Nvidia: Breakout or Breakdown 1/7/25

Summary

Halftime Report: Nvidia—Breakout or Breakdown? (January 7, 2025)

Introduction

In the January 7, 2025 episode of CNBC's Halftime Report, host Scott Wapner delves into the tumultuous movements of Nvidia's stock, analyzing whether its recent performance signifies a breakout or a potential breakdown. Joined by esteemed guests Josh Brown, Stephanie Link, Sarat Sethi, and Brian Belsky, the panel navigates through market fluctuations, interest rate impacts, and broader economic indicators to provide a comprehensive outlook on Nvidia and the tech sector at large.

Nvidia's Volatile Performance

The episode opens with Scott Wapner highlighting Nvidia's dramatic stock behavior. After reaching a record high and briefly surpassing Apple to become the world's most valuable company by market cap, Nvidia experienced a sharp decline of 5%. This rollercoaster movement sets the stage for a deeper exploration of the factors influencing such volatility.

Scott Wapner [00:00]:
“Front and center this hour, the Nvidia reversal. That stock at a record high. It passes Apple to become the largest market cap company on Earth and then rolls over. Look at that. Down 5%.”

Market Context and Interest Rates

The conversation transitions to the broader market environment, particularly the rising interest rates. Sarat Sethi points out that Nvidia's stock movement isn't isolated but part of a larger trend affecting mega-growers amidst increasing rates.

Sarat Sethi [05:30]:
“I think you're getting some movement out of some of these mega growers... the execution story is going to be really important.”

Analysis by Experts

Josh Brown on Nvidia's Reversal

Josh Brown offers a nuanced perspective, suggesting that Nvidia's recent decline is part of a "sell the news" phenomenon. He emphasizes that despite the pullback, Nvidia's long-term prospects remain robust, especially with ongoing advancements in AI.

Josh Brown [01:18]:
“It’s a stock that has been on an unbelievable tear... This is by, by the rumor, sell the news.”

Stephanie Link on AI Fundamentals and Valuation

Stephanie Link concurs, highlighting Nvidia’s substantial growth in AI and the strong buy-side sentiment. She underscores that the recent sell-off may present buying opportunities, given Nvidia's pivotal role in the AI revolution.

Stephanie Link [06:47]:
“91% of the sell side have buys on this thing. AI fundamentals are still incredibly strong.”

Brian Belsky on Long-Term Investment Strategies

Brian Belsky discusses the importance of liquidity trades and how investors might seek stability in large-cap tech stocks like Nvidia during uncertain times. He reiterates the necessity for investors to tolerate short-term volatility for long-term gains.

Brian Belsky [10:17]:
“What people are missing is welcome to normalization... they're going to seek the liquidity trade, full stop.”

Other Stock Movements and Strategic Moves

The panel also examines movements in other significant stocks:

• Apple's Downgrade: Moffitt Nathanson downgraded Apple to "sell," citing overvaluation and slowing upgrade cycles. Josh Brown agrees with the downgrade, noting the stock's high valuation relative to its earnings outlook.

  Josh Brown [16:10]:
  “This is one of the most expensive valuations... This is not a name that I think from today's level is poised for any sort of outperformance.”

• Investment Adjustments: Stephanie Link discusses her strategic sell-offs, including Dupont and increasing positions in Boeing, emphasizing the importance of cash allocation and selection based on company fundamentals and future prospects.

  Stephanie Link [12:03]:
  “I've sold [Dupont] and put it into Diamondback... This endeavor deal... is going to be $2 billion accretive.”

• Tesla's Volatility: Brian Belsky addresses Tesla’s significant gains and recent downgrade, advising caution and emphasizing a long-term perspective rather than chasing short-term rallies.

  Brian Belsky [21:14]:
  “This Stock was up 50%. So you can't, I'm not gonna chase.”

Dividend Investing Debate

A prominent segment features a debate on dividend investing between Josh Brown and Brian Belsky. Josh Brown cautions against an exclusive focus on dividend strategies, pointing out that dividend-paying stocks often underperform broader indices. In contrast, Brian Belsky defends dividend growth investing, highlighting its role in portfolio diversification and long-term stability.

Josh Brown [31:08]:
“... when you actually analyze it as a standalone factor, 54 of the time, it trails the performance of the S&P 500.”

Brian Belsky [34:02]:
“We focus on dividend growth... 60% of the portfolio should always be those core names that have never cut a dividend.”

Market Commentary and Economic Indicators

Mike Santoli provides insights into the erratic market behavior, noting high trading volumes in low-quality NASDAQ stocks despite positive economic indicators like the ISM services and strong JOLTS reports. He emphasizes the complexity of interpreting market movements amidst mixed signals.

Mike Santoli [36:59]:
“It's really erratic tape below the surface... breadth of roading throughout the day.”

Closing Thoughts and Final Trades

As the episode concludes, the panelists share their final stock moves and strategies. Scott Wapner underscores the importance of diversification and strategic allocation in uncertain times, reaffirming the episode's primary focus on assessing whether Nvidia's recent performance is a precursor to further gains or a warning signal of potential decline.

Notable Quotes

• Josh Brown [02:12]:
  “... this is very common. This is by, by the rumor, sell the news.”

• Stephanie Link [08:16]:
  “AI fundamentals are still incredibly strong.”

• Brian Belsky [10:17]:
  “The broadening out trade I think is a longer term perspective.”

• Josh Brown [35:32]:
  “Companies pay high dividends for a reason, because they're not growing.”

Conclusion

The January 7, 2025 episode of Halftime Report presents a thorough analysis of Nvidia's stock performance within the context of a dynamic and often unpredictable market landscape. Through expert insights and strategic discussions, the panel provides listeners with a nuanced understanding of whether Nvidia's recent reversal signals a breakout of sustained growth or a breakdown leading to potential setbacks. The episode also explores broader investment strategies, including the merits and pitfalls of dividend investing, offering valuable perspectives for both seasoned investors and those new to the market.

Key Takeaways:

1. Nvidia's Volatility: Understanding the "sell the news" phenomenon and the importance of long-term investment perspectives.
2. Interest Rates Impact: Rising rates are influencing mega-growers and contributing to market volatility.
3. Dividend Investing: A balanced approach is crucial, recognizing both the advantages of dividend growth and the limitations of high-yield strategies.
4. Market Signals: Mixed economic indicators necessitate a cautious and diversified investment strategy.

For those seeking to navigate the complexities of today's market, this episode serves as an essential guide to making informed investment decisions amid rapid changes and emerging trends.

Transcript

[Scott Wapner]

I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the Nvidia reversal. That stock at a record high. It passes Apple to become the largest market cap company on Earth and then rolls over. Look at that. Down 5%. Now we will debate where the most popular name in the market heads from. Joining me for the hour today, Josh Brown, Stephanie Link, Sarat Sethi, and Brian Belsky. I want to show you the market because we do have a developing story, especially in the NASDAQ. Take a look. It's a roll here, down 1.5%. And maybe as interest rates are creeping up today, that becomes a big part of our story. There is the 10 year at 468. We could show you the 30 year as well at 492. That's the highest since November of 2023. The Vix is up. There's obviously, Josh, some uneasiness as rates continue to rise. I thought the price action today in Nvidia is worth starting with. You had all this optimism last night around CES and that speech by Jensen Huang, and here we are with a rollover. What do you make of that?

[Josh Brown]

So it's a good question. I try not to make too much of it. Keep in mind, this is a stock that has been on an unbelievable tear. It's gone up a lot. It's not completely out of character for Nvidia to have a negative 3, 4, or 5% day. It does happen. But I do think a lot of people pile into it, knowing that Jensen Huang is going to make a keynote address. They expect to be wowed by the technology itself, which I think we could all agree absolutely accomplished the wow factor. But then it's like, all right, the trade's over. Let me, let me get out of this. I made whatever I made. This is very common. This is by, by the rumor, sell the news. So I would just leave it at that. If you tell me this is the start of the next 20% drawdown in video. Okay, that's a different conversation. Well, I don't think we can extrapolate today's weakness into something like that.

[Scott Wapner]

You know what I find interesting, though? I was almost going to start the show asking you if you thought this was the next, just to use your words, 20% breakout the stock, because, you know, what happened into CES was notable. The stock had basically been dead in the water for a while. It's been picking up lately. Past history would suggest that the stock not only gets a CES bump, but in the subsequent days as well. Jensen Huang's not done speaking out there, but this is a notable rollover. And I was going to say, is this the breakout or the breakdown? I don't know, maybe the market's voting right now with its hands saying that stock was up a lot in a little bit of time. After doing next to nothing for a while. Maybe here comes another breather.

[Josh Brown]

I think it's tough because, you know, people anticipate these things and they trade far ahead of, you know, when you would think there would be profit taking. Or maybe the CES bump is what happened in the 10 days leading up to CES rather than in the three days after, which people have become historically accustomed to. So it's really, really difficult to look at the price action and try to read into the thought processes of, I don't know, 100 million people who are buying and selling the stock for various investment portfolios. I think the thing that, that's worth saying is that you did not hear anything at all in this keynote address giving you some sense that there was some slowdown in innovation or demand or that there were any hiccups in this story. If anything, we're now thinking about 26 and 27 and the onslaught of physical AI announcements that will be coming. This year is the year of agentic AI. I think that's pretty clear. There's a consensus in Silicon Valley that this is the product people will buy and pay a lot of money for. Right now the robotic stuff is a year later or a year after that. But what Jensen Wang did was he waved the checkered flag. He's not, he's, he's not doing things in order. He's showing people what they're going to be selling products into 18 months from today. And look, if you're a long term shareholder in Nvidia, as I am, it's now my largest position again because of how much it's just gone up. I could live with 5% pullbacks. They don't, they don't affect me, they don't phase me.

[Scott Wapner]

So, Rod, I mean, the stock, you know, over the last couple of months down four and a half percent, right? It's kind of doing nothing for a while. This month alone it's up five and a half percent. So you get the rollover today. To Josh's point, it's not like, you know, Jensen Huang was on the stage last night and announced that there was anything wrong. Au contraire Monfre. I mean it was the exact opposite. Dan Ives talking about what happened yesterday. A slew of new AI technology PCs that will further stretch their enormous technology lead versus the rest of the semi and big tech landscape. Goldman highlights the company's ability to innovate at industry leading speed across hardware and software. Stifel the developments is further deepening the company's competitive moat. The superlative after superlative after superlative about what this company has going on. But yet you have the role in the stock today. Do you think it's related as big tech is down because the move in rates?

[Sarat Sethi]

I do. I think you're getting some movement out of some of these mega growers. And again it's interesting because it happened on the announcements that were really good. I mean you're talking about a company that is going back to gaming, it's going back to robotics and it still is so strong in AI. So I think what's going to happen is it's going to probably be dead money or up and down until earnings and that's where 20, 26, 27 earnings are going to be really, really important. And because you don't have as much recurring revenue in a stock like Nvidia as you do as some of the others, I think the execution story is going to be really important. The story itself is fabulous. Right? He is laid out, as Josh said, what is the roadmap for the next three to five years? Where are we going to play? And these are all the players. And Scott, if you Remember back in 2016, Nvidia was a gaming stock. Nobody thought it was an AI stock. He so I think this is kind of a really good way to say hey, if I'm going to own this stock, it's trading what, 30 times earnings. So it does have to execute and it does have to say our earnings momentum is going to increase.

[Scott Wapner]

Seems like Steph, if nothing else, this broadening trade, if you want to call it that, has got a lot of problems. You can't have rates rising like they are now and think that the market's going to broaden out, that the breadth is going to all of a sudden turn good.

[Stephanie Link]

Well, that depends on why rates are going higher and rates are going higher today because we had an off the charts ESM services number today. We had an ISM manufacturing is quietly recovering. Jolts was so surprisingly strong. So the economy. Well, last week the Atlanta Fed came out with the GDP number slowing to 2.4% after these numbers today, the number is going higher. And of course the problem with higher growth is that this inflation, the stickiness has continued. So you look the sell off in Nvidia, the Stock is up 188% in the past year. Trades at 48 times earnings. Fine, if they're going to grow into that earnings, go for it. But 91% of the sell side have buys on this thing. That is really, really a popular trade. And we all know I'm the only one on the desk that doesn't own it, but I own Broadcom, so I'm fine with that. But everyone owns. So I think that this is a sell the news thing. AI fundamentals are still incredibly strong. And so if you see a pullback, I mean you want to look for opportunities because if you listen to what all the companies are saying, it's that you're seeing a 30% increase from AI, a 30% increase in productivity and efficiencies from coding. Right. And engineering, a 20% decline in costs on the fulfillment side. Remember Amazon had that meeting about a month and a half ago and they talked exactly about all this and the power of it. And you're starting to see monetization from the big players.

[Scott Wapner]

That's why.

[Stephanie Link]

So that's my point.

[Scott Wapner]

Going back to the big cap tech.

[Stephanie Link]

My point is, is that you're going to look for opportunities. And video is up a lot. It's over owned.

[Scott Wapner]

It's not up a lot. In the last couple of months it was up a lot.

[Stephanie Link]

It bought up 188% in a year.

[Scott Wapner]

Well, there are a lot of stocks in this market though from the growth space that make that gain look paltry.

[Stephanie Link]

Well, I mean that some of them. But for the most part tech had an amazing Mag 7 had an amazing year last year, especially in Dec. Right. And then they slow down a little bit. So I mean I think you see this rotation happening within technology, but I don't think you want to be afraid of when these things pull back. My point of giving you these stats on AI is that it's real. We are all talking about the trillion dollar total addressable market. It's real, it's coming. And maybe it also, also according to Nvidia, it starts to expand into other products around, around the world, quite frankly. So it's just a bit extended in my opinion. By the way, so is Broadcom. So is Broadcom, sure.

[Scott Wapner]

But the problem I want to go back to is this issue of everybody Coming in to the year all bulled up on the Trump policies that are expected or hoped for and thus calls for the broadening. Trade is finally going to happen in more. In more of a magnitude.

[Stephanie Link]

The broadening should happen if we can continue to grow at two to two and a half, three.

[Scott Wapner]

Well, not necessarily. If interest rates continue to go up. That's the problem.

[Stephanie Link]

Interest rates are going up because of better growth.

[Scott Wapner]

Well, interest rates are going up on the. Well, they're also going up on the prospect of higher inflation. Inflation. Well, that's the problem. I'm not a bigger deficit on what.

[Stephanie Link]

You think inflation is going to. If it's going to stay around 3%, that's not horrible. If it goes to 5%, that's pretty bad. I'm not thinking that we're in that camp. A lot of it has to do with going back to the productivity.

[Scott Wapner]

You cannot, you cannot have a market that did all the work that it did on the expectation. You tell me what you think of inflation coming down closer to target and then now tell me that 3% is okay. It's not okay. It's not okay. You can't start reversing the course of inflation and think that it's okay.

[Brian Belsky]

This is a tug of war between daily trading, near term trading, longer term trading. I think what people are missing is welcome to normalization. What's a 10 year treasury average? The last 75 years? 5%. I think we need to as investors prepare for 100 basis point range, whether or not it's 4% to 5%, 3.5% to 4.5%. I think the thing that I think most people are missing, and you were very salient in your point, Scott, is that the broadening out trade I think is a longer term perspective. But when people are nervous, what do they do? They go back to liquidity. That happened in the 80s, 90s, the last couple decades and it's happening right now. So what's the liquidity trade? Large cap tech. So you're nervous about. Oh, the good news is bad news. Bad news is good news.

[Sarat Sethi]

What do you do?

[Brian Belsky]

You go right back into the liquidity trade.

[Scott Wapner]

The benefit of the doubt trade.

[Brian Belsky]

Exactly, exactly. So from a fundamental perspective, let's look at Nvidia. Right. So you bought the dip because of ces. Great. Now it became the largest stock in the world for a little bit and then for about five minutes. But here's the issue with Nvidia, amazing name, love it. But relative to the other big mega caps, it by far from a fundamental Perspective and technical perspective is the most volatile. So you have to be able to live with these ebbs and flows now. So I think that's why from a longer term perspective, what's going on here, if, whether or not, whether we start to see the semblance of a range happening in rates, when people are worried about inflation or rates going higher, they're going to seek the liquidity trade, full stop.

[Scott Wapner]

You have some moves I want to talk about because maybe they reflect your view on what you think is happening in the market. You sold dupont. You want to tell me about that before we discuss some of the other moves that you made?

[Stephanie Link]

Yeah, I mean, I needed cash, to be honest with you. I'm very low amount of cash and I wanted to buy other things. And so dupont, I love the spin, but the spin is going to happen in like 12 to 16 months. And so I think you have time. Also, 53% of their revenues are overseas. And I worry a little bit about the strong dollar. And so the near term in terms of earnings risk could be substantial. Not to mention China is about 20% of their revenues as well. We all know what is happening in China. And so I just, I was kind of flattish on the position, Scott. So I took that and I put it into Diamondback. I've rebought that. I've owned that for years. And I sold it for a nice gain late last year. And I just think the stock at the valuation, 11 times forward estimates and this company doing a fabulous job in the combination of growing production and also keeping costs low. The free cash flow is enormous and they're going to continue to return that to shareholders. And most importantly, this endeavor deal that they did is going to be $2 billion accretive between now. 2 billion each year between now and 2030. And that's a nice tailwind. What happens on the, on the energy front, in my opinion.

[Scott Wapner]

You bought more Boeing.

[Stephanie Link]

I did, because we talked about this late, late last year and I was restricted for a while. But I think the worst is behind the company. I think this is a 2025 story, my favorite one. And so if I believe that, I actually want to put my money where my mouth is. And by the way, I did trim a little bit of GE to buy the Boeing. I still own a lot of ge, so. But I needed some cash. Right? It's, I just, like I said, I'm very low, but I think the worst is behind the company. You've got a new leadership you're seeing almost every day in terms of the leadership. So the new CEO is bringing in new people and, and the CEO has a proven track, track record of strong execution. But most importantly, they just raised $21 billion in capital and it gives them three years to buy them time to get through some of these problems. In the meantime, the 737, the Max series, is on pace to get back to 38 per month. And therefore if they can, and they can do 400 planes this year and they can deliver them free cash flow, the guidance is probably too low. I think they could maybe even do flat free cash flow. And you're going to see something like six or seven billion dollars in the next three years in free cash flow growth. And I want to be part of that.

[Scott Wapner]

Okay, so you bought more Nestle?

[Sarat Sethi]

I did.

[Scott Wapner]

Why did you do that?

[Sarat Sethi]

Because the stock's down 82 bucks. It's down over 20% of the last year. The multiples at 15, it hasn't seen 15 in over a decade.

[Scott Wapner]

Why is it down that much? Gop?

[Sarat Sethi]

No combination of resetting guidance, new CEO and really, yes, the overhang of all these stocks with GLP and consumer staples being out of favor. You've got a 4% yield, a solid, really solid balance sheet. And look, their growth drivers are coffee, water, life sciences. Really not that, you know, salty snack kind of effect that you're getting with the GLP. So a world class name at 15 times earnings with a 4% dividend yield. I think you've got to add to it at these levels.

[Scott Wapner]

Let's take a look at shares of Apple too while we're at it here because on many days that may have been our top story. The fact that Apple got downgraded to sell today, which doesn't happen very often. It was Moffitt, Nathanson and their commentary I thought was worth reading to you as well. Much has been made of the fact that Apple shares have moved steadily higher over the past few months in the absence of any real news. But that's not actually correct. In fact, there's been a great deal of Apple relevant news. It's just that all of it's been bad, which is why they downgraded today. 188 is the price target that's considerably lower from the 243 that it is currently trading. Josh, you want to take a look at this one for us? Because it's not every day that a stock like this gets cut to sell. And look, I mean, you want to take issue with what they have to say. So when I sat at WWDC With Steve Kovach, that was the Energizer which got the stock moving again.

[Sarat Sethi]

Right.

[Scott Wapner]

I've been sitting around for a while, not really doing much. WWDC happens out at Apple Park. Next thing you know the stock blast off up to the right, hits new highs. All the while we've been hearing reports about a slow uptake in an upgrade cycle. So are they right?

[Josh Brown]

Yeah, I don't disagree with this call at all. I don't understand what the fundamental drivers were behind the Apple rally that happened. It really felt like after Thanksgiving just for some reason everybody decided they had to buy Apple maybe, maybe to try to keep up with the rest of the index. I don't really get it because there hasn't really been any fundamental reason for Apple to have added that much in dollar market cap in that compressed of a period of time. So maybe some of that's being unwound now. The stock is already fairly off that high for for Apple and maybe it will have a retracement during the course of the next quarter or two. This is not a name that I think from today's level is poised for any sort of outperformance barring an announcement that nobody is considering. So for just going by what we think the earnings outlook is for this year, what we think of the current iPhone upgrade cycle, company's doing great, but everyone knows that. And the stock is in the most expensive decile of its own valuation history. So Forget about Apple versus the S&P, Apple versus itself all time. This is one of the most expensive valuations, starting valuations to have ever been available to investors. So I don't totally disagree with the call. Now I'm a long term investor here. I own the stock for longer than some of our viewers were born, so I don't need to react to a downgrade but I totally get it and I'm not particularly excited about the next 90 days of the stock price.

[Scott Wapner]

Yeah, we're at the lows of the session. Brian, what do you make of this call? Do you agree with it or not? I didn't hear many people who own the stock complaining on the way up. Of course I also didn't hear many people saying that it was or they were trying to find hard to find catalysts for why the stock was going up other than sitting at WWDC where they said Apple Intelligence.

[Brian Belsky]

Right. Well I don't disagree with at least the near term. Directionally stocks had a big run. Remember last year it kind of tripped on itself the first half of the year. And then it kind of took over the performance of the technology sector the second half of the year. And remember too that we had a lot of weakness in December with respect to tech stocks. And I think going back to the liquidity trade, I think that's a big part of it. But people are going into Apple and I think indexing toward the end of the year. Now we're longer term investors, we're aligned with Josh. We've owned it long time. It's our largest position across multiple portfolios. So this is one of these situations where we'll be looking to see where this stock settles in and we'll probably add more.

[Scott Wapner]

This is a good call by Moffitt Nathanson, by the way. Craig Moffitt is going to be on the exchange today. I think it's a good talking about his call.

[Sarat Sethi]

It's a trading call, it's not an investing call. So it's really to say, hey, if you've got money, probably not the area to put to work at this level, there are other opportunities. And then if it does pull back a little bit, you could add to it.

[Scott Wapner]

Do you think that the run from, I mean, if you show another chart from WWDC to now, you feel like that was a justifiable move. Steph has been selling, shaking her head. No, it wasn't justifiable. That's one of the reasons why she was selling. We'll get her take after yours.

[Sarat Sethi]

I think there's a lot to be seen. Their execution has to be superlative and they really have to show that AI is taking over and the people are buying more phones and spending more money. So it's a very expensive stock, but it's a stock that a lot of people hold because you want protection in your portfolio.

[Scott Wapner]

Stock went from 150 to 250.

[Stephanie Link]

I know, I know. And I sold it in the fall after I was buying it in the spring. And so it went up obviously a lot more since I've sold it. But I just didn't understand. When I sold it, I was up about 35% from when I bought it in the spring. And you're talking about iPhone growth this year, 20, 25, 4%, that's the expectations. And next year 6%. And I'm not willing to pay 33 times forward estimates now. I know services is the bright spot, but it really is still quite small in terms of the total revenue percentage, about 24% of their total revenues. And I also think that you have China risk, that's 20% of their revenues. As well. And so I just didn't think the risk reward is that great. And I just don't think that the phone, this version is going to be the super cycle. And the numbers are clearly telling you that in terms of consensus, and consensus may be wrong, but they're not going to be off by 10%, 15% in my opinion. So I just took money off and put it elsewhere.

[Scott Wapner]

I got another call. I want to get to a stock that's up a lot in a very short period of time. It's Tesla. Belsky, I'm coming to you because you are downgraded today at bank of America. The target is 490. Obviously you take a look at where the stock is currently trading now. It's up 65% in three months. I think everybody at this point knows the reasons why the stock has gotten a big bump now down recently. Recently because of the delivery mess. But what do you do with the stock here?

[Brian Belsky]

I think it's a trading call again. I think they're making a trading call and I think they'll come back to it after you see some sort of a, some sort of a pullback. I mean, we think from the consumer discretionary sector, a sector that we're overweight both in the United States and Canada. Tesla is going to be part of that longer term barbell. So again, we initiated a smaller position. I know you love when I say that if we see some sort of a double digit, initiated like a very.

[Scott Wapner]

Big position when the stock has gone up a lot, is that.

[Stephanie Link]

No, no, no, no, no, no.

[Scott Wapner]

It's down a lot. This is a very.

[Brian Belsky]

Listen, brother.

[Scott Wapner]

Very tiny position.

[Brian Belsky]

Listen, brother, this Stock was up 50%. So you can't, I'm not gonna chase.

[Scott Wapner]

You about Palantir though. You'd be like, what's one of our biggest positions?

[Brian Belsky]

It was actually we, we doubled down on that, on Palantir. We. When we, when we got into Palantir, thanks to Dan Ives. Thank you, Dan. We had a huge position. So we have a big tracking error on that. But on Tesla, when a stock's been rallying like that, man, it's really difficult to say, I'm going to put 6% of the portfolio and you just can't do that. So guess what? If this stock's down 10 or 15%, I'm coming back in.

[Scott Wapner]

We'll take a quick break. Coming up, a Josh Brown hot take on why getting paid to wait might not always pay the best dividends for your portfolio strategy. We will explain. Well, he will. First, our Call of the day. Halftime's back in two. We'll do our calls of the day. We start today with Shake Shack upgraded to overweight from equal weight target to 159 from 125. That's Barclays. Josh to you. Comp compares relatively modest and valuation no longer outsized relative to high growth peers. We expect shares to continue to outperform this year.

[Josh Brown]

Yeah, I almost feel like a parent watching this company grow up. I bought it the day it came public, have never sold it. I've added to it on weakness. It's been a spectacular winner. I am not selling any of my stock regardless of how much it's up because I genuinely believe that where this company is right now is in a place where they can really focus on margins and they can really scale this business and it can join some of the more gigantic players in this space. As one of the premier names, it's tiny in comparison to a McDonald's or a Chipotle or a or a Starbucks. But it's every bit as good of a story as those stories were earlier in their lifespan. Rob lynch is the new CEO. Joined the company having grown Papa John's to thousands of units. This is just hundreds of stores, but it's global and it's growing. And it's the high quality option anywhere you see it. If you know anything about food, that's where you're going. Versus any of their competitors. And I think it's going to continue to work.

[Scott Wapner]

We watch that one snowflake stuff. Upgraded today. Overweight target 200, Wells Fargo. They say shares appear more favorably positioned heading into 2025.

[Stephanie Link]

Are favorably positioned or that it's down 31% since last February. It's really been a dog. But I do think that 2025, the setup is really well, is really good. And that is because they've got a whole new product cycle. Remember product revenue grew last quarter, 29% year over year. That was the best in two years. And the bookings are actually accelerating. So pretty decent visibility. Still a show me story, but I think the new CEO has his footing and I like the story.

[Scott Wapner]

Freeport cut today to market perform from outperform. That's at Bernstein. The Target goes to 46 from 51. So still optimistic from here, but not quite as much.

[Brian Belsky]

No.

[Sarat Sethi]

And the stock was 52 in the middle of last year and we were all, you know, holding and buying at those levels. I still like this area. I like Freeport and tech resources, both of them. Is Copper Place. The demand for Copper for the next three to five years is going to be extremely high. We have not built, we have not found or created a copper mine in 10 years. And if you look at where the demand's going, which is EVs, data centers, all the things, even new homes, it's just going to be extremely large. And that's just secular growth. Non ex China, if China ever wakes up, you've got got option value. But I'm not buying it for that reason. I'm buying it because I do think that this company can create really great cash flow and earnings. It's just going to be a play that's going to take some time.

[Scott Wapner]

Okay, let's talk Lulu. Mr. Belsky?

[Brian Belsky]

Yeah.

[Scott Wapner]

Upgrade to outperform from market. Perform the targets at 460. It was 360. That's at Bernstein. They expect to see an inflection in America's growth. Stronger, higher income, consumer, easier comps. What do you think? I mean, this stock hadn't really done anything and it's looked pretty darn good for the last few months.

[Brian Belsky]

I think it's true. And you know we are overweight. Consumer discretionary talked about Amazon and Tesla in the prior hit, but at the end of the day, Lulu's our largest overweight on a relative basis in consumer discretionary. Here's why. Great management, great product. Other companies in their space have clearly tripped on themselves. That is Nike. A lot of people are trying to play Nike as a value play. I think you buy stocks because they're working fundamentally and Lulu clearly is. And their CEO has a great vision and their product, in terms of what's happening in North America, I think is exquisitely.

[Scott Wapner]

This thing looks like dead money for a while.

[Brian Belsky]

Well, they got some things wrong for a while, especially with some of the merchandise. And I think with their chief product officer kind of moving on, they're kind of centering more on what they're really, really good at. And I think that's what you're going to be seeing over the next year or so.

[Scott Wapner]

All right, so tell me about Disney. Upgraded today to buy target to 147 at Redburn. Years of cord cutting pressures. Disney finally at a point where streaming profit growth will more than offset the linear TV declines. Is that, is that what the whole story is built on from here?

[Sarat Sethi]

It's not the whole story, but it is a very important part of story. It's a very important part of Disney. It's an important part of Comcast. You need streaming to start making money. You can't have this Loss leader that you're going to get this valuation for. It's going to hurt your equity. And I think Disney's was dead money for a long time. It is one of our large positions.

[Stephanie Link]

Yeah.

[Sarat Sethi]

So it's not a small one.

[Stephanie Link]

Good luck.

[Sarat Sethi]

It's not. I think you've got Catalyst ahead. You've got Iger there who's going to hand it off to somebody else, you know, James Gorman.

[Scott Wapner]

They have to get that right this time.

[Sarat Sethi]

They do, they have to get it right. And the stock is not expensive, it's not cheap, but I do think there's a lot of secular tailwinds behind.

[Scott Wapner]

How about United Airlines, which has just had had a remarkable 24. Yeah, I think it was up more than 100% today. The target goes to 115. From 105 at Bernstein, the target to 137. They're even more optimistic over at Wolf Seurat. You have United?

[Sarat Sethi]

I do. And I will tell you, I am selling my United and moving into Delta. I think Delta.

[Scott Wapner]

You're selling United.

[Sarat Sethi]

I am going to be out of United very soon and Delta, Delta is going to be my one and only airline position because the management of Delta, the routes they have, the service they have, the quality of the airplanes and the product is far superior than any of our U.S. airlines.

[Scott Wapner]

You just dropping that little nugget on us. So by the way, I'm selling United out of it.

[Sarat Sethi]

I just, you know, that's the January.

[Brian Belsky]

So therefore no position.

[Sarat Sethi]

So it will not be a small position, it will be no position.

[Scott Wapner]

When are you doing. When are you going to do that?

[Sarat Sethi]

Over the next few days.

[Scott Wapner]

Okay, you have Delta?

[Brian Belsky]

Yeah, we have both.

[Scott Wapner]

By the way, Delta's target today goes to 77 and 75 from Wolf and Bernstein, respectively.

[Brian Belsky]

He's spot on. Delta by far is the best airline and United's great because we own it in our small mid cap portfolio. An amazing, amazing company. But those two, you absolutely have to own both those companies, I believe. So keep the position.

[Scott Wapner]

You guys trying to have dinner with Ed Bastin? I mean, it's the best.

[Brian Belsky]

Why wouldn't we. Why wouldn't.

[Scott Wapner]

I know. He probably is. I know. What's the circle?

[Brian Belsky]

Delta by far is great operator. The fleet is good there. The expense control people forget that they have their own refiner. I mean all these kind of things that from a secular basis is by far the leader in their life.

[Sarat Sethi]

And the other thing about United, it has recovered really well. It's done everything you wanted to do. I just think the next leg is going to be tougher for them, especially as Asia has to grow. And that's where they have the expense issues.

[Scott Wapner]

All right. Seema Modi has the headlines for us. Hi, Sima.

[Seema Modi]

Good afternoon. A New York appeals court is moments away from hearing President elect Trump's bid to throw out his conviction on criminal charges in his hush money case. His legal team asked the court to dismiss the case ahead of his scheduled Friday sentencing. The last ditch motion comes after the judge in the case rejected Trump's attempts to delay the sentencing pending an appeal. China says a 7.1 magnitude earthquake that struck near one of Tibet's holiest cities today killed at least 126 people. Some 1,000 homes were destroyed by the quake, according to Chinese media. Many people trapped inside the rubble as first responders work to rescue victims amid aftershocks. And get this, about 15 million Americans will see around $49 billion of medical debt disappear from their credit reports. A finalized Biden administration rule bars that information from appearing on the reports, which means lenders won't be able to factor that debt into consideration when they decide on issuing a loan. The move expected to raise effective credit scores by about 20 points. Scott, send it back to you.

[Scott Wapner]

All right, Seema, thank you, Sima Modi. Coming up next, Josh's cautionary tale on dividend investing. We'll do that in two minutes. All right. Welcome back. The new year kicking off a good time now to look at your portfolio allocations. And today, Josh Brown ringing the alarm of sorts on being invested exclusively in one stock strategy. Josh, what's your hot take today?

[Josh Brown]

That's right, Scott. I think this is the time of year where we're hearing from investors who are allocated elsewhere and looking at their returns and wondering why they're underperforming the major indices to the degree that they are. A lot of this is just being in the middle of a bull market, some would say toward the end of a bull market. But suffice to say, 15% ish average annual returns for the S&P 500, the NASDAQ obviously substantially higher. And you find a lot of people who got back into the market after the great financial crisis or sometime thereafter, but they allocated so heavily to the dividend factor that they really missed out on a lot of what else drives market performance. So I am pro dividend. 75 of companies in the S P 500 do pay a dividend. But when you actually analyze it as a standalone factor, 54 of the time, it trails the performance of the S P500 over all 12 month rolling periods going back 30 years. So I think when you look at the way companies are now allocating capital, you go back to 1993. On average, companies use 36% of their, of their, of their retained earnings to pay out dividends. That number is pretty constant. What's changed since 1993 is that the cash used for buybacks has gone from 17% to 71% of all corporate cash. And that buyback strategy is a thing that companies are doing in response to the fact that it's a better deal for stockholders. You're not being double taxed the way that you are when you're paid in dividends. Right. Because a corporation gets taxed, then they pay out a dividend, you, the investor gets taxed. So I guess it's not really alarm bells. It's more just me saying, look, I understand the psychological importance of getting a dividend. You feel like it's, it's some cash being returned. You love seeing it hit your account. Maybe if you're older, you would rather live on the dividends than have to sell stock every year. I understand it all, but with a dividend only strategy, no Berkshire Hathaway, no Amazon, no Nvidia. Some of these companies that pay dividends now didn't for the first 20 years of their existence. And you lose out on thousands of percentage points in some of the most important publicly traded companies today. So it's not anti dividend. It's just be aware that there are huge opportunities in the market to not just focus exclusively on that one strategy.

[Scott Wapner]

You want to engage Belsky?

[Brian Belsky]

I sure do. I love you with all my heart, Josh. Do. But I completely disagree with you because I think that when you take a look at dividends, you can't look at dividend yield. You have to look at dividend growth, which we've shown through the way that we manage money. In fact, dividend aristocrats, the Dvy was up 12% in the US up 15.5% in Canada. The respective portfolios that we run were up 20% in Canada and 17% in the U.S. here's why. Because we focus on dividend growth. 60% of the portfolio should always be those core names that have never cut a dividend. 30% should be the names that are growing the dividend and 10% should be the names that are yields above that. If you're buying companies just because of dividend yield, you can, will and should underperform. That's what you're looking at in terms of the factor. Josh. I don't disagree. I don't disagree with respect to the yield part of it and paying the dividends. But we reinvest the dividend. It's a longer term fact. And oh, by the way, too, we've had this amazing run in momentum and as we normalize, again, I've said it before, we're going to be involved in different types of strategies, one of which is going to be dividend growth, another is going to be value, another one's going to be small cap. So I think now is not the time to be leaving dividend growth at all.

[Scott Wapner]

Josh, I'll give you the last word. We'll move.

[Josh Brown]

I didn't say a word about dividend growth. So I, I don't have any data on that. I'm talking about the dividend factor, which weights toward high dividend. Correct. That's the data that I have.

[Brian Belsky]

Companies pay a high dividend for.

[Josh Brown]

Disagree.

[Brian Belsky]

Companies pay high dividends for a reason, because they're not growing. You know, by the way, you don't want to buy those anyway because fundamentally they're not working well.

[Josh Brown]

Companies pay a high dividend for the most part because their share prices have collapsed.

[Brian Belsky]

Correct.

[Josh Brown]

And usually that's indicative of a disruption, risk or a fundamental problem at the company. A lot of companies pay high dividends on their way to slashing the dividend entirely in order to survive. Brian, I think the key thing that I want to get across when I say dividend investing to the exclusion of all other strategies, if you were to wait based on shareholder yield versus dividend alone, meaning dividend plus buyback, your results. This is not my opinion. Quantitatively significantly better.

[Brian Belsky]

Correct.

[Josh Brown]

There's this idea that dividends inherently are less volatile stocks. Completely false. The dividend index has a standard deviation of 18.9% versus a standard deviation of 18.19.2% for buyback stocks, for example. So there are a lot of misnomers about the dividend theme. My point is it should not be the only reason why you're selecting the equities that, that you're selecting.

[Scott Wapner]

All right, good stuff. Good stuff, guys. Santoli, he's next with his midday word. Our senior markets commentator Mike Santoli here now with his midday word. What's on your mind today?

[Mike Santoli]

You know, it's really erratic tape below the surface. You know, it's not necessarily easy to really tease out some of the thematic stuff. Obviously you got the somewhat, somewhat hotter than expected ISM services and jolts that seem to have this yield move, but it doesn't really Explain why there's all kinds of kind of low quality NASDAQ stocks flying and the volumes are so high. And Fubo is trading 300 million shares again today after yesterday was the news. So it's interesting on some level that we don't really have this sort of linear line like Nvidia down 5% should not necessarily be the first thing that reacts banks to yields where they are. So all that being said, I still think we're trying to sort out what the new year flows mean in terms of leaders versus laggards of last year. If there's going to be any kind of a, of a turnabout. Their banks are a pretty clean story and I think the market keeps treating them that way of the cyclical groups. They've managed to hang in there pretty well. But you know, it sort of shows you that yesterday it seemed like all you needed was a couple of the mega caps to work. But one consistent thing though is breadth of roading throughout the day. And that happened yesterday, is happening again today. We'll see if that means something.

[Scott Wapner]

Maybe the move in yields now just increases and the reads today on the employment front increase the importance of the jobs report now for sure, end of week.

[Mike Santoli]

Yeah, we're going to get obviously ADP is like the preview and jobs report. I mean these yield levels and the real yield levels that we're seeing right now should be attracting buyers. You would think that they're getting to a point where, where they're going to settle out a little bit. It just hasn't happened yet.

[Scott Wapner]

Okay, I'll see in a couple of hours on closing bell. Meantime, President Elect Trump had been speaking down at Mar a Lago within the last hour a number of topics, including commenting on Metta's plans to reverse its fact checking policy. Eamon Jabber is covering that for us. Eamon, what do you say?

[Eamon Jabber]

Well, Scott, that's right. Remember that Meta announcement this morning? Also the Meta announcement last night that it's going to add UFC CEO Dana White to its board. Dana White, of course, a big Trump supporter and a close personal friend of Donald Trump. Here's how the President elect responded to a reporter's question about Meta's announcement earlier today. Yeah, I think they've come a long way.

[Josh Brown]

Meta, Facebook, I think they've come a long way.

[Sarat Sethi]

I watched it.

[Scott Wapner]

The man was very impressive.

[Josh Brown]

I watched it.

[Scott Wapner]

Actually, I watched it on Fox. I'm not allowed to say that.

[Josh Brown]

Say it.

[Brian Belsky]

Do you think he's directly responding to the threats that you have made to.

[Scott Wapner]

Him in the past probably.

[Eamon Jabber]

So you see the President Elect there saying that he thinks that Mark Zuckerberg is responding to the threats that he's made to them in the past. Now just a quick reminder of what Trump has said about Mark Zuckerberg. Last summer, Trump accused Zuckerberg of interfering in the election. Interfering in terms of Facebook's algorithm, anti conservative, anti Trump messaging on that service. Trump said that he believes that the Meta chief executive should spend the rest of his life in prison if he interfered in an election again. Now Mark Zuckerberg appointing a strong Trump supporter to his board and announcing he's going to abandon these fact checking policies. All things that are being welcomed with open arms by MAGA supporters today. And of course, as we just saw, welcomed with open arms by Donald Trump himself today. Scott, back over to you.

[Scott Wapner]

Eamon, thank you. All right, appreciate that. That's Amen Jarvis for us down in Washington. We're back right after this. Got some stocks on the move today, starting with Reddit as a new record high. That was Yesterday. Stock up 148% in three months. Josh, the stock you own.

[Josh Brown]

Yeah, this stock did better than any stock in the S&P 500 last year, including Palantir. It's a recent IPO. It was very under owned. And then when they announced the September quarter, this thing just went absolutely bananas, gapped higher and kept on running. I think the theme for 25 with a name like Reddit is going to be the monetization of what can only be considered one of the biggest treasure troves of user generated data anywhere in the world. 19 years worth of hundreds of millions of people commenting on every subject under the sun. And Reddit can sell that to the LLMs. The LLMs are starving for data like this. And so I think not only do you have the ad business, but now you've got the search business and you've got this AI business which is fairly nascent. So I'm staying long. I do have a stop loss in here because of how much it's gone up. But I do think this will be a good story going into 25.

[Scott Wapner]

Hey Sarah, Pepsi new 52 week low.

[Josh Brown]

No dividend by the way. Sorry.

[Sarat Sethi]

Pepsi does have. Pepsi does have a dividend again. Close to 4% multiples compressed again. One of these high value branded companies that has great distribution. You've got salty snacks but you've also got the sodas. I think you have to have this part of a diversified portfolio quickly on.

[Scott Wapner]

Abbvie, they cut their outlook.

[Brian Belsky]

You know, we like it in relative, relative to the other big pharma. But we like the dividend. We love the value in the name.

[Scott Wapner]

Alright, good stuff. We'll do finals next. All right, I'll see you Closing bell today, 3:00 Eastern. Liz Young, Thomas, Jeff Degraff, Rashawn Williams, Ayako Yoshioka. We'll take you through the final stretch, see what happens. I mean we've had a significant role especially in the NASDAQ today and some of the biggest tech names within the market. So I'll take you through that. Josh Brown.

[Josh Brown]

Final trade remaining long shock, long term holding.

[Scott Wapner]

Thank you. Brian Belsky.

[Brian Belsky]

Financials, financials, financials. Synovus Financial. Snv.

[Scott Wapner]

Man, there was a call today. Wall Street's pretty bullish earnings next week, by the way. Yeah, don't forget about that before we get started here. All right. Seurat, Sethi, Comcast, 9 times earnings.

[Sarat Sethi]

Cattle is coming up. Spinning off cable. I think you had our own it.

[Scott Wapner]

And you still own it.

[Sarat Sethi]

Still on it. Good size.

[Scott Wapner]

Big stock.

[Sarat Sethi]

Big stock. Big position. Big position.

[Scott Wapner]

All right.

[Brian Belsky]

All right.

[Stephanie Link]

Stephanie Lake, Morgan Stanley. I think when they report on the 16th, it's going to positively surprise on the fee growth. Could be 70% for equity capital markets.

[Scott Wapner]

All right. Good stuff. See on closing bell. You've been listening to CNBC's Halftime Report, the podcast. You can also always catch us live weekdays at 12 Eastern only on CNBC.

[Unknown]

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