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Halftime Report
New Month, New Strategy 11/3/25
00:44:07
Frank Holland and the Investment Committee debate their November Playbook for stocks and how you should position yourself into year end. Plus, we hit some Committee stocks on the move and how to trade them. And later, we get to the Setup on some key earnings reports dropping in the next 24 hours. Investment Committee Disclosures
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A
Introducing Fidelity Trader plus, the next generation.
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A
Customize your tools and charts and access them seamlessly across desktop, web and mobile. For faster trades anywhere you go, try the all new Fidelity Trader Plus. Learn more about our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services, llc Member nyse, SIPC and now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, ATT 5G lets you deal with any issues with ease so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T5G requires a compatible plan and device. Coverage not available everywhere. Learn more@att.com 5G Network 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.
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B
Listen in.
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A
All right, thank you, Carl and Sarah. Welcome to Halftime Report. I am Frank Holland in for Scott Wapner front and center at this hour, the November set up for stocks. How should you position your portfolio as we head into the final stretch of the year, Our investment committee is standing by with their playbooks. And joining me for the hour, we got Joe Terra Nova, Kate Moore, Carrie Firestone and Steve Weiss. Before we get this debate started, quick check on the markets. You can see the S and P and Nasdaq both in the green, both about 1% away from a new all time high. The Dow pulling back about 180 points. The Russell down there pulling back about three quarters of 1%. With that Joe, I turn to you. New month, very strong year. November, historically the strongest month. But is it now time to maybe shift your strategy after we saw AI and the tech trade move the markets higher last week?
- [02:01]
B
Well, it depends what your strategy is. But overall when you're looking at the market, it is now a much more difficult environment than it was 30 days ago. 30 days ago you had the benefit about speaking about the broadening opportunity, speaking about the variety of different sectors that we're working. It appears as though in the last week, for whatever reason you want to cite, the strength of earnings, the relationships, new agreements with open I find what you what you wish, but it is very clear that we are back to that concentrated market once again today. S and P equal weights down 50 basis points again today. That's a difficult environment for portfolio managers because as a portfolio manager you are managing risk most importantly. And when you're managing risk, it's difficult to say I'm going to own seven stocks in a portfolio and basically that's it. So it's a different setup coming into this month than it was one month ago because you were not getting, you're not getting rewarded like you were 30 days ago for the broadening out.
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A
Yeah. I think you're speaking some of your own struggles as someone who runs an equal weight strategy. You're seeing this kind of concentration in the market.
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B
It is clearly frustrating. We'll talk about that a little bit more. Fortunately, we're okay today, but. But we're certainly not going to compete with the s and P500.
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A
All right, Kate, Joe's mentioned in the last week or so, if you look at the last month or so, if you look at the equal weight underperforming by quite a bit, down more than 2%, you look at momentum that's underperforming in the red and even dividends. A lot of people said it's time for a flight to quality even dividends. If you look at the SD, Y etf, that's underperforming. Are you concerned about this concentration when it comes to tech and the fact that all these other plays, well, at least the first two that we saw have relatively strong years so far, seem to be underperforming over the last few weeks?
- [03:36]
C
Well, look, I'd be a lot more worried about this market as we get into the last two trading months of the year if what was driving the market was not fundamentals. Right. And the truth of the matter is these large mega cap companies, it's beyond just the magnificent seven into all of the tech and tech adjacent leaders are putting up great fundamentals. They're producing free cash and they're continuing to manage through a challenging investment environment. Like if we were just about multiple expansion in 2025, I would be a little bit more uncomfortable. But I hear the point here around the equal weight versus the market cap weighted S and P. In fact, we did a study of this just over the last couple of days where we showed that really since 2023 there have been only two months where the equal weighted S and P has outperformed in. And when we look at this on a Z score basis, we have a three standard deviation outperformance of market cap weighted stocks relative to equal weighted. So as uncomfortable as that is, for portfolio managers and I completely hear that. I think we have to stay really focused on the large cap free cash generators which unfortunately are the bulk of the market cap.
- [04:38]
A
Carrie, you feel uncomfortable at all you're feeling good about with your your tech winners powering your portfolio power in the market.
- [04:45]
D
Well, I would say that the concern is that the free cash flow of these mega caps is not as great as it was. They're borrowing money, they're all issuing debt, they're using hundreds of billions of dollars in order to pay for their AI build out in in whatever way does buying chips or paying for data center. And therefore we're relying on these companies to push the market higher and propel it when the free cash flow and the earnings growth that is supposed to supported it is not as strong as it was. And how can it be when these are the biggest companies in the world, they're the biggest companies that have ever existed. They justify the size that they are, but it's a concern. And the rest of the market that was trying to participate has failed to participate. I mean that broadening which people were so excited about a few months ago just disappeared. And we were not big adherents of it. But what we believe in is that it's important to diversify your portfolio, not own eight names each of which is 10% of your portfolio. And then two other names are three other names in there. I mean that's not being a portfolio manager. But it just hasn't worked. Therefore these companies, you know, whether it's Metta, Google, Amazon, Microsoft, Apple, they have got to continue. There's more pressure on them and it would be better if we saw a little more spread of that and that's why the market could. Correct. And we wouldn't be surprised.
- [06:16]
A
Are you sorry Steve, are you saying it's a warning signal? Because it's odd enough that you say that today. Bank of America out with a note saying that right now companies are spending about 94% of their operating cash flow to do these build outs. When it comes to capex, if you subtract dividends and buybacks. So is that a concerning sign that they're spending so much of that cash flow in this one area?
- [06:32]
D
Sure, of course it is. Now it doesn't mean it's going to happen.
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A
But yeah, is a borrowing concern. We're talking about met, I'm assuming borrowing money if the demand is there. Is it concerning that they're borrowing the money?
- [06:44]
D
Of course it's concerning because when you're generating 100 billion and then suddenly you're, you're borrowing 5 billion or 10 billion. Yes, of course it doesn't mean it's going to happen this quarter, but we have to make sure that they begin to generate revenue and profitability from what they're spending on.
- [07:01]
A
Come over to you, by the way, Jim Lee Benthalin here saying it was just financial engineering, I believe that's what he called it last week, that it wasn't such a big deal. Basically that's what you learned in business school, that the borrowing wasn't concerning to him necessarily.
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D
Financial engineering is never a good term.
- [07:17]
E
I disagree with a lot of what you said first.
- [07:18]
D
No, you don't.
- [07:19]
E
First of all, running a concentrated portfolio, I'll take the words of some of the greatest investors of all time, like a Buffett, diversification is the enemy of performance. We've seen that time and time again. And Perhaps that's why 75% of portfolio managers underperform the S and P every single year. And it's not the same 75%. So I prefer concentrate portfolio. And am I worried about a concentrated portfolio? I'm always worried about any time I have anything at risk of cost, there's concern. Right. But that question's been asked so many times over the last five years that, you know, eventually it's going to be right for a nanosecond. You know, maybe we saw that nanosecond. But longer term, you go with permanent compounders, you go with, with Fort Knox balance sheets. And by the way, putting debt on a balance sheet when it's not an issue, what your coverage ratios are is a good thing because it's leveraging your returns. So I'm a fan of debt on a balance sheet for companies that can afford to pay it. And I don't look at it as a weakness now in terms of, of the mega cap, you know, what we saw was some mixed earnings matter being, you know, I'd say in terms of stock reaction dog of the group, but they're doing exactly what what I want them to do. They're investing in the future. So I took the opportunity to put on Friday a small trading position. It's already a big core position for me, but I'm looking to take advantage of it as I did with Google back then. So, you know, coming into this month, as Joe points out, it's a different game, but it's a different game because the Fed, you know, is saying, I'm not guaranteeing you that we're going to cut rates and that changes it. And that also limits the broadening of the market in my view.
- [09:06]
B
By the way, that's well said. And my opening remarks are not to suggest I think the market's going down. I actually think you're going to get, you will get the continued chase for performance. But I think Steve is eloquently defining the environment. It's just a little bit harder in November than it was in October because you can't come on the show and say, oh, the financials, they're going to be a great place to be the Fed.
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A
Right.
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B
You know, and you got the earnings, the they delivered in the financials but you did not get the price reaction thereafter.
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C
That's right.
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B
That's a challenged environment.
- [09:36]
A
So not a foregone conclusion to you. That's a significant departure from everything else. Data dependent. And Kate, I saw you nod. I mean just not a foregone conclusion. That's just a total sea change in your mind when it comes to the Fed.
- [09:47]
C
Well, let's be clear, like I didn't think October was a foregone inclusion despite the market pricing and no one was asking me to vote as part of the Fed. But I was looking at the data and the inflation data, both the official stats as well as what we were hearing from companies was suggesting that inflation was percolating, that lots of kind of third party and alternative data sources that we look at in terms of prices of imported goods were actually going up over the course of October. It wasn't necessarily an environment where if the Fed has a dual mandate and they care about both sides of it, that it was clear to them that they should be cutting. And I think that's what played out last week. And we're going to have this litigated in the media over the next five business days. We have 12 different Fed speakers coming out to about talk, talk to us telling us their specific views. But I think a more consistent debate as opposed to an expectation of Fed cut after cut after cut is, is going to be more of the rule for the end of the year.
- [10:37]
B
Doesn't, don't we get to a point though, even if the Fed doesn't cut in December, where the market dismisses, it says, okay, yeah, that's a one off in May. In May we've got a different Fed chair, we've got a different disposition on the Fed. They almost is not going to listen to the message of the Fed. At what point?
- [10:51]
C
Well, I think we're going to have to see there are people who have aligned themselves with this administration on the Fed right now who Also said it wasn't as much of a slam dunk to cut by a large amount in October. I want to believe in the independence of the Fed and the consistency of the way that they evaluate the data, both on the inflation on the labor market side to make their decisions, regardless of who is put as an in the chair. So I'm going to continue to believe in the institution for the time being.
- [11:15]
E
Yeah, I think that it gets really, really tough. Wants Powell's out. Particularly you have a Kevin Hassan, you know, who is such a sickle fan and just believes that rate should be zero. Taking the word of somebody's real estate investor. Real estate investors love leverage and of course they live off low rates. The lower the better. But we'll wait until we see what happens then. But I think you'd be very troubling now, what's going to happen in the interim? We've got the government shut down. There's no, there's no sign of it ending anytime soon. So we'll be explaining away the disruption the economy by so many people, you know, not getting paid because the government shut down the largest employer in the world. Right. So that's one thing. Inflation is going to continue to be an issue. What we really haven't discussed is how we've shrunk the labor pool so much with, you know, with, with the immigration policies. And I'm not saying for it or against it. I'm just saying it's a back. We've shrunk it. So particularly in skilled labor, which they generally weren't skilled labor. So about electricians, cetera, we've already seen the tightening there. We've already seen.
- [12:21]
A
And you're saying that's stationary.
- [12:23]
E
Right?
- [12:23]
A
I'm sorry, you're saying that's inflationary as well?
- [12:26]
E
Yes, of course it's inflationary. So we'll see wage inflation go up and we'll see, you know, we'll see more of automation. Automation will be the balance. Will be the balance. But talking about AI, and while we've seen a number of cuts, you really haven't seen that hit in force. But that's, that's going to change some things as well. So it's just not clear selling. Right. But there are always concerns in the market. What hits you generally is what you don't foresee. Right. That's the real, you know, black swan.
- [12:55]
B
If I could just give three quick names. You want to watch the homebuilders, because in the last month everyone said, okay, rate cuts are coming. You want to buy the Homebuilders. Well, Dr. Horton Lennar, if you could show one month chart as I'm speaking please on Lennar you'll see what Lennar and Dr. Horton Pulte and NVR are doing. They're not responding. They're not responding in the way that we intended on the belief that the rate cuts were coming in. It was going to be this healing medicine for the housing market.
- [13:25]
A
And to your point, we got manufacturing data today, we got ISM and also so pmi. ISE in contraction at the same time pmi, some notes from it. Tariffs remain a key source of higher input costs. Selling prices were raised markedly in response. Sharply higher prices out of the PMI report. So I guess that kind of leads to the idea it's not a foregoing conclusion, maybe inflation, it moves a leg up. TD Cab went out with a note earlier today saying over the weekend I believe saying that basically retailers, they've kind of lost their ability to absorb margin. They've also worked out a lot of their inventory on lower costs. So now we could potentially see higher costs maybe even as soon as the holiday season. So I understand what you guys are saying, but it just the words from the Fed itself didn't seem to change a lot. All right, I want to go back to the concentration conversation. Joe, I want to come over to you. We talked about your rebalancing of the JOT etf, the Halloween rebalancing and the question was was going to be a trick or a treat. So you tell us, which one was it?
- [14:13]
B
Well, I thought, I certainly think that I always say what I want the, the index to reflect is what's the personality of the market. And something that was very clear to me is interesting. July of 2023 we began to build significant exposure in the financial sector. We increased our weighting at that point to overweight. This is now the first rebalance since July of 23 where we've seen a significant reduction in financials for that sector. 35% down to 22.5. We'll get in more depth at what actually came out. But really where did we see the increase in waiting? And it was technology. And it was very obvious to us that it was going to be technology, it was going to be the momentum driven. Names like Apple, like Qualcomm, like Applied Materials, like amd. All of these technology names have remarkably strong momentum behind them, earnings growth. The one name that didn't make the cut was IBM. I was surprised by that. I thought IBM would but IBM has a high debt to equity Ratio that is one of the criteria for the quality factor. So was disqualified for that. But it's a, it's a very clear increase in exposure to technology really quick.
- [15:25]
A
The two that you got out of there, Checkpoint Software and Tyler, why those.
- [15:28]
B
Two, both of those lost significant momentum. Checkpoint is, I'll tell you, is disappointing to me. Israeli based company, I made it my final trade several times. In particular, an environment we're seeing seeing crowdstrike at an all time high. We're seeing Palo Alto Networks working as well. So there's been an idiosyncratic challenge for this company more than anything else that's been frustrating and the momentum criteria didn't qualify.
- [15:55]
A
While we're talking about tech, let's talk about one of the biggest tech names last week. Of course, that's Amazon hit a new record high today after announcing a new partnership with Open Air. Mackenzie Sagalis joins us now with the details on this new partnership. Mackenzie.
- [16:08]
B
Hey, Frank.
- [16:08]
C
So Amazon now on pace for its biggest back to back gains in three years after announcing that it signed a $38 billion deal with Amazon Web Services and will immediately begin accessing Nvidia GPUs through the Amazon cloud. Now it marks a significant move away from Microsoft, which was OpenAI's exclusive cloud provider until earlier this year and had right of first refusal up to last week. The partnership gives OpenAI more flexibility as the company rushes to scale scale up infrastructure. Now as part of the contract, Amazon will also build out new data centers specifically for OpenAI. And this is just the first of several unnamed October deals that CEO Andy Jassy teased on the earnings call last week. Part of why they're pacing toward a $200 billion plus Q4, the first company to hit that landmark.
- [16:55]
A
Frank McKenzie, Seagallos Live with the latest on OpenAI. Excuse me, Amazon, the latest on Amazon. Amazon shares seeing a new high up just about 5% right now. I want to toss over to you guys. Kate, want to come back to you. We were kind of talking about concentration when it comes to tech. When you see those earnings from Amazon, the results, new deals being announced, also kind of broadening out its AI exposure before where there's a lot of questions about, hey, is Amazon being left behind when it comes to the air race, a new deal here. They also have a tie up with Anthropic. Just your take on the idea of AI. It seems like more and more of these deals and more and more companies kind of broadening out their reach and their connections.
- [17:31]
E
Yeah.
- [17:31]
C
So one of the big takeaways I had from the earnings last week is the four hyperscalers. Obviously we're talking about Capex. We were just talking about that a moment ago. And yes, it is true that there's a small amount of debt being used, a little bit of leverage, more so than in the past, but that wasn't worrying for me. I share Steve's view that sometimes that actually makes sense and it's very small relative to overall cash flow at this point. But the other thing I took away from the hyperscaler earnings was actually that the amount of backlog of demand for a lot of these cloud services and we're hearing from many, many companies that they're continuing to sign new contracts, that they are extremely excited about continuing to spend, expand their own investment there. So it just was, it wasn't the spend from the hyperscalers, it was also the demand for their services that got me excited. And again, I know it's uncomfortable to have a concentrated market, but these fundamentals are still strong.
- [18:18]
A
Got Amazon ownership here on the desk. Carrie, I want to come over to you. Your view on this deal?
- [18:23]
D
Well, Amazon is one of the companies that really benefits from AI. They make money because of us. And part of the reason the stock has underperformed was because had a weakish quarter last quarter. It showed this quarter that they returned us to more than 20% growth. And it's like Google in that they're making money by cloud support and all of these other hyperscalers need them, plus everybody else who is trying to support their, their effort. So yes, I mean the business underlying the retail was strong, but us was particularly strong and open. They need more power, so does everybody. So I'm not surprised. And it's the, you know, the amount 38 billion. We're not talking about 100 billion or 200 where you have to question whether it's for real. I think this is for real. And they'll get paid.
- [19:16]
E
You know, it's another day, it's another Open Air deal.
- [19:20]
A
That's what I was asking K. Seems like every day.
- [19:23]
B
That's what I was complaining about last year. I was complaining that Amazon didn't have the agreement with opa. And to your point, they were just.
- [19:30]
E
Further down the queue, just weren't patient enough. Yeah. So, you know, look, if, if Versant Media, CNBC comes out and announces a deal with Open Air, doesn't have to give any details, the company would be worth a lot more.
- [19:42]
A
I feel like you're. There you go. You're being a bit sarcastic. You're saying these deals are a bit.
- [19:47]
E
Nebulous that my brand Frank but.
- [19:49]
B
But it was Apple, it was Alphabet and now it's Amazon that were very slow in 2025 to establish new all time highs. Here we go. Amazon's done it today. There's one left. Tesla. Tesla I think has its all time high at 488last December. Steve, you'll be happy to know we actually sold out of Tesla in the rebalance. We had bought it at 310 at the end of July. The problem was on the revenue growth scored. The last four in eight quarters are negative so the revenue growth is not there. So writing the register on it, I'm sure it makes a new all time high after we do that I just.
- [20:22]
E
Hope you don't get chastised as much as me for, for not being, you know, a devotee regardless of poor governance, regardless of, of, you know, we have no feelings enough.
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B
No feelings.
- [20:35]
A
I want to get to you very quickly. We're talking about Amazon though. Is it a good sign for Amazon to see them basically broadening out their bets? I mean they had Anthropic and now they're with Open Air. Obviously the door seems to be open for deals with other these companies. Is that just a positive sign even if you think it's a bit nebulous and you're feeling like there's not enough details?
- [20:52]
E
Look, yeah, on balance is positive. We really don't know all the details of these deals but look, if you're in cloud and you've got three major cloud players, you've got to be involved with Open Air period, end of story. So it's more like as we've talked about in the past, cost, it's vendor financing that we see and the question will be can OpenAI live up to their commitments in terms of their need for the data centers and the capacity they want to take on the cloud?
- [21:22]
B
As long as we keep hearing about these deals, the semi equipment names will work, all three of them. The major ones will benefit KLA Corp, Lam Research, Applied Materials and there's one more which is Teradyne. I think Stephanie Link bought that recently. Teradyne has had a really strong price appreciation over the last couple of weeks.
- [21:42]
E
Yeah, but also you know, Vertif, you know Verge is going to continue work.
- [21:47]
A
Well to your points back to the chips, I mean a lot of bullish notes about Nvidia. Target raised from 250 to 350 by loop. Also some news that the US is going to allow Microsoft to ship Nvidia chips to the UAE for the first time. Not saying it's a huge market, but it's obviously an emerging market, one they weren't in before. And then it seems like these things with China are going to be resolved.
- [22:06]
E
Kate.
- [22:07]
A
I mean, overall, when we're looking at the idea of US Technology and the US tech stack being around the world, the fact that these deals sometimes small, we're talking about uae, but bigger when you're talking about China, isn't that just another tailwind for this tech trade that makes it, quote, unquote, more real, even though we have some people who are skeptical of some of these circular deals?
- [22:25]
C
Look, I would approach the Chinese tech story a little bit differently, which is to say it's great if they can get some chips. But the bigger story, I think from the last week and from the conversation between President Trump and President Xi was effectively that, hey, we're going to hold things steady for the near term, but the strategic competition between the US And China is still very, very much in play. And in fact, we need to understand that in order to get access to the best technologies in the world, we need to separate out our investments in the US Technology stack and the Chinese technology stack stack. I prefer this kind of parallel and we add it to Chinese equities over the course of the summer, largely because we have this constructive view on government support for their semis business, for both their hardware, their software, their AI and eventually their quantum.
- [23:11]
A
When software and cybersecurity really participate. You mentioned that you sold out a check point cybersecurity. Crosstrek seems to be the, the outlier here, but the rest of the cybersecurity sector just continues to lag. Do you have a sense in your mind when you think is the time to kind of get on board cybersecurity because it seems to be the unloved part of tech?
- [23:28]
B
I wouldn't say that. I think Palo Alto and CrowdStrike have worked remarkably well. I think the bigger question is how much market share are they actually capturing? And that's the reason why we're seeing this bifurcation in performance. So I think you're still getting rewarded for being in CyberSecurity.
- [23:43]
A
But those two names in particular, you look at the broader sector, some of the ETFs, those are lagging. So you're saying it's all about market share. These two, they are the two dominant players.
- [23:51]
B
I think it's, it's somewhat similar to right now the market share gains that you're seeing from Broadcom and From Nvidia, very similar parallel in terms of performance and growth.
- [24:02]
D
It's software such as Adobe and Autodesk that's really getting hurt. I mean, you have to differentiate within the software segment broadly because Microsoft is a software company. But CRM and many other names are being, I'd say brushed with the air is going to kill your business stroke and that's what's been hurting your stocks.
- [24:24]
C
And a lot of that coming from the labor side as well. Because if you're a seat based software company, you know, based on the number of your licenses, that's obviously going to be a significant challenge. So something I'm not watching across this earnings season is how companies are talking about their labor force and specifically how they're thinking about forward hiring. We've gotten very muted commentary from companies there because many of them are waiting to see whether or not all these use cases lead to productivity gains. And obviously you're going to hold off on announcing any kind of workforce expansion or some cases, layoffs until they have that information.
- [24:55]
E
And that's a great point we really haven't talked about, which is that you're cutting 14,000 white collar jobs at Amazon. Right. How many of those had a license to Salesforce, had a license to pick the software company. Right. Including Microsoft. So. So it's a real consideration and that's going to be an ongoing story as a use cases proliferate.
- [25:18]
A
14,000 corporate jobs at UPS as well. So yeah, about, you know, nearly 30,000 corporate jobs you mentioned a lot of them may have had some type of license to some type of software product. And we're seeing layoffs potentially in other parts of the market as well. Very quick note, before we go to break, I want to make an amends with my friend Farmer Jim. He did not say financial engineering. That's what I say said earlier, he actually said textbook corporate financing. I know his ears were burning out there on the farm.
- [25:40]
B
Oh, boy.
- [25:41]
A
All right, halftime. That's the deal today that's creating a consumer staples giant. We're going to debate more of today's biggest movers and our top calls of the day. Halftime's back in just two minutes. The heaviest metal credit card of all time, rumored to be one of only 18 in existence, plated with the very same tungsten that forged the International space Station and wielded at business dinners like a samurai sword. It's a classic corporate power move, but the real power move, having end to end visibility on your most critical shipments. FedEx, the new power move.
- [26:29]
C
Hey, welcome into Walgreens Hi there.
- [26:31]
A
Hey.
- [26:32]
B
All right, hon.
- [26:33]
C
I'll grab the gift wrap cards and, oh, those stuffed animals the girls want.
- [26:39]
A
Great. And I'll grab the string lights and some. How about I grab some cough drops? This is not just a quick trip to Walgreens.
- [26:48]
E
I'm fine, honey.
- [26:49]
A
Well, just in case. You know what they say, tis the season. This is help staying healthy through the holidays. Walgreens. And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day.
- [27:05]
B
You've got AT and T5G so you're.
- [27:07]
A
Fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease. So the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more@att.com 5G Network and welcome back to Halftime Looks into some stocks that.
- [27:45]
E
Are on the move.
- [27:46]
A
Kimberly Clark is buying. Can you. In a $48.7 billion deal. You can see shares of Kimberly Clark pulling back double digits right now. Kate, I just want to start with you. Big deal in the consumer staples space, the sector is a big laggard. It's negative for the year.
- [27:59]
C
Yeah.
- [28:00]
A
Just your view on this deal and the idea of Staples, the defensive sector, is that of a piece place that you want to be right now in the idea they could bounce off these lows.
- [28:06]
C
I mean, I'd love to think that we could have some of the laggards lead to outperformers, but, you know, just looking at third quarter earnings, Staples are a laggard there as well. One of the only two sectors with negative earnings growth. And you know, I understand the desire to consolidate and to make sure companies have efficiencies, but I really prefer the kind of the more secular growers at this stage of the cycle. We are not in the early part of the business cycle. We are not at the early part of the market cycle. And fundamentals really matter. I don't think Staples have pricing power and I'm more worried about their margins than I am in other sectors.
- [28:36]
E
All right.
- [28:36]
A
Outside of the Staples sector, this is a pretty big deal. I believe it's going to be the biggest deal of the year. Steve Weiss coming over to you. Is this a bullish sign for the financials that we're going to see more capital markets activity, more deals being made? The fact that a deal this Size is coming so late in the year now.
- [28:50]
E
I think this is really a situation of a company that just didn't do well since it got spun off. And an opportunistic acquisition by Kimberly Clark that likely would have occurred during any interest rate environment. You know, they can take 2 billion out in synergies. So it's purely unique. Costs alone. You know, rates alone don't drive acquisitions, particularly of this size. Right. It's really an opportunity because the cost of a bad acquisition or an acquisition doesn't really fit. So. So is much more destabilized to a company and its culture. And culture is the backbone of any successful business. So you don't do that lightly. You don't do it. Okay. Rates are down, you know, a half percent, you know, 50 bips. I got to buy this company. That just doesn't happen.
- [29:39]
A
I want to go to another part of our calls today. We have a very bullish call from Roth Capital on biotech and pharmacy. Carrie, I want to come over to you. You own Amgen and Novo Nordisk in your charitable trust.
- [29:51]
D
Well, this has been a rough year for health care generally. And the biotech stocks just in the past couple of months began to really show a little life that seems to have paused right now. Both of these stocks, Novo and Amgen, we think, are attractive. Novo is down 60% from its high because. Because they've lost a little bit of the momentum on the Clip 1 drug portfolio. But they made a big restructuring of the organization. We think that's all positive. We have new management at the company. They have an oral coming. They're trying to get more active. So we still like the stock. But yes, it's been tough with Amgen. Again, a portfolio that's got a glip one. It has a few new cancer drugs. It's an inexpensive, expensive stock. Both of them are on, as Joe knows, on a P E basis. But the market hasn't liked health care. And right now it's going to have to be proven.
- [30:46]
A
I'm going to.
- [30:47]
B
I'm going to ask Carrie about a particular biopharma name in a second. But look, I've been talking about the xpi. I've been building a position, the xpi. Over the last month. It's worked out really well. Today's the first day that it's punching back and it doesn't feel good. So you kind of look at it. You realize that you might have to manage your risk. You don't want to have a winning position turn into a losing position. The biotech Entry point for me is somewhere around 104 and a half. We're at 109 now. We're going to take a look at that. In the most recent rebalance, we did increase our exposure slightly to health care. We added some pharmaceutical names. West Pharmaceutical. Not that excited about that one. Carrie, I don't know if you know Insight.
- [31:26]
D
I do.
- [31:27]
B
Bought Insight. It's up 5% percent today alone. They reported earnings on October 28th. Really strong earnings. Hematology, oncology. Reasonable valuation, upper teens. $18 billion company that one. I really like the ad.
- [31:43]
A
When you get to another call. Carrie, this is one of yours. Charles Schwab. Price Target raised from 130 up to 139. Still overweight at Morgan Stanley.
- [31:51]
D
Yeah, we've been overweight the stock for a long time and it's really, really finally come into its own. Sells for 14 and a half times or less on next year's earnings. It's now fully integrated. The TD purchase. We see that $13 trillion in assets they have as a source of growth and enhancement over the next few years. All of the cash sorting is done. People have moved the deposits to where they want them. And we think as a broad based institution on the financial side, we think Charles Schwab just offers everything that the consumers need.
- [32:23]
E
Yeah, sure.
- [32:24]
A
Is pulling back about 1% right now. When go to one more. Costco named a top picket. Oppenheimer. Joe, you own this one in the.
- [32:29]
B
Jyoti survived the rebalance barely. Costco has one more quarter to really prove itself. Because from the momentum score, which we're looking at 12 months in, you had some really strong appreciation from 12 months ago. That's going to begin to roll off. So the stock's been under pressure. Pressure. It has not been working out well. This is definitely bifurcated from what you've seen from a name like Wal Mart. There was a period where Walmart and Costco were both working together. No longer the case.
- [32:57]
A
Didn't Walmart just announced a partnership with Open Air?
- [32:59]
B
They sure did.
- [33:00]
C
Yeah.
- [33:00]
A
Speaking of companies and to your point, Weiss, there you go. All right. Time now for some headlines. Our Leslie Picker has those. Hey, Leslie.
- [33:08]
C
Hey, Frank. The Trump administration says it will partially.
- [33:10]
D
Fund snap, the nation's biggest food aid program.
- [33:14]
C
A judge ordered the federal government last.
- [33:16]
D
Week to use contingency funds to keep the benefits to some 40 million Americans flowing. The administration says the disbursement will cover about 50% of the current allotments. The program costs roughly $8 billion per month.
- [33:30]
C
A 32 year old British man has.
- [33:32]
D
Been charged with attempted murder in a.
- [33:34]
C
Knife attack on London bound train yesterday. Authorities say they are not treating the incident as an act of terror and.
- [33:41]
D
Are not looking for other suspects. 11 people were hurt in the mass.
- [33:47]
B
Stabbing and a judge granted Sean Diddy.
- [33:50]
C
Combs request for a speedy appeals process today.
- [33:53]
D
That means arguments to shorten his time.
- [33:55]
C
Behind bars could take place as early as April. The decision comes just four days after.
- [33:59]
D
Diddy was transferred to a federal prison to begin serving a few 50 month sentence on two prostitution convictions. Halftime Report is back after this.
- [34:11]
A
And now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease so the pillows will get delivered and everyone can sleep soundly, especially you. ATT 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
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A
Think with Capella University.
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D
Learn more@capella.edu.
- [35:13]
A
And we are back on Halftime. Dom Chu is standing by with today's ETF Edge. All right, so Frank, as third quarter.
- [35:19]
B
Earnings and economic data increasingly paint a picture of a fragmenting type market, where are investors themselves seeing the best opportunities.
- [35:27]
A
In terms of where they're directing their money? Joining me now is Ana Polya, the.
- [35:31]
B
Chief business officer and global head of ETFs at State Street Global Advisors.
- [35:35]
A
They know a thing or two, I would say.
- [35:37]
B
Anna, about ETFs. You guys are one of the biggest issuers out there. Where exactly are investors right now gravitating towards in terms of not just Maybe stocks, bonds, ETFs that cover commodities, but what parts of the market are they most hot on right now?
- [35:52]
C
Well, the market overall is really hot right now. ETFs are having a record year. We had $1 trillion of new assets, new money into the ETF industry year to date, which really breaks a new record for the industry. So what we see a lot of focus here on low cost, low cost continue to dominate. Almost a half percent of the new flows go into low cost, better exposure.
- [36:17]
B
Now what type of when you say low cost, low cost relative to other ETF issuers out there and exactly where are they going in of terms terms of the types of investments in ETFs that are the low cost ones that you're speaking about?
- [36:29]
C
That's right. So we see a lot of flows going into the S&P 500 exposure. So spy, spy, M, the mini spy. But we also see sectors, sectors having a rebound after Liberation Day.
- [36:41]
B
What types of sectors are getting the most attention right now?
- [36:44]
C
The most attention right now I would say is financials and industrials. They have seen a lot of new assets, assets coming into the market in the month of October. We have seen $5 billion into that combination of financials and industrials.
- [36:58]
B
And Anna, you made quite a few waves with the recent op ed that you penned out there with regard to how retirement accounts like in 401ks are doing vis a vis the ETF versus mutual fund story. State street, known for ETFs is getting a little bit more into the mutual fund side of things. What's the quick reason for why?
- [37:16]
C
Well, the quick reason is to put the same exposure under one umbrella right now. Exposure to The S&P 500, for example, is very fragmented. Retirement industry is $4 trillion stronger when it comes to index. But that exposure is fragmented across mutual funds, CIT, SMAs, target date funds. Our vision is really to bring everything under one umbrella that will reduce, has, avoid fragmentation and give the same exposure.
- [37:45]
B
Interesting point here, Frank. We're going to have a lot more to discuss on this. We're going to continue the conversation over at ETF edge.cnbc.com Anna is going to be joined by Todd Rosenbluth over at vetify, the director of research there. But interesting that an ETF provider, Frank, wants to get more into mutual funds these days. I'll send things back over to you.
- [38:03]
A
Our Dom Chew with today's etf. Dom, thank you very much. All right, coming up next on Halftime, the setup on some key committee stocks that are reporting their earnings in the next 24 hours. Halftime's back right after this. And welcome back to halftime. Let's get to some key names reporting their earnings the next 24 hours. Might as well start with Palantir reports today after the close. Joe, you own this one in the.
- [38:43]
B
Joe T ETF looking at 50% revenue, 70% adjusted EPS growth. I know everyone's going to say the valuation is an impediment. 85 times next 12 months. By the way, that's not the most expensive in the S&P 500. Albemarle and Boeing are actually more expensive than Palantir is. So I still think this is a name that we have owned since January of 2024 at $16. I've said over and over again if I had discretion on this I probably would have sold it five times over. Thankfully it's rules based, it stayed anchored in the position and it is working and I think it's going to deliver again.
- [39:20]
A
You know Steve, we were talking off camera, if you don't mind, about the valuation of this company. You have some questions?
- [39:25]
E
I don't have any question. Phenomenal company, I mean it's, it's truly a market leader and becomes such an important part of our defense complex and in the commercial area as well where they've export is huge. So. So it's valuation though, you know, and.
- [39:42]
B
Is 85 times that bad next 12 months?
- [39:46]
E
Yes, it's pretty bad. And I tell you the two years.
- [39:50]
A
Carries based alone Albemarle and Boeing, they're.
- [39:53]
E
On their trough earnings. So you know the multiples always higher. So it's not really comparable. But look, the market's making the determination. It's not up to me. My own decision is do I want to participate or not. And I choose not to at that valuation level. Not a commentary on the fundamentals, just about what I'm willing to pay.
- [40:11]
A
And while we were talking about software, this software company obviously not left behind in any way, shape or form. Up over 150% year to day.
- [40:17]
B
I believe it's 1711 they're executing in their strategy though, management has done a phenomenal job. So Steve cites the commercial business. I mean they very quickly pivoted to growing the commercial business. Now you're seeing the expansion internationally and they're very aggressive in that regard. So this is a management team that knows how to execute and I think that can't be dismissed or lost when you think about investing.
- [40:41]
E
No, it's absolutely true. So the question is will it grow into a more reasonable value valuation and that's why you own it or you believe that the growth is going to hold where it is or accelerate.
- [40:51]
A
So the companies are quote unquote boot camps really helping with adoption especially in that commercial business that you're talking about. All right, next up though, we got Uber reporting tomorrow before the Bell. Weiss, you on this one.
- [41:01]
E
I do it's going to be very interesting. You know, I'd love to see, I've said before 100 instead of becoming resistance become support, I feel better about it but I don't know what I, I'm missing here. Obviously it's the potential competition with Robo Taxis that continues to be, you know, a hang on the stock but I'm still there. It's not a very large position for me but you know, I'm willing to see what happens in the quarter, make decision then possibly.
- [41:27]
B
So last week we, we had this respectful debate. I don't know why Steve is so upset about this. It made an all time high in September 22nd at 10199 line. It's 9832 today.
- [41:39]
E
It's been flat for six months while the markets moved higher. That's why it's lagged the market under any measure of the last six months.
- [41:46]
B
Last six months I have a 15% higher. They're going to report tomorrow night ebitda margins at 30% monthly active users, double digit growth. This is, I'm an owner. No, I know we're on the same page here but I don't, I don't get the disappointment. I think you should be somewhat pleased with what they've done.
- [42:05]
E
I'm pleased with the money I've made on it. I'm greedy Joe on this one.
- [42:09]
A
I'm like, I want to make more capitalism right here at the New York Stock Exchange. So it certainly makes sense. One more.
- [42:15]
E
I need them to announce a deal with Open Air.
- [42:19]
B
One more.
- [42:19]
A
Spotify reporting tomorrow for the Bell. Joe T, you.
- [42:22]
B
I wish, I wish, I wish here. We've talked about this one over the last six months along with Netflix. I've been wrong. I've been telling you to View is Spotify is a name that I thought was going to be a pause in price that refreshes. It has not done that. It's now hugging the 200 day moving average. They really have to deliver tomorrow night and they can't, they can't give us flat margins. That can't be the story. It can't be flat margins. The pricing and the increase in pricing needs to lift the margins. This is a seminal moment in terms of the earnings report.
- [42:55]
A
Yeah, it's been a strong year though. Shares down 1% right now, but year data up more than 40%. All right, coming up next, we got Mike Santoli joining us with his midday word. We are back right after this. And we are back on halftime. Senior markets commentator Mike Santoli joining us with his midday word. Mike, good to see you. Read your column over the weekend. Great stat in there from Truist when the market goes into November, up 15% or more, 5% average gain for the last two months of the year. So is it just all engines go? Is it just rally on for the rest of this year in your mind?
- [43:51]
B
Well, if we're playing to script, I would say yes. And it is worth noting that one of those years when the market was up at least 15% at this point, it was down for the remainder of the year. So obviously there's no guarantee in any of this. But I do think everybody is pretty well aware that the path of least resistance, all else being equal, is probably higher between now and year and it doesn't mean every day. And I do think it's worth paying attention to some of the action here this week, you know, new month and all that. But it's very familiar character of this market, which is uneven. You have a few mega caps kind of holding the S and P above the flat line and then, you know, negative breadth and some definite concern being registered by the market for deceleration in the consumer economy, it's pretty hard to miss that at this point. Restaurants have been straight down. We know that story. So it's the combination of government shutdown, soft labor market and all the other issues that we know we're dealing with not fatal to the, to the rally. I would also note that we've had eight straight Mondays higher in the S and P and the nasdaq. So we'll see if that continues. It might be close.
- [44:52]
A
All right, Mike, you're a baseball guy. So we're looking at consumer staples. Big deal there with Kimberly Clark. Are we set up for a L, a Dodgers like comeback for this sector that's lagging year to date?
- [45:02]
B
I mean, it's hard to say aside from the pure mechanics of like mean reversion. And once you get to the end of the year, maybe the tax law selling is through and all the rest of it. Now that group is relatively cheap versus its own history and versus the market. But I do think it's about, you know, confidence in pricing power and, and the kind of durability of some of these brands. So it's been a, it's been a tricky spot. And I think the market is looking at this Kimberly Clark deal and saying it maybe expresses a little bit of desperation on the part of one of those players. So at some point, point, yeah, they get washed out and it's worth, you know, Kind of taking a look. You probably need a genuine growth scare, though, or even expectations of a recession for them to outperform sustainably.
- [45:44]
A
All right, Mike Sanjuli with his midday word. Mike, always good to see you. All right, stay with halftime. Final trades coming up right after this break. And we are back on halftime with final trades. Kate, you're up first.
- [45:58]
C
Yeah. My final trades are sponsored by the letter of K. K K shaped in the consumer case shape in terms of the large caps versus the small caps and K shape in terms of the less rate sensitive versus the rate sensitive, given my view on inflation.
- [46:09]
A
Mr. Steve Weiss, METTA look matter, you have to buy.
- [46:13]
E
This one stands almost in bear market territory, Stan. Almost 20% from the high. And so I think it's a buy right here.
- [46:20]
A
Kerry.
- [46:21]
D
U.S. s&P Global, they had a good quarter. There's more issuance. We think this is the kind of environment that they do well in.
- [46:29]
A
Joti, look at this one.
- [46:30]
B
IDEX Lab. It is in the Jyoti. It broke out above its 2021 high. This is Pet Health doing remarkably well. Double digit revenue growth.
- [46:39]
A
Yeah, remarkably well, but just about 15% right now. Okay, that's going to do it for halftime. We got the exchange starting right now. Thank you for watching. You've been listening to CNBC's Halftime Report, the podcast the you can always catch.
- [46:53]
B
Us live weekdays at 12 Eastern only on CNBC.
- [46:59]
C
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium.
- [47:12]
A
You should not treat any opinion expressed.
- [47:14]
C
On this podcast as a specific inducement to make a particular investment or or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer@ Capella University.
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D
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