Podcast Summary: Halftime Report – "Trading the Final Stretch" (12/23/24)

Podcast Information

• Title: Halftime Report
• Host: Scott Wapner, CNBC
• Description: Halftime Report is CNBC’s midday market coverage, featuring Scott Wapner and top investors who analyze current market movements and set the agenda for the rest of the trading day.
• Episode Title: Trading the Final Stretch
• Release Date: December 23, 2024

1. Introduction

In the episode titled "Trading the Final Stretch," host Scott Wapner engages with investment experts Joe Terranova, Jim Leventhal, and Rob Sechan to discuss the market's trajectory as 2024 winds down. With only six trading days left in the year, the panel delves into strategies for navigating the final weeks and setting up for the upcoming year.

2. Market Overview

Scott opens the discussion by noting that the NASDAQ and S&P indices are both on the rise, buoyed by mega-cap stocks. The conversation centers on whether the market has reached a tactical bottom after recent volatility.

Notable Quote:

• Scott Wapner [00:59]: "It is a NASDAQ winner today. S and P is higher as well."

3. Investment Strategies: Growth vs. Value

Jim Leventhal articulates a strategic shift from being overweight in technology to increasing exposure to value and cyclical sectors. This move is based on the premise that the current outperformance in tech cannot sustain indefinitely without potential earnings disappointments.

Notable Quotes:

• Jim Leventhal [02:30]: "We're trimming our overweight to technology and we're adding value, cyclical value."
• Scott Wapner [02:56]: "The tech has outperformed by a lot, as we know."

4. Specific Stock Analysis

a. Technology Stocks

• Nvidia: Torsten Sloch from Apollo predicts a 90% chance of Nvidia disappointing earnings. Rob Sechan counters, suggesting that Nvidia's current valuation (31x forward earnings) may already factor in potential disappointments.

  Rob Sechan [12:55]: "I don't think this quarter or the next quarter we're looking at a rational reason for a disappointment in Nvidia earnings."

• Qualcomm: Following a legal victory against AAM, Jim expresses confidence in Qualcomm's long-term prospects despite recent volatility.

  Jim Leventhal [15:48]: "It's a good name for the long run here."

• Broadcom: Jim highlights Broadcom as a core holding with strong fundamentals, emphasizing its free cash flow and operating margins.

  Jim Leventhal [16:43]: "There are cheap things in tech that make sense right now."

b. Financials and Utilities

• Visa: Rob Sechan discusses trimming Visa holdings to reallocate funds to Qualcomm, citing the strategy of "selling high to buy low."

  Rob Sechan [25:59]: "We're selling high to buy low."

• Vistra Energy: Recognized as the biggest winner of the year, Jim explains that Vistra's growth is tied to the demand for reliable energy in powering AI-driven data centers.

  Jim Leventhal [41:25]: "Given the demand that's required for reliable energy to fuel the AI trade, we don't think it's going to."

c. Healthcare

• Eli Lilly and Novo: The panel discusses Eli Lilly’s approval of Zepbound for sleep apnea and Novo's projected revenue growth, viewing both as strong picks despite recent volatility.

  Jim Leventhal [27:06]: "There is still time left to run on this trade."

d. Cryptocurrencies

• Bitcoin and Coinbase: Joe Terranova addresses the volatility in cryptocurrencies, advising flexible strategies such as setting support levels for Bitcoin and cautious positioning in Coinbase.

  Joe Terranova [21:26]: "It's a highly volatile asset class at the end of the year."

e. Airlines and Travel

• United and Delta: Both airlines have seen significant gains. Rob Sechan believes further upside is possible, emphasizing underlying sales and margin improvements.

  Rob Sechan [29:13]: "There is still time left to run on this trade."

5. Macro Factors Affecting the Market

a. Federal Reserve and Interest Rates

The discussion touches on the Federal Reserve's policy, with concerns about potential rate hikes or insufficient cuts impacting small-cap stocks and broad market movements.

Notable Quotes:

• Jim Leventhal [08:12]: "When you look at rents, when you look at wages... another type of event."
• Joe Terranova [10:33]: "Both growth and concerns surrounding tariffs, immigration..."

b. Geopolitical Events

Brief mentions include Ukrainian President Zelensky’s warnings about North Korean military involvement and Starbucks union strikes affecting the market sentiment.

6. Year-End Report Card: Winners and Losers

The panel reviews the top-performing and underperforming stocks of the year:

a. Winners

• Vistra Energy: Up 263%, driven by energy demand for AI.
• Nvidia: Up 178% YTD, though concerns about future earnings persist.
• Broadcom: Up nearly double, maintained as a core holding.
• eBay: Up 45%, benefiting from consumer and AI-related growth.

b. Losers

• Vertex Pharma and Other Health Stocks: Down 15% due to earnings disappointments and tax-loss selling.
• Zoom: Experienced volatility; Joe recommends holding off for potential declines before buying.
• Salesforce: Mixed opinions, but seen as a resilient long-term holding despite current skepticism.
• Bitcoin and Coinbase: Significant downturns reflecting cryptocurrency volatility.

Notable Quotes:

• Jim Leventhal [43:11]: "eBay up 45%. It's a name we continue to own and like."
• Joe Terranova [38:39]: "You have to wait... I need to ring the register personally and sell out of this name."

7. Future Outlook

Looking ahead to 2025, the panel expresses cautious optimism tempered by uncertainties in Fed policies, geopolitical tensions, and potential market corrections. Strategies involve balancing growth and value investments while remaining vigilant about earnings growth and market conditions.

Notable Quotes:

• Jim Leventhal [07:53]: "We reserve the right if earnings disappoint to unwind that."
• Joe Terranova [10:35]: "Positioning has a big problem... favoring mega caps gets exacerbated."

8. Notable Quotes

Throughout the discussion, several key insights and perspectives were highlighted:

• Jim Leventhal [02:30]: "We're trimming our overweight to technology and we're adding value, cyclical value."
• Rob Sechan [12:55]: "I don't think this quarter or the next quarter we're looking at a rational reason for a disappointment in Nvidia earnings."
• Joe Terranova [21:26]: "It's a highly volatile asset class at the end of the year."
• Jim Leventhal [43:11]: "eBay up 45%. It's a name we continue to own and like."

Conclusion

In "Trading the Final Stretch," the Halftime Report team provides a comprehensive analysis of the current market landscape as 2024 draws to a close. Emphasizing a strategic shift from growth-heavy tech stocks to value-oriented investments, the panel navigates through sector-specific performances, macroeconomic influences, and individual stock trajectories. As investors prepare for 2025, the insights offered aim to balance optimism with prudence amidst ongoing market uncertainties.