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Halftime Report
The State of the Bull Market 02/11/25
00:34:37
Scott Wapner and the Investment Committee debate the state of the bull market following Fed Chair Powell’s Testimony before the Senate Banking Committee. Plus, the desk debates the latest Calls of the Day on Schwab, Vertex and Transocean. And later, the Committee reveal their latest portfolio moves.
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- [00:00]
Multicare Representative
Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future.
- [00:27]
Discover Card Advertiser
Learn more@mycare.org 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? If this sounds like you, you're stuck in the past. 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. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report.
- [01:00]
Scott Wapner
I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Welcome to the Halftime Report. I'm Scott Wapner. We've been watching Fed Chair Powell's testimony before the Senate Banking Committee, mostly reiterating what he said after the last Fed meeting. The Fed in no hurry to make its next move on interest rates, that the economy is in a good place. He wouldn't comment at all, of course, when asked on terror tariff policy and the impact it might have on the overall inflation picture. Keeping an eye on the markets today, we were mixed. The Dow just dipping negative. So not too much activity for the major averages, but we will trade everything. And we do have some moves to tell you about as well with the investment committee. Joining me for the hour today, Josh Brown, Jenny Harrington, Jim Leventhal and Steve Weiss. So that's where we begin. Weiss, I feel like, you know, if you're looking for anything big from the Fed chair today, you weren't going to get it. And maybe the Fed's look, this may be a crazy statement, maybe the Fed today is as inconsequential to the path of a stock market than I can remember. They're not going to do anything. In no rush to do anything. They're probably not going to do anything at the meeting that's coming up as well. And there's a general feeling that there is goldilocks to be had because the economy, as the Fed chair himself said, is in a good place. What say you?
- [02:26]
Josh Brown
I say it's all working now. I mean, volatility aside, there is no thing for them to do right now because while they can't talk about it, as a matter of fact, it's smart not to talk about it. Tariffs are a real threat to the economy and to inflation. But he's not going to come out and say that. So, so I think we're going to stay in this trading range. I think we'll continue to see this volatility day to day, depending upon what comes out. But I can tell you, Scott, there are some things to consider and I don't know if you consider them good or bad because as we've gone through earnings and as you've had separate, less public conversations with company management, investment is dying down. The case for the banks, the IPO market, M& A has ground to a halt because you just don't know where the laws and regulations are going to go.
- [03:19]
Scott Wapner
Slowest January for deals in a decade.
- [03:21]
Josh Brown
Yeah.
- [03:22]
Scott Wapner
So your points will take it, by the way, just moving. And I'll tell our viewers this, I'm not exactly sure where this is being said or this where this was said, but Ken Griffin, who runs a citadel, certainly one of the greatest investors in the world, apparently has said, according to reports, the Trump tariff, in his words, quote, chaos is an impediment to growth. It sort of speaks to complete chaos. Your point, like the the field was deemed to be really open to run as you were coming into 25, Trump administration is going to take office for the second time and you've got a Runway that looks pretty good. But you do have now some obstacles that you have to get around and you may fall down in the process of trying to get to the end zone.
- [04:04]
Josh Brown
Yes. So so far, you know, you look at this as snatching defeat from the jaws of victory in some ways because of the chaos. Look, I've talked to people on Trump transition team. They're clueless. They don't know what today is going to bring. The administration gets caught by surprise a lot of time. FDA is sort of grounding to a halt, a lot of applications for drugs and devices had some needs based trial data in there. That's all got to be removed and that's before Bobby Kennedy, if he gets approved, is running it. So it's very difficult to take large sums of money. I've talked to private equity firms as well as well as us and it's very difficult to make a large bet. What will happen though in each industry as these regulations play out and particularly as Doge continues to wield their hatchet, particularly in defense, you're going to see massive consolidation because These large companies are going to look for areas of growth that they're now being deprived of. So I think it's important.
- [05:08]
Scott Wapner
So the comments from Griffin are apparently being made at the UBS Financial Services Conference. I think that's down in Miami, where Citadel is now headquartered, by the way. We're working on chasing down what else he had to say. But the initial comment certainly was worth all of you knowing about. I thought that was an interesting exchange too, during that hearing in Senate banking between the Fed chair, Josh and Senator Kennedy of Louisiana about whether it's time for the Fed to declare victory essentially in the fight against inflation. I want you to listen to the back and forth and we can kick it around on the other side.
- [05:42]
Josh Brown
The fact is, knock on wood, we have experienced a soft landing, haven't we?
- [05:50]
Scott Wapner
Not for me to say. Really. I'll let others.
- [05:54]
Josh Brown
Have we experienced a hard landing?
- [05:56]
Scott Wapner
No, we sure have.
- [05:57]
Josh Brown
Are we in a recession?
- [05:58]
Scott Wapner
No, we're not.
- [05:59]
Josh Brown
I call that a soft landing. And it seems to me that you and some of the ladies and gentlemen who are your colleagues at the Federal Reserve behind you deserve some credit for that.
- [06:15]
Scott Wapner
Thank you.
- [06:17]
Josh Brown
I don't know why you don't take the credit. Everybody else in Washington, D.C. does.
- [06:26]
Scott Wapner
I just thought that was an interesting exchange. It sort of, Josh speaks to the landscape in which we are in that the Fed's in a good place and they know it and they have a little bit of a flex about it.
- [06:36]
Jenny Harrington
Sure.
- [06:36]
Scott Wapner
He's not going to come out, Powell isn't, and say, yes, it's time to stand on the aircraft carrier and declare victory because they're in the last mile of the battle against inflation. But it does underscore why investors are bullish, why bank of America today shows that their flows, most sectors saw inflows into this market because people think that get is going to be good in the months ahead.
- [07:00]
Steve Weiss
Well, he's not taking credit because he may be the firefighter, but he's also the arsonist. And we have documented literally thousands of segments on this show and others talking about how absurd continuing not only monetary policy stimulus into the pandemic and beyond was, but even just ignoring what was happening on the fiscal side with the infrastructure bill when the Biden administration came in in 2021. So, yeah, it's great we had a soft landing. Some of the people I Talked to, like Dr. David Kelly at JP Morgan and Rick Reeder, they call it a no landing, meaning we basically didn't have a cycle. And that's all well and good, but.
- [07:45]
Scott Wapner
Even better, Sure, I mean that people are investing. But if what was.
- [07:51]
Steve Weiss
Respect, respectfully, that's not the Fed's doing, what actually ended up happening was irrelevant.
- [07:57]
Scott Wapner
There was so much monetary, it's irrelevant. We don't need to go back and litigate. We're not trying to litigate the Fed. All we're simply doing stating where we are now. And where we are now is deemed to be pretty darn good. Which is why the Fed chair sort of expresses confidence, which is why the Senator Kennedy asked the question in the manner he does. This is why bank of America continues to show that money flows into this stock market. Because the environment's pretty good.
- [08:27]
Steve Weiss
Yes, the question, the original question was why doesn't the Fed take credit? I'm giving the answer where we stand now. Despite the Fed having missed the inflation and then fixed its its own issue, the 10 year is at 4 spot 53% today, which is down about 4 basis points on the year. I want everyone to remember as recently as January 13th we were at 4.8% and the alarm bells were oh my God, we're going over 5. So we're down 27 basis points from that level. That's basically a full month ago. And so while there's a little bit of a blip higher this week, all in all we have not faced down that 5% level. The big thing that is even more important than where rates are though, this is an incredible earnings season and it justifies the rally that we finished 24 with and it justifies the S and P being positive year to date. You've got 62% of the companies in the S and P through this morning having reported and 77% of them have beaten earnings, which is above the 10 year average. When you look at the percentage that beat revenue, 7.5% above, which is above the 10 year average.
- [09:40]
Josh Brown
So.
- [09:41]
Steve Weiss
So it's a stellar earnings season and we are now seeing Earnings reports up 16.4% for Q4 over, over the previous. So going into this earnings season the expectation was 11.8. So not only are more companies exceeding, we are exceeding by a greater degree and seeing one of the highest rates of quarterly earnings growth than we've seen. You have to go back to 2021 to find anything like that, 16.4%. So how much of that is the Fed? Very little. And I think the Fed should be thankful that corporations spending on AI pulled us out of the potential tailspin of an actual hard landing.
- [10:25]
Scott Wapner
Jenny, the reason why the market's in a pretty good spot and why it yesterday all but blew off the tariff news is because exactly what Josh said, earnings are good. More than two thirds of the way through earnings season, we've gotten the growth that we really wanted. We thought the bar was maybe exceedingly, exceedingly high. In some cases, maybe it's proving not to be. Investors are betting with earnings. They're not betting on tariffs. They don't care until they have to care. And today they don't really care and nor do they have to.
- [10:52]
Jim Leventhal
So I would argue that investors preemptively bet with earnings and that's why the market's up 3% year to date, which is great. I love getting started on that. But when you have earnings exceeding estimates to the degree that they are, one might expect more. But I think that to some degree that was anticipated. And by the way, I'm saying this, thinking this is very healthy. This is where I want to be. This is logical. But when we ended the year last year at 21 and a half times earnings, which was almost unprecedented other than going into 2022 before the market collapsed. And then before that, you would have to go back to the.com like pre.com to see multiples quite that high and that many standard deviations above the average. So, so I would say this was anticipated, Scott. A lot of this was already baked in coming into this year. Earnings are great, economy is great. Even with all this, even with all the noise, there's not really anything too new. Right. Like, it's interesting listening to all these earnings calls and one of our companies, carrier reported, carries a huge global H Vac company company, you'd think there would be a lot on tariffs on there. And you know what they're saying? They're saying even with tariffs, we're still going to make $3 of earnings. And then every company that we've been hearing report, they're saying, look, we've been through this before, we're going to get through it again. We don't know where they're going to shake out. But there's just, you just can't say.
- [12:06]
Josh Brown
Anything, though, if you're CEO, unless you want to target your back, you can't say anything, but we'll get through it.
- [12:13]
Scott Wapner
No, but others can. I mean, you know, the idea of what, you know, Griffin is going into more detail too, where he talks about the uncertainty and the chaos. If you were to talk about how difficult it is for multinationals. Right. How are you going to plan for the next five, 10 or 20 years if you have this dynamic?
- [12:31]
Jenny Harrington
Because, sorry, the key example here is General Motors, which I don't own anymore. But think about it. You know, back in November, tariffs are announced, stock goes down, they're put in place a week ago, then they're reversed. And you think, okay, well, maybe GM's going to be okay. And then you get steel tariffs which are going to raise steel deal. That's a key example of what companies are going through. I do, however, think that what Jenny, you've said and Josh said at least offsets, that maybe wholly offsets that, which is earnings. And the thing that we haven't spoken about regarding earnings so far is how broadly it's distributed. You know, I'm looking right now at how each sector has done so far through the fourth quarter. Earnings season, technology earnings are up 11%. Financials are up 59%, consumer discretionary up 35%. I can go on and on, but the broadening of the earnings growth, which has been projected for many quarters and took a long time to come, is happening. And that's why the rally, I think has legs, is because it can broaden, continue to broaden and go further. That. Look, there's no question that what we're talking about for corporations and CEOs is tough. It's really tough to deal with. But if you've got good profits, that helps. And what they're not doing is laying people off. As long as they're not laying people off, employment stays intact, consumption stays intact and so does profit.
- [13:47]
Josh Brown
There are layoffs, but not a lot to your point. But here's the real point. The real point is nobody believes that the 25% tariffs across the board in steel, whatever, are going to come fruition because if they did believe that, then the mark would be a lot lower. So if it happens then, and it's a different story, would it? Oh, without a doubt. Let me, let me tell you why. Because you've got companies take GM with an EBITDA margin profit margin of 6 to 8%.
- [14:17]
Scott Wapner
GM is not the market.
- [14:18]
Josh Brown
No, but I'll go through. You want me to go to retailers where the Profit margins are 8 to 15%, except for like a Lulu that's over 20%. So the profit margins these companies have can absorb those, those tariff increases. It's not going to be the countries that absorb them. It's going to be the companies. So while this, so what that will do is it will increase inflation. That's undeniable. All the BS they talk about, the administration talk about, it's not going to increase inflation, of course it has. And of course it had.
- [14:48]
Scott Wapner
Which is, which is why when you look at Metta, which is going for 17 days in a row up and Nvidia is going for, I think tariff doesn't, tariffs don't, the tariffs don't, don't matter now, you know, chip exports and things like that are obvious.
- [15:01]
Josh Brown
You know, if you take a look I looked at before, I don't know today, but I assume it hasn't changed that over the last 30 days every s and P sector is positive and some around 5% or so, except for, you know, tech.
- [15:16]
Scott Wapner
Service tech is flat, Discretionary is flat. Now Discretionary has been hurt by Tesla obviously, which has a huge weighting within the discretionary space. Everything else year to date is up.
- [15:28]
Josh Brown
Nicely, which is my point.
- [15:29]
Scott Wapner
Comm services seven, materials up 6%. Health care and six and energy in six and financials in six. Isn't that what you want? Isn't that what you've been waiting for?
- [15:37]
Jenny Harrington
Yes, yes. And if you look at the 493 stocks that are not the MAG7 and go back a year ago, there was no profit growth. There was none, it was zero. Okay. Now you're looking at high teens growth in those stocks. That's why they're doing better. It's not that hard to figure out. It's the earnings growth is spreading out.
- [15:53]
Scott Wapner
Why did you trim some Microsoft? Why, why did you do that? I mean the chart obviously doesn't, doesn't look that great. Year to date it's down two and a half percent. It is the only, I believe stock out of the Mag seven that's negative over the past year. Down two and a half percent.
- [16:11]
Josh Brown
Yeah.
- [16:12]
Scott Wapner
So now it's got open air overhang too.
- [16:14]
Josh Brown
Yes, I've trimmed it. I think that could be a positive actually because they're not exclusively tied to them. But I trimmed it for a few reasons. The first is I don't see the future this year changing all that much. So I didn't cut it completely. It's still a core position, but I did cut it because it is a permanent compounder and we've been through periods of this before, so I don't think it's going to outperform. I want to lower some of my exposure of the market specifically to the max 7 and I want to have some more cash to deploy because I'm not so sure we continue to go straight.
- [16:49]
Scott Wapner
But if you're worried about you just, you know, you're talking about the consumer and you're like, well, retail is a problem with Tariffs. You just, you just bought Dick's Sporting Goods again.
- [16:57]
Josh Brown
I did. And the reason for that is not even when we go through recession, not every retailer loses. There are some that have a unique value proposition, like in Netflix for example, but also Dick's Sporting Goods. Sure, there are regional players in sporting retail sporting goods, but the management and the new management continues to excel with their online, with their E commerce, with their in store and unique experience and they have managed all cycles extremely well. So it's also one of the cheapest stocks in my portfolio, as it should be. It's a retailer but you know, they don't report for a month or so. I just think it's an attractive stock to.
- [17:39]
Scott Wapner
What's the, what's the biggest takeaway, Josh, do you think of that breakdown of the sectors that have done the best year to date and the fact that it's so evenly split and. Yeah, okay. Technology is flat, hasn't done anything that's okay, right? I mean look at these other sectors, what I told you they've done.
- [17:57]
Steve Weiss
Yeah, things could change. But like the areas that are working really interestingly, it's almost like a throwback to the middle aughts. It's like this economic expansion where it's, it's not too hot, not too cold, but like every sector is working and within every sector you can find names that are up double digits year to date. And it's only like February 10th or 11th. 51% of the S&P 500 financials are above their 50 day, 88% above the 200 day. Almost the entire sector is working. And when you think about how diverse the financials are, you have everything in there from capital markets, brokerage, insurance, large banks, small banks. It's just, it's this really widespread economic growth story with rates that are moderately high but probably headed lower. And you know what's not working? The Mag 7, they are actually detracting from the S&P 500 year to date performance as a group through yesterday's close. The other 493 names of the S&P are up 3 1/2%. The Mag 7 detracted 0.31% year to date. I'm trying to think when the last time we would have been able to say that in like January, February. Usually these stocks get off to a really fast start. What does that mean for investors today and going forward? I think there is an emboldening to look for new names to go lower in capsize, to go away from AI and to just do things differently. And there are tons of stocks that are working that have nothing to do with Mag7 and I think that's a really healthy tape. I kind of like it. I'm betting Jenny, Steve and Jim do too.
- [19:41]
Scott Wapner
All right, we'll document a number of those names that are working when we come back. Plus, well, a new chapter in the drama and the escalating fight between Elon Musk and Sam Altman. Kate Rooney following that story for us. We'll have an update on the very latest next.
- [19:59]
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- [20:33]
Kate Rooney
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- [20:36]
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- [20:54]
Scott Wapner
All right, how about this? Elon Musk and a group of investors making a $97.4 billion bid for part of OpenAI. Kate Rooney has the the very latest details on this ever escalating drama.
- [21:06]
Kate Rooney
Kate Scott well this is certainly an unwelcome headache in the eyes of OpenAI. It could stall plans for this company which was co founded by Elon Musk as a nonprofit to become a for profit. And Musk is already sued to block OpenAI's restructuring now as well as a competing AI firm. This marks Musk's latest attack on CEO Sam Altman. I did just speak, Scott, to a source, Glenn Close to all of this, who confirmed that the Musk team never submitted an official takeover offer to OpenAI's board. All of this came through a press release yesterday from Musk's lawyers and legal team. Typically there would be a more formal direct communication. So that is the latest there. Sam Altman also just telling Reuters at an AI conference in Paris, quote, I have nothing to say. He said it's ridiculous, said the company is not for sale, called it another one of Musk's tactics to try to mess with us. Here's what Altman told CNBC from that conference earlier today.
- [22:03]
Discover Card Advertiser
I think it's to slow down a competitor and try to catch up with his thing. But I don't really know, yeah, but you know, well, right to the degree anybody does.
- [22:14]
Kate Rooney
Altman also getting a jab at Musk in on Twitter saying about the offer, no, thank you, but we will buy Twitter for 9.74 billion if you want. Musk did buy Twitter for about four times that price. Musk then responding to that tweet, just saying swindler. Other investors involved here are loyal Musk allies, personal friends. You've got Antonio, Gracias, Gavin Baker, Ari Emanuel, Ron Baron, for example. And people close to this group speculate that the deal could be both a genuine offer and a tactic to get in Altman's head. This all comes as OpenAI is looking to close a frame $40 billion round, I'm told, which is being led by SoftBank.
- [22:53]
Scott Wapner
Scott, what if part of this, I mean it can be a lot of things at once and thinking a lot about this. OpenAI was originally set up between Altman and Musk as a nonprofit, right? Therefore, when Musk made his initial investment 45, $50 million is what has been reported. Reported he got no equity at all because it was a non profit. There was no equity to be had. So once Altman decided that he wanted to do the conversion from nonprofit to for profit, essentially Musk is like, well, wait a minute, I put in 45, $50 million at the very beginning and now you want to have a conversion where you are going to be a multi billionaire and I essentially get to pound sand for my initial investment. Now they're going to raise money at a post money valuation at $340 billion and they declare the nonprofit is worth $30 billion. Where Musk again is like, no, no, no, no, no. You can't tell me the Nonprofit is worth $30 billion if you're raising it 340. That doesn't make any sense.
- [24:07]
Kate Rooney
Well, a couple interesting points, Scott. You're spot on in Musk's argument and thinking behind this. That's what he's laid out to the courts. I think what you said there is especially spot on on the price of the nonprofit and is really setting a price here saying, okay, we would be willing to pay around $100 billion to get control of that. If Open Air is valuing it at so much less than the number that Musk is setting, that could be part of the strategy here. I think there's a little bit of psychological warfare going on with Musk versus Altman and him trying to just throw sand in this whole conversion. But he has argued you cannot convert to a for profit in this way. It's definitely unprecedented. There's also a control factor here in the context is that Elon Musk now has a competing startup with OpenAI. And that's important context that the court is also examining. But it is a never ending drama between, between these two.
- [24:59]
Scott Wapner
Scott yeah, no doubt. And we'll wait for the next chapter. Kate, thank you very much. That's Kate Rooney. We get the headlines now with Savannah. And now. Hi, Silvana.
- [25:07]
Multicare Representative
Hey, Scott. Good afternoon to you. President Trump is hosting King Abdullah the Second of Jordan at the White House right now. The meeting comes in the wake of the president's most recent comments suggesting Jordan and Egypt make deals to permanently take in Palestinian refugees while the US Takes takes control of Gaza. He also threatened to withhold aid to the countries if they don't agree. Former Trump adviser Steve Bannon pleaded guilty today to defrauding donors in a fundraising effort to build President Trump's wall along the US Mexico border. As part of the plea agreement, Bannon will not serve any time in prison, along with several restrictions on fundraising and working with charities in New York. And the top court in Massachusetts ruled this morning that Karen Reid can be retried on the same charges in the death of her boyfriend, Boston police officer John O'Keefe. Prosecutors have been trying to retry Reid on three charges including second degree murder for allegedly hitting him with her SUV and leaving him to die in a snowstorm in 2022. Her first trial ended in a mistrial when the jury filled failed to reach a unanimous verdict. Scott?
- [26:20]
Scott Wapner
Silvana, thank you. That's Sylvana. And now up next, a bunch of committee stocks on the move today on their earnings. We will break down those trades right after this.
- [26:32]
Discover Card Advertiser
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- [27:06]
Kate Rooney
We'll give you examples that can help you master AI tools.
- [27:09]
Discover Card Advertiser
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- [27:28]
Scott Wapner
All right, we're back. Committee stocks on the move today include Leidos they beat but the stock wasn't reacting well. Weiss, this is yours.
- [27:34]
Josh Brown
Why yeah, and actually I added to it today.
- [27:37]
Scott Wapner
I mean it's on the pullback.
- [27:39]
Josh Brown
On the pullback. Look, here's the story. The quarter was great. The guidance was very optimistic. When I contrast it with, with Booz Allen that reported on Friday, they are much more measured in the outlook. Both the great companies, both have a large portion of their, of their workforce embedded in the government. So they could be in the government crosshairs. But both actually work on the same, some of the same projects which are cyber, which Trump favors and you do need. And the Biden administration held back. They work on modernizing technology in the DoD and those are critical to, to defense and offense for the US So it's really the, it's really environments holding these companies back. So Leidos also bought back much more stock. They said they would. I spoke to the company today and my suggestion was, look, maybe we put more into M and A because they do have an active M and A program. But speak to my consolidation comments earlier. That's exactly where the capital should be going to unique opportunity to buy defense assets right now for both Booz Allen, which I still want to own. I did own it briefly but got out because of the environment.
- [28:48]
Scott Wapner
Just to reiterate, you bought more Leidos this morning on the pullback. Okay.
- [28:52]
Josh Brown
Love the company.
- [28:53]
Scott Wapner
Carlyle was down as well. Josh, what's your read here? Private equity stocks, by the way, of late have not traded all that well.
- [29:03]
Steve Weiss
Yeah, look, I think Carlyle is fine. I think the whole group is fine. They had a huge run last year. I think they're consolidating those gains. And the reality is it's not an A plus environment for private equity. Private credit, credit. On the plus side, there is demand and the wealth management door has been kicked down. The platforms are making inroads, but on the negative side, there's a ton of competition and it's unclear who's going to win in each category. And there is unlikely to be 10 different winners for every style of, of alternative asset management. So it's still relatively early and I think these stocks are buys on political pullbacks.
- [29:44]
Scott Wapner
What about carrier was down as well. Mixed earnings. That's your stock there. It is down too. I mean, so we, we go on waxing about how great earnings have been. We just told you we got three stocks down on their numbers. What about carrier?
- [29:56]
Jim Leventhal
So Carrier is kind of interesting. Earnings are great. They came in at like 6% organic. But the, but the street was expecting 11% so a little disappointing there. What I think is so interesting about this earnings call is so far, far beyond just the fact that they grew earnings by, by 6%. What they're saying is, look, and I mentioned this earlier, regardless of what's coming our way, we think we can still pump out $6 of earnings. And by the way, they buy their steel domestically. So as we're all freaking out about steel tariffs, here's a major company that should be largely unimpacted. And so when you actually start to like flesh out tariffs and what their real impacts are, the noise we hear is very different than the bottom line. In their $3 of earnings, they've already accounted for China tariffs and they're expecting them. So that's already in there. Where we are with it in our portfolio is we actually trimmed this several months ago when it was trading at 28 times and at $80 a share. Now we're down to a 2 1/2% position. Most of our positions are 3%. We're like 22 to 22 times mid teens growth ahead on earnings for the next few years. We're probably going to bump the position up. Sounds good.
- [30:59]
Scott Wapner
Okay. All right, we'll take a quick break. We'll come back, we'll do some calls and the setup as well, get you ready for some earnings. Let's run through some calls. Charles Schwab, the price target got bumped today by a bucket Truist. They say they have updated their model after TD bank announced it would be selling its entire 10.1 stake worth $14.6 billion. You got Schwab?
- [31:24]
Jim Leventhal
Yeah, there's just some. Something funny about a $1 price target raise, right? Like, who cares? But the bottom line is, what it does is highlight that the stock's undervalued, is trading around $83. They're saying 91. We totally agree with this. You know, we talk about permanent compounders. Schwab is a permanent compounder. Might take steps back and breathers now and then, but like, that's just a business that grows forever.
- [31:44]
Scott Wapner
Jimmy, we did the setup on Vertex going in. So let's talk about it coming out because Truist raised the price Target here to 520from 460. What do you think?
- [31:53]
Jenny Harrington
Well, the results reported for the fourth quarter weren't that great.
- [31:56]
Scott Wapner
They were mixed.
- [31:57]
Jenny Harrington
They were mixed. They were like blah. That's not the reason I own the stock. I mean, the stock is a great cystic fibrosis franchise. That's what the reported results are. But the reason I own the stock is what's to come. Primarily, this Pain drug that should replace opioids, non addictive, very effective. And the question going forward is how fast will that ramp up? I think expectations are actually pretty low at this point in time and they're easily exceeded. So this is a good price to be entering vertex if you don't own it already.
- [32:23]
Scott Wapner
What do you think about Transocean, which was called a new buy today at one firm? I mean, the price target, we're talking about a $5 stock. Really? I mean, we're talking about a less than, less than $4 stock. I don't even know why we're doing it, but.
- [32:35]
Jenny Harrington
Okay, well look, this year, 2025, what's.
- [32:41]
Scott Wapner
Your cost basis on this?
- [32:42]
Jenny Harrington
$2. Okay, but you're. But no, listen, I know where you're going. It went up, it came down.
- [32:47]
Scott Wapner
No, no, I wasn't going anywhere. I was just curious because I mean, $3.88 stock.
- [32:51]
Jenny Harrington
Yeah. $3.2 billion market cap. It is probably going to have 700 million of free cash flow this year. And I feel pretty confident about this because you can see what their long term contracts are. You see the day rates. 700 million of free cash flow versus a $3.2 billion market cap. Tell you, I think it's very undervalued.
- [33:10]
Scott Wapner
All right, the setup, Cisco, is tomorrow after the bell. Jenny, you get it first. Both you and Jim own it. But what do you think?
- [33:16]
Jim Leventhal
I'll defer to Jim. Can I give you Cisco, totally unprepared.
- [33:20]
Scott Wapner
Jim, go ahead.
- [33:20]
Jenny Harrington
No, Cisco's had a very good run. It came out of the penalty box. It was in the penalty box for about a year and a half. Had a lot of COVID effects were downstream of that. So the last six months it's up about 45%. I think they will have a very good quarter. I would be surprised if the stock went up from here. So I'm not, by the way, I'm not selling this. I own this for 10 years. It's been a great stock during that time frame. However, if you're looking to enter it, I would wait until after earnings. It's just gotten ahead of itself, that's all.
- [33:47]
Jim Leventhal
Thanks for bailing me out, Jimmy.
- [33:48]
Scott Wapner
What about Reddit, Josh? Are you prepared to talk about this? The stock that we have on our sheet today? What do you think?
- [33:56]
Steve Weiss
Yeah.
- [33:58]
Scott Wapner
Good, that's a win.
- [33:59]
Steve Weiss
Have you ever seen me not be prepared to talk?
- [34:03]
Josh Brown
Even when you're not prepared?
- [34:04]
Scott Wapner
I mean, I might put Jenny into that category with you, but that's neither here nor there.
- [34:08]
Jim Leventhal
I couldn't remember what earnings were expected to be.
- [34:11]
Scott Wapner
So read it.
- [34:11]
Jim Leventhal
I knew Jim.
- [34:12]
Scott Wapner
Let's do Reddit.
- [34:13]
Steve Weiss
Look, look there. If you have an obsession with a topic, not a cult of personality, not somebody who needs to hear every single thing Elon Musk has to say all day, but a topic. So for example, my favorite show is Severance. I need to know everyone in the country, everyone in the world, what are they saying about the latest episode? There's only one place where that conversation takes place and it's Reddit. It's a $37 billion market cap with a TAM that's probably not meta sized per se, but this is a gigantic 100 million daily active user social media platform that is just now figuring out ads to the extent that their competitors have a generation ago. In addition, it is an arms dealer to all of the AI training and inferencing and all the platforms. They've got 20 years of user generated data on platform that people aren't able to scrape. So there are a lot of ways to win here. I remain long. It's volatile, but volatility is my middle name. Josh.
- [35:18]
Scott Wapner
I hear you. I was looking at Moody's too, which is a record intraday high today. It was your pick for Al. I'm just waiting for the stock to come up. Wow. 507. Okay. It's a nice move.
- [35:30]
Steve Weiss
What do you think? Like, I don't know what I'm doing. I just. I just talk for a living.
- [35:33]
Scott Wapner
No, they don't always all go up. We'll have final stocks.
- [35:37]
Steve Weiss
You seem shocked.
- [35:38]
Scott Wapner
What finals Next? Closing bell, 3:00. Nick Timorosa, the Journal. Alex Cancewicz. Anastasia Amoroso. I hope you'll join me then watch these markets. Josh. Final trade.
- [35:51]
Steve Weiss
TTD Trade desk.
- [35:53]
Scott Wapner
Thank you.
- [35:54]
Josh Brown
Steve Weiss, Leidos. I'm going with it. Staying with it.
- [35:58]
Jenny Harrington
Farmer Jim AstraZeneca. Strong start to the year.
- [36:00]
Jim Leventhal
Jenny Harrington, Devon Energy. With oil above 70, it's wildly profitable.
- [36:05]
Scott Wapner
All right, I will see you on the closing bell. We'll see what this market does between now and then. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.
- [36:23]
Silvana
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 learn how.
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