Scott Wapner (3:41)

It was a nice respite, wasn't it, from, you know, the daily tariff headlines and the threats and, and this. I mean, you know, maybe it's a way to get the crypto dinner and the jet off of the top of the headlines. You go back to the trade war which, you know, you dance with the brung. Yeah. Is where we're at today. I will say vital knowledge if, you know, they're a market intelligence and analysis company, says of the Post today, quote, the absurdity of the threat undermines its credibility. It speaks to maybe how the price action is reacting. Today, though, they point out that, quote, an economy can't have a loaded gun pointed at its head for months. Goes to what Steph said, we got to get past this uncertainty. Right. We have to get past it, don't you think, for the market to really feel like it can dig in and do something special.

Jim Laventhal (4:29)

Absolutely. And that's why over the past couple of weeks when, when despite the market being up, I haven't been cheery because I've been nervous because we know that this is, that there's going to be another shoe to drop. And Scott, when you say we need to get past the uncertainty, I think we could have three and a half more years of uncertainty because that's to some degree what we had in round one in Trump 1.0, where there was just new information launched throughout that whole four year period.

Scott Wapner (4:53)

Yeah, but I mean, that's not, be careful. The point you're making though, it's not like the market was a disaster in Trump 1.0. In fact, it was good and the economy was really good. Covid upended a lot of things that, that were happening.

Jim Laventhal (5:06)

Fine. But here's my point. As an investor, I woke up every morning for four years and checked Twitter to see what new news I had to deal with. And that's kind of where I am again. And I don't think that you said it was a nice respite. It was a nice respite. I was very distrusting of the respite. I'm going to be distrusting of the respite whenever we have it again.

Scott Wapner (5:23)

What are you going to do? You're not going to get more invested in the market? You don't trust it?

Jim Laventhal (5:27)

No, you know, I'm fully invested. Here's what you do.

Scott Wapner (5:30)

What's the payoff for the viewer then?

Jim Laventhal (5:31)

Okay, here's the payoff for the viewer. You stay invested. Because I think the American business will overcome whatever political uncertainty is thrown our way. It doesn't make it easy, but what it means is that you need to go into the next three and a half years emotionally prepared to not overreact when we're at an April 4, to not overly celebrate when we're at a May 11, when we and just keep your wits about you. I think valuation matters. I think how your position matters. But I think if you can go into this saying bombs are going to be not actual bombs. Right. News bombs are going to be dropped on us. Don't get too despondent. Right. Euphoric statements are going to be made. Don't get too excited. I think you can actually get through the next three years with decent, with decent returns because again, American business has a very long history of overcoming whatever's out there. And I completely believe in America, I completely believe in companies to continue to generate earnings growth.

Scott Wapner (6:26)

We'll talk about one specific company that's in the crosshairs yet again today in a minute. But what's your view, Kev, based on how we started the program and how the market's reacting to those posts this morning?

Kevin Simpson (6:36)

Well, I think that's the dance that we've been accustomed to, to Jenny's point. And I think we need to continue to expect that volatility for the foreseeable future. When we were sitting here last week, it was a little bit too calm and the Vix is up 30% just in a week.

Stephanie Link (6:48)

So.

Kevin Simpson (6:49)

So the volatility is something you can play to Stephanie's points. We're going to buy the dips. We're going to sell calls into the strengths. This volatility may continue easily for the next three years, but I would venture to guess certainly until the summer is over, especially now where we've got a little bit of a lag in terms of earnings, the exception of Nvidia.

Scott Wapner (7:06)

You came in yesterday feeling pretty good about things today. Change anything?

Jenny Harrington (7:10)

No, no, because of.

Scott Wapner (7:12)

Because of how I painted the picture at the top. The. You know, the fool. Me once.

Jenny Harrington (7:16)

A little bit. A little bit. Look, we're playing the hand we've been dealt. There's no, no room for moralizing about this. No room for complaining about it. This is the hand we've been dealt and I'm going to characterize it. I'm not trying to be provocative, but this is kind of thuggish behavior. Apple has been told today, pay up. That's what they've been told. And now the negotiation comes. I'm sorry, Scott, did you not want to go there? Because I can talk about eu.

Scott Wapner (7:38)

Since you just mentioned that, let's show what the President posted this morning about Apple. Quote, I have a long. I long ago informed Tim Cook that I expect their phones will be sold in the United States, will be manufactured and built in the United States, not India or anyplace else. If that's not the case, a tariff of at least 25% must be paid by Apple to the US you mentioned the EU threat as well.

Jenny Harrington (8:00)

The same.

Scott Wapner (8:01)

So we got.

Jenny Harrington (8:01)

We got the same thing. Everybody has to get their checkbook out. And there's optionality in how it gets paid. I mean, Apple had 100 billion of profit last year. President Trump is looking at that and saying, I want some of it now. By the way, this isn't so awful, right? I mean, there are tax cuts on the way, so it's not that terrible. But basically he's saying, I want some of that. And it will be in part up to Tim Cook to decide how to pay it. It might be a check, it might be lower gross margins if he actually does try to manufacture iPhones here in the US Which I think is somewhat farcical. But basically what President Trump is saying is, I want more money for the federal government. We can moralize about whether that's thuggish behavior, we can complain about it, but that's what's happening. And it's best for everybody to Deal with it, as the market is today down less than 1% at a time.

Scott Wapner (8:49)

Too, by the way, where you just in the House passed a $4 trillion tax bill. The bond market obviously has, you know, thrown its hands up in the air at a point this week and said you're never going to get serious about spending cuts. So I don't even think that what happened this morning is a coincidence related to any of.

Jenny Harrington (9:08)

I think you're exactly right. I think you're. Thank you, Scott. I think you're exactly right. The world now knows we are not going to cut spending. I mean, again, let's not complain about.

Scott Wapner (9:18)

He wants whatever revenue he can get from whomever he can get it from.

Jenny Harrington (9:23)

That's exactly right.

Scott Wapner (9:25)

To help offset the cost of the tax bill, which he's not going to waiver on at all, despite what the Senate might do to it in the days ahead.

Jenny Harrington (9:32)

That's exactly right. He's squeezing everybody he can squeeze. I don't know if I can add more to it. You just said it. I totally agree.

Scott Wapner (9:38)

Well, the question is whether, you know, look, it's not like the Apple threat is out of the blue because he's been, the president has been talking about it. Steve Kovach joins us now. I don't know if we need to get our screwdrivers out again because we had tucked those away figuring that that wasn't going to happen. But here we go with the threats again.

Jenny Harrington (10:01)

What do you do?

Scott Wapner (10:01)

What do you make of it today?

Steve Kovach (10:02)

Yeah, a massive escalation, Scott. I mean, last week you had President Trump in the Middle east on that trip, bringing almost every day, mentioning Tim Cook's absence there, calling out Jensen Huang as his new favorite tech executive. And now we're saying he has a little problem with Apple building all those iPhones in India. Well, now that little problem is becoming a very big problem with 25% threat of tariffs on those iPhones made in India. And now we get to have that conversation again. How likely is it, or possible or feasible is it for Apple to start building iPhones here in the United States? And the answer, like Farmer Jim was just saying, it's kind of farcical here. We just don't have one, the labor force in which to do it. Tim Cook has spoken about this, that the Chinese labor force, and now increasingly the Indian labor force is capable of doing this. We can't, we don't have hundreds of thousands of workers here that we can move throughout the country like they do in China and India to start building those iPhones so what are the options here that Apple has? And everyone right now is saying, well, I guess they could try to eat these costs or raise prices. That's already been kind of floated in a Wall Street Journal article, I believe it was last week or two weeks ago that maybe the next lineup of iPhones will get a price increase, likely due to tariffs, but they can give whatever reason they want for that. And then also Tim Cook is not stopping with India. There was a headline overnight from the Financial Times, one and a half billion dollars being invested again into India for Foxconn plant to just expand that footprint even bigger. Remember what Tim Cook told investors, Scott, just a few weeks ago on that earnings call saying we're going to move as much production from China to India as we can. For those US iPhones, that's approximately 65 million of those a year. They're not there yet, but again, that spending is going to get them there and then Vietnam is going to be the source for things like accessories and MacBooks. So that is not the United States. It doesn't seem like it's going to happen. Now the question for investors to really think about is how serious is the President on this? He's already backed off numerous times and flip flop on this issue numerous times after saying there are no exemptions, then he gives Apple an exemption after Liberation Day. And so really it might be just a kind of wait and see thing here, Scott, to see if the President really means what he's saying here.

Scott Wapner (12:21)

I mean, Dan Ives today calls it a fairytale. Yeah, sort of. Your, your idea, the, the idea that iPhones are going to be produced in the US And Wells Fargo takes a look at this, Steve, and says that Apple would have to raise iPhone prices by 1 to $200. Yeah, I'm not, I'm not, I don't mean to sit here and spend other people's money, obviously, but one to $200 increase in price is not exactly the $3,500 price tag that we've heard bandied about by the skeptics and the critics of all of this. If Apple actually did raise its phone prices by 1 to 200 bucks, you do have the carriers involved here too to think about and whether that would hurt demand in any way for a premium product.

Steve Kovach (13:10)

Exactly that.

Scott Wapner (13:11)

I don't know.

Steve Kovach (13:12)

Just math, the math out here. If you're looking, if you're Tim Cook this morning looking at that true social post from the President, you're saying 25% for those U.S. iPhones or, or 100% for a U.S. made iPhone, which one are you going to choose? And to your point, that is exactly right. And that's something Apple's been doing for many years now. Either these trade in deals that you get from the carriers or Apple itself, or these kind of buy now pay later plans. You can finance any Apple product pretty much, not just the phone, through Apple itself and do a buy now pay later. They have a deal with a firm in order to do that as well. Zero interest and make your payments over time. We've become used to that. Yes, sure, the, the sticker price might be a thousand bucks on an iPhone pro, but you don't pay that. Not everyone is paying that right off the bat. So this might be something Apple feels like they're willing just to take the hit on, on margins and things like that in order to do it. We already know they're going to do it this quarter. $900 million charge related to all these tariffs just for the June quarter. What that looks like. Beyond that, who knows. We'll have to wait for the next post from the President.

Scott Wapner (14:13)

Yeah, we're two weeks from Monday. You and me are going to be sitting together out in Cupertino as well at wwdc. Supposed to be all about the developers and AI and everything, but this is the overhang and I suspect we'll be talking about it a lot between now and then. Steve, thank you. That's Steve Kovac back at our HQ. So we're below 3trill in market cap yet again for shares of apple below 200 bucks. Eight straight down days would be the longest streak since January of 2022. Kevin, what do I do?

Kevin Simpson (14:42)

I think you hold Apple here. I don't think that's going to skyrocket in the next few days.

Scott Wapner (14:47)

I blow this off. Just what do you think?

Kevin Simpson (14:49)

I wouldn't blow this off short term, but Scott, what I'm more worried about intermediate and longer term is what happened yesterday with Open Air Chat, GPT and Jony. I've because the Guardian said it best. They said that the next great iPhone moment may not even come from Apple because if they're building the next generation of hardware that we can use this ChatGPT product and bypass the phone. To me that's a lot more scary than a threat on a tweet for 25% tariffs made in China.

Jim Laventhal (15:13)

Can I ask Kevin a question on that?

Scott Wapner (15:16)

By all means.

Jim Laventhal (15:16)

Okay, so you think you hold Apple. What do you think? What do you think? If you hold Apple in an IRA versus a taxable account because everyone who has it in the taxable account has a huge capital gain. So you kind of need it to go down 15 to 30%. Right.

Kevin Simpson (15:30)

So I never let the tax tail wag the dog. It's irrelevant in all of my thesis because it just comes down to math. But certainly in an ira, you know me really well, I would want to write covered calls against it actively because you have no short term capital gains in the ira. We do the same thing in taxable accounts. But this was a stock that we sold out in December around 247 and a half. It was too expensive. Last month on April 9th we bought it at 177. So here at 200, I'm still okay holding it. But for your clients that have low cost basis, I think writing covered calls or at least putting in stops paying the tax is better. Think of in video when it was 150 and went to 88. No one sold it because no one wanted to because of the tax consequences.

Jenny Harrington (16:08)

But you can also just opine on here. I mean maybe expectations just need to be brought down. For Apple in general, we had that period of time through 2021 where it annualized at 45% annual returns, remember this, for like three, five years. And since then it hasn't had anything. I'm looking at the three year return. Well look a three year return, 10% annualized below the S&P 500. But what if it just grows at the S&P 500 and it should because of how representative it is in the passive ETFs. Whether it's below 3 trillion or not, it's still a huge part of the voo's and even huger part, sorry the spiders. An even huger part of, of the triple cues. So as money comes back into this market, it automatically goes to Apple. I think it's a touch overpriced. We've obviously seen the AI hasn't come out the way it should. The super cycle is, has been blown off, appropriately so. But it's still a major part of the US market. And as the US market goes, so will Apple.

Stephanie Link (17:00)

Why, why, why would you pay 28 times for mid single digit revenue growth.

Jim Laventhal (17:05)

At this where I'm at?

Stephanie Link (17:06)

That's the thing. The one thing that you really don't have to. Really good. I don't, I don't know. I don't. Share question.

Scott Wapner (17:12)

Let her finish.

Stephanie Link (17:13)

My, my point is what they do really well is gross margins and margins in general that they, they do very well, exceptionally well. But you're running Revenues in the mid single digits at best. IPhones are actually declining year over year. China iPhones are 20% of their sales. So you have so many headwinds and it's, and it's traded 28 times. I mean I just think out of any other MAG7 or any other technology name, there's just so many other things to choose.

Scott Wapner (17:41)

This is double what the. More than double what the valuation used to be. Right?

Kevin Simpson (17:46)

Yeah.

Scott Wapner (17:46)

When you back out, you back out the cash. Obviously we had a mid low double digit P. E on the stock like 10 years ago. Yeah, yeah. But I mean they have still a mountain of cash. Their revenue growth to Steph's point has slowed.

Jenny Harrington (18:04)

You know I brought this, I brought this up the multiple yesterday we talked about it because remember like 10, 15 years ago it traded like 11, 12, 13 times earnings when it really was a consumer price products company. I thought about this in the last 24 hours and the big difference here is the services, I mean the margins there are meaningfully different revenues though. I'm not going to over applaud the stock. I don't, I don't want to give you that impression. I mean the reason to be in it is more technical than fundamental. Stephanie, I will agree with you. I don't like it at 28 times but at the same time I submit to you that I do think it's going to go up at least with the markets because of the reasons that.

Scott Wapner (18:37)

More technical than fundamental. I mean let's not act like you know this, this, this company is dead in the water. They still have the most powerful installed base in the history of consumer products.

Jenny Harrington (18:49)

You're right by a lot.

Scott Wapner (18:50)

And then if you add the services business on top of all of that, the notion that they're just not going to get AI right enough to have a larger upgrade cycle I think is a bit far fetched. No, we just. Why do you own the stock at all?

Jenny Harrington (19:06)

You know I owned it.

Scott Wapner (19:07)

Sounds like you don't even like it.

Jenny Harrington (19:09)

I know, I know it's just a valid question because I'm asking myself this, but do you remember the trajectory here? That I was underweight for quite some time and in the downturn in April was when I built it up. I bought more shares at 189. Now we're just barely above that now. So believe me, I'm not patting myself on the back. And Stephanie, believe me, I hear you on the multiple. I'm not coming back to you and saying it really is worth that. What I am saying to you, I'M not so sure they get AI right. Okay. I think there are a lot of threats out there, just like we've been talking about threats with Google. I got it. But I do think there are still quite a bit of intellectual property there at Apple. They have a long history of innovating after the fact of catching up with innovation. I think it's more likely than not that they will do that. And when I say technical, I know it's the third time I'm saying it, but when money flows into the markets, it's going to flow into Apple.

Jim Laventhal (20:00)

See, that's where I disagree with you because the market's flat on the year and Apple's down 21%. So it's not necessarily true. And I think your argument is largely predicated on that it should participate with an S and P like return. And I think that's the dicey part of the argument. So for me, because I don't do covered calls like Kevin, so I don't have that option to make it work and make it productive for me I would look, I look at everything and I like this conversation because it's, it's representative of way more than just Apple. It's representative all the bit mag seven that people are sitting on.

Scott Wapner (20:27)

Well, Microsoft is having its best month since March of 23.

Jim Laventhal (20:30)

Right. And within two years growth. Let me just finish this one thing and then I'm done. I promise. But if I had Apple in an ira, I think you need to be very, very cognizant of what the opportunity costs of holding it are. And if you don't believe it's going to have an S and P like return and you don't have the ability to write calls and you don't have a capital gain, maybe you want to get out of it because I don't think, Jimmy, I don't think you're right on that one part that goes Apple or as it goes the market, so goes Apple.

Jenny Harrington (20:55)

And certainly over certain time periods. That's right. But I jumped when you said Microsoft because let's not forget that before this roughly six month surge, Microsoft was as a stock right. Left for dead for about 12 to 1850.

Scott Wapner (21:08)

Is the new price target at Jefferies today, as they reiterate it, a top pick. Kevin, you want it to.

Kevin Simpson (21:16)

Oh, I think it's a great company because you're talking about trying to integrate AI and monetize it. And we've talked about it for a really long time, the cloud copilot experiment. But I'm still so ingrained in the office ecosystem that if they get it right, just like the Apple product. I'm not going to go elsewhere to try to find an alternative Amazon. It's a monetization opportunity.

Scott Wapner (21:35)

Amazon's interesting today to Pershing adding it Ackman's firm a new stake in April. What do you think about this one?

Stephanie Link (21:42)

I mean it trades at 13 times EBITDA and it's the historical average is 17 times. And you win a lot of different ways. They're absolutely a. We have haves and have nots in retail. They are absolutely a have. Right. And I mean they grew their sales in North America 8% in retail when many companies are struggling. International grew 5%. US people were complaining about it only growing 17%. They're the behemoth. 17% is massive and it's more than.

Jenny Harrington (22:10)

Half of the profit.

Stephanie Link (22:11)

Oh absolutely. And so. And so is advertising the margins on advertising. So I think there's a lot of ways to win. The stock has done pretty well but I still like it. And on any dips I've been adding.

Scott Wapner (22:23)

Well what about since you went retail? So Target was a disaster.

Stephanie Link (22:28)

I was on the show earlier this week.

Scott Wapner (22:31)

I wasn't here.

Stephanie Link (22:31)

I know, but I was. I got beaten up.

Scott Wapner (22:33)

So I reminded you and myself at the same time.

Stephanie Link (22:36)

I know.

Scott Wapner (22:37)

Well what, what are you going to do with it?

Stephanie Link (22:39)

No, I'm just going to hold it. I mean it's down, down 40% in the past year. So I was not happy. I actually came on and said it was a really hard stock to defend at this point. It was the first quarter in a year and a half where they had negative traffic. I always made the case that at least they had traffic growth.

Scott Wapner (22:57)

Okay, so the games change. Why, why isn't your game changed?

Stephanie Link (23:00)

Because this. Because I think the stock is down so much and I think the numbers even at the low end of the range that they're giving. By the way, they gave a range as opposed to Deckers not today not giving a range. So at least they gave a range 7 bucks. You're talking about 12 times earnings with a 5% dividend yield. Yeah, it's not going to go anywhere near term but I just have a hard time selling it because I do still think that there's value to the brand at the company. I do still think they are doing a decent job in terms of what they can control to the for the most part. But it's been disappointing this.

Scott Wapner (23:32)

But this is the hardest part of the investing game. It's hard to sell emotionally A stock that's down a lot, you want to think that it can recover. There's been times in this trajectory where it's gone down a bunch. You defended it, it's recovered a little bit. But now we're back to, I think, even lower stages than when it was embroiled in the whole controversy of the products. Some of the products that, that it had, maybe. I mean, how do you get to a point? I guess, how do you go from point A to B? It's down a bunch. You feel terrible about it. You don't want to sell it because it's down a lot. And you don't want to take the L. But at some point, you may come to the realization that you have to take the L. But mentally it's hard to take the L. It's hard.

Stephanie Link (24:20)

To take the L. But that's not the reason why I'm not taking the L. I mean, I think that they do still have a good brand. I still think that the mix has to shift more towards like a Wal mart where it's 50% consumables, 50% discretionary. Right now they're 62% discretionary. And that's come down over the years. And I think the discretionary stuff they've actually done pretty well. It's just not a discretionary kind of an environment in this economy at this moment in time. It's all about services and consumables. And they're on the other side of that. So I do like the restructuring that they announced and we'll see. Z, I just. I'm surprised by the CEO and this management team that they haven't been consistent. But I'm not taking the L because of emotion. I'm not taking the L. I'm taking. I'm not taking the L because I still believe in the brand and I still believe in the enterprise value over the long term.

Scott Wapner (25:10)

Gap is going to report next week. How do you feel about that going in?

Stephanie Link (25:13)

Well, that stocks up 22%. So actually I've won on that name so far. And I was just asking our analysts this week, should we take some profits in it? But I don't think so. It's still trading at 12 times earnings. It yields about 2 1/2 percent. This is a turnaround story once again, Scott, as you know, I like turnaround stories. But this CEO has delivered. They're gaining market share. In three out of their four brands, they have new management team. And in three out of their four brands, they have Zach Posen as their creative director. I mean so I think that this stock can still continue to grow and this is without athletic and I do think that Athleta is going to actually improve in the second half of this year. So a little nervous just given that it's had a run in a very difficult discretionary tape. But I like the story long term.

Scott Wapner (25:59)

Okay, up next, we have several committee moves to get to Kevin Simpson with a new buy in this year's best performing sector. Stephanie is also adding a name that got hit on that mega tax bill clearing the house. We are back right after this.

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Scott Wapner (28:17)

Time for some moves. Kevin Simpson bought AXP American Express at the Open today.

Kevin Simpson (28:21)

Why We've been really active in this name Scott, for the past few months. We picked up some shares last month at 235, got pulled out at 255 to trim it. We wrote calls on it at 290 and had it called away. So this morning on the pullback with the tweet news, we added some shares at 282. It's an aspirational younger person trying to get gold cards, platinum cards, some old Wall street elite with your black cards. It's a sub subscription model, a service model.

Stephanie Link (28:48)

Right.

Scott Wapner (28:48)

Loven, Leventhal and Leventhal definitely on the black card.

Jenny Harrington (28:52)

There'd have to be three of us to rate the black card.

Jim Laventhal (28:57)

I can help.

Scott Wapner (28:59)

I've seen how he rolls. Jenny, you own xp. Goodbye here.

Jim Laventhal (29:04)

Yes. I mean this is such a long term holding for us and I actually added it the other day to portfolios who were, who had come in with new money and we'd held off because it was up so much and now it's down so much on the year. So added it here. The earnings growth is just remarkable. You know, it's like it's consistent mid to high teens kind of forever. So economic resilience.

Scott Wapner (29:23)

Starting to your point, Steph, you bought Quanta Services?

Stephanie Link (29:25)

Yeah, I just keep buying it like every time it goes down it was down 5% on you know, the phase out of the clean energy bill. We have no idea what's going to happen with the clean energy bill. But this company does not need it to grow. They had a record backlog last quarter at 35 billion. They beat, they raised. We're going to spend $4 trillion on electrification and the grid upgrades between now and 2050 and they are absolute beneficiary of that. And 70% of their customers are utilities which have to help in that upgrade cycle of the grid. So anytime it's down a lot, I'm adding to it.

Scott Wapner (29:58)

Vernova, you also own still Constellation Energy. You still.

Stephanie Link (30:03)

I don't know, I never did. But I do own over. I own any. Yes, I own a lot on this theme and that's what I was thinking of.

Scott Wapner (30:12)

I got it confused.

Stephanie Link (30:13)

No, it's, it's all about the same thing. I mean look, if you believe in AI, then you have to believe in the data center. And we're under supplied in data centers globally with 11,000 and you need an upgraded grid to make the data centers work and then you need power to make it all work. And so that is, those are four themes right there that I am hugely bullish on for the next decade.

Scott Wapner (30:32)

Okay. Kev, you bought Boeing also?

Kevin Simpson (30:34)

We did. We bought this in the growth strategy because it doesn't have a dividend. We think this is a return to normalization. You put Stephanie on the hot seat for Target. Five years ago we owned Boeing. And this was during a global pandemic.

Scott Wapner (30:47)

She's on the hot seat for Boeing, too.

Stephanie Link (30:49)

I was on the hot seat for a lot of things.

Kevin Simpson (30:51)

Boeing's going to be a nice turnaround.

Stephanie Link (30:52)

That's how you make money, though, by the way. Can't all be that easy.

Kevin Simpson (30:56)

We can't look at it for the dividend strategy. They cut the dividend five years ago also. But I look at this like we did exiting UnitedHealthcare last week. We exited Boeing in 2005. Can always come back to a name if they reinstate a dividend. We'll look at it in the dividend story also. But this is a stock that couldn't get anything right. Every headline was horrible, same as United Health Care. So I think given enough time, we're looking at this as a new trajectory. And I like the way the administration is pro Boeing, maybe their best salesperson.

Scott Wapner (31:23)

You like? You obviously still own Boeing.

Stephanie Link (31:25)

I do.

Scott Wapner (31:26)

You like? You like some headache stocks?

Stephanie Link (31:28)

I have a lot of headache stocks. But when they work, you feel really good. I'll tell you that. Kelly Ortberg is really a rock star. So far, last quarter, they had a decent quarter, but it's the first time I actually saw their margins in their commercial aircraft business. Up 290 basis points year over year. It's been years since we can say that. So they have a great backlog. Over 5,600 planes in their backlog. Seven years worth. And I think the story is really just beginning. I don't think a lot of people own this stock. For obvious reasons, they were right not to. But I think this has changed and the culture is changing. It has never been a demand problem. It was always a supply problem and an execution problem. And that's really attorney quality control problem.

Scott Wapner (32:10)

Absolutely right.

Stephanie Link (32:10)

100%.

Scott Wapner (32:11)

All right, let's get the headlines now with Silvana Hannell. Hi, Silvana.

Stephanie Link (32:14)

Hey, Scott. Good afternoon. A district judge has just blocked the Trump administration from revoking Harvard University's ability to enroll foreign students. The judge's orders means Harvard's international student body can remain enrolled there for now. Earlier today, Harvard filed a lawsuit against the administration arguing the government's action violated the First Amendment and was carried out without process or cause. Two Democratic senators are calling on the Justice Department to prosecute Boeing in a criminal fraud case stemming from two fatal crashes involving the 737 Max jet. In a letter today to the DOJ, Senators Elizabeth Warren and Richard Blumenthal wrote the department shouldn't sign a tentative deal that would allow Boeing avoid pleading guilty as it would let Boeing, quote, weasel itself way out of accountability. And in Norway, a man woke up early Thursday to find a 443 foot long container ship in his front yard. Local law enforcement said they're investigating what caused the ship to veer for from its course and have identified a suspect on board. No reports of injuries or oil spills have been reported. Scott. Wow. Wow.

Scott Wapner (33:25)

Yeah, no kidding.

Stephanie Link (33:28)

Wondering that's what you wake up to.

Scott Wapner (33:29)

A farmer ever has anything like that? Come on.

Jenny Harrington (33:33)

Sometimes bad things happen at sea and it scares the hell out of you. When you lose control, bad things can happen. I hope nobody got hurt in that thing.

Scott Wapner (33:41)

All right, Silvana. Thanks. Silvana says the former Navy.

Jenny Harrington (33:47)

Yeah, I mean that Mexican sailing ship that went under the Brooklyn Bridge. I mean sometimes you lose power the the Key Bridge in Baltimore. Sometimes you lose power and it's out of your control and it scares the hell out of you.

Scott Wapner (33:58)

You say submariner or submariner?

Jenny Harrington (34:01)

Submariner is the way Navy people say it. Submariner is the way non Navy people say.

Scott Wapner (34:06)

That's why I said it both ways. I was covered. All right, coming up, rising rate winners. Bank of America out with a list of names they say will benefit from higher rates. There's a number of names on this list that you might own, which is why we debate it next.

Jenny Harrington (34:23)

Are you still quoting 30 year old movies?

Stephanie Link (34:25)

Have you said cool beans in the past 90 days?

Jenny Harrington (34:28)

Do you think Discover isn't widely accepted?

Scott Wapner (34:31)

If this sounds like you, you're stuck in the past.

Jenny Harrington (34:34)

Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com creditcard Based on the February 2024 Nelson Report, Memorial Day door Buster deals are here at Lowe's right now. Rewards members save $80 on the Master Forge 4 burner gas grill. Now just 149 plus rewards members save $900 on the Lowes exclusive Hisense French door refrigerator. Now only 9.99 Lowes we help you save valid through 526. Selection varies by location while supplies last. See Lowe's.com for more details. Program subject to terms and conditions. Details@lowe's.com Terms subject to change.

Scott Wapner (35:35)

All right, welcome back. Big story this week, as all of you know, was the backup in interest rates. Bank of America today is out with a new list. List they say will benefit from higher nominal rates, that they are not uniformly bad. They put together A list of 50s and P stocks with the most positive statistically significant relative to the S&P 500 on the list. With ownership in our group today, Wells Fargo, SLB and Diamondback. What do you make of this list and those stocks being on it? Higher rates, not that big of a problem for them.

Stephanie Link (36:10)

No. And actually earlier this week JP Morgan, Jamie Dimon talked about higher interest rates helping them and their net interest income business. And so to the extent we do see the yield curve continue to be like this, I think all the banks should do well. But the companies that have more exposure to NII will do better. And Wells Fargo is certainly one of them with 70% truist also should be on the JPM.

Scott Wapner (36:33)

By the way, JPM is on the list too.

Stephanie Link (36:35)

Oh, okay. Yeah. So, and, but, and, but there are a lot of banks that should be. And I think the regional banks actually will benefit more for the energy stocks. I mean, I guess if rates are going up for the right reasons because growth is better, maybe that's the whole rationale. But I don't really correlate higher rates with energy stocks specifically. But I'll take it because I do own SLB and Diamondback.

Scott Wapner (36:57)

Yeah, I mean there are, there are, Conoco is on there, Halliburton's on there, eod, G, Exxon in terms of regionals, M and T, the third. Your point's really well taken. Regions Financial makes the list. There are several Energy, Baker Hughes, Diamondback Hess on the list, Farmer Jim, ExxonMobil and JPM. You don't have to give me anything on JPM. No, no, no, I know that well, but what about Exxon?

Jenny Harrington (37:23)

I mean this clearly is a list that is talking about pro growth reasons for nominal rates to be higher, in which case, okay, ExxonMobil benefits probably from both sides. Prices are higher and volumes are higher. And look, there's some curious names on this list besides this. United Airlines. This is. Airlines are highly indebted companies. And same with ExxonMobil, which has 30 billion in net debt. So this isn't because they benefit from higher interest expenses. No, this is saying that we're going to have higher nominal rates because the world is growing, which is what, you know, we've seen interest rates across the globe going higher presumably because growth is going Higher with it.

Scott Wapner (37:58)

Are you, are you suggesting by it sounds like you're criticizing the fact that United's on the list, but your Delta is not on the list.

Jenny Harrington (38:07)

Delta's. Delta's got debt, too.

Scott Wapner (38:09)

But am I, am I warm?

Jenny Harrington (38:11)

You're warm, but let's extend it because Delta's actually been paying down debt at a rapid clip. So it might, you know, that might be interesting how it I think it actually would be a bigger beneficiary because it's going to have the, the same boost if you've got pro growth, more travelers, but it's not going to have as much interest expense. I think, I think the list is very curious and one I'd like to keep track of because this is clearly because of pro growth. If you get stagflation, if you get higher rates, inflation and poor growth, this is not going to work.

Scott Wapner (38:41)

Have a larger global flight footprint. They're comparable than Delta does.

Jenny Harrington (38:46)

They're comparable. And to the extent, extent that any of these, the top three, American, Delta or United has a space missing, whether it's Korea or Italy or whatever, there's all the code shares that go on with it. Those three have excellent global coverage, particularly through their partnership.

Scott Wapner (39:01)

Charles Schwab is on the list.

Jim Laventhal (39:03)

To me, this is the easiest and the most obvious of all the stocks on the list. Schwab grow. Schwab's growth is predicated on their assets growing and their assets can grow two ways. They can bring in new business from new clients or they can have the existing assets grow. So in a pro growth environment, they're just the most easy direct beneficiary. They've got 33, 19, 18% earnings growth ahead. The more we grow, the higher those numbers get. It's easy.

Scott Wapner (39:26)

Do you want to do something quick on jpm, since that's yours?

Kevin Simpson (39:29)

I would only reiterate what Stephanie said about net interest margins. If you have banks that are lending and interest rates go higher, their profitability increases on all the banks.

Scott Wapner (39:37)

All right. Santol is next with his midday word. We're back right after this. Senior markets commentator Mike Santoli here with his midday word. It's good to see you. Do you, do you think there's credence to this idea that vital knowledge puts forth today that These, you know, 50% tariff on the EU or 25 on Apple sounds in their words so absurd that the market's just not going to fall for it yet?

Jenny Harrington (40:22)

I do to a large degree. I mean, I think that was the case with 145% on China. I mean, once there was a very quick rethink. But those cycles are shortening now in terms of when we reassess. That said, I do think that, you know, what we got as an example today of just exactly how relaxed this market's going to be able to become even in rallies, even in kind of calm circumstances when we still are unsettled on the final trade policy stuff. You know, we never got below 18 on the volatility index even with this 23% rally. Now you're at 22 on the VIX and heading into a three day weekend when the market's not going to move. And in theory you should be bleeding premium. So the hedging instinct was reactivated and I do think that's probably a pretty good excuse for the market to have cooled off 3% coming into this year. But it does show you though, the market's just not going to be quick to sell everything in panic. Just that soon after we got the backpedaling on the tariff policies a few weeks ago and the fact that the S and P is clinging to this 5800 level, it just won't go far from there. Intraday today probably tells you that there is a little bit of that reflex in there that says we don't want to lean too far. It gets yields down and therefore rate sensitive stuff is, is also lending some support.

Scott Wapner (41:37)

Well, especially not ahead of in video earnings next Wednesday.

Jenny Harrington (41:41)

Yeah.

Scott Wapner (41:42)

Which is going to be a market mover you would have to believe one way or the other just by virtue of how big it is.

Jenny Harrington (41:47)

I mean, you think so I actually went back and looked February. What happened was the market was already in pullback mode and the impending Nvidia numbers kind of held the index in place for a while, even through the Nvidia report. So it's not to me saying that that's going to define where we go, but it probably makes sense that we'll, we'll stay on even footing in terms of heading into that catalyst.

Scott Wapner (42:11)

All right, I'll see at 3 on closing bell, it's Mike Santoli.

Steve Kovach (42:14)

All right.

Scott Wapner (42:15)

Nvidia not the only one coming next week. We got the set up for you next.

Stephanie Link (42:38)

All right.

Scott Wapner (42:39)

The setup for next week, it is not just Nvidia's week, it is also Salesforce which is after the bell next Wednesday. You own that stock?

Stephanie Link (42:47)

Yeah.

Kevin Simpson (42:47)

We're not expecting too much out of this. I wouldn't be buying it in advance of the print. We trimmed the position back in September. There was a few downgrades today once you're in the ecosystem, you're stuck here. When the agent force really comes to fruition, I think this company is going to be terrific. But right now, I'd wait it out before earnings.

Scott Wapner (43:03)

Okay. Stock not doing too much ahead of it, maybe waiting for the. For the number. We also thought it fun to look at some of the biggest winners and losers in May. For the committee, Snowflake was a huge one within the last week. As a result of that, it's up 26% in the month of May. Yeah, just wanted to do a segue there because it's another software name and.

Stephanie Link (43:23)

They had a really good quarter, too. So they beat and they raised. And Earnings were up 71%. Revenues up 26%. Product revenues up 28%. That's what everyone cares about, product revenue growth. They're gaining momentum and they guided higher for product revenue growth and operating margins beat by 300 basis points. So across the board, great quarter. CEO, new CEO, over a year now at the helm and doing just an exceptional job.

Scott Wapner (43:49)

Hey, Kev, Both Robinhood and Roadblocks were big winners so far this month. We're not over yet, obviously, but Robinhood up 31%. Roadblocks up 22 and a half.

Kevin Simpson (43:57)

So these names are our growth strategy, Scott. And both of them have an amazing infrastructure. Long term, it's the user base that you want. The daily active users on Roadblocks was up to 26% year over year. And there's not enough that I could say about Robinhood in terms of their growth, their user base, their AUM stocks up almost 100% in a month. So be careful chasing these names. They're great option candidates to write calls against, but what they own in terms of the youth longer term is amazing. Amazing.

Scott Wapner (44:24)

I'm going to throw one more out there that we have time for. Organon, I'm just noticing this is down 34 and a half percent.

Jim Laventhal (44:30)

So unfair. And you give me the loser.

Scott Wapner (44:36)

You have the biggest. You have the biggest loser on this list.

Jim Laventhal (44:39)

Wait, did you say that my Disney is up 20% and my app gives up 14 and my Meta's up 14.

Scott Wapner (44:43)

Thank you. I want to focus on Oregon because we don't have that much time.

Stephanie Link (44:46)

Oh, my God.

Scott Wapner (44:47)

What about.

Jim Laventhal (44:47)

So I went on, or I went on the show maybe three weeks ago when Organon cut their dividend and they had a perfectly good quarter. Right. Numbers were good, reiterated guidance, but they're like, oh, we're going to take all of our cash.

Scott Wapner (44:57)

You were mad like you were straight up, but you Said you're going to sell it.

Jim Laventhal (45:01)

I haven't sold it yet. And the reason I haven't sold it yet is because it's trading at 3 times earnings and the earnings growth is still there. It's idiotic. But what's happening right now is there's a sorting out of all the. All the shareholder base who were in it for the dividend.

Scott Wapner (45:14)

You guys ever think a stock is just maybe trading where it's supposed to be trading?

Jim Laventhal (45:17)

Not at three times?

Stephanie Link (45:18)

Yeah.

Jim Laventhal (45:19)

And I sell things all the time because of that. When it's trading, I sell them on the plus side and on the negative side.

Scott Wapner (45:24)

And you think because they're growing earnings that the stock is just mispriced at three times earnings.

Jim Laventhal (45:29)

At three times earnings it's mispriced.

Kevin Simpson (45:31)

Usually when a stock cuts a dividend, it's a bad thing. I think you should sell the stock.

Jim Laventhal (45:34)

Okay, I will sell the stock. That's not even a question. I have to sell the stock. I don't have to sell it today. And where it is today is ridiculous. And you've seen it too, Kevin. When a company cuts the share, the dividend, you have a resort of the shareholder base. So you need the dividend guys to leave and you need the growth or distressed guys to come in. And that's happening right now. The stock stabilizes, so it's terrible. But I really appreciate you highlighting the one loser for me.

Stephanie Link (45:56)

It's my pleasure.

Jim Laventhal (45:57)

Thank you.

Stephanie Link (45:58)

Thank you.

Jim Laventhal (45:58)

You know, you made my week.

Scott Wapner (45:59)

Final trades are next. I hope you join me on closing bell, 3 o' clock Eastern time. We'll see if this market tries to make a run at positive territory. That's going to be the best part of the final hour. And I hope you'll join me with Gabriella Santos Low Tony and Warren Pies. Kevin Simpson. Your final trade is what?

Kevin Simpson (46:21)

My final trade is Nvidia in advance of earnings. They beat top and bottom line for the past four quarters. I expect them to do the same next week.

Scott Wapner (46:27)

All right, good stuff.

Jenny Harrington (46:29)

Farmer Jim, Cisco Systems. I think it's in the process of upgrading its rating. I know. Kevin just got back into it. Stephanie, when you were talking about power and data services, data centers. Cisco is going to benefit from data centers as well.

Scott Wapner (46:41)

Okay, Who's Rio Tinto?

Jim Laventhal (46:43)

That's me from our international strategy. Rio. 9 times earnings, 6% yield. New CEO coming on at year end who could unlock some value at the company.

Scott Wapner (46:51)

Okay. And Chipotle.

Stephanie Link (46:53)

Chipotle quality on sale. It's been really a disappointer this year, but I do think unit growth and margin expansion are set to expand.

Scott Wapner (47:00)

You own. You own this?

Stephanie Link (47:01)

I do. Painfully.

Scott Wapner (47:03)

All right.

Stephanie Link (47:04)

Deliciously delicious.

Scott Wapner (47:05)

All right, I'll see you on the bell. You've been listening to CNBC's Halftime Report, the P podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

Stephanie Link (47:20)

All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer earn a business degree on your terms at Capella University. Our flexpath format is available in select programs and lets you learn on your schedule. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.