The 2025 Portfolio Rebalance 1/3/25

Summary

Halftime Report: The 2025 Portfolio Rebalance – January 3, 2025

Hosted by Courtney Reagan for CNBC's Halftime Report, this episode delves into strategic portfolio adjustments as investors navigate the early months of 2025. Featuring insights from top market experts Brent Toffington, Steve Weiss, Jim Leventhal, and Kevin Simpson, the discussion centers on trimming major tech holdings, reallocating assets, and exploring emerging investment opportunities.

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1. Market Overview

Jim Leventhal kicks off the discussion with a positive snapshot of the markets:

"Green across the board. S&P 500 and the NASDAQ trying to avoid their sixth straight day of loss. The Nasdaq higher by almost 1.5 percent. What a nice move here on this Friday going into the weekend." ([01:03])

The S&P 500 posted a robust 5% increase, while the NASDAQ climbed 1.5%, signaling a potential turnaround after previous losses.

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2. Trimming Apple: Assessing Overvaluation

Brent Toffington initiates the conversation by addressing his decision to reduce his Apple holdings:

"I sold half the Apple position and we'll look to redeploy it elsewhere." ([02:40])

Reasons for Trimming:

• Valuation Concerns: Apple is trading at approximately 9x price-to-sales, significantly higher than its 20-year average of 4.4x.
• Growth Expectations: While analysts anticipate 7% earnings growth, Brent projects revenue growth to hover around 4%.
• Market Performance: Despite strong performance in November and December, the stock appears expensive across multiple metrics.

Steve Weiss echoes similar sentiments, adding supply chain disruptions as a factor:

"Apple was moving their supply chain to India. So there's going to be disruption now." ([03:07])

Kevin Simpson supports the move, critiquing the prevailing narrative around the "Mag 7" stocks:

"I hate hearing that you don't have to own anything... If one wants to be in tech, there's a lot more attractively priced technology stocks to be in." ([05:56])

The panel agrees that Apple's current valuation may not justify its continued weighting in portfolios, advocating for reallocating funds to more attractive tech alternatives like semiconductors and AI beneficiaries.

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3. Rebalancing Big Tech: Alphabet and Beyond

Steve Weiss discusses trimming his position in Alphabet (Google):

"The position, frankly just got too big. I trimmed it to manage portfolio risk." ([10:11])

While maintaining confidence in Alphabet's fundamentals, Steve emphasizes the importance of portfolio size management over fundamental criticism.

Kevin Simpson challenges the necessity of holding onto big tech:

"You're trimming... nobody's coming on the desk today and saying I'm adding to the Mag 7." ([20:11])

Bryn Talkington adds that within the "Max 7," certain stocks like Microsoft's Azure still hold promise:

"I'm going to believe what they're saying [about Azure sales and margins]." ([22:45])

The consensus underscores a shift from overvalued big tech towards specialized, growth-oriented technology stocks with better valuation metrics.

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4. Strategic Investments: Uber and Robinhood

Brent Toffington reveals his increased investment in Uber:

"I think Uber not only is a free cash flow machine, but their $7 billion stock buyback shows strong confidence." ([15:54])

He highlights Uber's transition and robust financial strategies as key drivers for his bullish stance.

Robinhood emerges as a new focal point:

"Robinhood is at the intersection of financials, tech, and crypto, poised to benefit from the generational wealth transfer." ([22:58])

Bryn emphasizes Robinhood's growth metrics and strategic acquisitions:

"They are taking business from Coinbase and traditional custodians, coupled with their retirement account matching program." ([22:58])

Courtney Reagan adds:

"Their crypto volume in November was up 780% year-over-year." ([24:31])

The panel views Robinhood as a high-potential fintech platform, leveraging secular growth trends and shifting investor demographics.

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5. Navigating AI Investments

Kevin Simpson advocates for a diversified AI investment approach:

"Look for companies in the non-tech corporate world that are implementing AI, such as insurance, travel, leisure, and retail sectors." ([17:28])

Contrastingly, Steve Weiss remains optimistic about large tech firms' AI advancements:

"AI is adding tremendous efficiency. You don't have to get to the mile markers; just go along them." ([19:09])

Bryn Talkington suggests focusing on AI-driven companies with clear monetization strategies:

"Companies like Nvidia continue to get cheaper as their earnings grow." ([09:04])

The discussion highlights a debate between investing directly in large AI tech firms versus supporting AI integration across various industries for sustainable growth.

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6. Other Notable Portfolio Moves

• Palantir: Bryn trimmed half of her position citing high revenue-to-market cap ratios, despite long-term confidence.

  "Palantir is one of the most expensive names now. Long-term, it continues to get stronger." ([15:49])

• Netflix: Steve Weiss reduced his holdings despite strong performance metrics, adhering to portfolio management principles.

  "Position just got way too big to be responsible." ([32:56])

• Diamondback Energy: Upgraded to outperform, recognized for capital discipline and strategic execution.

  "Excellent execution from the C-suite, positioned right within the energy space." ([34:32])

• Cleveland Cliffs: Jim Leventhal and Kevin Simpson discuss buying on the dip after the U.S. government blocked a $14 billion sale to Japan's Bond Steel, anticipating rising steel prices under protectionist policies.

  "Expected to benefit as steel prices rise and ferries protectionist policies." ([28:33])

• Goldman Sachs: Steve Weiss increases his stake, believing in the sustained demand for equity underwriting despite higher rates.

  "Pent-up demand for companies to sell shares and raise capital will drive Goldman Sachs growth." ([28:42])

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7. Cryptocurrency Focus: MicroStrategy and Bitcoin

Courtney Reagan emphasizes a leveraged play on Bitcoin through MicroStrategy:

"Bitcoin has a limited supply and strong demand, which will continue to drive it higher." ([40:23])

Bryn Talkington supports options strategies to capitalize on Bitcoin's volatility:

"Sold May 70 calls and collected close to $4 in premium, achieving close to 7% yield within six months." ([41:28])

Steve Weiss remains bullish on Bitcoin's potential:

"Bitcoin could retake $100,000 and reach $125,000." ([45:40])

The segment underscores a strategic approach to cryptocurrency investments, leveraging both direct holdings and options strategies to maximize returns.

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8. Investment Resolutions for 2025

As the episode concludes, each expert shares their investment resolutions:

• Steve Weiss: "To discern trends earlier and manage portfolio allocations more effectively." ([42:33])

• Courtney Reagan: "To exercise prudent risk management, focus on data, and avoid complacency after strong returns." ([43:09])

• Bryn Talkington: "To keep clients invested long-term and educate them to avoid reactionary selling based on short-term news." ([43:38])

• Kevin Simpson: Although playful, emphasizes continuous improvement and client education:

  "Clients that price does not dictate value." ([44:11])

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9. Final Trades and Market Recap

Bryn remains committed to Uber, anticipating no resistance until $72, praising CEO Dara Khosrowshahi:

"No real resistance until 72. Dara is one of the best CEOs in the business." ([45:13])

Kevin Simpson highlights ExxonMobil's cyclical resilience:

"Through each cycle, ExxonMobil gets better and better." ([45:34])

Steve Weiss reiterates his bullish stance on Bitcoin:

"Bitcoin will retake $100,000 and go to $125,000." ([45:50])

Market Summary:

• Consumer Discretionary leads gains, with Tesla rebounding 4% for the day, mitigating an 8% weekly decline.

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10. Closing Remarks

The episode wraps up with a reminder of ongoing market coverage and a brief visual of rising markets across sectors, emphasizing strategic portfolio management and proactive investment resolutions for the year ahead.

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Notable Quotes:

• Brent Toffington ([02:40]): "I sold half the Apple position and we'll look to redeploy it elsewhere."

• Kevin Simpson ([05:56]): "You have to take a little more risk control back to the portfolio."

• Steve Weiss ([10:11]): "The position, frankly just got too big. I trimmed it to manage portfolio risk."

• Courtney Reagan ([22:58]): "Robinhood is at the intersection of financials, tech, and crypto, poised to benefit from the generational wealth transfer."

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This episode of Halftime Report provides a comprehensive look into the strategic decisions investors are making as they reposition their portfolios for 2025. From trimming overvalued tech giants to embracing fintech innovations and cryptocurrency opportunities, the insights offered aim to guide listeners through a complex and evolving market landscape.

Transcript

[Scott Wapner]

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[Steve Weiss]

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[Courtney Reagan]

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.

[Jim Leventhal]

Thank you very much. Welcome to the Halftime Report. I am Courtney Reagan in for Scott Wapner. Front and center this hour, New year big moves. The investment committee making a lot of portfolio changes as we kick off 2025. The stocks and the strategies are coming up. Joining me for the hour today, Brent Toffington, Steve Weiss, Jim Leventhal and Kevin Simpson. Let's check the markets, green across the board. S&P 500 and the NASDAQ trying to avoid their sixth straight day of loss. Take a look at that. The Nasdaq higher by almost 1 1/2 percent. What a nice move here on this Friday going into the weekend. S&P 500 again up 5%. We do want to get to our committee moves because there are so many of them. So brim, we're going to start with you. This is a big one. You're trimming Apple. Tell us why and why now.

[Bryn Talkington]

Yeah, well, I think over the last six or seven years I've been in and out of Apple. I felt like as the iPhone 16 was coming out, I've been really consistent on saying I think the iPhone sales are going to be incremental, not exponential Apple. And I think that we're seeing that. And so I had felt that Apple would be a market performer. And after November and December's really strong performance of Apple, I just feel like the stock on pretty much every metric is really expensive. It's got around a 9, 9 price to sales. I Think revenues, I think the analysts are looking for 7% earnings growth. I think it probably comes. I mean, revenue growth probably comes in around 4ish. And I just feel like there's other spots I'd rather be. And so starting the new year, I sold half the Apple position and we'll look to redeploy it elsewhere, which will. Which we'll get into later.

[Jim Leventhal]

Wow, okay. How did you make the decision about half of the position? That's a pretty big move.

[Bryn Talkington]

Well, I mean, if you're going to trim a position, it's like trim the position either. I mean, part of me is like either I own it or don't own it. And so I still like the company long term. I think Tim Cook is great, but I think just doing like very small trims and names are not very useful in a portfolio. And so I didn't want to sell the whole thing yet, so I just took 50% off.

[Jim Leventhal]

Why? So you also trim. Similar logic or different reasons. Are you worried about China, for instance?

[Steve Weiss]

Yeah, so. So when China came out a number of months ago and said, hey, we don't want anybody in the government using Apple phones anymore, that was sort of the first indication. But I was also worried about that before because Apple was moving their supply chain to India. So there's going to be disruption now. I'd come back and so I'd cut my position slightly then. But then I did buy into the major upgrade cycle until I learned that they're just going to roll things out gradually and that's not going to drive anybody to really buy the phones. So I had actually trimmed the shares and I trimmed small. But I don't disagree with Brin, except it's been a small position for me, regrettably, because it's been such a good performer recently. And I trimmed initially around, I think about 200 to 15. So look, for me, the other part of it is I've got so much tech exposure that you sort of have to make choices this year, I believe even though it's still the area I want to be in in the max seven, I still think that you have to take a little more risk control back to the portfolio because I don't think. I don't buy into this narrative. Earnings could be up 13%. Stocks are going to. Stocks are going to do what they did last year and the year before. I just think it's much more nuanced and all depending upon inflation. And frankly, all the projected policies by Trump administration relating to inflation are inflationary, not deflationary. So I think the Fed is going to stay on watch. Not necessarily cut.

[Kevin Simpson]

Yeah, I agree with you, Steve and Brent, I agree with you and I applaud the move too. I think for most of the last two years there's been this plethora of strategists out there who come out with these aphorisms that say you have to own the Mag 7 and I hate hearing that you don't have to own anything. Look, it's been a great thing to own the Mag 7 for the last two years, unquestionably. But Bryn, what you're saying about Apple is true. I'm underweight Apple. Steve, what you're saying I've reflected this in Microsoft, which through the fourth quarter I've been trimming and brin just to kind of take a dialog that you started there about, you know, how much do you trim? I would not be surprised and I'm telegraphing this move that I would exit Microsoft entirely in the next couple of weeks. This is a time to position. Steve, if you want to be in tech, I'm not saying you have to do this. If one wants to be in tech. There's a lot more attractive priced technology stocks to be in there. You can look at a lot of semiconductor companies, you can look at Cisco, which is also an AI beneficiary and many people will look at something like Microsoft. I'm not trying to pile on here and say, well, it should be a beneficiary with Copilot. If that's the case, then why have the earnings estimates been doing nothing but going down for quite some time? Here's the point I'm driving at just to summary with what part that earnings.

[Steve Weiss]

Estimates have been coming down too early to have a referendum on whether Copilot and AI is going to add to their earnings.

[Kevin Simpson]

Let me finish my thought because I'm not arguing with you. It's factual. The estimates have come down. Maybe they go up on the basis of what you're saying, but right now they're coming down. You can find much more attractively priced technology stocks. You can find much more attractively priced other 493 stocks. So when people say to you you have to own something, it's just not true. Just don't believe it. You may find a reason to own something, but it's not that you have to own it.

[Steve Weiss]

And can I just add one thing? What Bryn said that I keyed on is that she's traded stock over the last number of years as of high. The people I'd say you can't trade Apple. It's just because they're not traders.

[Kevin Simpson]

Agreed.

[Steve Weiss]

And they don't see it. Of course you can trade it. And it's been a great trading stock. So when it hits these levels that you say why the hell did it get there? Which is why I sold it, you know, trimmed it. That's when you sell it and you buy it. When they miss a quarter, they will miss this quarter. Undoubtedly cautious. Will the market look through it?

[Kevin Simpson]

Let's hear from Kevin.

[Jim Leventhal]

Yeah, Kevin, you sold out of Apple earlier than Brent.

[Courtney Reagan]

Let's take it back to Apple because that was Bren's trade. I've sold Apple 10 times over the past 13 years. Most recently we sold out of the position in December in its entirety. So early December. December 9th. So it was right around this same level when you factor in the covered calls that we wrote. And for all these reasons, we thought this might companies from a valuation standpoint a little bit ahead of itself. Now we love the company. We don't always like the price that it's trading at. Bryn, you mentioned the price to sales at 9, which is important but like putting that into context, for the past 20 years they've averaged 4.4, so the price to sales is almost double. P E ratios for trailing 12 months is at like 40, which is very, very high against the historical 24. If you don't like the trailing 12 months, you can look at the forward PE. We have that around 33 and typically that's around 21. So you have a stock that definitely is an amazing share buyback. It's an amazing beneficiary of passive index flows. But for right now, if you're not believing that the 16 is going to be the super cycle, but you're waiting for the 17, maybe for the AI to really roll out, I think we'll get a chance to buy this cheaper. And I love that 215 to 10 where you sold it.

[Steve Weiss]

And let me ask you both you guys a question. Would any of you be surprised if one day you wake up given the problems that telcos are having? Right. How the stocks are just being shunned. If you woke up one morning and they said no more subsidies, we're tired of supporting Apple. You know, we've got our customers. All we're doing is creating churn to go to somewhere else and they come to us and then the others all follow suit. But that surprise anybody?

[Kevin Simpson]

I mean it's, it's reasonable. I just don't know when and I don't think you know, when you're not.

[Steve Weiss]

Saying when I'm not ready, it's going to happen. That is a risk. I mean that people don't assign to.

[Kevin Simpson]

The stock at all. And you've said it before and it's a rational thing to say. I just, I wouldn't trade it today. Buy that news on that potential news.

[Courtney Reagan]

It would surprise me if that happened. But the rationale is that it should.

[Steve Weiss]

Yeah.

[Jim Leventhal]

Brent, jump in.

[Bryn Talkington]

Yeah. I think also from a pricing perspective, as Kevin was talking about, if you look technically at the chart, the first Support is at 234. The 50 days around 209. And so I think as an investor, be patient here. But I think that this is 2025. We will continue to see a dislocation of prices between this monolith we all call the max seven. I mean we saw it with Microsoft this year, which was definitely an underperformer relative to the Qs in the S and P and then relative to the other mag six names. I think you're going to continue to see this. I think there's going to be companies within that, within that group that I think will absolutely underperform the market. And so to me, when I look at of those seven names, I think the one name where you have the most clarity, the most line of sight still goes back to India. Right. Because we know that Microsoft spent a ton of money. I don't think you're going to see big monetization with any of these companies this year except continuing to be with Nvidia, which continues to get cheaper as their earnings grow.

[Jim Leventhal]

I want to stay in this area, but sort of turn the conversation wise to Alphabet. You trimmed that name to tell us why. There was a note out yesterday as well. Any of that play into your thinking? When did you trim.

[Steve Weiss]

Yeah, these were. While I wasn't specific in terms of the moves I was going to make in January, this is just one of them. The position, frankly just got too big. I kept buying it when it got crushed. I remember buying it around 140, then around 165, 170 and it just kept building up. I trimmed it once before for the same reason, but it's just right sizing the position. So the other moves I've made are really just they're still big core positions. I've run a very concentrated book but you know, I just want to take some off the table on this. I'm not that concerned about them losing significant share in search and. Yeah, in search specifically. And I do believe that with a high they are right there with the others and they used to have incredible balance sheet They've also if you take a look at Verily and some of the other I want to, I don't want to say vanity projects they've really cut back on the spending so they're really focusing as shareholders want them to do and what their core businesses are.

[Jim Leventhal]

Kevin, what are your thoughts on this one on Alphabet?

[Courtney Reagan]

So we don't own Google at the moment but I do think that there's a potential for them to lose this monopoly on search really we all talk about it all the time but just think about any one of us here on the desk where I would never lose escape that ecosystem Personally I find myself at least 10 to 20% of the time bypassing Google and going right to chat GPT Really? What about you Jim?

[Kevin Simpson]

Well look we had this discussion yesterday and Josh was talking about things like perplexity as a competitor and my thought on this is very succinctly that if you want to compete in the AI world it really is an arms race and you better have the biggest bank account to do so. Google has that biggest bank account. This is one of those reasons that like I think it was a couple of weeks ago there was a discussion about Reddit of all things getting into AI and I didn't chuckle at it but inside I was like really? How are you going to go up against Alphabet? You don't have the money. Yes, there is some competition unquestionably. However, I think this is about the amount of money that you can spend at this valuation. I think more competition is priced into Alphabet's price than is likely to show up. That's an opinion. You don't own it, you own some of it. Josh trimmed it a couple of weeks ago for me. Look, we're all trimming it because it's done fabulously well. We're going to admit that portfolio management it's not fun to so far it is. I haven't trimmed it and because of that it is my biggest position. It's my biggest tech position. At some point I probably will trim it but I think there is more catch up for it to do could.

[Steve Weiss]

Be wrong and I've used Perplexities on my phone as a matter of fact I've used ChatGPT. I just find you know the old friend which you know I didn't find I was getting more from the others.

[Kevin Simpson]

Frankly, you know so look and also don't forget YouTube, don't forget Waymo, don't forget a lot of moonshots that really could pay out there.

[Steve Weiss]

Waymo just doesn't make any money yet. It's unknown when they will yet.

[Courtney Reagan]

They haven't even figured out advertising.

[Kevin Simpson]

Yeah. But also bear in mind that their competitors are falling by the wayside. Right. GM has given up on cruise. Ford gave up on it a long time ago.

[Steve Weiss]

It's the fundamentals of the business. When you have Uber, you've got drivers. That's why I don't know why Uber's rushing into, you know, driverless autonomous taxis. Because drivers right now pay for the insurance, they pay for the maintenance, they pay for the repairs. Who's going to pay for that? Waymo, they pay for themselves. That's why they're in profit.

[Jim Leventhal]

Hang on, hang on, hang on on that one. I want to get, I want to get to brand. You bought some more Uber there. So jump in on this conversation, Brent.

[Bryn Talkington]

Yeah. So you know I own Tesla, obviously. I bought, I bought Uber. I started buying in the, in the mid-70s. I bought some more down here in the low 60s. I just think that there's a narrative of this that had been happening at the end of last year of this long Tesla short Uber, because Tesla is going to come out with robo taxis and Waymo is going to take over and we're all going to get in these robot cars. I just think that's years off, have a Tesla. They are not ready to have these driverless cars around town. And so I think there is a hedge fund positioning CTA algorithmic trading doing this long Tesla short Uber. And I think when earnings start to come out in Q1 for both Tesla and Uber, you're going to see that Uber not only is a free cash flow machine, but don't forget In February of 2024, they announced their $7 billion stock buyback, which they really are just in their early days about actually implementing. And so I just think for this reason this is just a great name to own in the tech space. And this is what I did with partial part of, you know, my Apple, Apple shares or the Apple proceeds is buy more Uber.

[Jim Leventhal]

And Uber is kind of coming off some, some beaten up times, right. Its worst month since May of 2022. We jump back in there and continue your thought. I just wanted to move on that.

[Steve Weiss]

I've actually been looking at Uber because I sold it at 68 when I sold it and it kept going up. It is interesting. But again, nobody's been able to say to me that why going into Robotaxis is a good thing, given the cost structure that I mentioned. And that comes, by the way, from people that are or were critical people at Waymo. So. So I don't see it. You know, I don't see where the margins will be. It's much better outsourcing all that to your driver then. And. And even, frankly, if you have to pay W2 wages and benefits to your driver, it's still cheaper than paying to support the car.

[Jim Leventhal]

I mean, call me old school, but I want to person in the driver's seat. Just me.

[Steve Weiss]

It's great. Have you done Waymo in San Francisco? It's fine. No, no, it's absolutely. It's great.

[Jim Leventhal]

Well, Brent, you also have another. Another winner that you've been trimming Palantir.

[Bryn Talkington]

Yeah, that was a winner for sure. I mean, you know, stocks go lower than they should probably ever go, and they also go higher than they should go. And so I didn't want to take the profits last year, so I just waited till a new year. But when I look at Palantir today, I trimmed half the position. Huge fan of what they're doing. But when I look at the. Just the financials, it's got about $181 billion market cap, and I think they'll do maybe two and a half billion in revenues. So from a revenue to market cap, it's very expensive. I think it's one of the most expensive names. And so this is one of these names where I think long term, this company continues to get stronger and stronger, but I think there's a heck of a lot priced in right now. So, you know, I always say you can't go broke taking profits. And so definitely wanted to book some gains on this early in the year.

[Jim Leventhal]

I mean, up 400% in a year. Holy cow, what a run. And Kevin, because of that, you sort of. You got called out of it.

[Courtney Reagan]

Yeah. You can't lose money taking a profit. But I wish I would have sold it a little bit closer to where Brendan. Yes, we had covered calls in our growth strategy, Courtney, and it got called away and it just continues to run. Love the company, but amazing how far this thing's gone so quickly.

[Jim Leventhal]

We talked a little bit. We were touching a little bit earlier on AI and you were talking about Copilot. So I want to get back to that thought. And Jim let you sort of pick it up there because we. We kind of sideline the conversation. We're talking about, are we set for a breather? I know we brought up in video where we're talking about having those sight lines, but are we running out of steam? I mean, look at some of these names that are run so far.

[Kevin Simpson]

Look, I think we're set for a transition. AI is for real, is for real. But and sorry to just repeat myself, I think playing it this year in Microsoft is probably not the way to play it. The way to play it is to look for those companies in the non tech corporate world that are using AI that are implementing it. Could be insurance companies. I mean certainly there's a lot of room there for risk management and couch calculation. Using AI could be any of a number of travel and leisure companies that figure out how to get the right experience to the right consumer. I mean, I can go on and on about this. Could be retail getting the right product in the right size in front of the right customer. I think that's the way in 2025 that you're going to see monetization come from AI, but just sort of blindly throwing money at for instance, the hyperscalers because they're spending hundreds of billions of dollars on Blackwell chips. I don't think that's the way to make it. You know, Michael Semblis, the strategist at JP Morgan, really smart guy, he does very good analysis of the markets. His recent piece, it's called the Alchemists, goes through the fact that for the hyperscaler community, the big tech companies that are buying all these chips and building all these data centers, for them to achieve the same historical margins on the amount of capex that they've done in the last year and going from forward, they would have to create 400 to 500 billion of new revenues per year. And this is with their revenues around 100 billion right now. I'm not saying that it can't happen, Courtney. There's a lot of breathless projections out there. You can choose any of a number of podcasts to listen to that will tell you these are realistic. But I will tell you that to quadruple your revenues when you're already at this size is pretty impressive and I'm pretty generous dubious of it.

[Steve Weiss]

First of all, I'd say that that may be the right number in the end on that analysis, but that's not the number that's going to drive the stocks. What's going to drive the stocks is the continued adoption and continue and the return on those which some companies are seeing now, AI, coincidentally, is that because we're talking about it is the fastest adopted technology in the history of the world, faster than the Internet, the web, which was free. This people have to pay for. I'd also tell you that, that it has been around for a long time. For example, there's this one company we're looking at one of our portfolio companies that has been doing a transition for a decade and works with all the top firms in their portfolio companies. So a lot of companies already have this frame of reference. But what it is doing is absolutely mind blowing and it is adding tremendous efficiency to it. So again, all you have to do is go along the mile markers. You don't have to get to that.

[Kevin Simpson]

Let me make sure I understand what you're saying or let me, let me paraphrase this back to you. I'm not, I'm not calling you out, but you're trimming Google Alphabet or have trimmed. You have trimmed Alpha, Apple, I've trimmed Microsoft, Brin's trimmed Apple. I don't hear anyone. Please chime in here. Correct me if I I'm wrong. Coming into the desk today and saying let's go load up on the Mag 7. I don't hear any of us saying, hold on, AI.

[Steve Weiss]

I did add to Vertiv, which we were going to get.

[Jim Leventhal]

We're going to get there in a.

[Steve Weiss]

Second, which benefits completely.

[Kevin Simpson]

Okay. But I was being specific about the Mag 7.

[Steve Weiss]

So the Max. Because I've been fully invested in the Mag 7 with, with large core positions for over a year.

[Kevin Simpson]

But my point, my point is you're trimming. You're trimming. Bryn's trimming.

[Steve Weiss]

Trimming has done so well. Well, as portfolio management. I'm not trimming on fundamentals.

[Kevin Simpson]

You're not here. That's fine. You're not hearing me. You're arguing with me. Just argue with me. I'm saying nobody's coming on the desk today and saying I'm adding to the Mag 7.

[Steve Weiss]

Listen, I don't want to argue with you for the sake of arguing like you're trying to do. What I'm saying is there's a difference between trimming because of portfolio management and because of fundamentals.

[Kevin Simpson]

We're talking.

[Steve Weiss]

I still think you're getting the fundamentals.

[Kevin Simpson]

We're talking different things and you're getting mad and I'm not getting mad.

[Steve Weiss]

I try to be very patient with you, you know, in the opposite.

[Jim Leventhal]

I heard you try to speak up there. Obviously we started this conversation with a lot of your moves. So weigh in on the magnificent seven loading up trimming. Where are you going? What should you be doing?

[Bryn Talkington]

Well, two things. As I said earlier, I think you're going to see this distinct performance within these, let's say, seven names this year. And I think, to Jim's point, I think he's spot on. I mean, I own Microsoft, but I think I think about it in the same way that Jim does. I'm staying with it right now because they do have this big business called Azure. And Satya and Amy on last quarter's call said that Azure sales and margins are actually going to go up in the back half of the year. So I'm going to, I'm going to, I'm going to believe what they're saying. But I think if you're thinking today, hey, where's going to be my best return? And I'm going to buy these seven names in an equal weight basket. I think there's better places to put your money. But I do think, though, that, like, Kevin has a growth strategy that sells, you know, calls against growth names. We own jpq, which takes the cues and sells calls. But of those seven names, I'm still big fan of Tesla and Nvidia, because I think for different reasons, these names are going to do well this year. But I agree that especially with the Apple and the Microsoft, they're pretty rich here unless something meaningfully changes and they're able to actually grow revenues to sustain the multiple that the market's willing to pay today.

[Jim Leventhal]

So let's talk about then, where you're putting some of that money that you're trimming some of these profits of some of these big names and you're putting some to work in Robinhood, which has also been named a topic at JP Morgan, upgraded to outperform at Wolf. What do you like there?

[Bryn Talkington]

Yeah, yeah. Well, I mean, I think we've all seen this company, you know, grow up. I think we remember, you know, the Gamestop Steve was quoted in the movie. Right. I mean, you know, Robinhood was not a company I would have bought two years ago, but they really changed. And, and so I bought it last year and just for some numbers, they come out with earnings on February 13th and they're looking for revenue and earnings growth of 83 and 205%. And where I think they're at this intersection of the secular growth trend with there's what, 75 to 80 trillion, trillion dollars that's going to get transferred from the baby boomers through the economy down to their kids and grandkids on top of that. If you look at Robinhood's monthly metrics, which they print, I think they're taking business from Coinbase from the growing Crypto and they're taking market share from the traditional custodians. And then what I like about it also, if you, if you go to their site, they spend a lot of time talking about opening a retirement account. They'll do a matching program and they're doing much more investor education and to me, less of the gamification that they were doing a few years ago. And so I think as a financial as well as a tech company, as well as a crypto, this to me is at the intersection of all three of those, plus that secular tailwind of this big transfer of 75, 80 trillion down to this next generation of investors.

[Jim Leventhal]

You know, Kevin, you've got financials, you've got tech, you don't really have fintech. What do you make of this Robinhood idea? And the finish fundamental strategy here that Brian laid out makes a lot of sense to me.

[Courtney Reagan]

It makes sense to me too. And in our growth strategy, we do have Robinhood and I love the fact that they print these numbers. And I'll pile on to some of the things that Brian just talked about. Their crypto volume in November was up 780% year over year. Now that's obvious because we've seen what's happened with Bitcoin, but their equity volume was up 147 billion. That's 178% year over year. They made an acquisition of trade, PMR, which is a custodial firm for RIAs. So if you follow Brin's thesis and you follow the money, if these are the people that are going to inherit it, at some point they may want financial advice and to be able to tackle this legitimate financial planning division. I think they're just, I think they're going where the puck is moving. They see the field. And this is a stock that you shouldn't ignore.

[Jim Leventhal]

This was a jam packed beginning of the show. We got to take a break, get some air. Coming up, more committee, but Jim Laventhal buying the dip in one of his key holdings. The trade, though, is next. You're gonna have to hang on for it. Halftime. Back in two minutes.

[Courtney Reagan]

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[Scott Wapner]

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[Courtney Reagan]

Edu Global Markets up to the minute front page news. Wake up to Frank Holland and Worldwide exchange weekdays, 5am Eastern, CNBC live. Ambitiously.

[Jim Leventhal]

Welcome back to halftime. Shares of U.S. steel falling as President Biden blocks the $14 billion sale of the company to Japan's bond steel on national security grounds. In the last hour, the two steel companies have issued a joint statement saying they will take all appropriate legal action to protect their rights. Jim, you're buying more Cleveland Cliffs on this news this morning. Tell us why what go through your, your thought process here?

[Kevin Simpson]

Yeah, it's, it's not just out of sports. I mean, I will point out that Cleveland Cliffs made an offer about a year and a half ago for buying US Steel around $35 a share. They raised that to $54 a share. And here we are with US Steel now at $30 a share. So certainly US Steel could have done better, but that's beside the point. What has happened in that year and a half is that Cleveland Cliffs has bought a different company, Stelco, and they've bought that company at a meaningful trough in steel pricing. Now, I don't know where steel pricing is going to go over the next month, three months, etc. But I do suspect that over the next year, particularly under this administration, which has protectionist policies, that we will see steel prices have bottomed and that as they continue to go up, because they have started to go up, that you'll see a bigger Cleveland Cliffs benefiting from it. And let me just do the math on this very quickly. Two years ago Cleveland Cliffs did 23 billion in revenues with Telco. I think it's pretty easy that they can get to 25 billion in annual sales. May not be this year, maybe next year. 25 billion times the historical EBITDA multiple. 12% gives you 3 billion in EBITDA. Their historical enterprise value multiple on that EBITDA is 7. That gives you a 21 billion enterprise value target over the next year or two. Subtract the debt and the market cap on that basis is four times what's the share price is today. Now you can find risks to this. Maybe steel prices don't go up. Maybe we Hit a recession, any of a number of risks. But that's the analysis that I'm using to buy more of the shares.

[Jim Leventhal]

Today we're going to move on to a different move. Weiss, you are buying more Goldman Sachs here. So very different sector but go through your thoughts.

[Steve Weiss]

Look, I thought the stock had great momentum and I'm not a momentum player. I'm not ignorant to what's going on stocks. But then you know, it just corrected with the rest of the market and stayed down there. I can assume under the belief as Powell came out more with more hawkish stance that hey, our rates going to stay high, we're not going to, you know, you're not going to see basically a IPO, secondary cycle, etc. And I still think that's wrong. I mean there's so much pent up demand for companies to, to sell their shares, to exit part of it to raise growth capital that that's going to happen where the rates are, where they are. Whether they took up a few more BIPs or whether they come down. I do believe that, that not an insignificant portion of the increase of the rise in rates has been from exiting bond funds. You take a look at bond funds and the five star manager has put up an average of 3% over the last five years. So don't people get tired of saying okay, I'm tired of the safety. I see equity markets over that same five year period really creating substantial wealth for me. So you'll see that selling subside and maybe you know there is, there is another option. There is a Tina. But overall to me going back to my original premise, you will see the underwriting cycle. Everybody's anxious to get out there. The companies, the bankers and the investors. Investors.

[Jim Leventhal]

So that's why, okay, more ownership in Goldman Sachs and in Cleveland Cliffs. Let's go over and get the headlines from Bertha Coombs. Hi Bertha.

[Bertha Coombs]

Hey Courtney. The FBI released previously undisclosed video of a suspect who planted pipe bombs outside the DNC and RNC in Washington D.C. the night before the January 6, 2021 riot at the U.S. capitol. It's part of the agency's renewed effort to identify that suspect. The announcement comes just after Congressional Republicans released a report complaining that the FBI had not yet made an id. Supreme Court Justice Clarence Thomas will not be referred to the Attorney General over allegations that the justice may have violated ethics laws. The judiciary's policy making body told Democratic senators who had called for an investigation investigation into Thomas acceptance of luxury trips that the justice agreed to follow the updated rules on reporting such trips and gifts. The court has yet to respond for comment. And in the UK researchers uncovered hundreds of dinosaur tracks that date back to the Jurassic era in a quarry. Now, the tracks, which are about 160 million years old, were made by both herbivores and carnivores. Researchers say that raises some pretty interesting questions about how they interacted, eat or be eaten. I don't know, Courtney.

[Jim Leventhal]

I love that. I love finding like dinosaur fossils and stuff. Just fascinates the pants off me. Thank you so much, Bertha. Well, up next, our calls of the day. We'll debate today's analyst activity on four committee stocks. And Steve Weiss is trimming his position in one of those Halftime. We'll be right back.

[Scott Wapner]

Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella. Edu.

[Courtney Reagan]

Global Markets up to the minute, front page news. Wake up to Frank Holland at Worldwide exchange weekdays, 5am Eastern, CNBC live. Ambitiously.

[Jim Leventhal]

Welcome back to Halftime. It's time for calls of the day. Let's start with Netflix. Benchmark reiterates its sell rating. Why do you own it? And you're trimming your position on this one.

[Steve Weiss]

Yeah, again, this is one of the ones I was waiting for for this year to do. And it's purely a portfolio, you know, management call. I love the company. I love the fact they still have so much pride pricing power that they're doing more and more in sports, which will bring more subscribers there and then they will raise prices. The ad model is going well and their only competition, well, actually they don't have any real competition. So that's what I like about the position. Stock has done very well. As all we all know, position just got way too big to be responsible. Still one of my largest positions, if not my largest.

[Courtney Reagan]

Kevin yeah, I mean, the analyst calls nonsensical to go from 555 to 720. It's silly. Third quarter revenues were up 15%. Net income was up 41%. They report January 21st. They're going to crush it again. WWE comes to Netflix Monday night. So get ready.

[Jim Leventhal]

Jim oh, I'm so excited. I just, I can't wait to see.

[Steve Weiss]

Jim in one of those little bathing.

[Kevin Simpson]

Suits I show up as a masked crusader. I protect my hand on the going.

[Jim Leventhal]

To have to need some kind of special name.

[Steve Weiss]

I have a feeling people will be able to tell the Jew, I'll give you that one.

[Jim Leventhal]

But sports, sports though to be sports.

[Courtney Reagan]

In general, you had the Jake Paul, Mike Tyson experience. Monday Night Football, excuse me, Christmas football. They haven't really figured out how to completely monetize advertising and when they do this thing's going to be a juggernaut. And to Steve's point you can charge us anything. We're not going to get rid of Netflix.

[Jim Leventhal]

Yeah, that's probably true. Diamondback Energy upgraded to outperform from peer perform at Wolf. It's also named a 2025 pick price target at 190. Brand new on this one.

[Bryn Talkington]

Yeah, I mean Diamondback is one of the best of breeds in the energy space. It sold off along with the rest of the energy complex in the in the fourth quarter of last year. But I think you have great execution from the C suite. You have capital discipline. They're in the right spots. And so I think in the energy space this will continue to be somewhat of a darling of the energy companies that asset managers want to own.

[Jim Leventhal]

Steve and energy, what are you thinking about for this year?

[Kevin Simpson]

Such a loser previously but what about energy?

[Courtney Reagan]

I thought that but I didn't say it.

[Kevin Simpson]

Sorry Steve, that was all right. You would have taken it if the positions were reversed.

[Steve Weiss]

Here's the thing, even if he says something funny is delivery so bad you can't tell if he's talking back? Leaving lips again for me. So here's bad energy. I've not been an investor in energy but I do keep coming back and looking at it Constellation, you know with the nuclear deals I do think I am opponent of nuclear. It's much safer than it ever was. So I'm just trying to figure out where to go on NAT Gas looks interesting but they've already moved. So to me commodities are just so hard and they are the ultimate trading stocks that rather not, you know continue to trade. If you look over 10 year over any 10 year chart to get last 10 years they're basically flat across the board. So you definitely have to trade them. I'm looking, I continue to look. I can't guarantee I'm going to do anything.

[Jim Leventhal]

Brent, you have a thought there?

[Bryn Talkington]

Yeah, I mean I think, I think where Steven, Steve's not wrong there. I think there's certain names we really like the mineral rights spaces in both the Public and the private markets. But you definitely have to pick your spots. I mean I sold Devon last year and that stock's been negative for two years. And so when you think about allocating capital, I think you really have to get company specific or stick to the private markets where I think the returns are more stable.

[Jim Leventhal]

Okay, so TJX named an off price winner at Wells Fargo. It feels like. Kevin, it's almost always one of those names that analysts are calling out in almost any kind of economic environment, off price seems to be invoked. Do you agree with this call?

[Courtney Reagan]

I mean 100%. I agree with TJ Max. Both in strong economic times as well as, Yeah, a pullback. $4.4 billion record free cash flow. Earnings per share were up 11%. Revenues were up 6% in the third quarter. Management guide tighter for the year. The only thing I would disagree with about this call is I don't think the price is high enough. 115. The stock's 120. So if it's a, if it's the fourth quarter that they're leaning into, so maybe the price target should be a little bit higher. We love the name.

[Jim Leventhal]

Yeah, fair enough. It almost always comes up as a winner. I feel like when the analysts are going through their calls, no matter what the economic environment, Dell is another one top pick at Bernstein. Brin, you're in this name. Obviously not one of these big core, magnificent seven kind of tech names. But still you've got ownership.

[Bryn Talkington]

Yeah, I think this name, like an oracle is what, what's old is new again. And their inner, their infrastructure services group is really the key point, the key sector section of the company that's driving, you know, double digit returns. So, so keeping, keep an eye on that. I think it'll be another strong year for Dell as the infrastructure continues to get built out in the data centers.

[Jim Leventhal]

It's interesting here Bernstein sort of notes that they see the stock is attractive in the 110 to 115 range, which describes little to no AI premium. Well, up next, Mike Santoli joins us for his midday word. We are back right after this. We are back on half time. Senior markets commentator Mike Santori joins us for his midday word as he does every day at this point. Yesterday when I was here on the desk, stocks had taken a downturn. Now we're kind of just melting up higher. What's the action take trying it again?

[Mike Santoli]

Court actually from around current levels is when Yesterday's decline happened. So 55940 ish. 5930 it's the 50 day moving average. I think the market's caught up a little bit in the kind of tactical games. In the absence of really big economic data, probably worth acknowledging we're due for some kind of a bounce. Very rare for to have the market down five days in a row, not to mention around the turn of a year. So all this stuff, market acting not the way it's supposed to, so to speak. So you had the makings of an oversold market. Underneath the surface because you have had really negative breath is some numbers. Rocket yields are tame. So I feel like this is what the market's supposed to be doing right now. The question is, is it just a relief bounce? I think you could look at some of the cyclical sectors in the last few weeks and say market is at least clenched up against the possibility that higher bond yields and, and waning economic momentum might be an issue. But I wouldn't say it's really sounding a loud alarm yet.

[Jim Leventhal]

A lot of news cycle focus on what's happening in Washington. Is the market paying attention?

[Mike Santoli]

Absolutely paying attention. I feel like part of the December story was okay. The path to whatever policy objectives the Wall street was hoping for might not be quite as clear or quick. And the idea that you wouldn't have a speaker and the idea that the, you know, the budget fight was a little tougher than you thought maybe is a slight overhang. So if you do get, you know, Speaker Johnson gets clear for the job again and it's one less thing to worry about. So I don't think it's the main driver, but it's been one of the things that I think is giving pause to, to a lot of investors who otherwise felt like it was kind of clear sailing into this year.

[Jim Leventhal]

All right, got it. Well, coming up next, your crypto playbook for 2025. We're hitting everything today for you. Bitcoin prices breaking records last year. The committee strategy from here. That's coming up. We're back. Bitcoin is starting the new year in the green, but still below its all time high of about $100,000. Kevin, you own MicroStrategy rallying today up more than 400% in the past year. Sticking with this one.

[Courtney Reagan]

We are and it's not for a use case thesis. I hear Steve talk about that quite a bit from the bitcoin perspective. But this is a leverage play on bitcoin and if you believe that there's a limited supply and a strong demand, which we know that there's a strong demand that this will continue to go higher. I will also say, without going into credible detail, that you can write covered call premium on any of these names and bring in massive cash flow. So we've been taking advantage of that, not just as a shareholder of a stock that's on fire, but also as an income generator and a hedge. We have a little coinbase and a little rock Robinhood as well. But this is a trade that I think will continue into 2025.

[Jim Leventhal]

Wow, Brittany, you're not in MicroStrategy, but you've got to play here.

[Bryn Talkington]

Yeah, I think, you know, I want. I bet. And so options came out on. I bet earlier in the year. So earlier this week, I. When it was pretty much right here, 5455, I sold the May 70 calls and collected close to $4 in premium. So definitely not as much as MicroStrategy, but a lot less volatility. So close to 7% yield. Yield and within six months. So I think it's a good strategy, as bitcoin we know is volatile, to take advantage of that premium.

[Jim Leventhal]

I want to give you a quick final thought here on this.

[Steve Weiss]

Look, volatility, as is advertised. I still think the demand's there and that Trump's policies, not the least of which he owns a bitcoin business or crypto business, you can believe that it's going to go higher if for no other reason.

[Jim Leventhal]

I was. I was wondering when someone was going to say that, that this is a call because of a very pro crypto administration. At least that's the thought. Well, coming up, we will take you to trade school with this committee's investing resolutions for the year ahead. Halftime. We'll be right back. Welcome back. As we kick off another year in the markets, we asked our committee for their investing resolutions. Weiss, we're going to start with you.

[Steve Weiss]

Yeah. Look, my resolution is to be able to discern trends earlier. So once they get too fleshed out, you know, there's really nothing to do with them, but. Or it's more expensive, they could still continue. Then you just determine the duration. So that's really it. So I've been so focused on what I own this year and things that relate to what I own that I miss some trends. And so that's what I'd like to be able to do. That's the resolution. Clearly, I was looking for something to say when Patty asked me something to say, but that's it.

[Jim Leventhal]

Okay. Kevin, what's your trading or investing resolution?

[Courtney Reagan]

I want to exercise prudent risk management in 2025. After two years of 20 plus percent returns, it's very easy to get complacent. I remember in my early career, the first seven years, believe it or not, we had positive years in the market. Thought I was a lot smarter than I turned out to be. But you want to make sure that you don't get complacent, you don't get lazy. Focus on the data, focus on the numbers and the mathematics. Don't get caught up in the emotion.

[Jim Leventhal]

Yeah, last few years have been pretty big winners, even just in index funds. Brent, what's your resolution?

[Bryn Talkington]

Yeah, we want to continue to help keep clients in their seats long enough to earn the returns of the asset classes they're invested in. And that really comes down to help continue to educate clients to avoid what we call that perishable news, those one to two day headlines that can have that unwitting effect of derailing a long term portfolio.

[Jim Leventhal]

Jim, you're pretty much happy where you are. No resolutions for you.

[Kevin Simpson]

Yeah, I thought about maybe turning into a crypto trader, buying meme stocks, coming on the show wearing neon green jackets, that sort of thing.

[Jim Leventhal]

Your WWE wrestling outfit.

[Kevin Simpson]

Yeah, exactly. No, listen, I always like to, I always like to participate in these things. But I thought about it and the turning of the calendar year doesn't change who I am. Doesn't change any of us. Of course I want to get better. That's good. That was funny. Of course I want to get better. And that's what Kevin, Bryn, Steve, you've just said. So of course I'm continually going to improve. I want to echo though what Bryn said because I think it was, it was very insightful, is to continue to educate clients because the worst thing that can happen is when you get a market downturn. Maybe it's a correction, maybe it's something worse and clients sell at the worst time. If there's one thing I want to continue to do it. To continue to educate clients. Clients that price does not dictate value.

[Jim Leventhal]

I'm not allowed to invest. My resolution is to make more meals. My kids will eat anyway. Stick with us. Final trades coming up on halftime. We are back with final trades. Bren, kick us off.

[Bryn Talkington]

Yeah, I'm going to stick with Uber. There's no real resistance until 72. And don't forget that Dara is one of the best CEOs in the business.

[Jim Leventhal]

And we're sitting right now at a little above 64. Kevin Robinhood.

[Courtney Reagan]

We love the acquisition of trade, PMR. We're going to experience the largest generational wealth transfer ever and the young people, their demographic will be the beneficiaries.

[Kevin Simpson]

Jim it's true that energy is cyclical and through each cycle ExxonMobil gets better and better. That's going to continue.

[Steve Weiss]

And Weiss crypto, Bitcoin specifically, and more specifically, IB bit. I just think it retakes 100,000, goes to 125. Next stop.

[Jim Leventhal]

All right, we've got just a little bit left here and I want to show you that the markets are higher here across the board. Consumer discretionary leading the way. Tesla highest in consumer discretionary, reversing yesterday's move, higher by more than 4%, but still down about 8 for the week. That does it for halftime. The exchange starts now.

[Courtney Reagan]

You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays.

[Kevin Simpson]

At 12 Eastern only on CNBC.

[Scott Wapner]

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 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 is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.