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Trade Negotiations and the Market 4/25/25
00:44:14
Frank Holland and the Investment Committee debate the latest news on the Trade Negotiations out of Washington and how it will affect the market. Plus, we discuss some key earnings on deck. And later, the Committee making multiple portfolio moves, they share the details. Investment Committee Disclosures
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- [00:00]
Scott Wapner
Hey Fidelity, Can I get a second opinion on stocks in the Fidelity app?
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Frank Holland
With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions.
- [00:16]
Scott Wapner
That's right.
- [00:17]
Frank Holland
I am always right.
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Scott Wapner
Investing involves risk, including risk of loss.
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Frank Holland
Online US equity trades and ETFs and retail fidelity account sell order assessment fee not included some account types and securities excluded.
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Scott Wapner
Details@fidelity.com commissions Fidelity Brokerage Services, LLC Member.
- [00:28]
Frank Holland
NYSE, SIPC Are you still quoting 30 year old movies?
- [00:33]
Stephanie Link
Have you said cool beans in the past 90 days?
- [00:37]
Frank Holland
Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past.
- [00:42]
Scott Wapner
Discover is accepted at 99 of places.
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Frank Holland
That take credit cards nationwide and every.
- [00:47]
Scott Wapner
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.
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Frank Holland
February 2024 Nelson Report. I'm Scott Wapner and you're listening to.
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Scott Wapner
CNBC's Halftime Report, the podcast the most.
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Frank Holland
Profitable hour of the trading day. We record this live weekdays at 12 Eastern.
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Scott Wapner
Listen in.
- [01:15]
Frank Holland
Thank you, Carl and Sarah. Welcome to the Halftime Report. I am Frank Holland in for Scott Wapner, front and center this hour, the latest on the trade negotiations, key earnings reports and how to position your portfolio for Tech's Moment of truth. Joining me for this hour we got Stephanie Link, Joe Terranova, Malcolm Ethernet Ridge and Kevin Simpson. First quick check of the markets before we start this conversation. A lot to talk about today certainly take a look. The Dow pulling back just under a half a percent. The S and P essentially flat just fractionally higher. The Nasdaq the best performer up about a third of a percent. And we're starting with Alphabet, the stock that seems to be pushing that index higher. Alphabet also higher, following a much better than expected earnings report. And that's really where we got to begin. Joe, what did you make of this earnings report? Was the bar low? Is that why we're seeing this response or was this simply just a blowout report in your mind?
- [01:59]
Scott Wapner
$70 billion buyback? Clearly the spend is still there and I think it's indicative of the entirety of this week where for for the first time we've been able to say, okay, let's really look at earnings. And the earnings have been remarkably strong. So I love the fact today seems like a relatively calm and quiet environment. I think for us to end the week in that regard is is extremely positive the Vix back down to 25. We began the week thinking that the President was going to find a way. The Federal Reserve chairman. We got through the week with Treasury Secretary Bessen being the sole voice, the sole messaging voice on the policies of the administration. And that has allowed for a really good environment. Then you get an earnings report like Alphabet. You say to yourself, okay, so in my case, I still have my S and P futures began to early on Tuesday. Accumulate the S and P futures. You have a nice price gap now 5309-5356. Put a stop in on Wednesday's close, which is 5375. And you just kind of of ride what really is washing away that extreme negative pessimism of last several weeks.
- [03:11]
Frank Holland
Yeah, it's your point. S and p up about 4% week to date. Kevin, I'm going to come over to you. You're also an Alphabet shareholder. What was your take on the report? I do want to ask you about two key parts. Cloud missing estimates very slightly. I want to emphasize very slightly. Also YouTube ad revenues missing estimates, again, very slightly.
- [03:27]
Scott Wapner
Yeah, I think it's something that we.
- [03:29]
Frank Holland
Should be expecting in terms of ad rev coming down.
- [03:32]
Scott Wapner
But I still criticize Alphabet and Google for not completely monetizing what they can do YouTube, especially with what they've got with the NFL package coming up. So even though that was a slight miss, everything else was unbelievable. You look at the operating income, net income more than doubling at 2.2 billion. Top line beat.
- [03:49]
Frank Holland
Bottom line beat.
- [03:50]
Scott Wapner
Joe mentioned the share buybacks. Not to mention they also increased the dividend by 5%. So this thing was unbelievable. And what's notice, I think what's most important, Frank, is that we're paying attention.
- [03:59]
Frank Holland
To it and it's not just an earnings report that came and went.
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Scott Wapner
And all we focus on is guidance. No guidance, multiple guidance. So pretty good day here on the floor.
- [04:08]
Frank Holland
Yeah. Stephanie, coming over to you right now. What was your take on this and does this signal a comeback when it comes to tech? Tech having a good week. The defensive trade actually having a bad week. The Staples down about a percent week to date. Is this an inflection point when it comes to tech more broadly?
- [04:25]
Stephanie Link
Well, I mean, it's been a nice rally from the lows in the overall market, the s and P, 500, Nasdaq and tech in general. Certainly you're up upper single digits in tech just from the lows. So it's encouraging. I think we got oversold these. The technology as a whole is A great free cash flow story. There are a lot of wonderful moats as well. I look at Alphabet and I actually thought that for the most part it was pretty much in line. So like search up 9.8%. Good, but in line. YouTube up 10.3%. Good but in line. And cloud up 28%. I think we were bracing for Cloud to actually see a deceleration or actually a big miss. We didn't. I think the big highlight, as Kevin just mentioned, is operating profits. I mean, operating margins were up over 120 basis points relative to expectations. And so I think that we were bracing for negativity. We got a pretty good report against low expectations. But the big key in my mind, Frank, is that advertising did not roll over. And that to me is a big highlight. And one of the reasons why I actually have been adding to Metta.
- [05:36]
Frank Holland
All right, so you added to matter was the. Were the ad results where there was a major catalyst in your mind or was it this report overall?
- [05:44]
Stephanie Link
Yeah. No, I mean search is 56% of total revenues at Alphabet and it accounts for 75% of. Of advertising. That is positive for Meta because last quarter Advertising was almost 96% of total revenue. So if advertising just hangs in there, Matter should, should do pretty well. I think they're going to grow 20% in total revenues this year. 40% operating margins. And the stock is trading at almost 13 times EBITDA. The historical average is at 17 times. So I think you're getting quality on sale. I may be wrong. They are reporting next week, Frank. I will buy more if the stock is down because I think these metrics are very powerful. And again, it's a big huge moat. 3.3 billion users. So I like it and I've been adding to it for, for a while and added to it this morning.
- [06:36]
Frank Holland
All right, so stuff link. Adding to met a lot of confidence from this matter from these Alphabet report, I should say. Malcolm, I want to come over to you. Can I. Can you take the opposite side of the argument? I want to ask you about this ad business.
- [06:45]
Malcolm Etheridge
Okay.
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Frank Holland
This really stuck out in my mind. Alphabet said that finance, retail, health care and travel, one of the top industries, advertising with Google, I mean two of those, retail and travel, they could face a lot of headwinds going forward. Does that make you concerned about Alphabet going forward or other companies depending on ads?
- [07:00]
Malcolm Etheridge
Yeah, I actually. You didn't even have to ask me to. I feel differently about it than it sounds like Stephanie does. I'm actually concerned about both Meta and Alphabet in the sense that they are reliant on the consumer. And so I do want to be owning tech here. I do want to be adding to tech here at this moment of weakness, but I don't necessarily want to be owning tech that's so directly tied to the consumer, especially with those ad sales, because we know at the enterprise level, as soon as it looks like the road is getting a little rocky, the first thing to get an adjustment on the bounce on the income statement is going to. Sorry. On the spending plan is going to be advertising. Right. It's the first thing that you cut. And I think that they could be negatively affected in this current quarter's earnings, but we won't know until we get into the July period.
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Scott Wapner
So I think there's latency in the ad spending. We're looking at a quarter where you really didn't have a lot of the negativity reflected in the overall environment.
- [07:52]
Malcolm Etheridge
100%. I think the trade we're seeing right now in tech has a lot more to do with not as bad as feared, especially when we talk about the tariff war. And I think that tech is responding this week and will probably continue to respond next week to not as bad as feared, as long as we don't get any more announcements out of the White House next week during earnings. But I think that looking forward to that period, that's where we'll get that adjustment.
- [08:15]
Frank Holland
Yeah, Steph, go ahead.
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Stephanie Link
And I'm just going to say, I mean, matter is down 26% from its highs. And as I just mentioned, the valuation has actually come down dramatically relative to its historical average. And we did see pretty, pretty resilient results in advertising. I have no question that if the economy goes into a recession, advertising certainly will take a hit. But I think a lot of bad news is already reflected, especially in Metta, which, by the way, I've only been adding, I bought it back just about a month ago when it was down 30% from its highs. So I think the risk reward here is really very good. The free cash flow is wonderful for all of these companies, by the way, and the margin upside is really material. And that's despite the fact that these companies continue to spend a ton of money on capex, on AI. And so I think that these are opportunities for the long term that you want to take advantage of.
- [09:09]
Frank Holland
All right, I'm going to come over to you. We got more Mega Cap earnings next week. Microsoft, one of your holdings coming up next week. The concerns that you mentioned for Alphabet, do those also kind of loom over Microsoft as we wait for their report?
- [09:20]
Malcolm Etheridge
No, I think Microsoft is in a different situation. They're less reliant by a long shot on the consumer. They're a lot more reliant on enterprise customers that have longer term contracts that don't tend to make, you know, quarter by quarter decisions on how they're going to roll out their textbook spend. And so I think Microsoft Nvidia is another. Companies like that are in a pretty prime position when it comes to weathering a storm. If we are going to get a recession soon versus anything that's reliant directly on that consumer.
- [09:49]
Frank Holland
I want to talk about a stock that's especially trade sensitive and growth sensitive. That's Amazon. Joe, you own this one. You mentioned the President and Jay Powell earlier this week. What did you make of the comments earlier today that were in Time magazine? The President saying he would see it as a total victory of tariffs. A year from now. We're at about 50% on foreign imports. That certainly would have a big impact on Amazon. I imagine just from a growth standpoint when we come to the economy would have an impact on all these names.
- [10:14]
Scott Wapner
Well, I mean it continues a very mercurial nature of communicating how we're going to go about trade, global fair trade. So, you know, that's the comment that we're reading today. I think a comment that we could read two days from now might look a little bit different because certainly in the last 48 to 72 hours we've heard things that have been different as well. My feelings as it relates to why I think Amazon is something that you should be holding for the long term is I think that obviously they have strength in nwc, but I also think that they are going to continue to take their business and move it very similar to the what Netflix has done more towards entertainment. I think that's going to be valuable. I think they're going to get into a lot more live events, whether it be sports or other types of live programming. And I think that's going to allow for substantial revenue growth in this company. You know, this is a company, remember that they have been able to turn the dial on that revenue growth over the last several years. And just when the street questions their ability to actually exhibit the revenue growth, there they go. They show you that they can actually do that.
- [11:21]
Frank Holland
Steph, you also hold Amazon considerable ad business, obviously a lot of exposure to tariffs through the third party sellers. What do you make of the earnings that are coming up? What are your expectations? And again also not again, but also the Biggest cloud computing player. If you were worried about Alphabet, where do you stand when it comes to the cloud business, when it comes to Amazon?
- [11:42]
Stephanie Link
Well, the cloud business at Alphabet was 28.1% growth. It was in line, it was no worse than feared. But it still still really good. I know it's a decel from the last couple of quarters but still 28% is still very impressive. I would say that I think the quarter overall for Amazon is going to be just fine. I think is going to continue to be the behemoth. I think retail will gain more market share. Remember last quarter they gained 420 basis points of market share in the retail business relative to everyone else. And they are definitely just one of the haves in retail along with Costco and Wal Mart. The big question in my mind is going to be operating profit guidance for the second quarter and that is definitely going to be impacted by tariffs. So do they lower that number at 17 billion? So that's your number that you're looking at for the second quarter in operating profits. Do they lower that number? If they do, the stock is not going to respond favorably. If they just hold it, I think the stock will hang in there and actually do pretty, pretty well. The Stock trades at 23 times estimates, 26 estimates, which is a discount to Microsoft and it's, and it's also a discount to Wal Mart. To me that just doesn't seem reasonable given the long term growth algorithm that the company has.
- [12:57]
Scott Wapner
Steph, isn't there a tremendous amount of variability though even if they do lower something that it's a moving target? One quarter later you can see the acceleration once again. You just don't know where this is going to go with tariffs.
- [13:11]
Stephanie Link
I mean we don't, we don't know anything about tariffs and what the implications are going to be for all of retail, especially because they're so sensitive to it. So that's why I say like the guidance is going to be very important and can they dial it up? Can they cut costs? Can they do other things to offset. Yeah, I think that they can, but I think, you know, it's going to be hard to get around it for most discretionary companies. I think the point being though, I think the demand is there. So to your point Joe? Yeah, if they have one hit this quarter, the demand doesn't go away. It probably is delayed another quarter or two. But I, I own it and I continue to like it. The Stock is down 22% from its highs and if it's weak on next week's report. I'll, I'll be adding more for the long term.
- [13:57]
Frank Holland
Kevin, coming over to you. You own Amazon as well in the Q D, V etf.
- [14:00]
Stephanie Link
We do.
- [14:01]
Scott Wapner
That's in our growth strategy, Frank.
- [14:02]
Frank Holland
And good news.
- [14:03]
Scott Wapner
We're rolling it out as an SMA at Raymond James starting on Monday. So congratulations. Thank you so much for the Raymond James Advisors ETF and an sma.
- [14:12]
Frank Holland
The one thing we do know about.
- [14:13]
Scott Wapner
Amazon is that 30% of their margins come from China. So whatever the tariffs turn out to be, however it plays out, it's going to affect them. They're going to have to guide down. So I would expect good numbers.
- [14:24]
Frank Holland
But to Malcolm's point, don't, don't put.
- [14:26]
Scott Wapner
Too much stock into that because it's probably the next quarter. That's going to be a lot more important.
- [14:30]
Frank Holland
All right, what about Apple? You also own Apple as well. What are you expecting from that? A lot of questions about that Apple supply chain, of course. Some news today related to making iPhones in India, but a lot of your exposure to China. A lot of questions. Just a lot of questions in general. Also about Apple intelligence. I could keep going on a list, but you own it. What are your views when it comes to that report?
- [14:49]
Scott Wapner
You know, we loved Apple in the 170s. We added to it at 177. It's probably up around 205. I don't think I'd be adding to it in anticipation of good earnings, but I like the news today. You know, they've been doing this ever since COVID trying to expand where the manufacturing comes from. I'm sure India is a better place from the government's perspective than China at the moment. But at this point, I think the stock's pretty fairly valued up here. We have a $213 covered call against it. And I think writing calls is probably a better way to play Apple at the moment.
- [15:17]
Frank Holland
Malcolm, you own Apple as well, by the way. Just a quick side note. B of A says six straight week of inflows in the tech stocks. I would imagine Apple would be a beneficiary of that as well. What do you expect from this report going forward?
- [15:28]
Malcolm Etheridge
Yeah, I've been paying attention to what retail is doing, and I think Apple is one of the recipients. Less than a lot of other names you could name.
- [15:35]
Frank Holland
Why would you say that?
- [15:36]
Malcolm Etheridge
Well, if you look at the major companies that have been bought by retail this week alone, it's the usual hits. It's Tesla, it's Nvidia, it's those kind of names. And it is leaving Apple out of the equation. So I think that Apple is going to have to innovate its way out of this rut that it finds itself in. I've been making the case for a while as an Apple shareholder, someone who intends to continue to own these shares long term, that what we're, what we've been seeing is a dislocation between its share price and its reality within the company. And I think that we've been giving it a pass for a couple of years now where we've been looking at negative numbers as far as iPhone sales. And I think the market is finally starting to lose its patience as far as Apple's concerned. So it's going to have to innovate its way out of this rut that it's in. I'll say it again, and I think that a lot of the excitement about Apple around AI has just not panned out. And that's why we're seeing the sell off we're seeing.
- [16:28]
Frank Holland
I think everybody agrees Apple intelligence hasn't been quite what it's been. And also people like Dan Ives calling for the super cycle that hasn't happened when it comes to iPhones. Joe, what's your take on this report and what's the meaning of it? I mean, Apple doesn't seem to have the same weight on the market as it used to. It seems like Nvidia has more of that weight now. But what does this report mean?
- [16:44]
Scott Wapner
Well, first of all, we sold out of Apple from the Jyoti ETF in October. I apologize if I got this wrong, but I don't think Steph owns it. Kev, I think you accurately described how you feel about it, which is it's kind of fairly valued. So if you think on one hand, right, Malcolm, the revenue growth has been the challenge because the revenue growth has been absent. And when you actually believe that you were getting revenue growth, then they disappointed you in the following quarter. So that's the one element to this that I really call into question. But be careful getting too negative on Apple because guess what, there's still out there the possibility that they are going to be a significant beneficiary from the exemptions which we know ultimately will be coming.
- [17:25]
Malcolm Etheridge
Well, tariffs aside though, if we consider that to be sort of a short term headwind, longer term for Apple, when we look at like the explosion that happened with Deep Seek that has that traffic has to flow through that Apple App Store store where they collect their toll every time somebody downloads a new app and apps are being built with and for AI right now that we won't see come to fruition for another year or two. But all of that traffic is going to flow through that app store and they own that highway. And so I think, you know, longer term, yes, I will pan out for Apple in that way that's going to add to that services revenue that we've all been looking forward to grow for quite some time. But right now here today, the story is just a little bit stale.
- [18:03]
Scott Wapner
We've all been missing for many quarters now the contribution geographically from China and certainly given the environment that we have right now with the trade war, you have to call to question how long exactly it's going to be that China is really going to be sitting out.
- [18:18]
Frank Holland
Contributing to the revenue growth very quickly. You have a lot of confidence in an exemption for Apple. Is it based on the news today where China is considering exemptions on medical equipment, industrial chemicals? Is that an olive branch in your mind that's going to lead to that?
- [18:29]
Scott Wapner
Again, I use the word because before mercurial, it's a very mercurial environment. And one would have to assume when things look really bad, you're going to get some form of announcement that exemptions are coming.
- [18:40]
Frank Holland
So we're in a darkest before the dawn type of situation. That sounds like what you're saying.
- [18:43]
Scott Wapner
As long as we're getting the messaging from Treasury Secretary Bessant, we'll be all right.
- [18:46]
Frank Holland
There we go. Speaking of not getting too negative, let's talk about IBM very quickly. New popular position for the investment committee today. Stephanie, you actually bought more. Obviously the stock took a big tumble following earnings and it wasn't really. The numbers really seemed to be based on what they were saying about the consulting business and government cuts when it comes to spending in that area. What made you want to buy? What did you see or what did you hear that gave you the confidence?
- [19:10]
Stephanie Link
Well, I've been, I've owned this stock for a couple of years now, Frank, when no one was owning this name. And I have a lot of confidence in this management team. The CEO has done over 30 plus deals since he's been CEO and he's transforming this company into more growthier areas. So it's not just a mainframe company anymore. It's actually focused on data center and cloud, AI, blockchain, etc. And so the, the setup though was so bad for this name because it was, it's been a safe haven. It was up 10% year to date. At the same time, semiconductors down 18% year to date. Software down 18% year to date. So people were hiding in this because they really don't have a lot of tariff exposure. The quarter itself was good, up 13%. It was the mix. Everyone's focusing on consulting. Consulting and infrastructure actually were better than expected. It was software that was, that saw a decel. It was 9% but it's down from 11%. I'm not that concerned about it because Red Hat, their hybrid cloud business actually has annualized bookings in the high teens. So I think it's a timing thing. I think people were kind of obsessed with the, with this number it's about 44% of total revenue is software. So there were high expectations but. And so that's why the stock fell off. Fell off. Right. It had to be perfect. But the margins were up 50 basis points. Free cash flow was the best it's ever seen in a first quarter in their history and they guided free cash flow of 13.5 billion for the full year. So to me down, down 7% was a gift. And so I continue to add to it.
- [20:49]
Frank Holland
Yeah. By the way, we're showing that week to date chart talking about getting very negative on a stock very quickly. Malcolm, you also added to the position. Agree with Steph's thesis or you have one of your own?
- [20:57]
Malcolm Etheridge
Yeah, I actually initiated my first buy of those shares into that sell off and I think Stephanie might have been looking at my notes with that one. I was thinking the exact same thing. Consulting revenue doesn't scare me. It actually increases. Encourages me a little bit because this is a company that grew that consulting revenue related specifically to artificial intelligence over the last five quarters to about $6 billion out of nowhere. And so I think if we consider what the knock on effects of the artificial intelligence boom really is going to be away from the hyperscalers who had to build in order to get us there and then the semiconductors and maybe the data storage companies that had to be able to create the compute and store that data. Next is companies that need someone to teach them how to actually incorporate that into their own companies and their own tech stacks. And I think IBM is perfectly positioned to be able to step in and fill some of that need.
- [21:47]
Frank Holland
All right, Kevin, you actually trimmed going into earnings. What made you want to trim ahead of earnings? And now that the stocks drop quite considerably this week, considering re entering a position. Yeah, 100%.
- [21:56]
Scott Wapner
And Stephanie and Malcolm covered all the bull case. We still have a 4% position. Own the stock for years. Really love it. It's been one of our best performers but just pure active management position.
- [22:06]
Frank Holland
Right.
- [22:06]
Scott Wapner
Sizing going into earnings stock. We got out of it around 240. We just had too much of it. It's done too well. IBM went up, everything else went down. And absolutely at this point, it gives us opportunities to redeploy that capital back into it for all the reasons that were just mentioned.
- [22:20]
Frank Holland
All right, take a look at IBM shares right now. Up under just about a half a percent right now. All right, coming up, more committee moves for new ideas for your portfolio. Stephanie Link is ready with her new buy. Bill Baruch is standing by with a few more trades. Halftime. Back in just two minutes. For 140 years MultiCare has been in Washington prioritizing long term solutions, partnering with.
- [22:45]
Stephanie Link
Local communities and expanding access to care.
- [22:49]
Frank Holland
Together we're building a healthier future. Learn more@mycare.org Are you still quoting 30 year old movies?
- [22:56]
Stephanie Link
Have you said cool beans in the past 90 days?
- [23:00]
Frank Holland
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.
- [23:10]
Scott Wapner
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.
- [23:19]
Frank Holland
February 2024 Nelson Report. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment. Anyway, give it a try@mintmobile.com Switch upfront.
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Stephanie Link
Payment of $45 for 3 month plan equivalent to $15 per month required intro.
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Frank Holland
Rate first 3 months only, then full.
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Stephanie Link
Price plan options available, taxes and fees extra. See full terms@mintmobile.com.
- [24:06]
Frank Holland
And we are back on Halftime. Steph Link coming back over to you. You have a new buy for us today.
- [24:12]
Stephanie Link
Yeah, Intuitive Surgical. It was my final trade on Tuesday. I've never owned this stock but it's down 20% from its highs. And it's a great management team with phenomenal products in robotics and in software. And they have many years advantage in terms of their technology G products. So the quarter was very good. I wasn't buying it for the quarter but the quarter turned out to be really good. Up 19% in terms of total revenue. EBITDA up 22%. Margins also expanded over 100 basis points. And so the quarter itself was good. We were Kind of waiting for them to give us tariff guidance and they did. And I kind of feel like now it's de risk because we now know what margins look like in this tariff world and if for some reason we don't have these extreme tariffs, then you might have some upside in the meantime. The most important thing to me is procedure guidance was up 15 to 17%. That was prior 13 to 16%. So clearly they are seeing momentum. They have 30% of the market. I think that's going to expand over, over time and so not cheap Frank, but I think this is also quality on sale.
- [25:19]
Frank Holland
Joe, you on this one as well. One thing to Steph's point about the tariff guidance, company did say trade policy is going to lead to some shifts in manufacturing. They have to change some strategy. So they do have some tariff exposure even if so far it doesn't seem to be weighing on the stock. But what's your view on steps by the company overall they've done a great.
- [25:36]
Scott Wapner
Job in telling you what the worst case scenario is. This look, for the last five years this stock is overwhelmingly been part of the ETF. Port Jyoti ETF April of 2023 we put it back in after taking it out in the middle of 2022. Got in somewhere around $300 steps.
- [25:57]
Frank Holland
Right.
- [25:57]
Scott Wapner
I mean this is arguably one of the highest quality health care names that you can own. It's a company that delivers a growth, growth gross Profit margin of mid 60 range 65, 66, 67% Revenue growth is strong and it is really the the intersection of technology and health care being combined into one. So it's been a phenomenal name a company that you've wanted to own for many, many years now. And I don't see why when you look to the future that that should change at all.
- [26:29]
Frank Holland
Intuitive shares up about three quarters of 1%. Right now we're going to hit some more committee moves. Bill Baruch, he joins us now with his latest trades. Bill, you got a bunch of them. Eli Lilly. McDonald's also seeing more Palantir. Why don't we start with Lilly, if you don't mind. Yeah, we are underweight, have been underweight. Health care in general about 5% between AbbVie and Amgen.
- [26:50]
Scott Wapner
We wanted to add a best in breed name. What got us excited was last Friday.
- [26:54]
Frank Holland
Had the news that the GLP drug and pill form is testing better than expected. The stock jumped really well and we waited till Monday, settled in a little bit and that's when we added as a new position to Portfolios.
- [27:06]
Scott Wapner
It's closing the week out right now.
- [27:07]
Frank Holland
Back above the 200 day moving average.
- [27:09]
Scott Wapner
So we're excited to get a little.
- [27:10]
Frank Holland
More health care exposure, but it's all drug manufacturers that we're leaning into here. All right, speaking of. So you're a lot of confidence when it comes to GOP ones and then you bought some McDonald's, a stock that could be impacted by GOP ones. What gave you the confidence to buy some McDonald's in this current environment, by the way? Staples having a terrible week. I know McDonald's isn't a staple, but similar. I mean people kind of go to McDonald's, you have your kids, you want something quick to eat. Yeah, it's a little bit of a fair trade.
- [27:36]
Scott Wapner
But.
- [27:37]
Frank Holland
But the thing is here, as you referred to it as a staple and we're looking at this as a defensive.
- [27:42]
Scott Wapner
Name with multiple in the mid 20s.
- [27:44]
Frank Holland
You know, a lot of these traditional.
- [27:45]
Scott Wapner
Defensives are mid 20 multiples.
- [27:47]
Frank Holland
Now the thing about McDonald's is the relative strength against, against other names and how it's levitated.
- [27:53]
Scott Wapner
We really like that. But the franchise model in this environment, you know, I think that will really keep margins, you know, keep them firm.
- [28:02]
Frank Holland
And I think it's a little bit recession proof, you know, as they continue.
- [28:05]
Scott Wapner
To develop the menu, but it's also a lower cost price point to continue to bring people in the door.
- [28:11]
Frank Holland
So we really like McDonald's, love to see if this they can get above $320 and really break out. Kevin, you also on McDonald's earnings before the bell on Thursday. By the way, your view on the company, the outlook as we go forward, forward. Obviously we are worried about recession, things like that economic slowdown.
- [28:26]
Scott Wapner
We actually added to this stock as well, Frank. Really for the reasons being that if we do go through a recession, which is a real possibility, I don't think anybody is going to argue that there's a coin toss there. The consumer trading down to McDonald's is a beneficiary. They've navigated really well the rise in inflation. That was massive. And I think at this point you can really look at this stock longer term and feel that there's a solid investment thesis here. Plus a dividend grower that we really.
- [28:49]
Frank Holland
Like shares, the golden arch is obviously up about a quarter of a percent, about 9% year to date. So Bill, going to come to your other buy, you bought some more Palantir. Now earlier, we're just talking about IBM being a beneficiary of training people to use AI. This is A company that just does it themselves. And I've talked to a lot of people, I used to cover it, but a lot of people that just say that their offerings are very unique and they also do a great job with their boot camps. Why right now though, stocks certainly well off of its highs. Yeah, we initiated as a new position a few months back when around 85.
- [29:18]
Scott Wapner
$88 and it really held extremely well.
- [29:22]
Frank Holland
Technically when the whole market fell out over the past few weeks and it's levitated. I mean this is again a name where the relative strength to its counterparts is telling us price is telling us something here.
- [29:35]
Scott Wapner
But you know, at the end of the day, some of these big defense.
- [29:38]
Frank Holland
Names where they're, they were trading pretty poorly this week and their budgets are getting, getting slashed. But I think what you're going to.
- [29:45]
Scott Wapner
See is continue to lean in the AI driven defense spending.
- [29:49]
Frank Holland
And I think Palantir is me a big beneficiary.
- [29:51]
Scott Wapner
Continue to be a big beneficiary not only in that narrative but with the.
- [29:54]
Frank Holland
Administration at the forefront right now. All right, Bill Baruch, three big buys. Eli Lilly, McDonald's and Palantir. Bill, great to see you as always. Thank you very much. Joe. Going to come over to you on Palantir shares up almost 2% right now, up about 113 quarters of 1%. Your take on the buy, your take on the company overall in this environment.
- [30:11]
Scott Wapner
This company has had a remarkable rebound from the April 17th low at 6612. Look, you know, we added luckily nothing more than luck. We added Palantir at $16 to the ETF and we've wrote it higher. So here's what happened. Towards the end of the year you had this narrative where people were saying, okay, this is the purest form of quote unquote momentum. And then you have another name that is also well defined as momentum and that's Applovin. What has happened subsequent to that and what we are seeing in the last several weeks is that Palantir is actually giving you the fundamental reasons why it is appreciating the way that it has. It is not just about government spending. It is about the commercial division for Palantir which is contributing significant revenue growth as it relates to AI. It's NATO using the Maven smart system. So that's where Palantir has differentiated itself as. No, it's not just a momentum name. It is a momentum name that actually has some qualitative characteristics and strong fundamentals behind it. And just pull up a chart of applovin and you can see that difference where Applovin is kind of wallowing at the bottom after a dramatic sell off. That's a momentum name.
- [31:29]
Frank Holland
To your point, even if US Government spending on defense pulls back, we know Germany's upping its spending, Spain's upping its spending. This is a company that works with a number of different nations around the world when it comes to defense. And now, as you said, growing that.
- [31:40]
Scott Wapner
Commercial business, CEO Alex Karp is doing a really good job looking and saying over the last several years we need to pivot away from reliably solely on the government. Let's move more to commercial. And they're actually expediting it and doing it very quickly. So the all time high at 1:2541, I think that's February 19th. That looks like it's in jeopardy. I think they report earnings on May 5th. Monday, May 5th, somewhere around there we'll hear more.
- [32:04]
Frank Holland
Yes, to your point. Shares about 12% off their 52 week high, but right now up just about 2%. Time now for the headlines with our Silvana. And now, Silvana. Good afternoon. The FBI today arrested a judge in.
- [32:16]
Stephanie Link
Wisconsin on obstruction charges.
- [32:18]
Frank Holland
In a now deleted social media post, the agency's director, Keshe Patel said the Milwaukee Circuit Court judge allegedly helped an undocumented immigrant evade arrest. The FBI has yet to respond as to why the post was removed. And the judge's chambers declined to comment. NBC News has learned Senator Tommy Tuberville is telling fellow senators he is planning to run for governor of Alabama. Tuberville is rumored to be considering a bid to succeed the term limited Kiv rather than seek a second term next year.
- [32:50]
Stephanie Link
When asked for comment, the senator's office.
- [32:52]
Frank Holland
Pointed to a social media post from yesterday that said, quote, when I have an official announcement, you'll hear it directly from me.
- [32:59]
Stephanie Link
And disgraced former congressman Jorge Santos just.
- [33:02]
Frank Holland
Moments ago was sentenced to 87 months.
- [33:05]
Stephanie Link
In prison for wire fraud and aggravated identity theft.
- [33:08]
Frank Holland
Santos pleaded guilty last year to conning political donors and became only the sixth.
- [33:14]
Stephanie Link
Member in history to be expelled from.
- [33:16]
Frank Holland
The House of Representatives. Frank, I'll send it back to you, Savannah. Thank you very much, Savannah. Now back at CNBC hq. All right. Coming up here on halftime, we got our calls the day we're going to debate the bullish analyst activity on a few of the committee stocks. Halftime coming back right after this break, are you still quoting 30 year old movies?
- [33:36]
Stephanie Link
Have you said cool beans in the past 90 days?
- [33:39]
Frank Holland
Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past.
- [33:45]
Scott Wapner
Discover is accepted at 99 of places.
- [33:47]
Frank Holland
That take credit cards nationwide.
- [33:49]
Scott Wapner
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.
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Frank Holland
February 2024 Nelson Report. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment anyway. Give it a try. @mintmobile.com Switch upfront payment of $45 for.
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Stephanie Link
3 month plan equivalent to $15 per.
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Frank Holland
Month required intro rate first 3 months only.
- [34:28]
Stephanie Link
Then full price plan options available, taxes and fees extra. See full terms@mintmobile.com.
- [34:46]
Frank Holland
And we are back. We want to call attention to CNBC's newest subscription streaming product. That's CNBC Plus. You're looking at it right here. You can stream Halftime Report and all of your favorite CNBC shows like the Worldwide Exchange show anytime, anywhere and also on demand. Now let's get to our calls of the day. All right, first call of the day. We're going to get right to it. Trane Technologies. Actually this one, this is a pretty good one right here. Joe T. You own Trane Technologies, H Vac Player. A lot of exposure to data centers and things like that. What do you think about this one?
- [35:15]
Scott Wapner
Going to report earnings believe next week and that's really going to tell the story. Stocks down 5%. It peaked in November along with some of the the other industrial stocks. Really hasn't been able to recover since then. I'm kind of would identify it as a wait and see. I wouldn't really look at the stock right here. Get very aggressive buying it ahead of earnings and certainly if you're concerned about the decline. So for a year to date down 5%, I wouldn't take action. Let's hear what they say next week as it relates to earnings and then we'll go from there.
- [35:45]
Frank Holland
By the way, you can hear what they say on Worldwide Exchange having the CEO on a week from today. Another call of the day. We got Spotify. Spotify. Take a look at Spotify. Reiterated to a buy at 730 at Jefferies. Malcolm, you on this one.
- [35:56]
Malcolm Etheridge
Yeah, this is one to me. Anyone who looks at Netflix and loves the fact that it looks like defensive recession resistant company to own Spotify to me is in the exact same camp. I can't see exactly what the numbers look like, but I bet there's an overlap between their customer base. That looks pretty attractive. So if you're thinking, man, I really missed it on Netflix. This is a company that also is going to be very, going to perform very well. It's already shown how inelastic the demand is for its subscription based entertainment service in bad situations. This is a play to me to ride whatever storm might be coming.
- [36:29]
Frank Holland
All right, another call of day. We got Procter and Gamble upgraded to outperform at rbc. Kind of a tough week for Staples overall, Kev, but you own this one.
- [36:37]
Scott Wapner
Yeah, they put a price target of $177 in December. We got out of it a little bit above that. We've been buying it back since 52 week low. Yesterday they had earnings which as you would expect, had horrific guidance. You're going to see absolutely a continuation of that next quarter. I agree with the call, but I'd be patient reentering the name.
- [36:56]
Frank Holland
All right. Also, GE Aerospace, price target raised from 225 up to 230. Also called a sanctuary stock by bank of America. Stephen, cue on this one.
- [37:07]
Stephanie Link
Yeah, it's better than a sanctuary stock, Frank. It's up 19% year to year date. It was a great quarter. They beat earnings and they beat total revenues and margins. Margins actually grew 220 basis point year over year. Their guidance was in line despite the tariff issues. They're just handling the situation a lot better, being more proactive, moving supply chains all around the world. And the free cash flow guide of 6.3 to 6.8 billion is better than expected. And that's also up from 6.1 billion last year. Year. So they are really humming on all cylinders. I will say I prefer Boeing versus GE at this price, but I still like ge. It's a core holding. Has been for a while.
- [37:48]
Frank Holland
All right. Shares up about three quarters of 1% right now. All right, straight ahead here on Halftime, the state of the financials and the private equity space. We've got Dom Chu following the money for us. Plus the committee is ready with their strategy. Halftime back right after this. Stay with us. And welcome back to Halftime Private equity stocks. They're feeling the pain in this volatile market. Our Dom Chu joins us with a closer look at that space. Dom.
- [38:13]
Stephanie Link
All right, so Frank, in this episode of Sector Nomics, our focus is on the financials. We're going to drill down this hour into the publicly traded private equity firms. So the big private equity stocks like kkr, Apollo Ares Management, Carlyle, Blackstone. As you can see here, all of the above were expected to do well in a new Trump administration, from the tailwinds on deregulation to merger activity and beyond. Most analysts had predicted a pop instead of a drop for these names, but things have not quite worked out as expected. Now, so far at least, all five of these big names are down since the inauguration on January 20, with Carlisle Group and KKR at the bottom of that particular list. HSBC just made a move in this space, upgrading KKR to a buy from a hold last week. Now, in that note, the firm said despite higher uncertainty, they see opportunities. HSBC also said share prices have corrected meaningfully. So the firm is also maintaining its buy rating on Blackstone and Brookfield Asset Management as well. With regard to Brookfield, it's down about 5% since the inauguration, but it's also up 34% over the past year, 12 months. The rest of the group is also up in the last year, except for Carlyle. But the financial sector at large is outperforming most of the group overall. So as we talk about the dynamic in financials, we often think, Frank, just about the big banks, maybe even regionals. But these private equity firms play a big part of that story, especially these days. Frank, I'll send things back over to you.
- [39:44]
Frank Holland
Yeah, absolutely. A growing interest in alternatives for investors at every end of the spectrum. Right now are Dom Chu with sector nomics. All right, Joe, coming over to you. You own Apollo on the jot etf.
- [39:54]
Scott Wapner
Part of a very large weighting towards financials. We have nearly 30% weighting and that has allowed us a very strong degree of relative outperformance. Unfortunately, though, when you look at the sub industries within the financial sector, you see very, very strong performance from the insurance industry, strong performance from a lot of the money center banks. But private equity really is the prime example of the exuberance that was in the market at the end of last year. And a lot of the exuberance surrounding private equity, as Dom said, was really related to the potential sequencing of the incoming administration's fiscal policy. And that's where I think the consensus was thrown completely offsides. Because if, if you think about that sequencing, everyone believed, well, first you're going to hear significant regulatory relief, then you're going to hear about an extension of the tax cuts and oh yeah, you know, we've got these tariffs coming and they're not going to be 60% universal or as bad as feared. Well, guess what? The sequence was the complete opposite of that. That's where everyone was thrown off sides because what did we do? We first went after fair global trade. We put on the back burner a lot, lot of the fiscal policies surrounding the extending the tax cuts. We'll get to it at some point. So I think that's placed private equity in a somewhat perilous position. Right now we're down to owning one name. And when I look at the performance of the financial names that we own in the ETF, only PayPal and XYZ block is worse than what we're seeing from Apollo.
- [41:31]
Frank Holland
Malcolm, you own PayPal, but actually during the break, you guys remind me saying we were kind of talking about SoFi versus Robinhood. You also own Sofi.
- [41:37]
Malcolm Etheridge
Malcolm yeah. So Sofi has actually been one of the best performing holdings I've had in a long time. Right. I've owned it since it was in the 4$4 range. But to me, the thesis around SoFi has a lot less to do with the traditional banking system, as it were. They're doing a great job, I think, of adding additional services to each of their customers that they have on the platform. But the goody, if you will, that's baked inside of Sofi's story right now to me is really the banking as a service technology that they use and they lease out to companies that want to look bank like and want to perform bank services without having to go through all the trouble of getting registered as a banking institution. And I think that's where the real opportunity for this company continues to stay.
- [42:19]
Frank Holland
Kev, very quick word. We got to go.
- [42:22]
Scott Wapner
Robinhood is a great trade. I think it's a similar market to SoFi. The young investors are just taking over the world. And this is a real business. I love the stock.
- [42:29]
Frank Holland
Yeah. By the way, so far, up about 5% right now. All right, coming up next here on Halftime, Mike Santoli joins us with his Midday Word. And we are back right after this. And we're back on Halftime. Senior markets commentator Mike Santori joins us with his midday word. Mike, I usually kind of bounce the word off you. I don't have one for today's markets. What's your word? What's going on?
- [43:04]
Scott Wapner
I would say breather. And I think it's actually a refreshing change that we actually have this relatively muted action, not only because obviously the market's been under a tremendous amount of stress, but even the updates have been these furious chases and squeezes and up, you know, one and a half, 2%. And while that's great for making up a lot of Ground and we've made up half of what was lost between the peak and in the April low. It's actually not the healthiest thing in the world for the market to be really flying in all directions every single day. So you want it to get a little bit of traction here.
- [43:36]
Frank Holland
I do think we're kind of at.
- [43:38]
Scott Wapner
That, that border here. The frontier of okay, we had this capitulation in at the low by a lot of the bulls. You had this snapback rally and then a little bit of incremental hope that the worst case scenario for trade is.
- [43:50]
Frank Holland
Not going to be the likely one.
- [43:52]
Scott Wapner
Now maybe you're getting toward that level where you're pricing in some de escalation, some tangible progress along trade. We'll see if we get that. Is it me or is it equities are comfortable moving higher as long as bonds go with them? It seems like that right now.
- [44:08]
Frank Holland
Yes.
- [44:08]
Scott Wapner
Within a band. I think yields are comfortable right here. But dollar bouncing and gold selling off, I think it all tells you the fever is broken just for now.
- [44:16]
Malcolm Etheridge
Yeah.
- [44:16]
Frank Holland
To your point, Joe, the 10 year right now at 4.26. All right. Coming up on halftime, more today's biggest movers. And we will be right back after this. And welcome back to halftime. We're taking a look at the transportation space, specifically sia. Take a look at these shares. They're down more than 30%. Sinking as first quarter results. Mixed expectations, shipments down big. We're also looking at some bigger names related to Sire that are also under pressure in the less than truckload space. We're talking XPO, Old Dominion and FedEx. All of them are lower across the board. Now FedEx, of course, also an E Commerce player, but still this the biggest LTL trucker in the US they're about to spin that business off. Something to think about. Coming up next week we have earnings for XPO, also earnings for C.H. robinson and also ups three big earnings coming up next week. When you look at the Sire results, one of the reasons that they saw a big slowdown seems to be a slowdown of imports. Two of the big customers for Sia, that's Home Depot and Lowe's. Stephanie Link, I want to come over to you. Just get your take on what we're seeing from Saya today.
- [45:27]
Stephanie Link
Well, the Stock is down 54% in the past year, Frank. This, this company has had a lot of execution problems balancing growth, profitability and then new expansion we've had. On top of that, you have a freight recession for the last couple of years. No pricing power whatsoever. I think you stay away from the group XPO I like for the long term. I think they have better pricing power but I'm not involved.
- [45:50]
Frank Holland
Yeah, one other quick thing. Old demand millions in earnings. Earlier this week they beat on eps. The revenues came in in line. Question is it a SIA issue or a freight issue with that final trades coming up on halftime. Stay with us. And we are back with final trades. Steph Link, you're up first.
- [46:10]
Stephanie Link
Qantas Services electrification theme remains very strong.
- [46:15]
Scott Wapner
Kevin TJ Maxx, the biggest best off market retailer and terrorists play little part in the story.
- [46:20]
Malcolm Etheridge
Malcolm Digital Realty Most companies are expected to pull or adjust guidance. These guys turned in a massive surprise beat in a race.
- [46:27]
Scott Wapner
Jyoti Republic Services as an alternative waste management.
- [46:31]
Frank Holland
All right, there we go. That's gonna do it for halftime. Thank you so much for watching the exchange. It starts right now. You've been listening to CNBC's Halftime Report.
- [46:41]
Scott Wapner
The podcast you can and always catch.
- [46:43]
Frank Holland
Us live weekdays at 12 Eastern only on CNBC.
- [46:49]
Stephanie Link
All opinions expressed by the Halftime Report.
- [46:51]
Frank Holland
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- [47:02]
Stephanie Link
You should not treat any opinion expressed on this podcast as a specific inducement.
- [47:06]
Frank Holland
To make a particular investment or follow a particular strategy, but only as an expression of an opinion.
- [47:11]
Stephanie Link
Such opinions are based upon information the Halftime Report participants consider reliable.
- [47:16]
Frank Holland
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- [47:22]
Stephanie Link
To view the full Halftime Report disclaimer.
- [47:24]
Frank Holland
Please visit cnbc.com halftimereportdisclaimer anywhere else. Tuesday is just, well, Tuesday. But if you're at kfc, Tuesday is ten dollar Tuesday, which means you can get eight hot, juicy drums and thighs for just ten bucks.
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Malcolm Etheridge
Let me say that in eight pieces.
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Frank Holland
Of hot, juicy original recipe chicken hand.
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Malcolm Etheridge
Breaded in 11 herbs and spices, all.
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Frank Holland
For just 10 bucks every Tuesday only at KFC. Guess Tuesday isn't just Tuesday anymore. It's finger licking. Good Prices and participation may vary. Tax tips and fees, extra.