Trading the Final Stretch 12/23/24

Summary

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

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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."

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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.

Transcript

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[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. All right, welcome to the Halftime Report. I am Scott Wapner, front and center this hour, the final stretch. Just six trading days left in 2024. We will discuss with the investment committee today as one member makes a major move on the markets. Joining me for hour, Joe Terranova, Jim Leventhal, Rob Seachen, we're all here post 9 as we check the markets. It is a NASDAQ winner today. S and P is higher as well. Some of the mega caps giving both a lift. All right, big question, Robert. What are the markets going to do over the remainder of the year and beyond? Tom Lee says there was a tactical bottom last week. There was an overreaction to the Fed, there was a tantrum on Wednesday afternoon, and all was seemingly made right on Friday. Where do we go?

[Jim Leventhal]

So, yes, the question what do we think is going to happen in the year end? I think momentum continues in the year end in the tech trade. I think the setup, though, for 2025 is going to be a little bit different, at least early on and from a macro standpoint. And I don't want to freak everybody out because we run both micro portfolios at a stock level and macro portfolios as well, but, but from a macro standpoint, we're trimming our overweight to technology and we're adding value, cyclical value. And that's on the notion that this outperformance at this pace cannot continue that. Now we reserve the right if earnings disappoint to unwind that. But that's the tactic.

[Scott Wapner]

I mean, this is a big move though, right?

[Jim Leventhal]

It is.

[Scott Wapner]

It's a big deal. I mean, you're taking your, your tech holding tactically underweight and you're leaning in expecting a broadening in the market.

[Jim Leventhal]

Correct.

[Scott Wapner]

The tech has outperformed by a lot, as we know. I mean, this underscores in and of itself the outperformance of growth versus value of cap weight versus equal weight. Right?

[Jim Leventhal]

Yeah. And I think the challenge is do we see a 22 where value earnings actually can deliver or do we see another environment where they maybe continue to disappoint and it's all based on earnings expectations. You have this framework that's set up for the rest of the 493 to really deliver in the midst. This is on the growth side of the MAG7 decelerating quite meaningfully from 55% earnings growth this year to 20% next year. Now that's a part of the market that we're obviously invested in in our individual holdings. However, if you want to drive alpha, we think there is an opportunity. We'll know if short pivots to long in value. Right now it is oversold value. Small cap international. We forget the international right now, but we're definitely guiding towards US exceptionalism still.

[Scott Wapner]

You must agree with this.

[Rob Sechan]

You know I do. I just want to say, like we were up in makeup. You could have said something then, but. Okay, okay, look, I do agree with it.

[Jim Leventhal]

You were up there for a half hour. I was only up there for five minutes.

[Rob Sechan]

All right, that's on me.

[Scott Wapner]

You walked into that. You earned that one.

[Rob Sechan]

Here's the thing I want to say is to you, Rob, I obviously.

[Scott Wapner]

Wait a minute. You went to makeup. Go ahead.

[Jim Leventhal]

Okay.

[Rob Sechan]

I obviously agree with the call, but here's what I think is going to happen. All right, I think you're going to. I think the volatility that we're experiencing in the market right now is just the early phases of a good old fashioned correction. All right, I'm going to go out and say that now. You don't try to time corrections. I'm not suggesting that either, but I do think there will be some pent up selling from people who didn't want to take capital gains early in January. And here's my comment to you, stick with it because when the selling happens, I mean here history will say that value is not going to look good when the selling happens. People are going to say, just go to the defensive growth of tech names. That's where you're safe.

[Scott Wapner]

So you don't agree, you don't agree with Tom Lee where he says there was a tactical bottom last week. You don't think so?

[Rob Sechan]

Well, I don't. I think, I think you got further to go. And I just want to say this like some may look at the August drawdown, you know, we're down roughly 9% from peak to peak to bottom and they say, well, that was a correction. No, it wasn't because it was over in a month. We were right back to where we started in a month.

[Jim Leventhal]

It was only 4%.

[Rob Sechan]

And look, I want to make this disclaimer, okay? The fact that I'm saying we're due for a correction doesn't mean that I'm right.

[Scott Wapner]

But no, you didn't say we're due. You said we're going to have one. You said we're in the early stages.

[Rob Sechan]

I'm not mincing my words. I think we're in the early.

[Scott Wapner]

I'm not letting you. One, please.

[Rob Sechan]

I know. That's why I think we're in the early stages of one now. I don't, I'm not recommending to people like, oh, Leventhal thinks the market's going down 8%, let's sell all our stocks. That's stupid. That's a way to get really hurt. But if you are, seeing as we're one week away from the new year that, hey, maybe I might trim something and look for some betting better buying opportunities. Raising 10% cash in an all equity portfolio is not stupid.

[Scott Wapner]

Right, Joe?

[Joe Terranova]

Can I ask you two gentlemen a question? Owning value, is it a requirement that you have to have a correction? Because that seems like the only time that value really works.

[Rob Sechan]

No, and it might in recent memory, it might not work here. I mean, investors are trained that when markets go down, we go to not what's defensive, not consumer staples, but we go to defensive growth, which is mega cap tech. You have to be willing to actually do fundamental analysis and look at companies and look in the value space.

[Jim Leventhal]

Rob.

[Rob Sechan]

And this is why I agree with you. I can find companies, particularly in energy and in the commodity space right now that are selling it single digit multiples of free cash flow. I can find help for a percent dividend Yield.

[Jim Leventhal]

Let me continue.

[Scott Wapner]

That doesn't mean they're good buys. I can find a lot of stuff that's trading really cheap that sucked this year.

[Rob Sechan]

Okay, that's factually true.

[Scott Wapner]

And the point that I'm like energy and health care. You mentioned it.

[Rob Sechan]

Yeah. But I think you're making my point for me which is to say if those cash flows are there, if you're doing your fundamental analysis and you're willing to take a few punches along the way, there is the potential for multi times returns you're investing.

[Jim Leventhal]

Answer your question. I think we're willing to take the punches for a bit because the fundamentals have been there for a while. Okay. On the value story I think what's compelling right now is the technical side because you have this external factor where the index, The S&P 500 is not oversold yet. Yet a bunch of the names within the index are oversold creating a technical bounce back opportunity. So to validate whether we are going to continue continue to see value outperform, you have to look at what happens with a reset in fourth quarter earnings which we're not going to know till late January. So I think you get a technical reset and we'll see if it's fundamental follow through from that.

[Scott Wapner]

So then you don't mind or you don't think it's an issue if we get two rate cuts instead of four or if rates remain elevated next year because you can't I would assume think that rates have the risk of going even higher and think that the broadening is going to work because I don't see how that does.

[Jim Leventhal]

Depends on where. I think you're absolutely right within small cap because small caps a prerequisite to that continuing is you have to see the Fed continue continue to cut in.

[Scott Wapner]

Almost anything cap but mega cap. Right. Like how does that. How if the Fed at most cuts twice. But there are some projections like Torsten Sloch at Apollo today gave his list of 12 risks to the rally in 25 and the percentage chance probability that each might happen. US 10 year interest rates move above 5% before mid year. He suggests there's a 40% chance that happens. He also thinks there's a 40% chance that the Fed raises rates. Now he's a bit of an outlier to say the least on that call. But the point is bigger. The point is that rates remain either where they are or consistently move higher. And thinking that you're going to get a broadening out trade in that environment.

[Jim Leventhal]

Totally agree that those risks are still Persistent. But when you look at rents, when you look at wages, I mean, maybe if we had some type of oil shock, you could see an inflationary scare that pushes rates higher. But arguably, I think in these levels, you're going to want to start to broaden out into some fixed income going into 25. Because if you see any scare to growth, fixed income is absolutely going to work.

[Scott Wapner]

Why?

[Jim Leventhal]

So I disagree with, I disagree with Torsten that we're going to see those things. Given what we see today, it would take some type of event to be a catalyzer for that to happen.

[Scott Wapner]

Are we going to have more certainty in 25 or uncertainty? Certainly as we get the year. Let me finish, let me just finish where I'm going to because why has tech started to distance itself again? Well, because we've introduced a little bit more uncertainty on Fed policy, on Trump policy. We're thinking about tariffs and immigration and deportation and all these other things that could certainly play an impact towards where we go, not only in the markets, but the economy, at least in the early part of 25.

[Joe Terranova]

I think we proclaim to know a lot about 2025. In reality, we don't know very much about it. And I think there's, there's both sides of it. You could look at the concern surrounding the punitive effect on markets for tariffs, for immigration and you could see a potential correction occurring. You could look at the other side and you could say, well, that's an overreaction because we have a loosening in regulation that's coming. We have a pro growth, business friendly administration that's coming.

[Jim Leventhal]

So I just, I think we greet.

[Joe Terranova]

The year with a tremendous amount of uncertainty. I think what we have done from the Federal Reserve meeting is we have recalibrated sentiment in the market, I think dramatically. And I think this was a market that was optimistic, bordering on euphoria, that is recalibrated to an optimistic market that's now actually bordering on skepticism. And I think that's incredibly important on your points, on the fact that you want to own value, because I will tell this momentum is still favoring equal weighted strategies, momentum is still favoring financials, momentum is still favoring industrials. So if you come into the new year and in fact you don't get the fundamentals that you're talking about that align with the broadening out, I think positioning has a big problem. And I think where we are today, where we're favoring mega caps, I think that gets exacerbated at the beginning of the year. Tremendously And I don't want to go to the Russell. I don't want to go to value in that environment.

[Scott Wapner]

Momentum is still favoring financials, which down almost 5% in a moment.

[Jim Leventhal]

But Scott, you know, still in an uptrend to Joe's point.

[Joe Terranova]

And the momentum funds don't move that fast. You know, we rebalance quarterly. We are arguably one of the shortest rebalancing period funds out there.

[Scott Wapner]

Yeah, but that doesn't mean that you're right by the time you rebalance to what has already been a move.

[Joe Terranova]

Absolutely. You're making my point. So a lot of people still haven't really even made the turn. So you've got people that could be, you have funds rather that could be rebalancing at the beginning of the year and rebalancing into the trough, rebalancing into the bottoming of where financials experience that correction. But that still creates a dislocation in terms of positioning that's coming on the.

[Scott Wapner]

List from, from Torsten is one of the risks to the rally again, that in video, Nvidia earnings disappoint. Inflated expectations. He says there's a 90% chance that that happens, that expectations have gotten so grand that they're bound to disappoint. And that's an overall market risk. I mean, the stock has not traded well at all.

[Rob Sechan]

Okay.

[Scott Wapner]

In the last couple of months.

[Rob Sechan]

So, I mean, what if I tell you that at 31 times forward earnings, perhaps Nvidia has already priced that in, by the way, what do you say? 90%?

[Scott Wapner]

Yes, it's. Nvidia's priced in a disappointment. The stock's up 178% year to date.

[Rob Sechan]

I got it. And as you just mentioned, it's often, as I just also mentioned, it's 31 times forward earnings. He might be right, but the trajectory here matters a lot. Do we really think that the next quarter, the quarter we're in right now, Nvidia is going to disappoint with everything we're hearing about demand for the chips? I don't, however, if he's saying by the end of the year there might be disappointment, that's a long time. And perhaps I think the 90% is too high. But I'll say this just to make sure I'm super clear. 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]

I think the biggest risk in 2025 is earnings growth. If you look at the annualized earnings growth rate of the S and p the last 10 years, it's 8%. What's consensus for 2025, like 50? 14.8% this morning is where we are. That's a high ceiling that you have to kind of achieve. So I think that's the biggest risk.

[Jim Leventhal]

Is earnings with the MAG7 decelerating from 55 to 20.

[Joe Terranova]

Some of the MAG7 decelerating, if you.

[Jim Leventhal]

Look at them as a unit, that's ok. That's fair.

[Scott Wapner]

Let's look at a couple of things real quick. You're Palantir new record high today. Joins the NASDAQ 100. It was obviously leading up and the stock had a nice bid going into that. It's a marginal winner today. You have a stop point that you're flagging, Scott.

[Joe Terranova]

I don't think you reach for it here. I just don't. I mean, now it's gotten to the point if you don't own the stock, I don't think you're reaching for the stock here because I think at some point you're going to realize an opportunity to buy it lower. I also think if you're long and you're worried about your position, that automatically suggests suggests to me that you need to have a stop in place to reduce the positioning and to make you more comfortable so you could allow for the volatility that I think will occur with the stock. I think 66 is a critical price point. You go back and look on the charts, that acts as a swing area was previous resistance. It's now support gets below there. Maybe you just want to trim a little below there to give you some comfort and allow you to ride out the volatility. The volatility is not going away in the stock.

[Scott Wapner]

Qualcomm, they defeated AAM in court. You bought more, Jimmy.

[Rob Sechan]

Look, I did buy more. And frankly, if you're looking at value, Rob, within the technology space, this is a good name. 14 times forward earnings, 2.3% dividend yield. I do think that this lawsuit with ARM, which pertains to an acquisition that Qualcomm made and whether the terms that ARM had made with that acquisition target were still going to be in place, I do think that was an overhang. Now it's resolved clearly in Qualcomm's favorite. There was strong momentum in this name in the first half of the year along with the rest of the semi space. It gave it up. However, the business fundamentals are intact in terms of edge computing, AI applications that only Qualcomm can serve. I like this Name for the long run here, Apple.

[Scott Wapner]

Oh, sorry.

[Jim Leventhal]

It's funny, and I might get in trouble for saying this, but the investment team this morning on our call was talking about adding Qualcomm for a lot of the reasons that Jim just talked about. We do not own it yet, but thanks for pushing up.

[Scott Wapner]

Did you say.

[Jim Leventhal]

What did you say, Jimmy?

[Scott Wapner]

Did you say. Heck no.

[Jim Leventhal]

No, I didn't say likes it.

[Scott Wapner]

Absolutely not.

[Rob Sechan]

I was about to make that joke at my expense, but you beat me to it.

[Joe Terranova]

You certainly have a lot of semiconductors that have gone on sale and have a much lower value. It's not the case for Nvidia, it's not the case of Broadcom, but you look at KLA Corp, you look at Applied Materials, you look at Manpower, you look at amd, all these stocks on the chart don't look good. Right.

[Rob Sechan]

My old favorite, nxp, I don't own it anymore, but maybe I should get back into that.

[Scott Wapner]

Rob, you own Broadcom though, right? If you're talking about semis that have ripped, we do, maybe to frothy like levels, but they've ripped. Broadcom's up like 40% in a couple of days.

[Jim Leventhal]

And we trimmed it this year and it's still our second largest holding at the firm. It's been, it's been an amazing, an amazing security to own. Obviously. They have terrific fundamentals. 38% free cash flow margins, 64% operating margins. It's a, it's a key core holding for us. And they're right in the midst of this secular growth opportunity. And I. 100%. And by the way, this is why it pays to pay attention to price when you're getting into these names in video. We bought when it dropped to 29 times. 99 bucks. 96. 6 bucks. Broadcom we bought when the fundamentals recalibrated. There are cheap things in tech that make sense right now. You look at Google, look at it rerating the market is starting to pay attention to what is a little cheap.

[Scott Wapner]

You think, you think Google's cheap?

[Jim Leventhal]

It's cheap relative. It's cheap relative to the other. The other names you look at, I think it's like 21, 22 times meta's. Meta is still cheap. I know, but some of the other.

[Scott Wapner]

But Alphabet and Meta have always been cheap relative to the others, but not.

[Jim Leventhal]

Always in quotes, not as cheap as they were. And you're starting to see people look outside of a large cap mega tech to find out where they can place those bets and not have the same downside risk because there's a market margin of safety in price and those tailwinds still exist. Sure.

[Scott Wapner]

But the problem is a lot of those names over the last month to our point that we started at the top heaviness of the market again. Right. Matters up almost 15 in a month. Alphabet's over 17% in a month.

[Jim Leventhal]

That really doesn't matter to me the price move. What matters to me is the corresponding earnings move with that price so that it's supportive evaluation relative to its historical average. But that's the Microsoft expensive relative to that it has.

[Joe Terranova]

Under the part of the point that.

[Scott Wapner]

Joe is making though, and I agree with that you have you know, elevated earnings expectations and to some degree slowing earnings growth because the growth has been meteoric related to AI that now because of these moves and the movement of investors back into these names to the degree they've moved now, you can't have any slip ups at all. Right.

[Jim Leventhal]

So totally agree. My point is if I'm trimming somewhere and want to maintain my exposure within that universe, that community of stocks, I'm going to trim where it's more expensive relative to its history. That's just the way we do it.

[Scott Wapner]

What about Apple? Where, where does Apple fall?

[Jim Leventhal]

Apple were neutrally rated. Here's, here's a great story. We wanted to go underweight Apple. We didn't. Okay, we didn't go underweight. We went to neutral. We're benchmark weighted. And why are we benchmark weighted? A, we have enormous embedded gains in the position. B, we think it's very dangerous to go against a company that has that type of discipline and has that type of cash balance and can buy back stock to deliver on earnings. So the reality of it is we didn't. Boy, in the last couple months I'm glad we're not underweight Apple.

[Scott Wapner]

Well, of course, I mean record high again today. Excuse me. We're knocking closer to the door of 4 trillion in market cap. I think we're around 3 1/4 trillion, maybe a little bit more than that because the stock has been on a huge tear.

[Joe Terranova]

This proves the point. These are companies that have the earnings growth and back for a second. Like there's a critical decision that a large swath of the marketplace, the speculative marketplace is going to make surrounding semiconductors here as you move into the beginning of the year. Because you mentioned in video, you mentioned Broadcom. I know Jimmy likes some other names there and I'm there as well. But Nvidia and Broadcom, they have a monopoly heavily on the AI story they do. These other stocks do not have the market share that those two behemoths have in the semiconductors. And just because price looks attractive, I want to know what's your exposure to the AI story?

[Jim Leventhal]

Because I would argue that owning Metta this year was not bad.

[Joe Terranova]

This bad decision stay on semi Swansea because what what what I'm saying with the semiconductor industry right now.

[Jim Leventhal]

You are right. Whether it would be there's haves and have nots in legacy chips face more problems than others between two winners and.

[Joe Terranova]

Everyone else is growing so wide I don't know how they are able to catch up the rest of the field relative to Nvidia, relative to Broadcom. If you want to put AMD in that conversation, okay, fine, but it's not performing.

[Scott Wapner]

So from big winners to at least last week, big losers. I want to go through a few of these names. Coinbase was down 12% last week. Bitcoin's obviously come off the boil. It's still at a nice healthy simmer, but nonetheless, like what about this trade?

[Joe Terranova]

So we put the trade on October 31st. On December six we were up 91%. Today we're up 48%. That's the volatility of cryptocurrencies. I looked back at Bitcoin itself. You always want to identify an area and this is for people that have the flexibility and aren't beholden to a rebalance like I am. You have the flexibility to take action ahead of a rebalance. What's the level you're looking at a crypto? So in Bitcoin, 85,000 is a huge area that you support area. If you don't own bitcoin, you want to buy against 85, that's fine. If it breaks below 85 and you're long Bitcoin, you probably want to take some off there. But it's a highly volatile asset class at the end of the year where liquidity and volume is beginning to diminish and that leads to a more elevated environment and an environment which you can't dismiss. 10 year yields moving back towards close to their high for the year. I think they're 457 as we're talking right now.

[Scott Wapner]

Palo Alto was down 8% last week, by the way. You own that both personally and in.

[Joe Terranova]

The t Fortinet CyberArk. CrowdStrike. I still believe in the cyber thesis. I would say Fortinet right now. Look, I own CrowdStrike personally. I own Palo Alto personally. We own Fortinet in the ETF. Fortinet has more of a reasonable valuation relative to CrowdStrike and to Palo Alto. But CrowdStrike is gaining significant market share. They've made a dramatic recovery from where they were in the summer. They've done all the right things things to repair some of the negative effects of the headlines in the summer. And I believe in the cyber story. So if you believe in the cyber story, you're going to have to position size accordingly because there's going to be volatility.

[Scott Wapner]

Robert vertex Pharma down 15% last week. Both you and Jimmy got that.

[Jim Leventhal]

You know, to me this is just a matter of timing. This is one of the few stocks that is down for the year. I think there's a lot of investors out there, you know, essentially tax loss selling against some of the large gains that everybody has had this year. So we are not worried about that. I think there's a nice setup for health care going into next year if earnings can deliver. Remember, health care had 20% earnings growth expectation coming into this year. It delivered plus 3. So people are right to be nervous around that. And I think you have to be selective. I just think this is window dressing.

[Scott Wapner]

All right, let's take a quick break. We'll bounce for a couple. When we come back, we'll talk about a bounce back for two of Rob's beaten down pharma plays. We got a bullish call and one sector that's flying high this quarter as well. We'll do it next.

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[Joe Terranova]

Get a head start on 2025 with CNBC's Big January, the hottest tech event.

[Jim Leventhal]

CES from Las Vegas. The Data the jobs report and meet the future of biotech and pharma at JPM HealthC Care. Check out the AMEX golf tournament from California, Inauguration Day and the meeting of world leaders in Davos. Plus the first Fed decision of the year. The investing edge you need to start the year ahead of the game. Cnbc.

[Scott Wapner]

Got a lot of names on the move today for the committee. We do have another move though. We'll top this block with. It's Jimmy and it is Trimming letter V. Yup. Like Visa.

[Rob Sechan]

Beloved Visa. I needed some funds. I wanted to keep my equity exposure intact, so I needed some funds to raise for Qualcomm. I'm not overly negative on Visa. Stock's done really well, so we can qualify this as selling high to buy low. You know, at the same time, I will say, how much more can we put on the back of the consumer? Which is really what Visa is all about. But I still own shares of Visa even after I've trimmed it.

[Scott Wapner]

All right. Eli Lilly securing approval for Zepbound to treat sleep apnea. Jyoti.

[Joe Terranova]

In an awkward place for me to talk about, but okay.

[Scott Wapner]

Rob, you want to do it?

[Jim Leventhal]

Yeah, yeah, sure. I mean, listen, we trimmed this back in May based on valuations. It's rerated. We still own it. Overweight position for us. Broader distribution of Zepbound and use of these GLP1 drugs to treat other things like addiction and heart disease are obviously a positive for the business. I mean, it's up 33% year to date. It was up in the mid-50s for a while. Sure was. And again, one reason why you want to pay attention to valuation and sell a little at the tops. Right? Trim.

[Scott Wapner]

What about Novo, which is rebounding? It had a volatile week last week. Obviously you own it as well.

[Jim Leventhal]

Same bet internationally, obviously. Looks like it's behind relative to Lilly in the space. It's rerated over the last several months. But this is a company that still has 24% projected revenue growth next year and 60% returns on invested capital. So if they can get right footed in this space, I think it's probably a good time to be a buyer.

[Scott Wapner]

Let's hit Salesforce, which Monash, Crispy and Hart says, quote, remain on the sidelines. You agree or disagree with this call?

[Joe Terranova]

Disagree with that.

[Scott Wapner]

They say they're well positioned to capitalize on on the digital transformation with a strong cloud portfolio and new Jenny capabilities. However, competition's dynamic, software's in transition and the macro environment, they say fragile.

[Joe Terranova]

I think they're okay on the competition. Front. They're proving themselves in these earnings reports that they're remaining resilient to any type of competition. They clearly are engaged as it relates to what the strategy is. And you know, there have been many who have been critical over the last several years about their M and A strategy, myself included. I thought over the last several years maybe they spent a little bit too much going out, whether it was Mulesoft, Tableau or Slack. But now you're seeing that these businesses are accretive to the model. And I think it's diversified salesforce. So I view this company as reasonably valued and a longer term holding.

[Scott Wapner]

So airlines. Barron's is. Go ahead.

[Jim Leventhal]

Sorry. I was going to say if you believe in Dan Ives broadening out from AI to software monetization. This is one of the most influential software software companies in the world. Who is benefiting from the monetization of AI. It did get cheap earlier in the year where we bought it. This a name that I agree with, Joe, that you can own here.

[Scott Wapner]

You have an outperform rating on Ives. Is that what you're saying?

[Jim Leventhal]

No, no. I love Dan Ives. Love.

[Scott Wapner]

Well, I was obvious the way you answered the question, Rob. Thank you. All right. Airlines. Barron says holiday travel surge is great for airlines stocks. While the sector can fly higher in 25. I mean they've flown high. I mean United is a massive winner this year, up 138%. Joe, you own that. And Delta's been good too. It's up 51%. Do we think that there's a lot more left to go here?

[Joe Terranova]

Look, I'm just going to credit gsa. Jimmy does the fundamental analysis on these stocks and kudos to him because he's been on these names for a while. We're chasing price here. That's what we've been doing. You've seen both. First in the case of Delta, secondarily in the case of United. You saw the momentum begin to build. We were captured by that. We took positions. We've been rewarded accordingly. I've been skeptical of the fundamentals, Jimmy, as you know. But look, I'll turn to being good on it.

[Rob Sechan]

Thank you. And there was a period this summer where we were looking at the fundamentals. And I remember having this conversation with you, Scott, and you're saying what does it take to get these things to work? It was legit question and the answer is just time. And I think there is still time left to run on this trade. Here's why I say that I think the estimates are too long. I'm looking at Delta's sales estimates right now for next year, not earnings per share sales. They basically have not budged for next year in the last nine months. Completely flat. That makes no sense. When you look at the volume. Yes. Through TSA of the passengers and you look at the price increases for tickets which we get from CPI all the time. And then you combine that with where oil sells slash jet fuel prices are, you know, there's no way that the sales figures right now are properly estimated. And what I just said about margins implied by jet fuel implies that the earnings are going to go higher than what's priced in right now.

[Scott Wapner]

Rob Decker's new high on Friday. We've talked about it so much. When you look at the chart of let's say that relative to a Nike, for example, or Jimmy's on which he's been hot on to what do you.

[Jim Leventhal]

See here from the name that our team added on May 1st, it's up 52% since we've added it 90% year to date. It's still not that expensive. They dominate DTC trends, still look favorable over the holiday season. So you know, it's a name we continue to own and like and probably wouldn't exit until at least May of next year.

[Scott Wapner]

Okay, thank you. The headlines now with Seema Modi. Hi, Seema.

[US Cellular Ad]

Hey, Seema. Scott Ukrainian President Zelensky says more than 3,000 North Korean soldiers have been killed and wounded in the Kursk region. In a post on X, Zelensky warned North Korea could send additional troops and military equipment to the Russian army. Ukrainian and U.S. officials estimate North Korea has sent already about 10,000 soldiers to Russia. Starbucks union workers expanded their strike to New York, New Jersey, Philadelphia and St. Louis over the weekend. The five day strike began last Friday in Los Angeles, Chicago and Seattle. Talks between Starbucks and the union have stalled over unresolved issues regarding wages, staffing, scheduling. The union warns the strike could reach hundreds of stores by Christmas Eve. And President Elect Trump says it's, quote, an absolute necessity for the US to own Greenland. Trump had floated the idea of buying the island, which is part of Denmark, during his first term in the White House. Greenland's prime minister has already rejected president elect's remarks saying Greenland will never be for sale. Scott, back to you.

[Scott Wapner]

All right, Seema. Thank you. Seema Modi. Still ahead, our halftime year end report card. We'll take a look at the committee's winners and losers for the year. Rob has yet to be graded. We'll do it. He'll come to the front of the class coming up after Mike Santoli joins us next.

[US Cellular Ad]

Gifting is hard, but here's a Give the gift of connection from US Cellular. Not sure what that means. Here's a slightly more specific hint. You can choose four free phones and get four lines for $90 a month from US Cellular. Your family wants new phones. How do we know? They told us. The good news is that compared to wrapping presents, you're great at getting hints. So take the hint and get them four free phones and four lines for $90 a month. US Cellular built for us. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella. Edu.

[Scott Wapner]

Welcome back. Our senior markets commentator Mike Santoli joins us now. You're really looking at whether the squall, as you call it, has truly passed this month because it felt a little windy on Wednesday.

[F]

Yeah, to a fairly unexpected degree, Scott. I think the deepening of the sell off into Wednesday reaction to the Fed did probably or at least plausibly clear the way for that to have brought forward some of the selling pressure I think a lot of people might have expected to come after the first of the year. We did finally register some pretty good, you know, washout, oversold readings, responded to it on Friday. Now we did have negative breath again today, although it's improved throughout the the morning into the afternoon. So I think it's time for this market to prove that the seasonal tailwinds are going to have some effect and have a bit of upward drift and, and maybe sort of reset things a bit here. So I don't think you can say that the challenges that were presented and caused some of the pressure in the first three weeks of December have totally gone away. But you can say that we've sort of surfaced them a little bit. We've observed them and now we've, we've started to contend with them. We'll see if, if that has to, you know, be a battle, we fight it in January.

[Scott Wapner]

This market breadth that's been negative for we had that, what, 14 days in a row. I think it was finally broken on on Friday. But one day's performance doesn't mask underlying weakness.

[F]

No, it doesn't. And it's the pressure from, from rates on some of the cyclical areas of the market, rates going up when economic surprises have waned a little bit. It talked about that to a fair degree. Also, you have to imagine whatever tax loss selling in the year to date laggards should be pretty much through right now and start to dry up. That's why I think you have a lot of the makings for at least a little bit of a migration higher. But, you know, got to see it's hard to extrapolate too much from the action of the last few days of the year. But that doesn't stop people from trying.

[Scott Wapner]

You know, Certainly not. I'll see you in a little bit, Mike. Thanks. That's Mike Santoli, senior markets commentator. His last word, of course. Coming up in a bit on closing bell. Coming up here, the streaming sports blitz. Netflix running two NFL Christmas games. But will it be a touchdown or a turnover where shares already near record highs. The investment committee breaking it down next.

[Jim Leventhal]

Are you following the Halftime Report podcast?

[Joe Terranova]

What are you waiting for?

[Jim Leventhal]

Look for us in your favorite podcasting app. Follow the Halftime podcast now.

[Scott Wapner]

All right, Netflix ramping up its push into live sports this week, getting set to stream the NFL's two Christmas Day matchups. Julia Boorstin looking now at what is really at stake here, Julia?

[US Cellular Ad]

Well, Scott, the two NFL games streaming Christmas Day are Netflix's first live stream of a major league sporting event. And the stakes are high for these two games that Netflix paid a reported $150 million to the NFL. More Netflix investing more in a Mariah Carey opening show and a Beyonce halftime performance. Now, these Christmas Day games are seen as a key way for the NFL to expand its dominance over the holiday season at a time when NBA ratings are down nearly 20% this season. And live NFL games are a key way for Netflix to build its advertising business. They also come as Netflix is increasingly betting on sports, just announcing that it secured exclusive streaming rights to the next two FIFA Women's World Cups. Now, after Netflix struggled with technical issues streaming its biggest ever live event, the Mike Tyson Jake Paul fight, the pressure is on for Netflix to pull off the live streams without a glitch. And the upside could be huge. Antenna reports that that Mike Tyson fight sparked the addition of 1.4 million new Netflix subscribers. But with Netflix shares up 87% in the past year, Barron's flagging today that the move into live sports is an expensive one for the streamer. Scott.

[Scott Wapner]

All right, Julia, thank you. Julia Borstin is Giving us a set up here for a conversation. So, yes, they say it's expensive. They say. Why this talk about Netflix, quote, why it might fumble at live sports push. Investors should stay on the sidelines because it won. Rights are expensive. Expensive. The Tyson Paul fight, which obviously draw a lot of interest, was riddled with tech issues. The stocks pricey and they're unlikely to move aggressively into sports when rights are this expensive. What do you think? I mean, the stocks had a tremendous run. Look at the chart. Look at the chart.

[Joe Terranova]

This, this is a difficult one. I, obviously it's in the etf, but I own this personally and I owned Netflix before it was ever added to the etf. I've owned this now for the better part. Part of the last 24 months. I've done remarkably.

[Scott Wapner]

Why is it so difficult? Because if you don't break down and.

[Joe Terranova]

Cry, you don't own Netflix. If you don't own Netflix, I think you have to wait. I think you have to wait. And let me tell you the reasons why. First of all, what Netflix has done in 24 has seen an acceleration in revenue growth beyond what analysts expected. They did 6% revenue growth in 23, 15% revenue growth in 24. You're going to reach the closet cliff where that revenue growth is going to go from being stagnant to actually falling off. So as we move it to 25, I actually think I have to reach a moment where I need to ring the register personally and sell out of this name. And that's one of the reasons why I'm telling you.

[Scott Wapner]

So that's why your voice was one.

[Joe Terranova]

Of the reasons why I'm telling you that if you don't own the stock, I wouldn't buy it. The one thing that's keeping me anchored though, in holding the position both personally in the ETF is the analyst community is not there just yet. The 12 month price target on this is 850. Do you know there's three analysts that actually have a sell rating and a 550 price target on Netflix. So I kind of wish the analyst community would come around and, you know, represent some enthusiasm in their price targets. And probably at that point, that's when I exit personal.

[Rob Sechan]

As you know, we were talking earlier.

[Joe Terranova]

About just by the way he wants to just like say something about, no.

[Scott Wapner]

I don't need to. I mean, it was just me. I was. It wasn't just me. No, no.

[Rob Sechan]

It was very palpable. You look like you were going to, you know, Anyway, moving on.

[Scott Wapner]

Yeah.

[Rob Sechan]

Torsten Sloke earlier we were talking has a 90% chance that Nvidia disappoints. I'd say there's a 90% chance that Netflix disappoints. This is not me crying sour grapes because I don't own it. You know, these sports rights are expensive. Now granted, this is not the main thrust of their business, but we're kind of well into the advertising. We're well into the password sharing crackdown. This is agreeing with you on the point that the analyst can. Community may be pricing in far more good things than can actually happen here.

[Joe Terranova]

Yeah, Jimmy, the only thing that I'd be crying about this week is if they don't put the sweet sausage in my lasagna for Christmas.

[Rob Sechan]

Okay. I hope that doesn't happen, Joe.

[Joe Terranova]

I hope it doesn't either.

[Rob Sechan]

I'll cry for you if it does.

[Scott Wapner]

Okay. Coming up, the report card for Rob Secchin next. We are back. Our year end report cards continue. Rob Secchen, make your way to the front of the class. Please sit down.

[Jim Leventhal]

Ready?

[Scott Wapner]

Vistra Energy, your biggest winner. One of the biggest winners of the year for anybody, 263%. We know why, because it's become a sort of derivative. I play powering data centers and the like. What happens now with that stock? You trim any of that?

[Jim Leventhal]

We have not. We have not.

[Scott Wapner]

Why is it. Why you trim the other? Some of the other stuff.

[Jim Leventhal]

It's not that. It's still not that expensive. Maybe expensive for a utility, but it trades at a 20 times forward P. And given the, the, the demand that's required for reliable energy to fuel the AI trade, we don't think it's going to now. It's gotten pretty big. So we may kind of going in.

[Scott Wapner]

Let me ask you this because I truly don't know the answer. And if you don't, I'm sorry, you say what trades at what? 20 something.

[Jim Leventhal]

20 forward P. Okay.

[Scott Wapner]

What is, what's like an average PE for a utility stock? I'm thinking like what are they? Single, low, double digits.

[Jim Leventhal]

But I don't think anybody has the leverage to this kind of community the way that this company has. And it's why it's done what it's done. Obviously I don't think, just being honest, I don't think when we added this we thought that we did think that something like this could be possible. I don't know that we saw this price performance and as such it's become an oversized position.

[Joe Terranova]

We own Constellation.

[Scott Wapner]

Answer that question.

[Joe Terranova]

We own Constellation owns it trades at 26 times so a lot of the larger market cap utilities have grown in valuation.

[Scott Wapner]

Is that too expensive?

[Joe Terranova]

It's a little expensive, yes. Relative to its 10 year average? Yes. I think its 10 year average is.

[Scott Wapner]

In the mid teens.

[Jim Leventhal]

Hey Scotty, I do have a question for you. I know when you look at that report card, you see the punches that I land or we. My team landed on that page. You'd say that if it was Tyson throwing those, he would have won that.

[Scott Wapner]

There is no I in team, Rob.

[Jim Leventhal]

No, I said we.

[Scott Wapner]

I said we because there is me, though.

[Jim Leventhal]

There is a me, as Kobe Bryant said.

[Scott Wapner]

That's right. Famously. Okay. Nvidia, Huge winner. Everybody knows that. Broadcom up almost a double. Everybody knows that. EBay. EBay up 45%. Talk to me.

[Jim Leventhal]

Yeah. And it still only trades at 12 times. 12 times earnings. As Cameron Dawson said to me and Jay Peters on the investment team, there will always be ebay and there will always be leverage to the consumer and a lot of leverage to potential AI development performance there as well.

[Scott Wapner]

So we've seen a huge divergence between software and chips. Some software stocks have done really poorly, like Adobe, which had a problem most recently with its earnings down 25% year to date. What do you do?

[Jim Leventhal]

We continue to be patient with Adobe. We do think that this disruption story to their core franchise is maybe overdone. This is a company that has incredible, incredible profitability. It trades at a 30% discount to its 10 year average. And we think they are going to figure out how to monetize AI.

[Scott Wapner]

You get this signed and you bring it back to my office tomorrow, okay? No, you got no forging either.

[Jim Leventhal]

My parents will approve.

[Scott Wapner]

Okay. All right, up next, two big winners and two big losers in today's session. We will document those. All right, winners and losers today. Let's focus on Alibaba for a minute. It's on pace to snap a three day losing streak. Stocks up near 3%. Rob, you own that name?

[Jim Leventhal]

We do this a name that we bought, right? Right. Time. Kind of around the same time that David Tepper was talking about the resurgence in China. We saw this as a very inexpensive way to play that and one that provided us with a little margin of safety. Obviously we brown tripped it, we wrote it up, came back down. I think it's still a name you can own. As we reach kind of peak pessimism around some of these types of trades.

[Scott Wapner]

Joey Carnival, Norwegian, Royal Caribbean are all lower today. What do you own? Rcl.

[Jim Leventhal]

We do.

[Joe Terranova]

It's been a strong performer. It feeds into the Travel theme, which has been a surprising theme here in 2024. Represented by the airlines and obviously represented rather by the cruise ships and more recently, Jimmy, by the casinos, like Wynn. Yes.

[Scott Wapner]

Okay.

[Joe Terranova]

Wynn performing well. Las Vegas Sands.

[Rob Sechan]

Dinosaurs in the desert performing well.

[Joe Terranova]

Caesar's not so tired.

[Rob Sechan]

Jurassic Parks in the desert is what you meant.

[Scott Wapner]

We'll do finals next. All right. It's the Great Lasagna Debate taking place during the commercial. Thankfully, not during closing bell at 3:00 when Chris Harvey, Bryn Talkington, Malcolm Etheridge, do join me at 3:00 Eastern Time.

[US Cellular Ad]

Thank you.

[Scott Wapner]

All right, Final Trace. Why don't you give me one? Zoom Beyond. Sweet sausage. What do you got?

[Joe Terranova]

Zoom bought it last week. This is one of my favorite stocks going into 25.

[Scott Wapner]

Okay, thank you very much, Farmer Jim, Lockheed Martin.

[Rob Sechan]

We are far more likely to buy Greenland than we are to kill the F35 program.

[Scott Wapner]

Okay, Rob Sechin.

[Jim Leventhal]

I'm gonna go with where we began, which is selling tech but buying value. IWD into the new year.

[Scott Wapner]

Iwd. Big, big value player. Okay, we shall see. I'll see all of you, of course, at 03:00 Eastern Time for closing bell. We'll follow the final hour of trade S and P is now positive. I'll see you then. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

[US Cellular Ad]

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 affiliate, 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.comhalftimereportdisclaimer. gifting is hard, but here's a Give the gift of connection from US Cellular. Not sure what that means. Here's a slightly more specific hint. You can choose four free phones and get four lines for $90 a month from US Cellular. Your family wants new phones. How do we know? They told us. The good news is that compared to wrapping presents, you're great at getting hints. So take the hint and get them four free phones and four lines for $90 a month US Cellular built for us.