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Halftime Report
Records in reach? 6/6/25
00:43:47
The Halftime Report Investment Committee breaks down today’s market action as stocks jump following a strong jobs report. Plus, Kevin Simpson lays out his strategy for Tesla amid the brewing battle between Pres. Trump and Elon Musk. And Josh Brown has a big update to his “best stocks in the market”. Investment Committee Disclosures
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- [00:00]
Edward Jones
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Scott Wapner
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Walker. Front and center this hour, surging stocks, new highs draw even closer today. We're trading the markets with the investment committee. Joining me for the hour, Josh Brown, Jenny Harrington, Kevin Simpson and Rob Seechen. We're off the best levels, but we still have a good day going. There's no doubt about that. Better than 1% on the NAS. We're about that on the S and P and the Dow not far behind either. We did touch 6000 on the S and P for the first time since February 2024 and we're just a few points below that now. Jobs report the catalyst today, unemployment holds it for to 139k versus 129k. Was the estimate, Jenny, been a little more cautious than most. This market continues to run is running away from people who are cautious. What do you do?
- [01:48]
Jenny Harrington
I don't, I mean, I don't really see it as running. Do you? What are we up now, one and a half percent, 2% on the whole year?
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Scott Wapner
Well, if you want to, if you judge it, if, why don't you judge it from the low? If you're going to make yourself feel better. Well, if you're going to make, try to make yourself feel better and say, well, we're only, we're only 2% up for the year. You're kind of missing the story, aren't you?
- [02:06]
Jenny Harrington
You know me, I take a longer term perspective.
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Scott Wapner
Well, I know that, but. So this has been an incredible market. It's a bounce.
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Jenny Harrington
It's about a run. Yeah, it's a bounce off that bottom that we saw in the Beginning of April. I don't see it as a huge run because I don't think it can go a lot higher from here. You know, I think that we've got a lot of headwinds. I know there could be tailwinds, too, but I think there are serious headwinds out there. And those headwinds come in the form of. There's a lot of uncer. You know, when the President can squawk and drive a share price down 16% because. Because of a fight. That's uncertainty in the.
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Scott Wapner
Uncertainty in the market.
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Jenny Harrington
Yeah.
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Scott Wapner
Talking about a certain.
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Jenny Harrington
How can you be certain about the market when things. It's a single stock, it's indicative of a bigger.
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Scott Wapner
I'm certain about the fact that the S and p is up 24% from the low.
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Jenny Harrington
Are you certain then that S and P earnings growth are going to come in at plus 14% this year?
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Scott Wapner
I think they're going to come in better. And they already have better than most people. They would.
- [02:56]
Jenny Harrington
But when you're trading at 22 times, that presumes a of perfect market set up ahead where you're going to hit every growth target. Right. I don't see how that happens. Markets don't like uncertainty. We live in a world that's. That's infused with uncertainty. I think there's uncomfortable. At least, I think there's uncomfortable complacency out there where. Just saying like, oh, sure, you know, Taco. Oh, sure, the bromance will come back together, whatever it is. And I don't. I don't really like this market. Now, I want to caveat this with. Just because I'm not bullish and just because I don't see us running doesn't mean I think that we fall apart. I think that to your point, corporate earnings were deep decent and. And the consumer continues to spend, so there's a decent floor out there. But when we say run, like, I don't see it as a run. I just see it as this kind of like big volatility bouncing around here.
- [03:44]
Scott Wapner
24%. Don't call it a bounce, Rob. Don't call it a run. Ll said don't call it.
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Jenny Harrington
Come back for the year.
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Scott Wapner
You pick whatever you want. What does it feel like to you? What does it feel like to you?
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Josh Brown
It feels like a Super bowl, like when we were kids that bounced off the ground. I very rarely disagree with Jenny. Very rarely.
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Jenny Harrington
But I said bounce. I didn't say run.
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Josh Brown
Okay with you on the bounce on the. The pain trade is still higher, Jenny. There's no question about it. The market is fueled by haters. There are still tons of haters out there. I don't see any of these shows where people are coming on and pounding the table. The most bullish people are neutral, frankly. And by the way, one of the biggest bulls is Mike Wilson. What a shocker that is to me personally. And so he's a fundamentalist, and I think he's looking at positioning. And positioning is still wildly offsides. CTA systematic traders are only 16% long right now. When you look at aggregate positioning, despite the fact that you have the fundamentalists that are a little longer, you look at aggregate positioning, it's in the 23rd percentile. We were in the 95th percentile coming into the year. So when you look at this and you look at the way people are positioning and markets climb walls of worry, I think there's obviously a lot to worry about. Naturally, the things that you talk about, Jenny, valuations being where they are, it's a ceiling, and we're probably near that ceiling. I'd say the range that we're in is 6150 to 5400, but you're going to need something pretty powerful to knock us down to 5,400. Not saying it won't happen. I don't think it's the bromance being over, I can tell you that. The little things. The little things is noise. Yeah, I agree.
- [05:29]
Scott Wapner
I want Josh's point of view on all this. Dubrovko, Lacos, JP Morgan. He raises his target today, just, I guess, reflecting this newfound optimism. Josh, that's in the market. Rob's right. I mean, a lot of institutionalists are cautious to negative. They're not sort of buying all in yet. But, I mean, this market continues to. You pick the word that you think fits best. Run, bounce. All I know is it continues to move higher.
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Rob Seechen
Yeah. In early April, I was as pessimistic as everyone else. I looked at those tariff numbers that were on that cardboard, which was subsequently thrown out. But, like, when that looked like the new reality, and we had no idea how quickly Trump was going to capitulate, the obvious thing to say was, all right, we're in for it. This is not going to be fun. The thing is, all of that was abandoned relatively quickly. And a couple of other things have happened on the way up that I think should give you faith that we don't have to revisit those levels, at least not this year. And here are those things. In April, the most important trend in the stock market was reaffirmed by the CEOs of the largest publicly traded companies that I spend. That capex expectation that the market had was ratified by Zuckerberg, by Sundar. But like one after another, Microsoft, they all came out and said, no, no, no, we don't care. The NASDAQ's in a correction. We're all doing what we said we were going to do. And then the cherry on top was in video having another incredible report. That's important. You ask about earnings growth for this year. Where the hell do you think it's coming from? It's coming from that theme. So getting that sense that it's intact was really important to this rally. Jobs reports, we haven't had a bad one today. Included 139,000 jobs added. Not as hot as the pace from 2024 where we averaged 168,000 per month. New jobs each month. Right now we're at a run rate of 124,000. Not terrible, even if you consider the revision they just threw out for March. That has been important to the rally as well. You also have a situation where the Robin Hood crowd, and by the way, Robinhood, new all time high right now, they're buying every dip. They're buying quickly. They don't read the news, it doesn't land on them. They don't care about bromances or whatever we're talking about. When you look at fund flow data, whether it's Robinhood or Vanguard, look at the iBit, the Bitcoin ETF, they're buying the risk. So long as you have that dynamic and everyone's working and there's $19 trillion in cash and bank accounts and money market funds. Again, I don't think we need to revisit. I think we can build on some of the things that changed our minds and enabled us to look at this market as being constructive.
- [08:32]
Scott Wapner
Give me hood again, guys, please. 52 week high yesterday, just since Josh mentioned it. We'll talk about it for a moment. Barclay says it might go into the s and P500. As a matter of fact, the price target goes to 81 from 72. At Goldman Sachs, we like to highlight for you stocks that are on the move as we're talking about them. It's up 2.5%. Kevin Simpson, you own it. Just give me a thought on that. And then I want your view overall about what you heard from the rest.
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Kevin Simpson
I mean, Robinhood has been one of our favorite stocks in the growth portfolio. You could have picked this up at 31, $32 in the lows on April and here it is at $72. I agree with the upgrade to 82. I think it can go even higher when you look at the statistics that the total platform assets have just surpassed $250 billion. This isn't a joke. This isn't a little thing that you trade crypto on your iPhone anymore. This is a legitimate company and I think if you're in Wall street, you should look out.
- [09:23]
Scott Wapner
Feels like investors are bullish about that call from Barclays that its potential. It is a potential candidate for the S&P 500 inclusion along with some other stocks. But as I said, Target to 81 from 72 at GS. So wanted to get that out of the way. What about what you've heard from the panel here? Where do you come down on this market? We're at 2 and a half percent or so away from highs, if that.
- [09:47]
Kevin Simpson
I agree with Rob that the risk is to the upside and I think you want to enjoy the ride higher. I don't think I would chase it. So I agree with Jenny from the standpoint that there has been a tremendous run from the 24% bottom and trees cannot always grow to the sky. But at the moment the economic data continues, continues to support a Fed rate cut later in the year. And I think that's what's fueling the market. Not the headlines or the tweets. But the jobs report today gives enough of a pathway, another pathway for the Fed to be able to be in a position at the end of the year to give you one, maybe even two.
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Scott Wapner
The President wants a full point.
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Kevin Simpson
No chance.
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Scott Wapner
He posted that today again calling Powell late the chair and saying that they should cut by a full point point. But you all think that they're going to cut at some point this year, baseline. They cut at least once.
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Kevin Simpson
Yes.
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Josh Brown
It's either all or nothing at all in our mind. Right. You're either going to have data that indicates that they can do that. So far we haven't seen that data. And if you get that data, we may all be a little worried about it because to me it would indicate a growth slowdown or you're going to be in this type of environment where they're not giving the ammunition they need to be able to cut.
- [10:57]
Scott Wapner
I'm just thinking like if you, if you as an investor, if you also have that in your back pocket, don't fight the Fed.
- [11:05]
Jenny Harrington
Yeah.
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Scott Wapner
Remember that. Remember how they say that?
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Jenny Harrington
Yeah, they used to say that, but I spent.
- [11:09]
Scott Wapner
They still say it.
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Jenny Harrington
I spent the Week at the NAREK conference, the national association of Real Estate Investment Trusts. And there you just sit there and listen to like CEO after CEO. And as we all know, real estate investment trusts are highly dependent on low interest rates. So those CEOs to me are the most attuned, even more than we are to what the Fed's really going to do. And what I thought was interesting was as, as the days went on, I would say overall the expectations are for no cuts this year.
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Scott Wapner
Well, you came back from a REIT convention and that is, is shaping your view of the overall market.
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Jenny Harrington
No, I specifically just said it's shaping my view of where I think rates.
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Scott Wapner
Yeah, I know, but if you're just coming from a REIT convention, I mean is that, that, is that the best and most recent place to get your it actually market leading news.
- [11:57]
Josh Brown
Get him, Jenny.
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Jenny Harrington
Yeah, I'm like actually this might be.
- [12:01]
Eamon Javers
No, but it's like you're dealing with.
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Scott Wapner
People who are dealing with the most difficult part. Well, I know, but you're obviously, obviously extraordinary. The real estate business is having a tough time because of high rates. Okay. But that's not representative of the overall.
- [12:18]
Jenny Harrington
You don't think. Because here's what I listen to. Health care, REITs, shopping mall REITs. Big like big mall REITs offices or skilled nursing retirement homes, billboards, digital realty, digital space, industrial REITs. And so I think the beauty of that conference is actually that you get an extraordinary insight into the broader economy.
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USAA
That's why I was negative.
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Jenny Harrington
No, and that's not what I said. What I said specifically is that they don't think that rates are going like on average. I would say they would. They don't expect rates to come down. They don't expect the Fed to cut rates. I was actually surprised by how kind of positive and comfortable they were. I would have thought there would be more negativity coming out of that. There wasn't.
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Josh Brown
Go ahead.
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Scott Wapner
No, no, no, go ahead real quick.
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Josh Brown
So to me it's amazing businesses ability to adjust when they have some clarity. So is this economic data comes in stronger and stronger. They don't think the Fed has the ammo they are able to deal with, with what drives their business in a very surgical way. And I think that's the messaging is that we can manage through this. Housing is different.
- [13:20]
Scott Wapner
All right. I mentioned the President calling for a full point rate cut. It gives us the opportunity to pivot to what is the very latest in the political version perhaps of Hagler vs. Hearns from way back in the day round one greatest round in the history of prize fighting. I think everybody would agree, boxing would agree to that. We bring that up just because this captivated everybody yesterday. And there are some new developments. Eamon Javers is at the White House with some of the very latest. There's not so much of a back and forth, if any, like there was yesterday, but there is, as I said, a new development in all of this. Eamon.
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Sylvana Now
Yeah, Scott, that's right. I mean, it was sort of like a prize fight yesterday and it was, you know, shocking, but maybe not unexpected. And what we know as of this morning is that, you know, it's all quiet on the North Lawn here so far today. We haven't seen the big flare ups throughout the day on social media, but we did get indication from the White House that the president intends to sell or give away that red Tesla that he bought at the, you know, the sort of the peak of his hype cycle around Elon Musk. He went out on the South Lawn here at the White House and held what amounted to a Tesla commercial on the South Lawn, talking about how great the cars were, how he wanted to buy one himself, showing off a number of the different models, lamenting the fact that blue state liberals weren't buying Teslas anymore because of Elon's participation in the White House. Now the White House is letting folks know that the president intends to sell or get rid of that Tesla. I just looked over there on the driveway a short time ago on West Executive Drive. It is still parked there as of right now. And I can tell you that a number of the TV networks have live cameras pointed at that, watching to see when it might be moved away. Scott, you know, we're above that sort of thing, so we don't have that. But, you know, that's sort of what this relationship has gotten to. And I think, you know, a couple things. One is you've got to take this seriously, though, as weird as it is and fascinating as it is because of the coalitions that it could fracture, right? Republicans on Capitol Hill concerned about debt. What does it mean for crypto, the crypto world, world, the crypto bros who are going to have to pick sides here. What does it mean for Silicon Valley and those folks who are going to have to pick sides here? J.D. vance, the Vice president, was forced to put out a tweet last night. He said, president Trump has done more than any person in my lifetime to earn the trust of the movement he leads. I'm proud to stand behind him. The vice president had to put that out because Elon Musk put out a tweet calling for President Trump to be impeached and for JD Vance to replace him. When your vice president has to put out a statement saying he's still with you, you know that lines are being drawn in the sand. And that's what's happening here at the White House. Scott?
- [16:00]
Scott Wapner
Yeah, it just continues to be a fascinating story. Eamon, thank you. On the North Lawn of the White House, as always, Eamonn jabbers for us today. So the street is obviously weighed in as you would expect. Nothing less from Dan Ives. Time to make up and move forward. And Tom Lee, the sell off in Tesla overdone, one of the worst days in a while, obviously, for that stock, which Barclays calls may have preempted a potential sell the news event on the company's Robotaxi event on the 12th. That's an interesting perspective. Does raise the degree of near term uncertainty, says TD Cowan and Wolf, like the rest of us, hard to know how all this ends, but until it does, we'd expect the stock to remain under pressure. Goldman takes the target to 285 from 295. Not a big move, but nonetheless it is something. And Kevin Simpson has trimmed his Tesla position as of yesterday afternoon amidst the drama as well. What's your thought process through all this, Mr. Shareholder?
- [16:57]
Kevin Simpson
It's my job to navigate volatility and uncertainty. And yesterday was something I'd never seen before in my life from just an optics perspective and thinking about the entire Elon Musk ecosystem. They're not in as good a position today as they were 48 hours ago. However, the stock trades, whatever handshakes might happen when you're dependent upon the government to the extent that they are, I look that as a very risky scenario. So it's my job to hedge. We took the position from 3% to 2% as this was happening. Then we went in wherever we could and we wrote covered calls on 60% of the portfolio. And I wrote calls at 270 for $25 premium, which is essentially getting out at 295, a little bit below where it's probably trading right now. And this explains expires next Friday. And if we're out at 300, there's plenty of other stocks that we can look at. I don't need to be a part of this drama.
- [17:47]
Scott Wapner
I mean, Britain, you know, talking to knows the stock. She's like, well, this means the stock could trade maybe 250ish, 260 she was sort of hesitant to think that it was time to get back in on that big dip yesterday.
- [18:00]
Kevin Simpson
I watched you, I thought she did a great job. I agreed with that baseline. I just wanted to be out of the name. We still have a small percent, you know, essentially what would equate to a 1% decline position. Yeah, I hope it works. I hope everyone makes up and the stock does better because I love the full self driving Tesla's but I'm paid to manage money, not hope for an outcome.
- [18:18]
Scott Wapner
Yeah, we missed having Josh on the, on the program yesterday on his usual Thursday slot because it really would have been great to have your perspective. Do you have one today now that you've taken it all in?
- [18:32]
Rob Seechen
Oh man, I was at a funeral yesterday. That's the only thing that could keep me away. Scott. Yeah, my perspective is the drama on Twitter is hilarious. Of course everyone's having a great time, but I think the real story here is the investor base in Tesla literally doesn't care about anything. This is still a nothing matter stock. It's 120 times earnings. They are losing market share in every key EV market around the world. There's not one that they're gaining or holding market share and they're not just losing a little, it's plunging. Other Companies are selling EVs at a faster pace and Tesla is selling less. They're literally selling in like the four digit, like a few thousand Teslas in some of the biggest automotive markets in Europe and obviously in the United States. That's becoming a bigger problem as well. China, tons of competition. The stock market though has voted. And the vote is this is now a robot and automation stock with a sprinkle of AI. It has nothing to do with car sales. The car sales are only important insofar as they get us to the robo taxi, which is the next trillion dollar idea. Fine, sure, I don't believe that, but that's what the market believes and I think it's just incredible how faithful this shareholder base is. I wouldn't bet against it. And the sell off might be overdone. Dan Ives and Tom Lee might be right. It's not my bet, but time and again that's been proven. The stock is already in a 30% drawdown year to date. Keep in mind it's lost 290 billion in market cap since New Year's Eve and it's still a $900 billion situation. So I wouldn't bet against the shareholders buying the dip here and coming right back in.
- [20:30]
Scott Wapner
People kind of say the same thing about Apple over the years. Don't bet against it. No matter what happens in the near term with that stock. We're watching those shares. Excuse me. Obviously, with WWDC looming large next week will be there live. As we've told you a million times, Steve Kobach will be next to us, too. And he's been looking at the most important things investors need to get from that big event. He is here with us now with his final preview. We were so caught up in this news yesterday and you were doing some Nintendo reporting. So we didn't get to 2 and 3 of what we really need to know. Out of the top three.
- [21:06]
USAA
I'll give you a double whammy.
- [21:07]
Scott Wapner
Do it.
- [21:08]
USAA
Because I already told you, Scott, about what AI features Apple's expected to give to developers on that Monday event. But now let's talk about search and AI and potential new partners, plus the legal case that's kind of rattling the App Store ecosystem right now. Now, we all know Apple failed to deliver that AI version of Siri this year. It's delayed indefinitely. In the meantime, they're Depending on chat CBT's integration to fill in some of those gaps. Last month, Apple services boss Eddie Q said Google searches on Apple devices fell in April for the first time ever. Also said he's considering partners for AI search, like the AI search company Plexi, who's cutting a deal with Samsung. By the way, Apple also said last year it plans to integrate Google's Gemini AI search. Watch out for more on that deal. Another partner out there is Alibaba in China. But the Financial Times reported this week the Chinese government is holding up approval of Apple intelligence in the country due to President Trump's trade war. And finally, developers, this is a developers conference after all that court battle with Epic Games. Apple now has to allow apps to accept payments over the web where it can't get that cut of fees. That's an opportunity now for Apple to woo developers back with lower fees before more bail on the App Store and move over to the web assuming Apple loses its appeal in court. Judge already denied Apple's request for a stay on the injunction this week. In the meantime, we just showed you a bunch of names, Scott, that are already taking advantage of those payments. Spotify, Amazon, Kindle and so many more.
- [22:35]
Scott Wapner
Dan Ives today reiterates his outperform to 70 Steve and he says this event, WWDC will, quote, be the start of AI monetization period of the Apple ecosystem. That that face that you made a.
- [22:48]
USAA
Little look there I know.
- [22:49]
Scott Wapner
I don't know if we had a two shot during that or not. I don't think we did. But you made a face that suggests. I don't know about that.
- [22:54]
USAA
I haven't seen any indication that we're heading towards some kind of major app artificial intelligence announcement spent next week. There might be some minor things though they have to talk about AI but last year that was the coming out party Scott. That was Apple intelligence. That was supposed to be it. That was what they failed to fully deliver on. And they have to really use this as a kind of pivot point now to readjust show that they could be trusted to announce things that actually ship. And it sounds like they're just not prepared to do something big in artificial intelligence yet. So if you think you're going to be monetizing, I don't know what that looks like. Like what are they going to be monetizing exactly. There is this thing that I told you guys about on Monday where they're going to let developers kind of tap into their AI system. Maybe that grows the app Store a little bit. But at the same time the AI system at Apple is not as good as competitors like at OpenAI and others.
- [23:43]
Scott Wapner
Down 19% this stock is Rob year to date.
- [23:47]
Josh Brown
You know we've owned this stock for a long time. We trimmed it at the beginning of the year because the premium valuation relative to its to its growth rate. So we got to neutral. It's really hard to be underweight Apple when you're managing a growth portfolio and you have huge embedded gains with shareholder friendly management, tons of cash and certainly the optionality to their AI strategy. I'm not sure that we would buy more if we expected this to be a big thing. I don't think it's going to be yet but again I wouldn't bet against it this leadership. I do think you should be concerned about valuation relative to growth rate though.
- [24:24]
Scott Wapner
All right, Steve will see out there and we look forward to that. Lots to talk about when we're sitting next to each other at Apple park at Steve Kobach, Microsoft today new record high worth mentioning and by the way, overtaking Nvidia as the world's most valuable company once again. Six straight days up. Longest winning streak since December 24th. It's up more than 30% since the lowest 2025 close on April 8th. It's been a great comeback.
- [24:49]
Kevin Simpson
Kevin Simpson Yeah, I'm surprised at how great it's been, to be honest with you. I know that the Azure cloud growth was better than AWS and the investments that they've made in OpenAI are probably starting to pan out. But I haven't been using any of the AI within the ecosystem of the office products yet. And I think once they can really turn that on, it can be a game changer. We're talking about Apple being an AI story. Maybe that's another year away, but I think Microsoft is a heck of a lot closer.
- [25:17]
Scott Wapner
You bought matter, you bought more Metta. Why did you do that here?
- [25:20]
Kevin Simpson
We bought it at 644 the other day and it's almost 700, so I don't mind bragging about it, but really we rotated into this over the past three months. Once in a while we still had 1% of Tesla. The the idea here is that the advertising that they're doing with AI is incredible and if there's not a recession, we don't think that's our base case. We think they can continue to just improve margins. Maybe one of the cheapest big tech names, share buybacks, dividend, dividend growth and low multiple.
- [25:47]
Scott Wapner
And before we take a break, Josh, Amazon today reiterated overweight Morgan Stanley. They call it an underappreciated gen AI winner reiterated by as well B of A.
- [25:59]
Rob Seechen
Yeah, for me this is the best of of the max 7 for this year year. I think it's pretty competitive on returns so far. I've been saying it all year and I think in the second half Amazon has more levers to pull to surprise people with some of the things that they're working on that no one's even really talking about, much like robots is a really good example. Delivery, etc. So I remain long. It's one of my bigger positions and.
- [26:24]
Scott Wapner
I'm not going anywhere. All right, quick break. We come back and we have several committee moves to get through. Jenny, Rob and Kevin all have them and Stephanie Link has a new largest position to tell you about, which we certainly will do when we come back. And coming up later, Josh Brown. A new stock added to his best stocks in the market. That reveal is ahead as well. If your small business has a problem.
- [26:53]
Edward Jones
You could say, just my luck.
- [26:56]
USAA
But you should say, like a good.
- [26:57]
Jenny Harrington
Neighbor, State Farm is there and we'll.
- [27:00]
Scott Wapner
Help get you back in business. Like a good neighbor, State Farm is there.
- [27:07]
Edward Jones
On WhatsApp, no one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late night voice messages that could basically become a podcast. Your personal messages stay between you, your friends and your family. No one else, not even us. WhatsApp message privately.
- [27:37]
USAA
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- [27:51]
Scott Wapner
But that's weird.
- [27:52]
USAA
Okay, one judgment anyway. Give it a try.
- [27:56]
Edward Jones
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- [28:23]
Scott Wapner
All right, welcome back. We just told you before we headed to break that Stephanie Link has a new largest position and it is as she joins us now, that stock you're looking at right there, which is down 4% today, Steph. So you bought more on the sell off after earnings. Why is this worthy of being that now largest position?
- [28:44]
Stephanie Link
Because I think this is a great opportunity to take advantage of the the pullback today. It's a small pullback. The stock is still up a ton, 70% from the April lows. However, I have more confidence in the growth rate at this company in the earnings power of 10 to $12 a share over the next two years. And that puts this thing at like 25 times forward estimate for a company that's going to grow and has grown 40% in earnings, 21% in total revenue, 34% in EBITDA and 317 basis points of gross margin expansion. So the stock is down because again, the expectations are really high. And the guide was actually mixed on the positive side and what it gives me the conviction in the growth going forward, the positive side was a growth for not only 2025 to be up 60% year over year, but 2026 also up 60% year over year at the same time because the growth is coming from the Asics business. That means that gross margins won't be as high as they are right now. But you're talking like 100 basis point possible decline from these very, very high levels. I mean, you're at 79.4% gross margins. That's the best in the business and that's one of the best of any company that I own, Scott. So that is why it is deemed my largest position.
- [30:11]
Scott Wapner
I don't recall you being as anxious as you clearly sounded on the two days this week we talked to you ahead of that print, I know why. So was it because of the run? What were you, what were you fearful of? Because you, I know you would admit, because I think you did on the show, there were nerves going into this.
- [30:31]
Stephanie Link
Number, 100% and that is a function of the stock being up 75% since April, 39 times earnings and an RSI of 80. So very, very high expectations. I just wasn't sure we were going to get the fiscal 26 clarity in the air business. And by the way, this is not just AI that's 31% of their revenues. VMware software is 41% really humming and we haven't even seen a turn in the cyclical pieces of the business. So I think you add it all up, I think you can see a $300 plus stock here. And that's why I wanted to take advantage and add to it.
- [31:05]
Scott Wapner
All right, good stuff. Thanks for updating us and telling our viewers of what you've done. Stephanie Link, have a good weekend. We'll see you soon. We do have more committee moves. Jenny, we begin with you. You bought Lyb Lyond El Bazelle, you sold Dow, right? Tell me.
- [31:18]
Jenny Harrington
So these are very, very equivalent companies. They both make chemicals and plastics that are used in everyday products like cars, construction materials, etc. They're basically identical businesses. One of the big differences is that Dow came out of that Dupont Dow combination spin off and set a really high dividend yield. Lyondale Basel was a merger that came out of the great financial crisis and set their dividend yield way back, their dividend policy way back. So where we stand today, I think there's a tiny bit of risk and I mean a tiny, not a lot that Dow's dividend could be at risk to over the next few years because to cover their dividend, they need oil prices to go up, gas prices to go down and they really need to complete this big Alberta project that they have on hold right now. If all of those happen, the dividend is fine. In the case of Lyondale Basil, they don't need, they don't have any big capex projects. They've got the cash flow just to cover it. So on the last earnings call, you saw Dow for the first time start to back away from their super strong commitment to the current dividend. Meanwhile, Lyondale Baseline came out and they actually increased their dividend yield. So from a portfolio management perspective, what I did, I said this is a great chance to upgrade similar identical valuations, identical dividend yields, more certainty on the Lyondale Basil So I sold Dow, took that capital loss to offset capital gains earlier in the year and put Lyondale Basil into the portfolio.
- [32:33]
Scott Wapner
All right, they're taking us through that. Rob, you sold ConocoPhillips. You bought more Jefferies.
- [32:38]
Josh Brown
Yeah. So on Conoco, similar to Jenny, this is more, more of tax loss harvesting. It also took our weight in energy down to neutral. It's hard for us to imagine, given the administration's ambition to have lower energy prices, that we should be overweight. It's still a quality business. It just has not been a great performer. It's been the weakest of our energy performers. In terms of adding Jefferies. This is a Stock that's down 35% since December. This is a terrific middle market investment bank. If you start to get some certainty in policy, those, those animal spirits could start to reignite, and this company would be a tremendous beneficiary of that. So we're, we're taking advantage of taking the loss and buying something that we really like at a very low price.
- [33:27]
Scott Wapner
Lastly, Kev, you bought Merck.
- [33:29]
Kevin Simpson
Yeah, this is a little tricky. We had gotten stopped out of Merck last year above $100 a share. It's come down. We know that Katruda makes up 50% of sales. We also know that that comes off patent in 2028. Clearly, they're going to need to reignite this pipeline. Feel a little bit like you, Josh, with the Pfizer play stepping into this. But 4% dividend, 8 and a half percent or 8.5% multiple. And that's way off of their historical norm. $17 billion of free cash flow, incredible balance sheet. Management's going to need to deliver through acquisitions, but we're going to take a shot with it.
- [34:00]
Scott Wapner
You sold Salesforce?
- [34:02]
Kevin Simpson
Salesforce. We rotated the proceeds into matter that we talked about earlier. We've been doing that since March. I think it's going to take them some time to monetize agent force. I like what they're doing. I love the ecosystem. I just like better.
- [34:14]
Scott Wapner
All right, let's get the headlines now with Sylvana now. Hi, Silvana.
- [34:17]
Edward Jones
Hey, Scott. Good afternoon. The U.S. is issuing a new round of sanctions on Iran. The Treasury Department website shows the the sanctions include 10 individual and 27 entities, most of which are in the UAE and Hong Kong. The new sanctions come as the White House is trying to reach a new nuclear deal with Tehran. Mazda is recalling more than 170,000 vehicles in the US because the airbags may not deploy in a crash, increasing the risk of serious injury. Safety regulators say a sensor may set an error code that deactivates the airbags due to a low battery. The recall affects certain models of the Mazda 3 and 6:30 from 2024 and 2025. Dealers will reprogram the unit with a software upgrade. And David Beckham may be about to add to his list of accomplishments. According to Sky News, Former the former English soccer superstar David Beckham is set to be knighted by King Charles earning title of Sir David Beckham, while his wife, former Spice Girl Victoria Beckham, would be known as Lady Victoria Scott.
- [35:23]
Scott Wapner
All right, good stuff on the thanks. Up next, An AI Wolf in sheep's clothing Josh Brown calls the name that he just added to his best stocks in the market. He'll tell you what's going on next. Welcome back. An AI Wolf in sheep's clothing. That's what Josh Brown says about the stock he just added to his best stocks in the market. Which one is that? Netcredit is here to say yes to.
- [35:54]
Kevin Simpson
A personal loan or line of credit.
- [35:56]
Scott Wapner
When other lenders say no, apply in minutes and get a decision as soon as the same day.
- [36:01]
Sylvana Now
If approved applications are typically funded the next business day or sooner.
- [36:06]
Scott Wapner
Loans offer offered by Netcredit or lending.
- [36:08]
Kevin Simpson
Partner banks and serviced by Netcredit Applications subject to review and approval.
- [36:11]
Rob Seechen
Learn more@netcredit.com partner netcredit credit to the.
- [36:16]
Scott Wapner
People.
- [36:21]
Kevin Simpson
How many discounts does USAA Auto Insurance offer? Too many to say here.
- [36:25]
Scott Wapner
Multi vehicle discount Safe driver discount New.
- [36:28]
Kevin Simpson
Vehicle discount Storage discount Legacy how many.
- [36:31]
Edward Jones
Discounts will you stack up? Tap the banner or visit usaa.com autodiscounts restrictions apply.
- [36:38]
Rob Seechen
So we wrote up Deere yesterday which is on the list and I still think has upside potential as one of the better setups that I'm seeing. Even though the stock has already been a big winner, the company is expecting 18 earnings per share growth in the next year right now selling at 25 times trailing but at 23 forward pe. The important thing here is very simple from a risk management perspective. The buyers have been respecting that rising 200 day moving average all year. They come in routinely, they buy it even during the worst of this market. In early April you could see it only spent three days below that level and the buyers came in and bought it. The main reason here that that level has been such an important support that trend line is because tariffs are not really a big issue for Deere and that was what a lot of the bears expected earlier on. It turns out 76% of Deere's components are sourced within the United States. 79% of its completed goods in the United States. So there'll be some issue from tariffs but very minor. They learn their lessons in from the 2018 experience like a lot of American industrials have. So I like the stock here. It is up a little bit from where we wrote about it on CNBC Pro yesterday. The AI angle here is very simple. They're basically taking what used to be a very cyclical, heavy machinery oriented business like tractors and farm equipment and they're turning it into a subscription model. They're turning it into an ARR business much like we saw with Spotify, with Netflix. These are the hottest stocks in the market. Uber has Uber 1. Robinhood is Robinhood gold. All of these companies that have gone from selling products and equipment to selling subscription and having an ARR revenue model have seen a RE rating in their multiple. That's what's going on with Deere. Their public talk target is that they'll get to 10% ARR by 2030. If they can do that, that's 5 billion out of 50 billion in annual revenue. And I think they deserve the higher multiple the stock is currently garnering. So I like it. Here is the best stock in the market. I'm not long it yet. I may go long this name at some point soon.
- [39:04]
Scott Wapner
Yeah, well Melius today agrees, excuse me. Agrees that it has big upside. They upgraded it to buy two year price target to 750 again a two year outlook but 750. Josh, thanks. CNBC.com pro Josh Brown QR code. We had it on screen. You know the drill by now. Santol is next. Senior markets commentator Mike Santoli at the desk for his midday word. What do you make of the trade today?
- [39:42]
Eamon Javers
Hard to argue with kind of reasserting the uptrend. I think the relief makes sense evident in in the stock market on a good enough jobs report I'm definitely aware of. You know historically you could look at these sort of monthly jobs day reactions as culmination moves. A lot of times the market's been kind of looking forward. Pricing in is the last known catalyst we've been rallying we at the this round number. Maybe it's time for a rest. But honestly it doesn't seem like the market's doing anything that would suggest it would be any particularly nasty to come next based on what credit's doing. Yields, they're up but they're still tame because they had come down. So they're in their established ranges. So I think it's okay we'll see if we can, we can hold up here though because it does seem as if fatigue might set it.
- [40:29]
Scott Wapner
Yeah, I mean what, what are the next big catalysts that are out there? Wwdc, Just Apple, Such a big stock matters.
- [40:36]
Eamon Javers
You got Tesla, Robotaxi next week. Who knows what that now, you know, who knows who's going to show up at the circus and then, you know, cpi. I mean that stuff does matter. But I take what you're saying, which is during the third month of the quarter, you know, probably not expecting a huge pre announcement season, earnings are steady, but maybe with a little bit of downside for the current quarter. And so you have to, to figure out what you want to pay for them. And that's where we are. So I think the market is the reassertion of Mag7 capitalizing on their huge earnings move and also the fact that they got way oversold, that's kind of done. It feels like we've used up a lot of that.
- [41:12]
Scott Wapner
All right, I'll see at 3. That's Mike Santoli. Coming up after this quick break, we got some calls of the day to talk about several stocks on the move you need to know about as well try and get through as many of those as we can. Next, let's talk about some stocks that are on the move today. Large moves like DocuSign, which is down at least 20% last we checked. Last. Jenny just told me she wanted to talk about it, which is admirable considering it's down 20% and you own it.
- [41:43]
Edward Jones
Right.
- [41:44]
Jenny Harrington
So we owned it for two years. We're up 80% since we've owned it. Why is it down so much? Probably because it bounced a little too high and ran up a little too much. But they had earnings and on the call and by the way, the earnings were fine and on the call they highlighted that, that there was a change in sales, coverage and incentives. And as that their billings were up only 4% they were expected to be up 8 to 10%. So here's where you stand today. Trading at 20 times earnings, 6% free cash flow yield, 9 to 15% earnings growth ahead. I think you have a huge opportunity to get in here here. I don't know anybody who's not using DocuSign constantly. And I think this is a really, really long term, sustainable, incredible growth trajectory. So I think you take advantage of something like today and get in at a decent multiple.
- [42:27]
Scott Wapner
How about Roblox? Eight weeks up out of nine. That's a run. Kevin Simpson.
- [42:35]
Kevin Simpson
It's like Robin Hood. I mean, it just surprises me how well these things do, but the ecosystem that they have. This stock has such a unique user base and it continues to grow exponentially. I would watch what they do with ad tiers down the road. This is a stock to look at 10 years from now.
- [42:50]
Scott Wapner
People don't want to look at Lulu today down. Let's look at it now, please. 20%. I mean, pretty much at the lows. It cut its full year guidance. Rob, you happy you sold this in August of last year, aren't you?
- [43:02]
Josh Brown
Very, very much so. Took some pain at that time, though, too, to be honest with you. One of the reasons we sold it. Listen, this, this is actually a very good business, but one of the reasons we sold it was for a tax loss and the stock seems to have broken down.
- [43:17]
Jenny Harrington
The problem with the Lulu, though, is the competition is unbelievable and it's kind of insurmountable. So when you have a Lulu down 20% and you have a docket. DocuSign down 20% there for two very different reasons. And I'd be way more comfortable buying Docusign where even if people are using other kinds of signing technology, they still call it DocuSign versus a lulu, where you've got like.
- [43:38]
Josh Brown
You would never buy Nike either.
- [43:40]
Jenny Harrington
I don't know. I know. Would I not buy Nike? No, I wouldn't. And maybe not never, but certainly not now. I mean, think about the competition that's flooded the sneaker space in the past 10 years. It's extraordinary. They're tough companies to.
- [43:51]
Josh Brown
Yeah.
- [43:52]
Scott Wapner
But I feel like when people talk about Nike, they, they say that all the time. It's still Nike. And at some point, what's a level where you'd be interested in Nike, you know?
- [44:03]
Jenny Harrington
Yeah.
- [44:04]
Scott Wapner
Have you thought, you thought about it?
- [44:05]
Jenny Harrington
Sure. Once it's got a 5% free cash flow yield because it's never going to have a big enough dividend. For our dividend strategy, where there's a 5% or better dividend yield requirement, but it could go into our growth strategy. And so if there was a 5% free cash flow yield plus very, very clear earnings growth ahead of that, then it can qualify for the, for the, the discipline growth strategy.
- [44:24]
Scott Wapner
Okay.
- [44:25]
Jenny Harrington
I don't know what that price is off the top of my head, but those are the valuation factors that come into play.
- [44:30]
Scott Wapner
What.
- [44:33]
Rob Seechen
You never get it? No, I don't think clear growth ahead of Nike. It's not going to sell at its.
- [44:38]
Jenny Harrington
Right, right. You know that and I know that, and that's why I don't that's why, like we only own meta of the Mag 7, right? It's the only one that ever traded with those kind of characteristics that let us get in. But you can still, still sit there, set those parameters and wait for something crazy to happen.
- [44:53]
Scott Wapner
All right, we'll do finals next. I'll see you at three with Jeremy Siegel, the Wharton School, Chris Verone, Alex Cancerowitz, Shannon Sokoshen. I hope you'll be there too. Josh. What's your final?
- [45:12]
Rob Seechen
Amazon's breaking out here at 211. No resistance until 240. I like it.
- [45:18]
Scott Wapner
All right. Up about 2% today. There is Jeffries on the list.
- [45:23]
Josh Brown
Rob Secchen talked about it earlier. Want to add Jeffries very low valuation, price to book, etc.
- [45:29]
Scott Wapner
Okay. Kevin Simpson, Elf Beauty.
- [45:31]
Kevin Simpson
We're looking at this for the new growth strategy. Full year sales were up 28% and they've enjoyed 25 straight quarters of growth.
- [45:38]
Jenny Harrington
Jenny Ventas are 3% yield high single digit FFO growth.
- [45:43]
Scott Wapner
You did that on purpose.
- [45:44]
Jenny Harrington
Yes, I did.
- [45:44]
Scott Wapner
Have a great 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.
- [46:00]
Edward Jones
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.comhalftimereportdisclaimer.
- [46:39]
Kevin Simpson
How many discounts does USAA auto insurance offer?
- [46:42]
USAA
Too many to say here.
- [46:43]
Scott Wapner
Multi vehicle discount Safe driver discount New.
- [46:46]
Kevin Simpson
Vehicle discount Storage discount How many discounts.
- [46:49]
Edward Jones
Will you stack up? Tap the banner or visit usaa.com autodiscounts restrictions apply.