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Halftime Report
Playing the Rebound 5/2/25
00:44:28
Scott Wapner and the Investment Committee debate the rebound in stocks as the S&P 500 heads for its longest winning streak in 20 years. The experts detail their latest portfolio moves. CNBC Senior Markets Commentator Michael Santoli joins from Omaha with a special Midday Word ahead of Berkshire Hathaway’s annual shareholder meeting. Calls of the Day include AutoZone, Roblox, Eli Lilly, Johnson & Johnson, and Quanta Services. NBC Sports host Mike Tirico is live in Churchill Downs ahead of the 151st Kentucky Derby. The Setup is on Ferrari, Zoetis, Elanco Animal Health. Investment Committee Disclosures
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- [00:00]
Stephanie Link
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. Edward Jones Member, SIPC With HubSpot's suite.
- [00:33]
Scott Wapner
Of AI powered tools, you can get more done way faster, speed up your lead generation and create attention grabbing, lead driving, quota crushing campaigns in an instant. Get started today@HubSpot.com AI I'm Scott Wapner.
- [00:49]
Carl Quintanilla
And you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour on the rebound, stocks going for nine positive days in a row. A better than expected jobs report showing just how resilient the economy remains. We're trading it with the investment committee. Joining me for the hour, Stephanie Link, Kevin Simpson, Surat SETI and Rob Seachin. We will check the markets and you'll see exactly what I'm talking about. At least 1% for all three of the majors. So, Steph, nine days would be the longest streak since 2004 on this jobs report. And that's our top story. The incredibly, at least to this point, resilient economy, yes, it's slowing and it may even more as long as these tariffs remain in place. But for now, you have been right and you've been dead on that it's too good. It's good enough. Good enough to get too negative now.
- [01:58]
Stephanie Link
Yeah. And it was a busy week. We got a lot of information this week, right? I mean we were talking about earlier, earlier this week, the GDP report, the headline was not good. But underneath the surface, you look at final sales to domestic purchasers up 3%. That's the true read of growth and demand. And yes, maybe we, we, we fall from that 3% level. Maybe it's 11 1/2 percent, but it's not recessionary. Non farm payrolls, to your point, was very good. It was actually a really good report in general because not only did the jobs beat, but the inflation piece, the average hourly earnings actually were contained 3.6%. Still good on the wage, not accelerating so that we get scared on the inflation front. And oh, by the way, inflation is Coming down. I mean look at gasoline prices down 13% from last year. Food prices at home are down actually from peak levels a year ago. So I think all in all it's still a really constructive environment. The reason we're up Scott, 14% from the April lows is because earnings have been better than expected. 72% of the companies in the S&P 500 have reported earnings and the growth rate is 13.3% and revenues are running at about 4 to 5%. So that's pretty healthy and that's why we've, we've done what we've done in the marketplace. I think there's more to go though.
- [03:13]
Carl Quintanilla
Yeah, you deserve a lot of credit for hanging in there in the face of a lot of noise, a lot of fog and questions about whether your view was too optimistic or not. And for right now it proving to be pretty much on the ball. Rob Secchen, you guys debated this issue the last time you were on. Let me ask you first though. When you had the putt to win the Masters recently, did you anticipate the putt breaking to the left left the way it did and you were able to obviously make it and capture the green jacket.
- [03:44]
Rob Seachin
You like the green jacket, Scott. That's, that's also happens to be the color of managing money if you're good at it. So you know, I think Steph brings up a lot of great points. The economic data has been resilient. The question is, is it resilient enough to absorb the shock and how close can we fly close to the sun without resolution? I think what that tells you is you've got to focus on the details and you know, the stock market is obviously counting on a deal. They're looking at the final destination. The bond market looks like it's focused on a slowdown and it's worried about the path traveled to get there. It's important to know that we thought coming into the year you weren't have a follow volatile bands and when you're at the top of the bench your focus on reducing for clients that need cash or hedging risk and at the bottoms taking advantage of positioning, getting out of line. We've done both those in this year. It's very similar year to 2018 in a lot of ways where you can go nowhere and take advantage of it. In the last two days after this nine day run, including today, we've been hedging for clients by using put spread proxy collars on the S and P. It makes a lot of sense on a costless basis through October you can get 8% upside and hedge. That's 5 out of 20, 15 out of the first 20% of downside. It's meaningful protection. Now, no doubt that the pain trade is higher. So we did a little of that and we might have an opportunity to do more. But we're bumping up against resistance again and without resolution, I don't think we can break meaningfully through. Back to the highs again.
- [05:35]
Carl Quintanilla
Okay, Kevin Simpson, instead of the first place check, by the way, Rob just took another couch. That's what he said that he would take in lieu of the financial reward. So now he's got like eight in the picture, which is great. So are we supposed to get more bullish on the market now? Because as I said at the top, this economy seems to be more resilient than many people had expected it to be. Look, albeit with a lot of questions still to be answered. No one's coming here with any Pollyanna view of hey, everything's just great. There are issues to be dealt with, but we're going for nine in a row on the S and P. Yeah.
- [06:18]
Kevin Simpson
I think you said it right with the Pollyanna view because we're looking at a market that has been somewhat volatile over the past month. For those of you who aren't paying attention, you get your statements in April. It doesn't look like a whole lot happened. But I think that the pressure to the upside is something we should be considering. And I'm not saying we're out of the woods by any means, but if everybody's talking about how negative they are, and I'm not saying that people here on the desk, but if you look at consumer confidence this week, it came out at a level that we hadn't seen since 2011. And the inflation prediction also for that same report was as bad as we'd seen in 2022. AII consumer sentiment or retail sentiment, professional investor sentiment, as bad as we've seen in 2022. And the CNN fear greed factor, if you pay attention to that, as bad as we've seen since March of 2020. So if everyone's saying that the things are horrible, perhaps the contrarian view makes sense. So I still think it makes sense to buy the dips. We've been doing that. I'd sell the rips and right covered calls. We've been doing that. Expect a range bound market but there's no guarantee we're going into a recession. In fact, I can make a strong case that we don't.
- [07:23]
Carl Quintanilla
There's Also, you know, no guarantee that we're not going to get any sort of significant developments related to the trade war, especially as it relates to China. You're obviously looking at what we're all seeing here, a move higher in the S and P midday, a little bit of a leg here pushing 600 now on the Dow, potentially on this exclusive report in the Wall Street Journal just moments ago that suggests Beijing is weighing a fentanyl offer to the US to start trade talks. We're getting our mega casella up on that and we hope to go to her at the White House momentarily for what she is learning about a Wall Street Journal report that appears at the moment to be having a positive impact on the s and P500. Just like you see in front of you here. This is the risk, right, that the economy is going to hang in and some kind of deal is going to be reached or at least a detente to the degree that you can have a market that can go up and an economy that doesn't necessarily need to fall off a cliff.
- [08:22]
Surat Sethi
Yeah, 100%. Because all this is self inflicted. Right. It's happened because of the way the negotiations started. And then middle of April or you know, April 9, when we kind of said, okay, let's start some negotiations and you got negotiations with India, Vietnam, all the others. So the market found a bottom at least and temporary. And if we do get a slowdown, you will have levers that you can pull. So I think you've seen that. And with companies actually talking about earnings going forward saying if we do have more tariffs, this is our earnings and if we don't, this is our earnings. And I think that clarity, that understanding of where we're going is helping form this bottom and then having some of our good companies do really well.
- [09:00]
Carl Quintanilla
The big story of the week, I think, but beyond the economy, obviously and the data is that the NASDAQ closing yesterday above its pre trump tariff level for the first time and that's significant. The S and P has also recovered its Liberation Day loss and that's today with the move you're seeing on your screen. It obviously brings us to Apple, which is negative but needs to be watched pretty closely. Rob, given this headline from the Journal, what subsequent reporting comes from that it's right at the crosshairs. Clearly you own the stock. It had been up eight straight days into the print, but they've got a China issue, they got a tariff issue and they don't know how to predict anything past the current quarter as a result of it.
- [09:46]
Rob Seachin
Yeah, no question is why we're neutral the name. And we trimmed earlier this year after the second half rally next year. There's still a premium valuation here, Scott, relative to its growth rate. They've had also a lackluster product refresh cycle. The AI strategy and monetization plan has been far less clear. That said, given their balance sheet, shareholder friendly management team, negative current sentiment surrounding the name, it's hard to be underweight this name. So we kind of, we kind of stay at neutral. I think right now we're digesting what's happening with the consumer and given the possible cost increases, the possible strains on the economy, what could happen to this stock. But realize that we've owned this name for a very long time and being neutral is about as smart as we can be with it.
- [10:43]
Carl Quintanilla
Yeah. Let's bring in our Steve Kovach who's got more on this. Obviously has followed this. He was out in Cupertino. He's at our headquarters or our bureau out in San Francisco. I'm going to go to you with the caveat of I might have to break away from you to go to the White House as we're chasing this Journal report and trying to get more information on a report. Steve, that has certainly led to a little bit of a move in the market. So you'll bear with me if I have to take it back from you. But your big takeaway is what?
- [11:11]
Stephanie Link
Yeah. Yes.
- [11:12]
Kate Rooney
Got two things are really happening here. First, you have Apple's management of supply ahead of this April tariffs. We heard all those reports about flight flights of Indian iPhones going over to the United States. So that really shows what Tim Cook Co. Were able to do is smartly manage the supply chain ahead of those tariffs taking effect in April. But Tim Cook also told me yesterday on these earnings he saw no evidence of pull forward buying of iPhones in the March quarter. I know a lot of people were expecting to see that. Tim Cook doesn't believe that was happening. It might have happened a couple of weeks later in April. Of course, he also said that more than half of iPhones sold in the USA this quarter are going to be coming from India. The result of all this is a $900 million charge in the June quarter because of tariffs. However, revenue is still expected to grow according to the guidance in the low to mid single digits. And margins, they're still going to take a hit, but very strong at 45 and a half to 46 and a half percent. Second of all, here's the bad news going on just no clarity on tariffs beyond the June quarter. That prompted the stock to sell off a little bit more after hours. And the expectation here is that the tariff impact is only going to get worse if things stay the way they are. Now I know that WSJ report, especially on the fentanyl tariffs could really change the calculus around there. And look, timing could not be worse though. This is why we're seeing such a reaction in the stock. That's all going to happen when the next generations of iPhones come out in the fall. But overall, the message, the picture that Apple and Tim Cook tried to paint yesterday, the goal is for China to supply the rest of the world and for the United States, India is going to supply the iPhones and Vietnam, other products like Mac AirPods and watches. Though it is going to take some time, Scott, for India to ramp up to get to 100% of US iPhones.
- [13:04]
Carl Quintanilla
Okay, Steve, thank you for that update on the stock. We'll continue to watch it. We can throw up the S&P 500 again as well. Look at the Dow highs of the day better than 600. Now you have a leg higher for certain in the S and P S and P. On this initial report from the Journal, we'll stay on the Apple story for a minute. A minute longer for sure because you got a move here. You wrote some covered calls.
- [13:27]
Kevin Simpson
Yes, we did. We weren't expecting the knockout blowout quarter just based on all the things that we've covered here with respect to Apple. I believe that there's still a range bound opportunity. But this is a stock that was in the 170s literally three, four weeks ago. So to see it pop, we were able, able to write calls both in our dividend strategy and in our new growth strategy. They both expired today. Each one brought in about A$30. The strikes were 215 and 220. So if you're in the name and most of us are, most viewers are take a look at writing cover calls over the next few months. I think it's going to be very.
- [13:58]
Carl Quintanilla
Very opportunistic right in the eye of the storm. This stock is, as Steve so perfectly laid out for us downgraded today to underperform. Apple was at Jefferies. More downside to 1 6. 270 is their price target. So you're north of 200. Got a little ways to go to get there. Downgraded to neutral. At Rosenblatt they go to 217. They were optimistic at 263 but they, they dial that back. And by the way Morgan Stanley's Eric Woodring says, yes, you got some clarity here, but there's still so many uncertainties. And he's going to join me today on closing bell. So you'll hear from one of the top analysts on the street, the star analyst over at Morgan Stanley. We'll watch all of that. Let me get to the White House now. And our Megan Casella, who has more on this headline. She's actually in Washington for us. Hi, Megan.
- [14:44]
Megan Casella
Hey, Scott. Good morning. So the Wall Street Journal out with some powerful new reporting out of China, reporting that Beijing is considering ways to address the Trump administration's concerns over fentanyl. Remember, fentanyl was the initial reason that the president put 20% tariffs on China. So 20 of the 145% is because of fentanyl. The Journal is reporting now that the Chinese securities czar in recent days has been trying to figure out what exactly the Trump administration would want to see on the fentanyl front, potentially in terms of blocking the amount of the precursors, the chemicals in fentanyl that Chinese companies are producing. They say part of the thinking right now is for China to send this securities are who's also the minister of public security and a senior leader, sending him either to Washington to meet with Trump officials or for the meeting to take place in a third country. Now, a potential movement here, Scott. The Journal emphasizes that discussions remain fluid, but this would be a potential off ramp in these trade talks. It comes, as we've been for weeks now, at something of an impasse with China. But it comes just a few hours after the Chinese Commerce Ministry on the record was saying that they are now evaluating the U.S. s outreach to start talks. But they've always been emphasizing, and they did again today, that the US Needs to show sincerity in talks by canceling some of the unilateral tariffs. So if there was a move on fentanyl like what the Journal is describing in this story, that could potentially lead the administration to cancel, I would think at least the 20% fentanyl tariffs. Potentially that's enough to get the ball rolling here. So much more to come. We will reach out to the White House and we don't have our own reporting on this, but the Journal reporting now that the Chinese are considering making some sort of a fentanyl offer. And from where I sit, Scott, that could potentially be enough to at least get the conversation going on the tariff front.
- [16:33]
Carl Quintanilla
It goes back, Megan, to the treasury secretary himself. Whether it was a week or so ago, a handful of days or what have you at this point, you know, suggesting that the current status was unsustainable between these two countries, that, you know, the market really doesn't want want to deal with a extremely protracted situation here. Neither do any of the parties involved, the administration, the White House in China, you'd have to believe, doesn't want to let this drag on for too long. The market implications and the economic implications are potentially too severe.
- [17:10]
Megan Casella
Absolutely. The 145% tariffs effectively cancel almost all trade between the two countries in the exit. Experts and the manufacturers and businesses I've been talking to emphasize we're probably just a number of weeks away before we would start to see very real impact in terms of empty shelves, for example, or real scarcity in the supply chain because of that. So Scott Bessant, everyone I've spoken to, says that he's really sort of the most reasonable voice in the room on this and we've heard a lot from him this week. It's hard to keep track of all of it, as you mentioned, but he's been talking a lot about this saying, you know, that 17 of 18 of our most important trading relationships I've been moving forward and that China was the one that was set to the side that where there was no momentum. That was as of Tuesday this week. So now if there's something like this and we do at least start to get things moving forward, he's been saying for days now that because it's unsustainable, he always thought we were going to get to at least some sort of a resolution. We don't know if that means all of the tariffs come off, if we cut them in half or something like that. But I think any progress, as you mentioned, would be something the markets would welcome.
- [18:12]
Carl Quintanilla
Yeah, no doubt about that. Thanks for the reporting, Megan. That's Mega Casella down in Washington, as you see. Keep our eyes on that story for certain, which is having an impact on the stock market. As you see, we're at the highs of the day across the board. Let's talk Amazon, Steph. Yeah, I think we should. Obviously there's not just Apple, but there was Amazon weaker than expected. US Growth guidance was a little bit light. Everybody all on the program owns this stock today. But you also have a high of the day move here. You bought more. That's our headline.
- [18:40]
Stephanie Link
Yeah, I did because I thought the quarter was actually very good. I thought the guidance was okay. It was fine. It bracketed consensus. But you have a company of this size growing, total revenues 8.6% North America and international retail beat expectations. Advertising was up 18%. That's the highest margin piece of the company. And I know AWS is being spun as a disappointment, but I was thinking 17%. I came in at about 17%. They're two and a half times the size of Google's cloud business and one and a half the size of Microsoft's. So they are just because they're so big not going to keep up with the competition in terms of the growth rate. But the growth rate is still very much there. And so to me when it was down 5% initially after the, after they reported after hours, I just thought that was kind of silly so I made it bigger.
- [19:30]
Carl Quintanilla
Okay, K. Rooney, we like to lean on our experts here. You heard from Kovac on Apple, let's hear from Rooney on Amazon. I mean your, your big takeaway here is what Scott?
- [19:41]
Stephanie Link
Well, I would say the street right now is really aligned with what Stephanie was just saying. I think the takeaway is there's still a lot of optimism. Amazon posted top and bottom line beat for the quarter, saw a lot of ad momentum. The big focus yesterday was the miss on cloud. Plus some tepid guidance did hit shares last night as a street this morning that was digestion results commentary, largely bullish. Stock turned positive as of this morning and CEO Andy Jassy on the call really reassured investors that he is optimistic that Amazon scale positions it well to weather a trade war and potentially take market share. Deutsche bank at least agrees as Amazon's delivery infrastructure and scale are going to help it outperform. Goldman meanwhile calls out other moments of macro volatility. You think back to Covid. He said that he being the analyst, if those are any indicator, Amazon is likely to emerge more.
- [20:33]
Carl Quintanilla
All right Kate, thank you. That's Kate Rooney reporting there. What's your take on the stock here?
- [20:38]
Surat Sethi
Oh, I agree with Stephanie. I mean I think the opportunity, as Andy Jassy said in the call, is huge for Amazon. They have their tentacles everywhere. They have buying power, they can have inventory. And then when we're through this, once you get the customer base even more loyal, that's where you get the recurring revenue. That's where you get that multiple expansion.
- [20:56]
Carl Quintanilla
Okay. Markets are moving. Amazon's at the high. Stocks across the board at the high as well. On that headline of maybe some progress in the trade war between the United States and China will bounce for a couple. We come back committee stocks on the move next.
- [21:16]
Stephanie Link
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- [21:34]
Scott Wapner
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- [21:49]
Stephanie Link
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- [23:00]
Carl Quintanilla
All right, welcome back. Let's do some more moves because Eaton beat on their earnings and Stephanie Link also bought more of that name. So let's go back to you for a stock you've liked for a while now.
- [23:10]
Stephanie Link
Sure, yeah, I think there were very high expectations just on electrification in general. Ge, Vernova, Vertif, Quantus Services all reported excellent numbers raising numbers as well. And Guidance and Eaton they beat but they just maintained it. I think they're being conservative and the most important piece is Electrical Americas. That's why I own this thing. And organic growth was up 13%, much better than expected. And margins expanded and back backlog expanded. So to me the story is very much intact. It fell 3% at the Open, I bought a little bit more. It's now my largest electrification play. But I still like Quantum Services too.
- [23:43]
Carl Quintanilla
All right, another one to get to is Blackstone which is having a pretty darn good day here, up near 4%. We mention it not only for that reason, but Rob Sechin, you bought this too.
- [23:54]
Rob Seachin
Yes, Scott. We bought it last week. Wish I could have jumped on the show to talk about about it. Year to date it was down about 20%. It trades at a 25 times forward P that's down from a peak of 35 times last year and 10% below its 10 year average. A is growing in the high single digits. They've got great operating margins. They are obviously the world's largest alternative asset manager at 1.1 trillion. The story here is that have healthy diversification across all categories. But the real opportunity for Blackstone is the growth in the perpetual evergreen vehicles and the push into individual and retirement channels which dwarf the institutional channels. Today individual investors have just 5% of their allocations in alternatives. We're seeing that migrate up with price premiums and traditional assets and they will will be the lead beneficiary of that. So we liked entering this stock with the sell off that we've seen from a high of 199. I think it's like 138 today.
- [25:00]
Carl Quintanilla
All right. Yeah, 138 and 73. Appreciate that. Let's kick some other stocks around. Amgen they beat at least their earnings did the revs were in line. Kev you on that name.
- [25:10]
Kevin Simpson
Yeah. Incredibly strong quarter. $4.90 I think crushed it. There is also the idea that they're coming out with a a GLP1 drug that could be completely revolutionary. But this is a value stock in my opinion.
- [25:22]
Carl Quintanilla
Why is it down 2% if they crushed it?
- [25:25]
Kevin Simpson
It's been up a lot.
- [25:26]
Carl Quintanilla
You think it's just given a little back.
- [25:27]
Kevin Simpson
That's surprised it's down. To be honest with you. I don't think it should be. I'd be buying it at this.
- [25:31]
Carl Quintanilla
Well of course you surprised. You said they crushed it. The stock's down 2%. I figured you'd be surprised. EOG they beat. Let's look at that one. Surat. You got that?
- [25:38]
Surat Sethi
I do. I like this company. I think it's one of the best independent plays out there. Dividend of three and a half percent. They do special dividends almost once a year. They've cut their capex a little bit just to kind of monitor prices. But if you're going to be a long term holder in this space, EOG is one of your core holdings.
- [25:53]
Carl Quintanilla
Show me Chevron 2 guys please. Because they had their EPS in line. Their revs were a miss. That stock is in the green though. Surat, you take that too.
- [26:01]
Surat Sethi
I do and actually it's nice to see it pop because expectations were pretty high for this company. They, they came in, they're still buying back shares, their dividends close to 5%. So you've got, you've got some support here at these levels. And why I like these companies too is because now they have balance sheets so that if oil does get lower, they can make some more what we would call some good acquisition.
- [26:23]
Carl Quintanilla
You don't even discriminate between the two companies. The majors, Chevron and Exxon, you own both.
- [26:27]
Surat Sethi
I do because they've just merged at all the companies that we've owned over the past year. So you end up owning both of those is the behemoth. And then we have EOG and Schlumberger to kind of corner that as to our oil and gas exposure.
- [26:39]
Carl Quintanilla
Okay, we'll take a quick break. Got some good stuff coming up. A special midday word with Mike Santola. He's live from Omaha today ahead of Berkshire Hathaway's annual shareholder meeting's got an interview with Chris Davis coming up. Looking forward to that. He's on the Berkshire board. When we come back.
- [27:00]
Scott Wapner
It's impossible to find more time in the day until now. With HubSpot's suite of AI powered tools, you can get more done way faster, speed up your lead generation and create attention grabbing, lead driving, quota crushing campaigns in an instant which will give you more than enough time to listen to podcasts like this one. HubSpot Impossible growth made impossiblies. Get started today@HubSpot.com AI Are you still.
- [27:31]
Leslie Picker
Quoting 30 year old movies?
- [27:33]
Carl Quintanilla
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- [27:53]
Stephanie Link
Learn more@discover.com creditcard based on the February 2024 N report. We are back on Halftime Report.
- [28:15]
Carl Quintanilla
I'm Leslie Picker with your CNBC News Update. President Trump has signed an executive order to end federal funding for National Public Radio and pbs. In a statement today, the White House said the networks received, quote, tens of millions of dollars every year to spend, quote, biased and partisan news, spread bias and partisan news coverage. The CEO of PBS on Friday called the order blatantly unlawful and that PBS is looking at all options to continue operations. Reuters reporting the NATO Secretary General has proposed a two tier spending plan that would boost defense spending in order to meet President Trump's 5% target without having to commit member nations to the pledge. But a spokesman for NATO did not directly confirm the secretary general made the proposal. And workers installed a chimney on the roof of the Sistine Chapel today that will be used by sequestered cardinals as they vote on a successor for Pope Francis. Black smoke from the chimney means there is no new pope yet white means someone has been chosen. The conclave begins May 7th. I'll send it back to you.
- [29:18]
Scott Wapner
Scott.
- [29:18]
Carl Quintanilla
All right, Leslie, thank you. Leslie Picker, Berkshire Hathaway's annual shareholder meeting kicking off in less than 24 hours from now. We, of course, bringing you the entire meeting live right here on CNBC and streaming on CNBC.com and CNBC plus, all starting tomorrow, 8:30am Eastern. Our senior markets commentator, Mike Santoli is in Omaha. As always, he joins us now for a very special midday word. A midday day interview.
- [29:44]
Scott Wapner
Exactly. SCOTT, thanks so much. I am here with Chris Davis. He is chairman of Davis Advisors, longtime Berkshire shareholder, now a member of the Berkshire Hathaway board, portfolio manager. Chris, it's great to have you here.
- [29:55]
Leslie Picker
I'm glad to be here.
- [29:56]
Scott Wapner
Let's just, I think, start with this market moment. This meeting is happening at a fascinating time. We did a big round trip in the equity markets. You had this mini panic in the early part of the month. A very wide range of policy scenarios you have to contemplate. I guess, given what's happened from your perspective as an investor, has it caused you to reassess the broad outlook or the market you think we're in, or has it created any opportunities?
- [30:21]
Leslie Picker
Well, I think we came into this year with three big transitions happening simultaneously. So you you had this enormous change in sort of the monetary background of the economy. We had 15 years of near zero interest rates, free capital, magical thinking, modern monetary theory, deficits don't matter, all of that. And so we've had a massive change in that. Then we've had this enormous geopolitical change, the end of globalization, the breakdown of a sort of stable world order. And so there's a transition happening there. And then you have a technological transition with the advent of AI, which is going to be a transformative technology is going to roll through the economy and sorts of ways that are tough to predict. Those three transitions were coupled with incredible complacency, high valuations, high market concentrations, rosy growth assumptions for companies that would be almost impossible to sustain. So I think we came in in a very unstable situation, but I do think that there was durability available in the market, and I think that's where people should be focusing. It's, you know, hard to make any short term predictions, but I think resiliency and durability are going to be catchphrase.
- [31:31]
Scott Wapner
Down 20% in seven weeks in the S and P. Obviously, coming back from that does suggest some kind of durability. Berkshire Hathaway has been a massive outperformer throughout it. Obviously, the balance sheet, the quality aspects of it. Just from your perspective, I know you're not going to get ahead of Warren tomorrow and talk too much about what's going on with the business. But as an investor, what does an investor own from now and into the future when they own Berkshire Hathaway? The way obviously there's going to be this transition at some point into new leadership. But what is the business?
- [32:01]
Leslie Picker
Well, I can never comment about Berkshire Hathaway given my position. But what I'll say that is, I think so fundamental is that Berkshire Hathaway is a national treasure that is built to endure and withstand almost anything. And so that focus on resiliency, on a culture of stewardship, on durability, those things, and on being an asset to the United States, that sort of view, that is a really powerful combination. And, and of course, everybody read about the cash, but that mindset has been a part of Berkshire Hathaway for 50 years. And I think that is an enormous sort of unique defining characteristic of this.
- [32:48]
Scott Wapner
Incredible treasure and market obviously rewarding that you've been coming to these meetings since 1989. Enjoy this one. Appreciate it.
- [32:56]
Leslie Picker
Thank you so much. So glad to be here.
- [32:57]
Scott Wapner
Scott, back over to you. All right.
- [32:59]
Carl Quintanilla
Good stuff, Mike. Thanks. We'll see in a little bit. That's Mike Santoli at the Berkshire event, which is going to kick off tomorrow. So we'll go big there. And we want to call your attention to another big event coming up on cnbc. Our friends at Fast Money are holding a get together on June 5 up at the Nasdaq and you can grab a front row seat to watch the show live and meet up with Melissa Lee and the traders to order a ticket. You can scan the QR code on your screen right now or go to cnbc events.com fastmoney and we hope you do. First one was a huge hit and we think the second one's going to be as well. Up next, our calls of the day. And later we count down to the Derby, the Kentucky Derby. We're going to speak with NBC Sports's Mike Tirico. He's live at Churchill Downs for us ahead of the big Race. We're back after this. Calls of the day begins. AutoZone today. Why? Upgraded to outperform at Oppenheimer. Rob, you own the stock. You do have the tariff on auto parts beginning tomorrow. That's of note. Thanks to our producers for flagging that. But they like the stock. What do you think?
- [34:18]
Rob Seachin
Yeah, we like it too. It's one of our largest portfolio overweight. It's been a long term holding, exceptionally high quality company with a great management team and they're very capital efficient their allocations. They're a beneficiary of an aging auto fleet. Sorry about the Fort Lauderdale air show in the background there, Scott. Not sure if everybody hears that but as OH is a likely beneficiary of tariffs from my lens, as consumers hold on to vehicles longer, repair them as opposed to replacing them.
- [34:49]
Carl Quintanilla
Okay, roadblocks. The Target goes to 62 from 46 at Barclays. Kev, you own this name.
- [34:55]
Kevin Simpson
I think obviously it's too low based on where the stock's been trading. But there's not a tariff situation here. They control a lot of eyeballs. Daily active users was up 26% to nearly 98 million. That's every day, Scott. So free cash flows doubling. They raised guidance. I like the name.
- [35:11]
Carl Quintanilla
Okay. Wells is defending Lilly link. Stephanie reiterated overweight today. We see the Lilly weakness as a buying opportunity as we think it's too early to worry about a price war. Trends have been good and they see upside. What about you?
- [35:28]
Stephanie Link
Yeah, I mean the total addressable market is easily $100 billion by 2030. One in every 10Americans are going to be on weight loss drugs by 2033. So you want to have exposure. These guys are the best in the business. Sure there's going to be competition but I don't see a price war anytime soon.
- [35:42]
Carl Quintanilla
JJ reiterated by Goldman. Sarah, you take this one. They're bullish on their treatment for bladder cancer they believe is going to drive outperformance. At least help with their other products too.
- [35:52]
Surat Sethi
They have a great pipeline. The stock's trading at 15 times earnings. It's really done nothing for a couple of years. Yeah, it's up for the year but you've got a very strong AAA balance sheet product pipeline. They've separated some of their other businesses. I think you're looking at a company that has a great down the road earnings growth rate that we haven't seen in a while.
- [36:10]
Carl Quintanilla
Okay. And finally we mentioned Eat Eaton earlier today. You know the Steph's been on the on the power play if you will for Nova, Eaton, Quanta Services, their price Target goes to 375 today from 324 and that's at truest.
- [36:26]
Stephanie Link
Yeah. And the Stock was up 10% yesterday. They really did have a great quarter. They beat earnings, EBITDA revenues, they guided higher. They had record backlog, electrification and grid. This is what it's all about. And I still remain very bullish.
- [36:41]
Carl Quintanilla
Okay, coming up next, it's 5:00 somewhere. Grab your mint julep because we are going down to Churchill Downs ahead of the 151st running of the Kentucky Derby. NBC Sports is Mike Tirico. He's standing by to talk the big money on the line. There always is. We look forward to that conversation. Next. Alright, the 151st running of the Kentucky Derby tomorrow on NBC. 19 horses in all in the field, including the sires of two former Triple Crown winners. Just some of the storylines. NBC's Mike Tirico will be hosting his ninth Derby for NBC Sports and he joins us now live from Churchill Downs. It's so good to see you always, Mike. Thanks for being with us.
- [37:38]
Scott Wapner
Right back at you. It's great to be seen in this spot too. Twin Spires behind us. This is of all the good spots we get to hang in sports, this one's right up there at the top of the list.
- [37:48]
Carl Quintanilla
Yeah, it's a gorgeous shot. There's no question about that. Let's talk the race Journalism is the favorite at 3 to 1. We'll take that for obvious reasons. Sovereignty and Sandman are next. What do we know about the favorites?
- [38:01]
Scott Wapner
Yeah, the rare sentence in 2025, journalism and favorite are in the same sentence. Journalism is a horse that has been the best in the West. Five races, four wins. Santa Anita Derby, usually one of the top tests for a 3 year old out west. This horse won in a field of five out there about a month or so ago. Also, a very interesting storyline. Michael McCarthy is the trainer. He was one of the many people displaced by the fires in January in Los Angeles. He didn't lose his house, thankfully, but folks around him did. So there's a sentimentality and a pull from McCarthy and his success as well. There is a clear favorite in journalism, however, interestingly enough, Baeza is a horse that got in the field yesterday because of a scratch and that horse that is the last one in the the field might be the second best choice in terms of the odds when we get close to post time tomorrow night.
- [38:56]
Carl Quintanilla
Oh, that's interesting. And I think what we've learned and you've seen it firsthand, obviously is that the race doesn't always go to script. The last four Derby winners were at least 10 to 1. Long shots. I didn't realize that.
- [39:10]
Scott Wapner
Yeah, we had a long run of favorites winning the Derby and now we're in one of those stretches where that has not been the case. This is an odd race. You never get the horses running in a field of 20. In this case it'll now be 19 because there was another scratch. The horse Grande, trained by Todd Pletcher, was scratched earlier this morning. But 19 is as big a field as they will ever run in in their lives. They'll also never run in front of 150,000 people. So things happen because of the atmospherics and because of the number of horses, things happen in the Derby that don't happen in any other race. So there are times that the best horse doesn't win the Kentucky Derby but goes on to a great three year old career and if they run beyond that as well.
- [39:54]
Carl Quintanilla
Another great storyline. I guess what I'm calling the Sons of Greatness because you have Luxor Cafe, a son of American Pharaoh and American Promise, a son of Justify. Those are the last two horses to win the Triple Crown. That's pretty interesting.
- [40:11]
Scott Wapner
It really is. And to have the American Pharaoh line especially is quite a story. Publisher is also a son of Pharaoh. So you have two Triple Crown winners with their progeny in the race. But for American Pharaoh, that was 10 years ago. Winning the Triple Crown after a 37 year wait and that was really the jump start that this sport really needed. The Triple Crown, those three events are where everybody points to along with the Breeders cup as the biggest days in American racing. And the Triple Crown had not been accomplished for so long, people were wondering, will it ever happen again? American Pharaoh captivated fans, brought so many people back to the sport. First time his progeny are in the race at Justify as well. Two great stories and a great connection of that happening here in this race this weekend.
- [40:57]
Carl Quintanilla
Yeah, speaking of connection, what's really fun is our friend Kenny Dichter, certainly a friend of the network. So he has wheels up before he sponsors Faro and Justify. Those are the pictures that we were just watching and you could see those logos on the silt. And then you've got his new one. Real SLX is going to be on the suns in the race too. So I don't know, he finds himself everywhere. If there's a good marketing turn, Kenny's in the middle of it.
- [41:24]
Scott Wapner
That's exactly right. Never doubt Kenny. He shows up every, everywhere, and everywhere he shows up, it's usually fun, good time and something important. So good on Kenny for identifying this and making it happen with his new business, for sure.
- [41:35]
Carl Quintanilla
Do you feel as well as you've gotten to know this sport and what you know the field is going to be, that we have the quality to talk about the potential of another Triple Crown winner?
- [41:45]
Scott Wapner
It's so hard. This sport used to run horses every couple of weeks. I'm talking 25, 30 years ago. Now, most of these horses get four or five weeks between races. In large part, you're trying to make sure they stay healthy if they are this good, so they can get to the end of their career, stand and stud like American Pharaoh and Justify. Now you sell their progeny once that happens. And it's a different phase of the business part of this. Because of that, you see the best horses running less often than they used to. That makes a Triple Crown really hard because you've got to win here. You've got to win in two weeks, which is probably the only time a horse will come back in two weeks in its life, and then win three weeks later at a mile and a half at the Belmont. It makes accomplishing the Triple Crown harder. And there's been significant talk of this should be spaced out. This is the first Saturday in May. Maybe the Preakness should run Memorial Day, the Belmont, Fourth of July. Yes, it would change the rules, but you know what? We've changed the number of baseball games. We've changed the number of teams in the football playoffs, the NBA season schedules adapted. If this is the new measurement of the sport, if that's going to give you the best chance to get Triple Crown winners, thus people watching the sport, it might be the time to start thinking about that.
- [42:59]
Carl Quintanilla
Yeah, you make great points now. It's, it's. Change is hard for the purists, but it has happened, as you just said, perfectly so in these other sports. So we'll see. The weather, to me, looks pretty good today. Your live shot looks great. I mean, are we looking at good stuff tomorrow, too?
- [43:15]
Scott Wapner
Come back to us at 5 o'clock. It might not be as nice. There are storms on the way. There's a steady rain in the forecast for tomorrow. As a matter of fact, as I was listening to the last segment and getting ready for our segments later on today, I've been going through horse by horse, who's run in the slop, who's run on a wet track, because that very much can be a part of the story. And change the calculus of how the bettors want to go about looking at this race. It looks like if you had a bet on something right now, that rain and a less than fast track is likely. We're going to end up by 7:00 tomorrow evening.
- [43:50]
Carl Quintanilla
We'll be watching nonetheless. You once again, Mike, thanks so much. Have a great one. We'll talk to you soon.
- [43:55]
Scott Wapner
Same here. Great to be with you.
- [43:57]
Carl Quintanilla
All right, you as well. That's Mike Tirico down at Churchill Downs. Be sure to tune into the Kentucky Derby live tomorrow. Coverage begins on NBC 2:30pm and that is on NBC and streaming on Peacock as well. The setup is next. Let's do the setup. We have a full slate of earnings coming next week. Ferrari top on our list today, Rob Seachin, Tuesday, it's before the bell. You own the stock.
- [44:43]
Rob Seachin
Yeah. I mean, Expectations are for 12% revenue growth, 17% earnings growth. We'll be watching for any comments around their strategy regarding offsetting tariffs. Business is 100% of their business or vehicles are produced in Italy. And I think they're pretty vulnerable to tariffs because their plan currently is to eat some of those expenses. So really tariff dependent.
- [45:09]
Carl Quintanilla
All right. Zoetis and Elanco are both next week as well. Zoetis Tuesday before the bell. Elanco Wednesday before the bell. Surratt recently bought Zoetis, sold Elanco, Stephanie Link owns Elanco and Zoetis Surat. Your first. So at us, your take is what?
- [45:27]
Surat Sethi
Look, it's going to be earnings expectations. The stock sold off quite a bit during the whole tariff debacle. Highest quality company in what we think is a really growing area that's not doesn't have insurance issues. It doesn't have a lot of other issues. So I think expectations are low. So we'll see what happens in the front.
- [45:44]
Carl Quintanilla
What do you think?
- [45:45]
Stephanie Link
I think what do you like better into the print? Elonco because it's down 20% year to date, trades at 12 times earnings. And you have a product cycle story coming in the second half of this year, which should help margins. I still love Zoetis. It's just, it's just rich.
- [45:56]
Surat Sethi
Just the Elanco thing. Also, the leverage is very high on that. So if they don't get what they need, that stock could get hurt even more. But the upside is definitely their short term.
- [46:05]
Carl Quintanilla
All right, quick break. Finals on the other side shaping up to be a pretty interesting final hour of this trading week given what the market is doing right now. We'll take you through the final stretch with Jeremy Siegel of the Wharton School, Eric Woodring from Morgan Stanley on Apple, Rashaun Williams and Cameron Dawson will be with me on the closing bell. And I hope you will be as well.
- [46:29]
Rob Seachin
Rob Final Trade Blackstone for all the reasons we talked about earlier on the.
- [46:34]
Surat Sethi
Show, Delta just doing a $1 billion stock buyback. It's got huge amounts of free cash flow and this is the time when you use the cash.
- [46:42]
Carl Quintanilla
Okay, thank you.
- [46:43]
Kevin Simpson
Kevin Simpson TJ Maxx this is not a tariff story. This is a story of a company that can benefit from tariffs.
- [46:49]
Stephanie Link
Stephanie Link meta Best mag 7 quarter.
- [46:52]
Carl Quintanilla
Yet all right, good weekend everybody. I'll see you on the bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [47:09]
Stephanie Link
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. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of 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 halftime reportdisclaimer with HubSpot's.
- [47:49]
Scott Wapner
Suite of AI powered tools, you can get more done way faster, speed up your lead generation and create attention grabbing, lead driving, quota crushing campaigns in an instant. Get started today@HubSpot.com AI.