this is portfolio management. If you take what I just said about Citi and I still very much believe in it, but I still believe in ExxonMobil and wind just as strongly then what I'm doing with those two names is what I was doing with citigroup a year, two, three years ago.
- [30:55]
Scott Wapner
Trimmed BlackRock as well to raise some funds, too. Let me get to one more before we take a break. Alibaba. The shares are up huge this week. Week 15%, a new 52 week high. They're going to spend aggressively in AI. I think we sort of. That was the story of the week. At least it relates to that name. You're a believer now in these Chinese Internet names. You bought the K Web and you bought pdd. I talked a lot in the last couple of weeks about, you know, sort of Tepper doubling down on his belief that these stocks are a place to be. His 13F revealed the fact that he increased the holdings of all of the Chinese names that he had owned. PDD included JD Alibaba, I think it was Baidu was the other. What's your, what's your thesis here?
- [31:37]
Jim Lebenthal
Yeah, I talked to Dave as he was getting out of his hot tub last Night in Palm Beach. So he was in a good mood. Look, it's kind of strange that I view adding money to China to be a safer investment than the US but it is and right now. So there's no reason to believe.
- [31:57]
Scott Wapner
Wait, wait, it's safer in China than.
- [31:59]
Jim Lebenthal
The U.S. these stocks are. These stocks are absolutely. These stocks are safer to invest this time than in the US Broadly. And the reason for that is because there, there's no uncertainty in terms of what the economic outlook is and as the government sees it. And when I take a look at these names and China's not safe but place to invest. Don't misunderstand me. I'm just saying very specifically a law intermediate to maybe longer term trade in these names I won't be there forever is attractive. PDD is at 10 times earnings. Right. So that makes it very cheap. There's no reason to believe that you won't see the same momentum in the air related stocks in China. See here it will never get the multiples number one, number two, as the US has cut off off as they should have our technology to China. It's necessities of other invention. They were going to stop and say, okay, we're not going to advance technology. They'll do it themselves. So that's what they've done. So I think those are all good trades, all very cheap stocks now.
- [33:03]
Scott Wapner
All right, let's get the headlines now with Angelica Peebles. Hi, Angelica.
- [33:06]
Angelica Peebles
Hey, Scott. The National Science foundation reclassified hundreds of employees from permanent to probationary status in response to President Trump's directive to reduce the federal workforce. According to Democratic Representative Don Bayer, who represents the Virginia district where the NSF is located. The agency's move violated labor contracts. A spokesperson for the foundation said 170 people were fired on Tuesday, 86 of whom were classified as probationary. Pope Francis, who is being treated for double pneumonia, is not out of danger yet, but his medical team said today that his condition is not life threatening. The pontiff will remain at the hospital at least through the end of next week. And Ford is recalling more than 240,000 vehicles in the US over potential issues with the seat belts. The recall affects certain models of the Ford Explorer and Lincoln Aviator from 2020 and 2021. The seatbelt buckle anchor bolts may be improperly secured. Ford dealers will inspect the bolts and replace them if necessary. Back to you, Scott.
- [34:07]
Scott Wapner
All right, Angelica, thank you very much for that. That is Angelica Peebles. I've got more moves coming up as well from Jim Laventhal. I think Steve Weiss may have something else we need to do. And we're back with more trades next. Welcome back. We're down 500 on the Dow. Call of the day today for us is William Blair downgrading the defense stocks in the news a lot this week. As all of you know, Booz Allen, caci, General Dynamics, Leidos, which Weiss has been trimming of late. Parsons is on that list. Everything gets a downgrade here. I'm wondering how you guys think about these defense names now. Northrop, Jenny.
- [34:59]
Jenny Harrington
Yeah. So this has been a really, really long term holding in our discipline growth strategy. And this kind of goes back to the top of the show when I say you stay on track and you stay on plan. And so while there's near term noise, near term, we don't know the rules of the road. I think in the long term, what's going to come out of this is that all these countries need to rearm. What we're finding out is everybody has no stockpiles or low stockpiles. And I think, I think there probably is like strength. What is it? Peace through strength? I think there probably is peace through strength.
- [35:27]
Scott Wapner
Yeah.
- [35:27]
Steve Weiss
But if we're, if we're going to.
- [35:28]
Scott Wapner
Cut the budget, okay, but 20% a.
- [35:30]
Jim Lebenthal
Year for each of the next five years.
- [35:32]
Jenny Harrington
Well, I thought it was 8% a year for the next five years, but there were all these exemptions to that, too. And also, who the heck knows if that's even going to be real? Right. Who knows if it sticks? Who knows what happens to Congress in two years? Why would they continue those budget cuts in two years if there's a problem? So I'm not adjusting the portfolio right now for things like that because the landscape keeps changing.
- [35:54]
Scott Wapner
Jimmy, you have Lockheed.
- [35:55]
Steve Weiss
Yeah. Europe's going to pick up the slack. It's that simple. Yeah, there are going to be budget cuts. I'm not so sure on these budget cuts that the F35, which is the backbone of Lockheed Martin, is actually going to get cut. I know Elon Musk threw that grenade over his shoulder on one day. The F35 is a very capable platform. And to the extent that the U.S. air Force cuts back, European air forces are absolutely going to pick up the slack. They've been waiting for these planes for quite some time. And then there's missiles, too, that unfortunately the world is still going to need, Europe's going to pick up any slack in the U.S. so these are part.
- [36:25]
Scott Wapner
Of the industrial complex in which Jeff DeGraff calls vulnerable today. Which leads me to another move from you. We've been busy with moves. Today you sold Deere, which you've owned for almost three years.
- [36:37]
Steve Weiss
Yeah.
- [36:38]
Scott Wapner
Why did you bounce that?
- [36:39]
Steve Weiss
Deere has also languished mostly through 2024am 2000, 2023 on poor sharecrop prices. Now, share crop prices are projected to start recovering and with it farmer incomes that they can start buying deer tractors. That recovery is, in my opinion, more than priced in the shares. They're up something like 40% in the last year. Frankly, it's been a good investment over the last three years, up 14%. I'm not going to pat myself on the back. That 14% per annum is a little less than the S&P 500. But I'm looking at it right now. I see it at fair value. I think the company has done a very good job of navigating through this downturn, controlling inventories and thus branded pricing. But the recovery is all priced in, in my opinion.
- [37:19]
Scott Wapner
All right, another break. We got to talk crypto as well, which has stalled out of late. It is still below 100k. I know Bryn has thoughts on that. We'll talk about that on the other side. Market Flash to get to you with Mackenzie Segalis. Hi, Mackenzie.
- [37:53]
Angelica Peebles
Hey, Scott. So you got shares of Block that have plunged more than 15% today, marking the company's sharpest single day drop in five years. The sell off followed a fourth quarter earnings report after the bell on Thursday that missed expectations on both revenue and earnings. Now 2025 guidance also failed to provide the upside that investors were hoping for. Two key concerns are flatlined cash app user growth and a less than robust acceleration in Square's seller business. Now, Square is also continuing to lose market share to Toast Clover and Chiff4, all of which have been gaining traction in that SMB payments space. And while block shares have climbed 10% over the past year, today's sharp decline suggests that investors are growing increasingly impatient with the company's execution. Back to you, Scott.
- [38:39]
Scott Wapner
All right, Mackenzie. Appreciate that, thank you. Makes me think a little bit about Bitcoin. You talk about companies like this. Brin, what do you make of the way Bitcoin's traded over the last month? It seems to have stalled out after a nice move. You own the ibit. That's the Bitcoin trust. There's some Coinbase news today as well.
- [38:58]
Bryn Talkington
So Bitcoin's around 6, 70% over the last year. Feels like, you know, with these cryptos, especially bitcoin, you get these big rushes of moves. And so I don't think there's anything to read into. It's like up 4% for the year. I think what's interesting is, you know, gold is up 12. And so from a trader perspective, I think gold's been getting a lot more shine than Bitcoin. I think. I think longer term, this is a crypto that people absolutely buy the Diplomat. So I think if we got any type of meaningful sell off, people are going to step back in and buy it. Like I bought Etherium right when it was down 20% the other day. It's still down about 20%, but I think this is definitely a buy the dip asset that people will continue to invest in long term.
- [39:43]
Scott Wapner
Why do you think that too? I mean, you own the same thing.
- [39:45]
Jim Lebenthal
No, look, I bought it. I don't believe in it at all. I don't think it's got any utility. I think that'll continue to be the case even on the administration. Administration. Although I've heard that the Trump family has hired a salesperson. True story. And guarantees a White House visit If you invest 5 million or more in his crypto business. But here's what I'd say. No. No utility for it whatsoever. Purely momentum trade. Britain's right. The momentum goes and then it just pauses, even corrects. So I did sell about 20%. I'm holding on because I got no other place for money. But it is a risk asset, as you can see today.
- [40:22]
Scott Wapner
All right, a quick break and then obviously Nvidia reports next week. And on that note, we have some tech moves to get to from Jim. Next to these moves that you have in tech, we obviously looking ahead, doing video next week, talking some hyperscalers. Amazon and Google, you trimmed. Why?
- [40:43]
Steve Weiss
They have just had great runs. I've been in Amazon a little less than a year and it's done fabulously. Google I've been in much longer and it's done fabulously as well. But basically this is rebalancing again. I needed some funds to add to the ones that I want that have been down. Amat. Applied Materials and Adobe, two companies. I strongly believe in Applied Materials. We're building semiconductor plants all over the world. Their equipment is needed. Adobe, we all know the product. I think there's a messaging issue from the CEO's office. But these fears of competition I think are way overblown. Both stocks are way down. I want to add to them just like I did with Citi and Win. I need funds and that comes from the winners, Amazon and Alphabet.
- [41:21]
Scott Wapner
Okay. Adobe is down 17% over the last year. You can't tell me that that's because of messaging from the CEO.
- [41:29]
Steve Weiss
I actually think the results have been very good. The thing is, is, you know, and I compare this, as does some of the analysts on my team, to when you see Marc Benioff get on the air in an earnings call and talk about agents and all that sort of stuff, stocks go through the roof. The CEO here just doesn't do as vibrant a job.
- [41:46]
Scott Wapner
They haven't been as big of a player in where everybody else is.
- [41:51]
Steve Weiss
I Acrobat is also. Wait, wait, wait. Acrobat is very important. It has very good AI capabilities. I think that gets lost in the shuffle. And again, this is where I go to the messaging. The fact that I'm the one who has to be saying this and that it's controversial. It shouldn't be me, it should be the CEO who's making this point again and again and again.
- [42:10]
Jim Lebenthal
It is indeed troubling. But I would say that Adobe is one of those that can be disintermediated very quickly. That's the thought.
- [42:17]
Steve Weiss
Whether it's true, that's why it's down. I think that's wrong.
- [42:20]
Scott Wapner
I'm sorry. You continue in the break. We'll be back with finals. 3:00 Eastern. Closing bell. Cameron Dawson, Malcolm Methridge, Rick Heitzman, Stephanie Link and JP Morgan. Private bank's global head of alternatives, Kristen Color. Just Roland. So I hope you join me. Then let's do some finals. Britain, what do you got?
- [42:43]
Bryn Talkington
Uber stock's been in a downtrend. Now firmly in an uptrend. 170 million subscribers over 70 countries. Uber one is growing exponentially. I think this, this name once again has a nine handle. Sometime this year.
- [42:56]
Scott Wapner
We'll see you soon. Thanks for that.
- [42:58]
Steve Weiss
Farmer Jim MP Corporation. This is a strategic asset. Reported earnings last night. It's well on its way. Continuing to not only mine, but also refine rare earth elements and create magnets from them.
- [43:10]
Jenny Harrington
ConAgra. As money rotates out of momentum and into staples. It's a great play. You get a five and a half percent dividend yield.
- [43:15]
Jim Lebenthal
UnitedHealth. Even if I'm wrong on the justice case, it's going to do quite well. It's going to take forever to determine.
- [43:22]
Scott Wapner
All right, I'll see you on the Bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live. Weekdays at 12 Eastern only on CNBC.
- [43:36]
G
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