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Halftime Report
The fate of the rally 12/20/24
00:43:06
The investment committee debates the fate of the rally as stocks bounce midday. Plus, we debate the trade on Jenny Harrington's newest buy. And we're talking the committee's big winners and losers as we close out 2024. Investment Committee Disclosures
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- [00:00]
Scott Wapner
Support for this program is provided by Chevron. The Anchor offshore platform is utilizing breakthrough technology to enable us to produce oil and natural gas in the US Gulf of Mexico at pressures up to 20,000 psi. A new industry benchmark. Anchor is part of Chevron's plan to produce 300,000 net barrels of oil equivalent per day by 2026 in the US Gulf of Mexico, home to some of our lowest carbon intensity producing operations. That's energy in progress. Visit chevron.com anchor what's your boldest, truly ambitious life goal?
- [00:34]
Kevin Simpson
Everyone has one and everyone deserves a.
- [00:36]
Stephanie Link
Way to get there.
- [00:37]
Kevin Simpson
That's why State street offers a wide variety of ETFs to give all investors access to the market and the chance to reach their goals. Like with DIA, where you get 30 US blue chip stocks in a single trade. Wherever you're heading, getting there starts here with State Street.
- [00:50]
Stephanie Link
Before investing, consider the fund's investment objectives, risks, charges and expenses. Visit ssga.com for prospectus containing this and other information. Read it carefully.
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Jenny Harrington
DIA is subject to risks similar to.
- [00:57]
Stephanie Link
Those of stocks all at are subject to risk, including possible loss of principal Alps Distributors, Inc.
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Jenny Harrington
Distributor.
- [01:03]
Stephanie Link
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the fate of the rally and what, if anything, really changed this week. We'll debate that with the investment committee. Joining me for the hour today, Stephanie Link, Kevin Simpson and Jenny Harrington Surrott T and our CNBC senior economics reporter Steve Liesman as well. There he is. He's getting all set. It's been a rough week. We know by now those stocks are bouncing and in large part they are bouncing because of a conversation that Steve Liesman had with Austan Goolsbee, the Chicago Fed president, and that I really want to get to you first because it's a market changing commentary that Goolsbee had today. He said the policy rate is still far from neutral, implying more cuts. In fact, he said, I think rates still down a fair bit more. We're still on a path to 2%. Was this cleanup of sorts from Wednesday?
- [02:10]
Steve Liesman
I don't think so, Scott. I think that this is what Goolsbee believes and believed and probably wrote down for the for the summary of economic projections. I think it's important that it was preceded by New York Fed President John Williams, who's the one regional bank president that has the permanent vote and he's the vice chair of the committee. So, so it's important that there's, you've heard, I think, from a lot of the hawks on the committee leading up to the meeting. And there was a lot of hawkish talk in the market. And I think there's two guys here, by the way, buttressed by the data that came out earlier that showed a weaker than expected rise in the pce. And so what I think the market learned today is there's two sides to this trade. I think they thought it was one sided for a very long time. And, and they did get a hawkish pause, as expected, and they didn't hear the other side of anything.
- [03:07]
Stephanie Link
All right, guys, I'll open it to the table. Steph? It was, I mean, it's, if nothing else, it just reminds people that the Fed is still cutting. Okay. We don't know how many cuts we're really going to get. The, the economic projections that they put out the other day are, I get it, they're a baseline, but they're almost meaningless Y, because we don't really know nor do they exactly. What's going to happen. What really changed this week in your mind, if anything?
- [03:33]
Scott Wapner
Well, I mean, it was really confusing commentary from Powell for sure. Right. I was expecting the guidance to come down in terms of cuts for next year, but it sounded like maybe two cuts would be the best case scenario. So that's why the market kind of freaked out. And it was inconsistent because they raised the growth rate, but they also raised the inflation rate. So it was a mess. But what we did learn is we learned that they're focused on inflation first and foremost. I know they are also watching the labor market, but inflation is really it. And when we got the core PC numbers this morning at 2.8% year over year, that was a breath of relief, if you will. Right. And so also at the same time, we got personal income that was up 5%, we got wages up 5.8%, we got spending up 6%. That is very positive for the consumer overall. So if we do make progress on inflation or it doesn't escalate from here and the consumer hangs in, you're still looking at a very healthy economy.
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Stephanie Link
Here's my question to you. Where is my list of Stephanie Link buys today?
- [04:42]
Scott Wapner
I have, I have, because I don't.
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Stephanie Link
See anything on my sheets that say you're buying anything. And you've been super positive on this market. You have taken advantage of opportunities that have knocked on this door. You are just telling our viewers how positive you are. And I was expecting somebody to come in here today and say, you know what, I bought that because that was down a lot. And I bought that because that was down a lot.
- [05:02]
Scott Wapner
But I will tell you that I have 2% cash. So it's like I'm pretty bowled up. I don't, I would have to sell something. I'm not selling something when the market's down 1000. But I'll tell you, Morgan Stanley was down 4 and a half. So the S&P down 3 and a half percent. Before today. Morgan Stanley is down 4 and a half percent, Truist down 4 and a half percent, Dr. Horton down 6% and then CrowdStrike Zscaler down 8. Those are all on my list. But I don't want to sell something today because everything was down this week. So I've got a laundry list. You know, we've been talking about. I'm buying some of the laggards too.
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Stephanie Link
That's what I'm. No, but that's where I was alluding to. I was expecting laggard buying.
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Scott Wapner
That's my biggest, my, the biggest bet that I was looking to buy was Boeing. And actually that stock was up on the week. So no, it didn't come down more than I wanted it to come down to. So I have a la relist. Doesn't mean just because I'm not buying that I'm not bowled up because I just said I have 2% cash. That's pretty bullish.
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Stephanie Link
Tony Pascarello of Goldman, you know, in terms of, you know, did anything really change this week? I mean, in his mind, maybe you had an incremental change, at least in the way we need to think about a so called Fed put. He says, quote, the expectation of easier money was incremental fuel for equities, particularly in the higher velocity corners of the market. While the put is still alive and well, the Fed variable will now serve as more of a floor to the S and P rather than a catalyst for the upside. What do you think about that?
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Kevin Simpson
That's exactly right. And so when we've been talking about this and thinking about the rally and tatters, you know, where it goes, Is it in tatters? Is it pulled up? Like, where should you be? I think what Tony is saying, which is how I feel too, is why can't it just sit tight, right? Why can't we grow into this multiple? The economy is good, corporate earnings are good, we expect 15% growth next year. Why can't we just sit here and grow into this. And that's really at the root of it. Now we know there's going to be massive distortion within that. But I want to answer your other question too. Like, I was buying yesterday and, and when. When Steve said before, there's two sides to this trade. I've been on the wrong side of this trade for the month of December. It's been an insane month, right? You see things like materials, real estate, energy, all down 10 and 12% for the month. You see, you see equal weight. S and P down 7%. Russell down 9%. Meanwhile, the S and P itself is only down two and a half. So there's been a lot of messiness out there, even though at the superficial level, it's kind of flat. S and P down two and a half percent. So to me, yesterday I had huge opportunity. I already had opportunity. And then it became even more compelling yesterday. So I added to names like Columbia bank shares, Organon, Hercules, Sabra, Dominion and stuff. This is where the way we manage money is just a little bit different because all of our accounts are separately managed, right? Some of them have cash, some of them only have 2% cash. The ones that are with us for a long time, some that are newer still have cash that's been sitting on the sidelines. So is those accounts where they hadn't been fully invested, where I was like, great, let's go, let's go today and take advantage of this.
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Stephanie Link
So how do you see what happened this week? What transpired? Does it change anything about how we should view this market and opportunities that may exist and how, look, sentiment was really, really positive post election. It got really seemingly negative after Powell. Now we're having a bit of what feels like a reset because Goolsbee, you know, told Steve, wait a minute, we're not right up against neutral as some are trying to make it appear. We're not at the very end of the cutting road, as some would like to suggest we are.
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Surrot T
No, absolutely. And I think the market, we got up so fast so quickly, and then we kind of had this elevator down really fast. And I think through all this, you know, Jenny made some really good points there. Like, you look at the commodities sector and you look at like a freeport that's down to, you know, 3839 or the Schlumberger is at 37. So if I have additional cash and accounts and I'm like Jenny, with separate accounts, I will be buying more of these as we go into year end, I'm Also doing tax lot selling. So that gets a little confusing where you're doing it. But they are opportunities out there that these things are on sale for 10, 15% down in a month when the SB is only down.
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Stephanie Link
That's why I was saying like, where's my lists? Like, where are you guys coming in? I was expecting, I mean, there was a dislocation on Wednesday afternoon. I was like, all right, well, by the time we get to Friday, if things look pretty ugly, I'm going to have a lot of names that are going to be thrown out on this desk. And I just felt like it was a little light. I wanted to know why. I'm not forcing you to do anything. But I was. My expectation was that we were going to have some activity. Liesman, you want back in?
- [09:25]
Steve Liesman
I just want to make one point that I wouldn't take everything being said today to the bank. I think I'm going to be back here, I don't know next week when something goes the other way. Scott, it's worth pointing out. Powell used the word uncertainty or uncertain 13 times in his press conference compared to five in the prior press conference. Goolsbee was all over the word uncertain. So was Williams. There's a lot not to be known here. Some of it's good, some of it's bad. There's issues of timing. Yes, the data was better today. Yes, Goolsbee and Williams are both talking about additional cuts next year that reoriented the market. But there's a lot coming down the pike that's uncertain. I don't know how Stephanie trades uncertainty, but just want everybody to be aware that if you look at the summer of economic projections, the level of uncertainty is elevated in each particular category that they forecast.
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Stephanie Link
Of course. And we're trying to figure out the shutdown mess, policy play out and the whole thing. Steve, thanks for being with us and for the interview that was so important that you brought us to the network today which really did move the market. That's Steve Liesman. Let's turn it back here. So Kev, I mean if anything the so called Hawkish cut, which is unequivocally what it felt like, we got exposed some parts of the market that were pretty ripe for a pullback and looking frothy anyway, that's what Blackrock's Rick Reeder told me yesterday. I want you to listen. I think equities can still have a pretty good go. I just think, you know, we got, I mean the last couple of weeks it felt a little bubblish in terms of some of these sectors and I.
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Surrot T
Mean, you look at, you know, all.
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Scott Wapner
Of it, including crypto, that it felt.
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Stephanie Link
A little bit frothy. Right? He's right. And he felt a little bit frothy in some places. I mean, you know, bitcoin obvious had had this incredible run post election. It's off the burner a little bit. MicroStrategy down 13% this week. It's still at 463% this year to Rick's point. Robinhood down 5% this week. I mean, you have things like microstrategy. You have areas that were in the right, in the center of the froth conversation.
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Tony Pascarello
You said it was ugly. I don't know if it was ugly enough. You know, these are the weeks that really make us humble. We kind of knew exactly what was going to happen. There was going to be a cut, a hawkish pause, the dot plot. But we don't always know or we're not always able to anticipate how the market's going to react to it. And the truth is it's probably good and healthy that we had a little bit of a pullback here before the year end because all of us remember 2017 was a great year when it was all said and done. But the first six months of the administration, tons of volatility. We're going to have a president who once again is going to be criticizing advertising like individual companies on a daily basis. He looks at the stock market religiously. So this is something for newer investors. It might seem unusual, but this is not something that's terribly bizarre. But it is nine years ago. There's a bunch of people trading currencies, cryptos, option stocks were probably in elementary school, junior high, nine years ago. That's not a dig or criticism. I wasn't reading the Wall Street Journal every day when I was in grade school. But when we saw this news on Wednesday, after just a year of Goldilocks, seemingly Goldilocks data, it was the fly in the ointment and things certainly changed.
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Stephanie Link
You did trim Tesla. Speaking of high flyers and speaking of things that some would probably add to the list of, you know, frothy question mark. And you'd look at some of the crypto names and you'd look at Tesla for no other reason than it was up so tremendously from the election on. Not really fundamentals. Some fundamentals, I think, because, you know, we're talking about incentives going away and things that will benefit Tesla in the long run over some of the other EV makers. But why did you trim this Pure risk management.
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Tony Pascarello
We had a 6% position because this thing lit like a rocket.
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Stephanie Link
Yeah, it was a rocket since the.
- [13:23]
Tony Pascarello
Election, like you said, we sold it Tuesday at the Open at 470. That same day, Scott, we wrote a covered call for $440 expiring next Friday. We sold it for $46, and by the afternoon we were able to buy it back at 20 bucks. So we netted a $26 profit. Essentially. We just rolled down the call. Then we rolled into a 435 also expiring next Friday, brought in $20. So it'd be fun to see when we're sitting here next week if we let that expire, if we bought it back. That's pure risk management and a little bit of luck.
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Stephanie Link
Did we wash out. You think Seurat enough of what was frothy are feeling a little bit too out of control?
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Surrot T
No, I think at 3 to 4%, really not. I mean, if you're going to get a real correction like we had in August, about 10%. So I think come January will be very interesting as the new administration comes in. And I think what we got was a little prelude to what could happen, especially as our new administration starts talking tariffs and general economic data. And, you know, thankfully we did get some positive economic data today. But if that number went the other way, I think you could see a 2 or 3% down again today. So I think, at least from speaking for myself, I'm not really stepping in until a couple of these stocks because I think when the market does pull, I'll get a better opportunity. But I think that could be the next four to six weeks.
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Stephanie Link
What are we doing about the mega caps? Since we were talking about Tesla, there's been a lot of defense stuff of them this week. Dan Ives saying, you got to buy the dip. I mean, this is where the game is. Week to date, Apple still up one and a half percent, but you have had declines that are much less severe now because of the rally that we're undergoing as we speak.
- [14:58]
Scott Wapner
Yeah, I was hoping that Amazon would be down more than 4% on the week, to be honest with you, because that's the one that I own, that's the one that I want to be adding to. And I've. I've said for a while now that the winners into the end of the year are going to continue to win because PMs are chasing because they're underperforming and the losers will continue to lose because of what Sriracha said he's you know, tax loss, hard harvesting and so it's always funky the last couple of weeks of the year. So I try not to get too caught up in it. But I have a shopping list. We talked about all the names on my list, but Amazon in particular, I thought it would hold up a little bit better than down 4% but it wasn't down enough for me to go and buy and add more almost.
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Stephanie Link
You know, a lot of these names were down 4%.
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Scott Wapner
Yeah.
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Stephanie Link
Until Austan Goolsbee decided to change the dynamic today because the NASDAQ is now up 350 points. I know you're looking at the Dow, but Nasdaq's up almost 2% as a lot of the names that got crushed this week from the largest places in the market have now had a nice rebound. We've been discussing too that, I mean it's a nice number and it's important for the, you know, the headlines on the newspapers of the Dow. But in the reality of the way the markets are, the Dow doesn't really tell you all that much about what's going on. The S and P does. The Russell, which got absolutely hammered this week. Jenny. Excuse me, but you know, certainly does because that's some of the more rate sensitive areas of the market. Like the Russell got absolutely pounded on Fed Day.
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Kevin Simpson
I'd argue actually that the Dow does tell you a bit more. You know, it's old, it's antiquated. But the conversation Surround and I were having just before the show started was how almost like all of our normal clients, anyone who has any asset allocation in their portfolio has a Dow like return this year. You know, they're up 10%, 12%. And so the Dow in a weird.
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Stephanie Link
Way that's bad relative to everything else.
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Kevin Simpson
It's normal.
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Stephanie Link
SCOTT well, maybe even it doesn't matter if you look at that people, people don't look at that return and think it's normal. They look at it and say where.
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Kevin Simpson
Is our other 20%? For the everything we tell our viewers, if you're up 10, 12, 13% this year, you're normal. And you know what else is up 10, 12, 13% today? This year, like all the ivy endowments, like any money that's out there.
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Stephanie Link
I know, but it feels like an L. Correct.
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Kevin Simpson
And there's a difference between what it feels like and what reality is.
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Stephanie Link
The reality is when people open their statements and they're like why are we only up 10% this year when the S&P is up 30?
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Kevin Simpson
Because no, no one who works with an advisor, has a portfolio just in the s and P500. Because everyone's been trained in this business that you asset allocate to some degree that you give your client like some value, some international, some growth, that they get some bonds, some cash. Right. Everyone, every normal person has an allocated portfolio. Even people who don't work with advisors, by and large and are doing it on their own, they've been taught what's the smart thing to do. You allocate your portfolio and across the board, if you look at what real returns are out there, they're not the S and P. And I think this is where there's a problem because if you're comparing yourself to the S and P and you think like, oh, I'm a loser to your big L, you're going to start to make really stupid decisions. And your stupid decisions right now are going to say, oh, I missed microstrategy. I'm going to sell my whole portfolio and put in that.
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Stephanie Link
My only point was if you're looking at the Dow as representative of really.
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Kevin Simpson
Everything, it's not everything, but it's a normal Dow.
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Stephanie Link
The Dow was down. What did it have like 10 straight days that it was down down.
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Kevin Simpson
Right.
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Stephanie Link
Well, half of the loss over those 10 days was UnitedHealth. Okay, but you know, points to the why it's not the greatest place to look as your overall market.
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Kevin Simpson
But you're saying it's a representative total return number. If you take, if you take Broadcom, Tesla, Google, like out of the S&P 500, you have a completely different return in The S&P 500. Broadly out there. Like we all know the smart portfolio.
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Stephanie Link
I understand. But if you take the Chiefs and the Bills out of the NFL, you have a much different playoff picture.
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Kevin Simpson
But you know, sports analogies are lost.
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Scott Wapner
I don't know. I haven't been looking at the data.
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Stephanie Link
Good.
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Scott Wapner
I haven't been measured against the Dow. Look at it. We all as PMs, but you know, we S&P 500 as the market. That is what it is. It's a much broader representation.
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Kevin Simpson
But you know, my point is Steph, and it's no one's portfolios or the S&P 500% agree with you.
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Scott Wapner
But I will say this, that The S&P 500 is not perfect either because you got 35% of the waiting is tacking services. So nothing is really perfect. But I think as portfolio managers, if you're kind of a core manager, the s and P500 is your benchmark. So that's what we pay attention to. What's why it's so important.
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Kevin Simpson
Historically that worked. But this year I don't think it works because of the, because it's got 35% in a few small companies that have been extraordinary. We look across the board in the.
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Scott Wapner
Case Jenny, for a couple of years, fair enough.
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Kevin Simpson
But this year it seems a little bit more extreme. All I'm saying is like most normal people with any kind, with any kind of allocation in their portfolio have a.
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Scott Wapner
More down like 70, 30, whatever the allocation is it's about some international, some.
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Kevin Simpson
Some value like and you get this 13, 14. I'm not saying look to the Dow. I'm just saying it's not a distorted return. When, when you look outside of just the S and P or the qq.
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Stephanie Link
You do have a pretty good battle of companies that want to get into the S and P or be included in the NASDAQ 100. Palace Volunteer is going to join effective Monday. It is the best performing stock year to date, up better than 300%. Kev's position in that got called away. But Bob Pisani joins us now because that's what it is. Bob. It's a pretty fierce fight and a whole big hullabaloo to get into these things.
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Bob Pisani
That's right. And there's a lot of lobbying going on to get into these indexes.
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Stephanie Link
Scott.
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Bob Pisani
So today as you heard from Scott, the S&P 500 and the NASDAQ will add and delete new members and rebalance the indexes. At the close today, Apollo Global Management and Workday is going to join the S&P 500. Qorvo and Momentum will go out of the S&P 500 in the NASDAQ 100 MicroStrategy. Palantir, Axon Technologies will join the NASDAQ 100. Illumina Super Microcomputer and Moderna will come out of the NASDAQ 100. Now years ago these index reconstitutes institutions had very little impact on trading. It was more intellectual. Not anymore. The explosion of index based ETFs has changed all that. Today roughly $16 trillion trillion is indexed to the S&P 500 and over $400 billion is indexed to the NASDAQ 100. That is really big money now. If you doubt that being included in a large index matter, just ask Palantir. Scott mentioned this. On November 14th the company announced it was transferring its listing from the NYSE to the NASDAQ with the specific goal of being included in the NASDAQ 100 index. They said it, they got their wish. They're going in at the close today. Not everybody got their wish. There were a lot of bitcoin advocates hoping that Coinbase would be added to the S&P 500 instead of workday or Apollo today. That would help validate crypto as an asset class. Big lobby. And Coinbase has a similar market cap to Workday. But Coinbase did not make the cut today, maybe because it's too volatile. We don't know. MicroStrategy is going into the NASDAQ 100. But given that its biggest asset is bitcoin, half of the value is bitcoin. And the CEO Michael Saylor has said he wants MicroStrategy to be a bitcoin bank. There's some question about whether MicroStrategy should be a tech stock or a financial stock. For the moment, Nasdaq says it is a technology stock. However, Scott, if they reclassify this sometime in the future as a financial, it's not eligible to be in the NASDAQ 100. You see all this lobbying going on and furious moving around. The point is people care now about being in these indexes and we've seen a lot of lobbying to get into. Well, I think we're going to see.
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Stephanie Link
Yeah, as you said, I mean the minute the announcement comes out, the stock goes up into the right workday. Surat you own. Yeah, it's another one that's going to join, as Bob said, effective on Monday.
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Surrot T
And it's interesting, I mean, I don't know about you guys, but we put a stock on our prove list and buy it. We don't really see what index it's in. But then when it does come in or out, it affects the stock. And look, this is positive, but you never know. You own one that gets the other way, too. And you know, Apollo being more representative, I think these are companies that are more true representative of where business and commerce are going.
- [23:07]
Stephanie Link
All right, up next, Jenny, she alluded to the fact that she's been buying and she has a new name as well to tell you about. Next, is the committee along for the ride? We're going to find out the name and we're going to debate it. Coming up.
- [23:23]
Scott Wapner
Support for this program is provided by Chevron. The anchor offshore platform is utilizing breakthrough technology to enable us to produce oil and natural gas in the US Gulf of Mexico at pressures up to 20,000 psi. A new industry benchmark, Anchor is part of Chevron's plan to produce 300,000 net barrels of oil equivalent per day by 2026 in the US Gulf of Mexico, home to some of our lowest carbon intensity producing operations. That's energy in progress.
- [23:51]
Jenny Harrington
Visit chevron.com anchor@capella university Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [24:12]
Stephanie Link
All right, we are back. Been a good year for stocks. Everybody knows that. Not for every stock.
- [24:17]
Kevin Simpson
Not for every day.
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Stephanie Link
Your stock that you're buying is down 38% year to date. It is 53% off its 52 week high. It trades at only 10 times earnings and it is TripAdvisor. Right. Why?
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Kevin Simpson
So we added this to the discipline growth strategy yesterday. First I'll give you the numbers and then I'll tell you the story. So like you said, 10 times earnings, 14% free cash flow yield, double digit earnings growth ahead. Here's one of the best parts. $232 million a year of free cash flow generation on a $1.9 billion company. So here's what happened. We started looking at this last November when It was at $28 a share, Liberty. There was a Liberty Media overhang. And that really concerned people for a whole pile of reasons like what was going to happen with that controlling stake, what was going to happen with debt, blah, blah, blah. Drives the share price down 50% from that. It was 28 bucks. We bought it yesterday just shy of 14. Since, since last November you've had two things happen. And the big thing was yesterday. Yesterday TripAdvisor announced that they're buying in Liberty Media shares. Right? So that whole overhang is gone. Separately over the past year, there is a part of their business called Viator, which is a huge growth business. It's really cool. They've grown really nicely. Oh geez. I forgot to mention, mention one thing on the fundamentals to 33% EBITDA margins. That's huge.
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Stephanie Link
Oh yeah.
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Kevin Simpson
So, yeah, huge. So Viator, that right. Viator generates $800 million a year of revenues. They do 55,000 tours from global providers. What's super interesting here is that global tours, only 30% or sorry, tours of all sorts, tours and experiences, only 30% are booked online. But meanwhile, airfare and travel hotels are all booked at like 65% online. So there's an enormous opportunity to expand this Viator business and drive growth further. So, so that's kind of what you've got going. You've got the overhang of Liberty Media gone. You've got Viator driving growth, you've got 300 million monthly users. Like it's just a great business. And it kind of goes to your initial question, why aren't you buying right now? Well, we are.
- [26:20]
Stephanie Link
All right, there you go.
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Kevin Simpson
Argue with that.
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Stephanie Link
People do this, so argue with that. Let's do what I think most investment committees would do. You come within a name. You like, I want to buy it.
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Kevin Simpson
Right.
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Stephanie Link
And the committee debates it. What do you think?
- [26:32]
Scott Wapner
I think you have to have patience on this one. I understand what the appeal is. For everything that you just said, it's very contrarian. It trades at 8 times EBITDA. It's down so much. There are only 5 buys on the street on the stock, there are 14 holds and sell sells. So it's definitely contrarian. But their core travel business is in bad shape and it's in transition and the revenues are going to drag down, in my opinion, the good from Viator or the fork for that, for that matter. So I think if you're comfortable with a year time frame for them to turn this travel, the core travel business around, I have no problem buying it and owning it. But I think you have to just say it's not going to happen overnight. 12% for their core business and it's the biggest part of their business. And a transition into kind of the, the, the planning and guidance, that's what they're doing. I just think that's going to take a bit of time.
- [27:25]
Kevin Simpson
I think you're right. And I think on the patient's front, two things there. One, we've literally worked on it for 13 months. So that's like step one of the patients. Two, you know, in our strategies. And it drives people bananas, right, that we're so patient. But generally when we buy something, I'm like, look, I want to own this for three years, Right?
- [27:39]
Scott Wapner
You buy low, sell high.
- [27:40]
Kevin Simpson
Totally. And I'm completely comfortable waiting it out.
- [27:43]
Scott Wapner
So the catalyst in your mind, though?
- [27:44]
Kevin Simpson
I think the catalyst is really the liberty overhang disappearing, because that was huge. Like there was a chance that they were going to get laid in with a billion plus of debt and that's just gone. So you saw it pop 8% yesterday on it, Kev.
- [27:57]
Tony Pascarello
I mean, occasionally good things happen to cheap stocks and I tend to think that you've made a good.
- [28:02]
Kevin Simpson
Funny.
- [28:03]
Tony Pascarello
No, I like it. I think for a speculative trade, now's the time to take a swing at it, especially considering you've lost almost 50% of the value on all the points that Stephanie brought up. And I know you're not a trader. You're looking 12, 18, 24 months out and I like that. I think that the AI, the personalization, the mobile aspect of it can really be something. But if you're looking for a trade, you know, tread lightly. But for an investment, I'm in it with Jenny.
- [28:25]
Stephanie Link
What do you think? You own any, have you owned any of the stocks that are in the surrounding orbit?
- [28:30]
Surrot T
We've owned Expedia in the Past and TripAdvisor and I think I understand your thesis. And where value people to. I'm digging the other side and I'll go to Delta because if I got a cheap stock, I also want some of the catalyst. And just this week the CEO talked about Delta's bookings in January are the highest they've ever been. So you got a Stock during the 8 times earnings that's got forward momentum. Cheap stock here too. But I like to kind of wait because I've been in these stories before where I'm waiting for two years and the market's up 20% and I'm like now what am I going to do? So I do want cheap with a little catalyst. But I totally get where you're doing.
- [29:04]
Stephanie Link
I'll give you the last word then, Jenny. $2 billion market cap. I mean there still is pretty good demand for travel. Consumer confidence is in a pretty good place I think.
- [29:16]
Kevin Simpson
Like if you want just one nugget on it, you can land at 14% free cash flow yield. That's incredible. You do a lot of good things for a business when you're minting cash like that.
- [29:25]
Stephanie Link
All right, Good stuff. I appreciate that. Pippa Stevens has the headlines for us today. Hi, Pippa.
- [29:29]
Kevin Simpson
Hey, Scott. An Indiana man received today a maximum sentence of 130 years in prison for the so called Delphi murders. That's the 2017 killings of two teenage girls. Richard Allen was convicted last month of murder for killing best friends Abigail Williams and Liberty German who vanished during a winter hike outside the town of Delphi. The Consumer Financial Protection Bureau is suing three major banks, bank of America, Wells Fargo and JPMorgan Chase over alleged fraudulent payments on the Zelle payment app. The agency claims customers lost more than $870 million on the app because the banks failed to protect themselves. Operators said it will fight the meritless suit. And Unibababy Essentials is recalling more than 600,000 child car seats due to a harness issue. The National Highway Traffic Safety Administration said debris could get stuck in the front harness which could keep it from properly restraining a child, increasing the risk of possible injury in a crash. The recall affects the rabba models from 2016 to 2023. Scott, back to you.
- [30:32]
Stephanie Link
All right, thank you. That's Pippa Stevens. Coming up, we are trading more committee stocks on the move. We have several today. A pharma double double price target hike for one of Stephanie links newest buys. Document them all next. Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted?
- [30:54]
Jenny Harrington
If this sounds like you, you're stuck in the past.
- [30:57]
Stephanie Link
Discover is accepted at 99 of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back.
- [31:06]
Jenny Harrington
Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report at Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [31:33]
Stephanie Link
Let'S get some committee stocks on the move today. Uber favorite idea for 2025 at RBC. They say they're drawn surrott to controversy with their favorite ideas. Not afraid to go there on this name. What do you think?
- [31:45]
Surrot T
Look, the stock's down 10% six months. It's flat year to date. We sold a bunch of it in the 70s but I'm not selling it here. I think the opportunity the next year is really good for Uber especially as travel and people are moving and the economy is doing well. It's just been one of those that people have used for source of funds and I think the overhang of EVs and who's going to be in their space too short term is going to take a long time for them to have any competition.
- [32:08]
Stephanie Link
Carmax price target goes to 88 from 72 at Truist. They do reiterate their hold right. They don't love it here but they try and get closer to where the stock is currently trading.
- [32:21]
Kevin Simpson
Right. So this isn't that interesting but it's still really compelling. They just announced earnings. They were really good. Unit sales were up five and a half percent. And here's the cool thing, earnings actually beat consensus by 31%. People really weren't looking at this fairly and had been become over overly negative on it. So when we're talking about valuations and growth rates and what's fair to pay. Right now you've got a stock trading at 23 times and the earnings growth expectations and these are for the consensus estimates that by the way were just beat wildly are 22% next year and 31% the year after that. That's a combination that I want to own. The other nice thing about CarMax is they basically sell cars in like the three to five year old vintage and that works really well in the kind of economy that we're in. And also coming out of the huge distortions on auto sales from the pandemic, we're past that. So they're in a nice spot to grow, you know, have achieve some really nice high margins.
- [33:09]
Stephanie Link
Watching Novo today, you guys have probably heard me take a look at the stock on an intraday. It's a, it's a brutal day for, for Novo down more than 16%. It's even you know, come off the worst levels of the day on their weight loss drug missing a target. But the flip side of that of course is Lilly which is getting at least it was popping in part on that development. We could take a look at Lilly go in the opposite direction today. Up 4%. Kev, you have that in the Q devo.
- [33:38]
Tony Pascarello
Yeah, we missed that in our dividend strategy but we own it in the growth strategy. Real nice pop upwards. Novo Nordisk problems are Lilly's gains. This is something that again will play out over time for these weight loss drugs. But it's not their only product. So I think there's a lot of, a lot of things that can help elevate Lilly beyond just a headline.
- [33:56]
Stephanie Link
Surat. What about Merck? They got downgraded today and it's was it outperformed. Now it's at perform. The target goes to 105 from 136. So again, closer to where the stock is right now, what do we think?
- [34:09]
Surrot T
I mean Scott, all my pharma stocks, whether it's Bristol, Mark J and J, they're all in the dumpster.
- [34:15]
Stephanie Link
It's been one of the worst performing sectors of the year.
- [34:18]
Surrot T
Well, especially since we got the new administration coming. The overhang there is huge. I think this is the stock. I think somebody mentioned these are the earnings have to grow into these. The valuations are so cheap for these guys. Good dividends.
- [34:32]
Stephanie Link
You're going to hold it. Are you making the case for a Surat holding is a Surat hold for.
- [34:37]
Surrot T
Bristol and JJ and Merck.
- [34:39]
Stephanie Link
Okay. Crown Castle TPG said to be in advance talk to buy the company's fiber unit. 8 billion. We do have a 52 week low. 52 week low today, is that right? 52 week low?
- [34:50]
Kevin Simpson
That's right.
- [34:51]
Stephanie Link
Of course.
- [34:52]
Kevin Simpson
Oh, it's a dividend stock. They're all terrible right now anyway. On a serious note, they're not all terrible today, but Crown Castle is interesting. This rumor of these fiber assets being for sale started a few months ago and the valuation on them, which right now is 8 billion, came in lower than people anticipated maybe six months ago. So the share price came in. What happens when they sell these fiber assets are two things that are interesting. On the one hand, FFO funds from operations will be reduced. On the other hand, once this kind of like, like low, no kind of capex sucking business is gone. They might be able to get an expanded valuation. So right now Crown castle trades at 13 times and that's weighed down by their fiber assets. Their peers AMT and SBIC trade at 17 and 15 times. So they could get some multiple expansion. So you have like an. On the one hand. On the other hand, right here. All right, it's not super clear, but you're getting a 7% dividend.
- [35:38]
Stephanie Link
All right, Accenture target to 430 from 420. So it's modest bump. We take a look at that stock. A little upside from here by Goldman Sachs. They, they said they see significant secular tailwinds.
- [35:50]
Scott Wapner
Yeah, I mean it was up 6% yesterday on a good quarter. They beat earnings, they beat revenues. Operating margins grew 90 basis points year over year. Free cash flow grew 102% year over year. Their Gen AI bookings grew 166% year over year. AI and Cyber both through double digits as well. And that's what they're talking about. AI and cyber is a play with Accenture and the stock has lagged materially year to date. So I think it's a catch up trade for 2025.
- [36:19]
Stephanie Link
Okay, we'll take a quick break, we'll come back. Santoli is on the other side with his midday word, which is probably a little bit different. Well, not probably, perhaps a little bit different now than it would have been some 40 minutes ago. Because the Dow right now is of 827 and the NASDAQ's up nearly 370. That's almost 2% with the S&P good for about 108. Knocking on the door at least trying to get back to 6K. We are back in two. Are you following the Halftime report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now. Okay, we're back. Senior markets commentator Mike Santoli joins us now with his midday word. I'll just leave it to you to make sense of what we came into today thinking and then what Goolsbee may have us now adjusting to.
- [37:15]
I
Sure. I mean, look, coming into the day, I think when you talk about just what the conditions were and we've talked about it for a couple of days, things were getting a little bit washed out. You saw all the extreme oversold readings. The question was whether the the market could make any use of that if the PC numbers were pretty much benign. And they were. And I think it allowed the market to exhale. You had yields come in off the highs. Absolutely. I think, look, Goolsbee kind of refocused people on the idea that maybe we're still on the Trend back to 2% inflation without having to really radically change the rate path. But I think the more actual encouraging thing to me is that the market just seized on that. Let's be honest. That's something you probably would have expected Austin to say a couple of days ago. He said it, the market was in a spot where it was ready to make a run for it because it had been cleaned out a little bit coming into this. We have a 90% upside volume down the New York Stock exchange right now plus 90%. Actually. That's generally a positive thing. To keep in mind. Where we came from though, the S and P right before the Fed decision a couple of days ago was at 6060. Right. So we're 5970 right now. So at this point we're still relieving the oversold. We're trying to say, okay, maybe things didn't change radically a couple of days ago. We got through a lot of the political noise. So we'll see where that leaves us. Maybe we can make use of the the positive seasonals into next week feel.
- [38:36]
Stephanie Link
Like, though maybe, I mean, I don't know. You look at today which suggests that the market overdid it a little bit post foul, post power.
- [38:43]
I
I mean, yeah, look, the market, it always is going to overshoot it in the short term. I don't think you necessarily had the basis for a 28 Vix when you're a couple percent off the highs. It showed you really how weak things were below the surface. And now you have a really nice spike peak on that vix chart. That's usually one of those things that says market clenched up too much. Now we're releasing the tension. I guess the question is how far it carries us because we do now have a sense out there that whenever we think thought the preferred policy priorities and efficacy was going to be next year, maybe we have to rethink that. If that was a core of your bull case for 2025, maybe you have to adjust. If it's just about, hey, the trend is, is friendly then, then stick with it. Not much has changed.
- [39:26]
Stephanie Link
I'll see in a couple of hours. Mike. Thank you. That's Mike Santoli. Coming up next, our year end report card reveals continue. We will look at the best stocks and some of the worst as well from the committee next report card time. Surat, please come to the front of the class. It's your time. All right. Nvidia up a lot. We know. United Airlines up 134%. That's been a huge winner. GoDaddy. Yeah, almost a double. Up 92%. You've owned it all year. What's with this stock? Why does it work so well?
- [39:59]
Surrot T
So GoDaddy is in a perfect space. It basically when you go online, you get a domain name, they're selling you additional services like security, things like that, cash payments or you know, so great growth, recurring revenue. It was out of favor for a while and then you can just look at the chart picked up in the last year, year and a half.
- [40:17]
Stephanie Link
You like United along with Delta?
- [40:19]
Surrot T
Obviously I like Delta a lot better than United. United is on my trim. If not, I'll probably be out pretty soon. But I think Delta is the key stock in the airline.
- [40:27]
Stephanie Link
But we were trying to find you the other day. You were hiding from us.
- [40:31]
Surrot T
I always hide.
- [40:32]
Stephanie Link
Lamb Weston debacle disaster. We're like Seurat. Pick up the phone. Huge debacle. I'm not answering that. Huge debacle. Executive producer calling. Boom.
- [40:44]
Surrot T
Huge debacle.
- [40:45]
Stephanie Link
What do you do now?
- [40:45]
Surrot T
They fire the CEO. Jana's in there. Activists are in there. They messed up the ERP a couple quarters. Europe was much worse. A lot more supply than they have for demand.
- [40:57]
Stephanie Link
You're selling it. No, let's cut to the chase.
- [40:59]
Surrot T
No, actually it was a tax law double up for me. So I'm in even more pain. But I'm at 60 bucks. I'm not selling it, okay? Because I think in, in two years it gets about five bucks. You get a 15 multiple. It's going to go back to 75, 80. It's too cheap to sell at this point unless I'm doing the tax lot selling which you know that I'm already doubled.
- [41:16]
Stephanie Link
Don't ghost us next time, all right?
- [41:19]
Surrot T
It never ghost to you, Scott.
- [41:20]
Stephanie Link
Kinetic, Jenny, K and TK is the ticker symbol for wherever you are. Playing up 68%. You bought it in August, didn't own it all year, but nonetheless, it's a. It's a big winner. What now?
- [41:32]
Kevin Simpson
So on Kinetic, I think there's still more earnings growth ahead and more upside there. I think if. Can we go to my bigger list? Because I want to talk about it comprehensively.
- [41:41]
Stephanie Link
You can do whatever you like.
- [41:42]
Kevin Simpson
Thank you, Jenny. So.
- [41:43]
Stephanie Link
So you call the shots. Sod over here.
- [41:46]
Kevin Simpson
You're such a head. He's such a match. Okay, so my three winners that you had for me are Better, XPO and Kinetic. What's interesting is the losers are active, Devon and Starbuck. And I think it's really interesting in this because if you say what went right and what went wrong, when I sat here last year, they looked similar, right? They looked like compelling valuations, decent earnings growth. And for each one, there's an opposite. So you've got in the tech space, Meta and Aptif. In the energy space, you've got Kinetic and Delta 7. And then Industrials, you've got XPO and Starbuck. And they're wildly divergent returns. But what really separated it was the earnings growth that either came through or didn't. But like I started last year with Aptif, for example, saying this thing's trading at 13 times earnings and has 21% earnings growth. By the way, Meta didn't look that different. It was 21 times earnings and had 20 plus percent earnings growth. One of them executed on earnings, the other didn't. If you ask me what I want to buy and sell right now, we want to trim. We want to trim xpo. We want to trim Meta. Totally comfortable holding Kinetic, all three of the losers totally comfortable buying or adding to Dev. And I might wait until after the first of the year because I'm probably going to use it as a tax law service. Sorry.
- [42:50]
Stephanie Link
Okay, hurry up. Okay, let's go.
- [42:52]
Kevin Simpson
Say like a parent's only as happy as their most unhappy kid. I really appreciate the report card because a PM is only as happy as their worst. As their worst position. So thank you for reminding me that I actually have some winners.
- [43:02]
Stephanie Link
Okay. It's my pleasure.
- [43:04]
Kevin Simpson
Thank you.
- [43:05]
Stephanie Link
Kevin met us up a lot. We got it. Amex been one of the better performers this year. Goldman's had a great year. We know about Marathon Petroleum, down 11%. We talked about Merck, Pharma but what about Marathon Petroleum? Down 11?
- [43:19]
Tony Pascarello
Yeah. I mean, we would still add to it here, Scott. It's an energy play. Energy. We've been underweight most of the year. We had higher expectations for them. It's a strong dividend. The increase increased the dividend by 10% already this month. They reduced the float by 15% just this year. So we know what's happening with Energy. Its return of cash to shareholders, dividends, dividend growth, share buybacks. We think it's still a good story for 2025.
- [43:43]
Stephanie Link
Freeport's down 8%. There was a note today that says materials. I think it was from Krinsky at BTIG suggesting materials are way, way oversold.
- [43:51]
Tony Pascarello
100%. But it seems like every time we say that, they go down further. But this is a copper play long term, not a China play. Good dividend. You can write calls against it. We will add to the position here. We're not sellers.
- [44:01]
Stephanie Link
All right, good stuff. We'll take another break and we will come back and we will do final trades. 3:00 Eastern, the final closing bell of this week. We'll take you through the final stretch, see what we're going to do. 800 points right now on the Dow. So we have a reversal on our hands.
- [44:17]
Steve Liesman
Pretty powerful.
- [44:18]
Stephanie Link
One, two. Chris Toomey and Matt Boss will be with me. Let's do final trades. Surat, I gave you the business earlier. I'm gonna let you go first.
- [44:26]
Surrot T
All right, thank you.
- [44:27]
Stephanie Link
Ghosting you, Sarah.
- [44:28]
Surrot T
I know you're not ghosting me. I'm going with Freeport. One of Kevin's plays. I like it. It's so cheap at 38.
- [44:34]
Stephanie Link
All right, Jenny.
- [44:34]
Kevin Simpson
Columbia bank shares 5.3% dividend yield.
- [44:37]
Stephanie Link
Thank you. Kevin Simpson.
- [44:38]
Tony Pascarello
Procter and Gamble just pulled back from 182 and a half percent dividend, of which they've raised it 66 years.
- [44:44]
Scott Wapner
Stephanie Link, Target 2025 turnaround.
- [44:47]
Stephanie Link
All right, great weekend, everybody. Good holidays. If we don't see you, the exchange is next. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live, weekdays at 12 Eastern only on CNBC.
- [45:03]
Jenny Harrington
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the halftime report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer@ Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella. Eduardo.