Does the Rally have Legs? 5/16/25
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Guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour. Does this rally still have legs? We'll ask the Investment Committee and find out how they are playing the winning streak for stocks. Joining me for the hour today, Steve Weiss, Kevin Simpson, Rob Seach, and Bryn Talkington. We'll check the markets. We are going for three weeks out of four. S&P positive by just a little bit, but it's still hanging out above 5,900. NASDAQ has been the big winner on this week, up near 7%.

Rob Seach and haven't heard from you for a while. So I want to get your view. Russell is on a six week win streak. Rates are down. Consumer sentiment today, the second lowest read on record. You have a big options expiration today, so maybe a little volatility towards the close. What do we think about this move here?

I think it has legs. I think the pain trade is certainly higher. When you look at Monday's breadth thrust, it's well supported. You have institutional investors that still remain broadly underweight. You look at the Deutsche Bank surveys. You look at some of the hedge fund surveys. They're chasing right now. There's some short covering happening. I think most of that thrust is behind us.

But the worst of the tariffs are a little bit behind us. High yield spreads are tightening and the IPO market appears to be coming back. And so when you have that mix of positioning and, you know, just the momentum in the market that you have right now, I think the push is higher. That said, on the other side of this, there's, you know, valuation concerns. And I think you have to pay attention to things like that so you don't get too seduced by the by the rally.

So Bryn, Rob says the rally has legs. Chris Harvey at Wells Fargo today says the rally has legs. And he never peeled back his 7,007 target on the S&P. That may be overly aggressive at this point, but the point is clear. Stocks are going higher, and he thinks that they can go substantially so. What do you think?

Well, I think the information has changed. We were faced just a shy month ago about isolationist win-lose, we're going to close ourselves off. And obviously there was a massive pivot to the positive. And now we have this week on top of the China pause last week, which to point out one of Rob's statistics I think is interesting is Monday was the largest notional buying. Goldman had a piece, largest notional buying in five years.

But, but, but, the majority of that was short covering. And so I think that's where you've also seen this huge thrust, way over 7% in the high beta names like HIMS, Palantirhood, etc.,

But I also think this week where you're going to get a sense that the market can go higher is I think what's happened in the Middle East is just historic. This potential peace dividend that now we're making, we're going to try to make friends with Syria, we're going to try to do a deal with Iran, obviously Qatar, Saudi is huge. And so I just think there's a really interesting chess move here. And so what people were saying last month about recession, recession, recession, which I didn't buy into that,

I think those people are going to have to really backpedal on that. And I also think that earnings clarity is going to get clearer as we're now in a scenario from the president that's more of a win-win globally versus this win-lose where I think everybody lost if that was going to be the case going forward. Weiss, people are buying into it. Weekly flows, according to Bank of America Flow Show, $25.2 billion to stocks. Equities are on course for $416 billion inflows. It's the second biggest inflow.

second biggest year. What do we make of that? Stock ETF has reclaimed its flow lead. That's the VOO. Just hit near $650 billion in assets, according to Bloomberg. There's the headline there. So there's a buy-in. There's a big buy-in to this. There's a big buy-in, and retail will typically buy the top and sell the bottom.

So I'd say, do you work on stocks individually? Don't pay attention to flow show. I'm going to counter that in a second with some data. But continue your talk because I've got some interesting stuff on that. Yeah, but I think, well, recently there is interesting stuff on that, but that's not the historic. No, but that's kind of my point is like this is one of those examples where

you know stop saying the retail retails the dumb money I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I

retail hung in for the most part and then they came in they came in and i'll tell you why i think that is i'll tell you why i think that that is i've made this observation the last couple of years is that since 2008 we've had a fit that's come to the rescue and there's always been a v-shaped recovery so as those those investors some of the aged out all the investors know right now

This group of investors, not all of them, but the majority, they think that's always going to be the case. And guess what? You've been rewarded. So you're basically following Warren Buffett. Now, here's what I'd say, though, that the momentum in the market has been extremely strong. There was a lot of shortcoming, as Bryn pointed out. I think that right now you're just in the market.

I don't think there's a reason to take the market down. And I also don't think going to valuation, we're back to where we were last year. And if you recall, the market was getting a little shaky. So I think that we're just going to be in a narrow trading range right now.

absent some really good headlines. I think the markets got somewhat immune to the trade deals because there's been nothing behind them. So, look, I'm staying invested. It's a question of where you are in this. All right. Kev, I'll get you in just a second. I do have some breaking news down in Washington from our Emily Wilkins, who is watching these budget negotiations on the Hill very closely. What do we know?

Hey, Scott, well, the Trump mega bill has hit a huge hurdle here. The House Budget Committee that was the next one to be able to clear the bill has voted down the Trump mega bill over concerns about the deficit and about a lack of spending cuts. You had five Republican lawmakers join with Democrats to halt progress on the bill. This is something Speaker Mike Johnson wanted to see on the floor next week.

But at this point, it can't go any further until the Budget Committee is able to advance it. Now, negotiations have been going on all this morning. Members of leadership have been here meeting with the holdouts, trying to find a path forward. But, of course, it's difficult. If you want to give the fiscal hawks more cuts or deeper cuts or move some cuts that were supposed to start in four years up to now, you could potentially risk, as

alienating some of the more moderate Republicans who say some of these benefits need to be in place for not only their taxpayers, but also for companies and businesses in their districts. So it's a very difficult balance here. We knew this would be tough to do, but the bill at this point is just not able to clear that hurdle, really questioning exactly when they'll be able to get this done and what a final product has to look like to be able to actually get through the House, get through the Senate and potentially get to Trump's desk.

if a product can even do that. Guys? All right, you'll keep us up to date, but that is a very, very big development. Emily Wilkins, thank you. Right in there in the halls of Congress, letting us know the latest. There are a couple of implications here, obviously. Why we were cycling through not only the market activity, but also the bond market. If you take a look at an intraday of the 30-year, there's been a point of concern over, if you ask yourself, well, why are rates continuing to back up a bit?

Part of that concern definitely had to do with a still rising deficit and the cost of funding it. It's interesting, you know, Kev, on this news that almost see stocks taking just a marginal move up, thinking that, you know what, maybe...

Maybe the budget bill's too big. Maybe the bond market was screaming that it's too big and that if you can take a little bit of the sizzle out of the move in yields, you can get a little more freeway, if you will, for stocks. I think everything you said is accurate. But again, we're pushing up against the valuations that are concerning me a little bit. This was the last time that we saw the stock market pressed up here. And we think about

how close we are to July and we can start thinking about the 2026 earnings and extend multiples onto higher numbers. But your point about the bond market being bigger, smarter and right is worth paying attention to. And when the bond market speaks, the stock market should listen. Yeah, bond markets kind of been been screaming a little bit, right? That, you know, we're not we're not happy with the trajectory

of where this deficit is going and this $4 trillion budget, the tax cuts, I should say, re-upping them was only increasing those concerns.

There's going to be ebb and flow around that news. The real important news right now is positioning in the short term and in the intermediate term, this margin squeeze that's going to impact valuations that Kevin and Steve and Bryn have all talked about a little further. Because right now, businesses are absorbing that. What does that do to margins? Well...

It's not raising them, I can tell you that. Therefore, it's squeezing earnings a little bit and your valuations are pressed. And so in the intermediate term, you need to have economic growth, which has been decelerating, offset that. We got to see if that happens. And I think that's only going to happen in the intermediate term if animal spirits pick up.

And that's a possibility. There's no question that that's a possibility. See, I still don't see, I think the chances, you know, to Bryn's comments of recession, which I was frankly believing would occur, I think they've lessened, but I don't think you can take it off the table, nor do I think you can take a slowing economy off the table. Companies are going to run, to your point, not just higher costs from tariffs, but from labor also.

So while business is slowing, and we can't ignore the consumer confidence number today, while business is slowing, they're not going to cut labor like they used to in prior cycles because they've been through that experience of how tough it is to bring them on. That's why volume is so important and confidence is so important in the intermediate term. Right, right. And I don't think you have it there. So I still think, and you don't have CEOs that are still willing to open up the population.

a book and make investments because they have no idea what they're investing into. Yet. Well, I'd say in the short term, that's problematic for the market. No, in the intermediate term, that's problematic for the market. Well, short term and intermediate, which is why in the short term, still staying pretty much fully invested. Intermediate, I'm still very cautious. Yeah. Brynn, do you want to respond? Yeah. We keep...

Steve and Rob, I think, have both brought up consumer confidence. Those numbers, let me be crystal clear, are a counter index. You should be buying when those numbers are weak. And so if you go look back 30 years, when consumer confidence numbers are this week and you look out the S&P 12 months, the average return is 17% to 18%. And so I think investors, when we are talking about these confidence numbers, that is a counter index. Do the opposite of what that is saying. I think we're...

People are concerned as the CEO confidence index where that's real because they're going to allocate capex But I think though you're seeing especially in America. We are not a manufacturing hub We are services economy And so if you look at you know, the big hyperscalers a lot of the Nasdaq stocks, you know, they're they're not immune but they do not have

The CapEx, I think limitations that companies and countries that are heavy into like building big things. And so I just think we have a different type of economy and just fade that consumer sentiment and do the opposite. - The only thing I would say, can I just say one thing in response? You know, I hear what you're saying about consumer confidence of where it is a year after, but I think you gotta be careful about that because the real story for that is consumer confidence usually dips when the economy's dipping

and then the fed comes in and lowers rates so that drives the market it's you know it's not always not just one data point but it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a it's a

But look at Fed Fund during that time. In general, in general, it's been a very good signal to fade. And so I think that you want to really be able to understand between leading and lagging indicators. And so I just wanted to note to the viewers that are watching my narrative. My viewpoint is to fade that. Don't buy into it. I'm glad you did. I think the market move at this moment in the S&P is so interesting. I'm not talking about a big move, obviously, but.

You know, in other times, if you have the prospect of tax cuts potentially expiring and a vote in Congress, even as preliminary as this one obviously is, and if it fails, you'd probably have the reverse movement in the market. The market wants tax cuts. It always does, right?

But this time might be different in that it doesn't want them at all costs because of the deficit issues that currently exist and the movement in the bond market over the last month and the people who've come out and suggested that you better deal with it or you're going to deal with it when you don't want to deal with it in a way that you don't want to have to deal with it. Is that fair?

I think that's really fair. That's why the market, that's even why Trump pivoted on the move in the bond market and delayed for 90 days, right? That was the catalyzer. So it's clearly important for valuations. Confidence in the U.S. Treasury is incredibly important.

foundational to the support of the U.S. economy. I don't think you can have a threat to the U.S. dollar like that, and that's what that intimates. So that's what scares markets. I still believe.

that there is a huge put either by the Fed or by Trump on this market. It is clear that they are paying attention to what's happening in all markets. Sure. And, you know, that goes back to retail. I think retail, the retail investor still believes that too. It's one of the reasons why they continue to buy the dips in this market. They've been a key in holding this market down.

maybe in a better place than it otherwise would have been. Kate Rooney has been following that money force and joins us now with, as I said, this special look at what's been going on here. Because in some respects, it might be counterintuitive to some.

It's been interesting to look at, Scott. We've been taking a look at individual trading activity. They have been really busy buying the dip through all of the market chaos we've been seeing lately. And it has been paying off. So the average retail portfolio, it's up about 15% in recent weeks, as according to JP Morgan. That's pretty much in line with the overall comeback. And right now they are driving an outsized portion of overall trading activity. So usually retail participation, it's around 12%.

Of the total, it recently hit 36%. That is the highest level in history, at least as long as J.P. Morgan has been measuring it. It's roughly tripled the long-term average, which is around 12%. They also point out at the same time institutional activity has been what they called subdued. And then you've got Vanda Research also noting a similar recovery and trend for retail portfolios. Long-term adjusting for prices, retail investors have outperformed both the Qs.

and the S&P going back at least a couple of years. Part of this comes down to muscle memory. So the buy the dip mentality, it's really worked at least in recent history. So take the year of COVID, for example. Retail portfolios ended that year up 30%. That was more than four times the overall market performance. And part of that success really comes down to some of the outsized risk appetite we've seen. The top three stocks in terms of retail buying right now,

Tesla, Palantir, Nvidia, it's pretty consistent. You also got the Q's in a lot of the mega cap tech names. Profit taking right now, though at least this week, is starting to kick in. You're seeing the lowest net buying since April. And then traders are right now cutting back significantly, we're seeing, on single stocks and then turning to ETFs.

Banda there for that data. Scott, back to you. Yeah, good stuff, Kate. Thanks for that look. That's Kate Rooney out in San Francisco at our bureau out there. What have they been buying? I think you know. I told you NASDAQ, what it's been doing. Retail has been buying. Seem some of the biggest investors in the world have been buying a little bit more. Tepper buys more Apple. We see that from his 13F. They're backward looking in some respects. So be careful how you judge those. But nonetheless, we'll note that.

Dan Loeb, Third Point, added a bunch of new stocks, including Nvidia. That's notable. On Apple, Dan Ives is out today, says Apple could ramp iPhone assembly production in India by 60 to 65 percent in the fall in a best-case scenario. Could easily, though, pivot if they have to back to China based on what's happening. Everybody owns Nvidia. A lot of people own Apple.

Is this going to continue, Kevin Simpson, to be the place to be once again? Well, I think people always pay up for innovation, and momentum is a hard thing to fight. So we look at these stocks a month ago, and that's when these professionals were buying, and that's when we were purchasing them here on the desk. Apple, for example, was $177 when we bought it, I think, on April 9th. So these stocks can move higher.

But be careful, because at this point, you don't want to be the last person in. You don't want to be chasing these stocks. And I agree with Steve that there's absolutely an opportunity for volatility here this year. And on those weaknesses and on those pullbacks, just as retail investors did previously, that's when we want to be buying. So don't go crazy chasing here. I'm wondering if they're going to come in and buy the MetaDip.

If you look at the mega cap moves today, Meta is still red. And that follows that report yesterday that was market moving. It certainly was that stock moving late in the day when the Wall Street Journal came out and said that Meta was again delaying the rollout of its flagship AI model. That was interesting news. Deirdre Bosa has been following it because it's relevant to everything that we're talking about. All

all of the big players here. You got it. If you're going to spend, and if you're going to spend that big, you have pressure on your shoulders to deliver. You better have something to show for it. You're exactly right, Scott. There's the delay, one, but bigger picture. Also, what it says about meta strategy and the AI race at large. So these days, this is a backdrop. In the AI race, it is less about who builds it and more about who delivers. Models

size used to be the flex that used to justify those tens of billions of dollars in investment. But now the advantage is shifting and we're seeing that play out in real time. Now, Google isn't getting credit for having the best performing model on the market. Rather, it's under increasing pressure to reinvent search. Apple, which doesn't even have a model, is also on the back foot to give users AI powered applications. So the model here doesn't really matter. Both mega caps, they need to prove that they can deliver on apps and

product at I/O for Google next week, WWDC in June for Apple. So the point here is whether Meta gets behemoth out matters less than whether it can continue to compete in the open source race and prove that its models aren't just widely distributed but also widely used. And there the cracks are showing. Meta isn't

hitting either end of this AI market. It doesn't have a benchmark beating flagship, nor does Lama have breakout adoption. And that could raise questions about that enormous spend as the industry moves toward the smaller, cheaper, faster models. Remember too that Meta's Lama models, they're open source. So the path to monetization, that's much less clear. Behemoth

I'm told that Meta hasn't disclosed whether that's going to be open source or not, but it could provide a path to monetization, which is now delayed. OpenAI, meanwhile, Scott, it's worth bringing them up. They continue to transition from an LLM research lab to a fully-fledged product, and that raises the pressure for big tech to deliver, especially over the next weeks and months. All right, good stuff, Dee. Thanks. That's Deirdre Bosa.

FORCE THERE. I MEAN, INVESTORS ARE GOING TO BE PATIENT, BUT TO A POINT. YOU HAVE TO HAVE SOME ROI IN THE AT LEAST NEAR VIEW. NO?

No. Is anybody surprised given the complexity of their goals? I mean, this is a company that has executed unbelievably flawlessly. It's not that expensive. We bought it in December of 22. It's up on nearly 450 percent. And it's like building a supercar. They haven't. It is, though. It is like building a supercar. When you say that they've executed nearly flawlessly, maybe as it relates to AI. But if you go back a few years ago, it was anything but.

They righted the ship. They pivoted in '22, late '22. Following the worst year in the history of the stock. Because people were not confident in the capex. They were worried they were spending frivolously. So now they're doing the opposite. They're getting it right. They're building a supercar.

and they want to make sure it's ready for prime time. This is a stock that is not that expensive. Everybody uses this thing. Look, everybody owns it on the show, so I think everybody agrees with you on the trajectory of the album. I do, and if you're selling it for what's essentially a timing difference, you don't know what you're doing.

because technology, I'd be hard, look at how many times Apple has delayed the release for a product, whether it's AirPods or phones they've been typically good on, but they delayed AI, right? So this is just the natural course for technology. So you don't sell on time differences. That's when you buy, that's volatility you want. Yes, correct.

I mean, the stock's up $120 in a month. So I think there's an air pocket here. But to your point earlier, if you get a sell-off in meta, you should buy it, 100%. It's the best performing of the megas year to date. It's up 10%. It's up 26% since the April 8th closing low. Bryn, you have a view? Still down 10% from the highs. Yeah. Yeah.

I mean, if you think about where from their larger plans to compete with open AI, yet open source versus closed source, think about this though, where Meta continues, I think, to make huge inroads, inroads is on advertising. I mean, Instagram continues to be such a behemoth of advertising and that's where they're already using their models inside of that to get us to click more and buy more.

I think that's been incredibly successful. They are a free cash flow juggernaut. And so I just think this is the reality. I think everyone on the desk has the right view that this is more of a timing issue. But I think this is such an important company that is trading cheap with a ton of cash. And so it's not like they're going into debt to do these things. And so I don't think it's really going to sell off on this news. I think it probably just takes a rest. I may even have a slight online buying addiction as a result of this company. Yeah.

Buy a lot on there. Yeah. Let's talk about some moves real quick before we take our first break. We'll move off of the mega caps and we'll get to some things that are happening. Oil is a big story this week as we've been following. Energy, by the way, is the worst sector today.

Oil hit a low of 55.30 on May 5th. So if you take a look at WTI, it was back above 61. I think it's still holding. Oh, now it's above 62. So it's continued to move higher a little bit. You sold the XLE. I did. And as you know, I'm definitely not a great energy investor. And I believe it's a trading class. It's not an investable class. And any chart will bear that out. In

The reason I sold, I bought it because of expectation that the China talks last weekend would come out positive, people would view the Chinese economy better, and oil would move back up.

What I didn't count on was progress with Iran in the nuclear talks and Trump's willingness to let bygones be bygones, as we saw with Syria and others. And if Iran comes on, if Saudis keep drilling and drilling and drilling, and they drill baby drill here, I think you've got to live in oil. All right. Bryn, do you have a view on this? You know, crude is going to move, I suspect, based on what global demand is.

prospects are. We thought we were going to have a recession. It looked like there was no potential bottom for where oil was going to go. And now we recovered. What now? I think China...

has hit peak demand back in 2023, right? So China to me is incremental. It's rumored that you're going to get one more OPEC hike. And so between Saudi and then another OPEC production hike, I think shale will actually pull back. You know, the CEO, that going CEO of Diamondback was like,

It just doesn't work at these prices. And so I think that share will actually pull back because OPEC and Saudi will pull forward. And I just think this is a year where energy stocks trade in a range and aren't going to be the best return relative to the other sectors because Trump wants energy low. It's great for inflation.

Let me get a trade from you before we take this break. What I see here is an options trade, a new one that you made around Tesla. Tell me about it. Oh, yeah. Kevin's going to love this one. Kevin, you should join in on this trade.

Tesla's had a monster run. So I sold the August, they expire August 23, 400 strike. So you still have 15% upside here and you can get $26 of premium, which is 7.5% yield in around three months.

And so if it gets called away, if that position gets called away, you have about a 23% return, but you still have 15% upside. I do think that 400 level, 380 to 400 for Tesla is resistance. And so I actually don't think it would get called. I hope it doesn't. I don't think it will. But if it does, it's a good return. And it just goes to show you the call premium in some of these names. And Tesla, Robinhood are so high. And you can create a really nice return income stream by selling calls against your position.

I love it. I may even do it during the commercial on our growth strategy. Thanks. If you do it, you tell us. Thank you. He thanks you, too. We'll take a break. We'll come back with the big battle brewing over United Health. One committee member throwing in the towel. Another one is buying the sell off, which means we'll debate it coming up.

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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.edu. All right, welcome back. We continue to follow the latest on the move in United Health Group shares. You can see them there. It's been a very rough week, down 27% on this week.

One of our headlines today is that you sold it, you got stopped out, right? I guess that's the point of having a stop. If a stock is going to fall out of bed, you want to have a stop.

Well, there's a lot more to it in terms of risk management because in February we had 6% in this position, same as there was in the Dow Jones, which if we had owned it today in a 6% position, I wouldn't be smiling or having a really great afternoon. But we sold 2% on February 21st. That's when the first DOJ news came out. We sold it at 455. We talked about it on the show. We had a note that said where there's smoke, there's sometimes fire.

Now, granted, in hindsight, it would have been brilliant if we had sold all of it. Then we didn't. So we had 4 percent on Monday. We took it down to 2 percent. We did that because of the presidential order that came out. It was going against health care firms, drug firms. We didn't want the risk. So we sold it at 389 on Monday. Tuesday, Steve S. bombed the bed. Like, it went down a lot on Tuesday. We had a 2 percent position. Wednesday, we sold another 1 percent just trying to get out of it.

And then yesterday it was down another 40 points. So we're sitting on a 1% position. We're effectively stopped out. It's just operational. We'll be out of it today or Monday.

We said on the show yesterday you couldn't join us, but that you got out completely. You think this, the new news of the investigation is a bit of a game changer? Yeah, somewhat. And as I was thinking about it after my comments the other day, so whether the investigation occurs or not, we're talking about the criminal investigation, they're already under a civil investigation. That's the one I'm talking about. Yeah. The management's coming in.

It's distracting enough turning around a company, and now they've got the civil investigation where they've had that, and possibly the criminal.

I actually think it's very cheap here and that the next quarter, second quarter if not the third, will be the kitchen sink quarter and they'll reset. But here's why I did sell. Here's what was perhaps the biggest part of my thinking, which is that I don't think the stock's going anywhere. And since I have a decent sized loss in it, why not harvest that loss, give me some flexibility to sell against gains,

and I get past the wash/sell rule in 30 days, 31 days, I can come back into it, and it may be likely that I do. So this stock just, until there's more clarity, until it's true that they're not investigating on the criminal side, which again is a distraction, I'm not suggesting the company did anything wrong, I actually find knowing Steve Hemsley and John Rex, I find them to be of the highest, absolute highest integrity and excellent operators.

You know, when you can do something for your portfolio and harvest loss, then why not do it? I mean, the lack of clarity is a big issue, I guess, despite the fact that you think it's cheap. There's two other points, two very important fundamental points, which a lot of people don't know. And what that is, is that there's V28, which I've talked about, where they're essentially shrinking the codes, thousands and thousands of codes that allow you to get reimbursement.

So the government's done that, so it's much tougher to navigate that. We saw the hit in the first two years. The other thing that a lot of people don't know is value-based care, which is where the government wants every Medicare participant to go. And what that means is that the risk is shifted from the government

to the insurer and to the docs. So if they don't, so if I give you $40,000 as the government, if it costs you more than the 40,000 to treat a patient over the year, that's coming out of your pocket. And that's what part of what hit UnitedHealthcare. So they also bought a lot of or took a lot of the Humana business and as I said, didn't really underwrite it.

appropriately. So those all have to get out of the way. The V-28 and the value-based care are the biggest headwinds against any company, any insurer, and most people don't know diddly about them. And the companies that have been aggressive there, like Canoe, have gone bankrupt. You literally had a filing of but five minutes ago?

It looks like to me, a ballpark five, six minutes ago, where you had an insider purchase. A director bought a million dollars worth of UNH stock, according to an SEC filing. I'm looking at it right now on FactSet, as some people pointed out on social, that they had seen that. I wanted to just make sure I saw it with my own eyes before I said anything about it. I'd expect to see more of it.

Yeah. The other news, and maybe plays into that, is that Stephanie Link actually bought more. Steph, she joins us on the phone right now. So there is this lack of clarity. Even if you think it's cheap, to Weiss's point, and he would agree with you on that, it's superseded by all the unknowns that now exist. And now a even larger one, perhaps with this criminal investigation.

Well, the stock is down 45% year to date. I think a lot of bad news is priced in. It's still the number one managed care company in the world with scale in UnitedHealthcare and Optum. They have the number one market share with 151 million people. They will reprice Medicare Advantage.

that the the cost issues they're going to do that and that'll help twenty twenty six and that's thirty one percent of their total revenue so it is a big piece but they have other areas in their revenue stream they have a strong balance sheet they're going to do twenty five billion in free cash flow this year one point two times net leverage they have a three percent yield and five billion left in their buyback i expect another buyback to be announced and it's trading at eight times EBITDA the ten year average is thirteen times EBITDA

and how much we did they proven winner at new p_e_o_ from two thousand and fifty twenty seventeen dot when he was p_e_o_ stock was up three hundred and fifty two percent so it will take time i agree with the about that but i just think there's an opportunity all by the way the r_s_i_ it's twelve that's crazy oversold i mean things can be cheap obviously for a reason i mean the stock is getting a little bit of a move here by the way as i look at the filings uh... there were three

uh, insider buys, uh, three directors buying shares of a United Health Group. And all of these filings hit, let's start, let's say as of 1223 ish. So really in the last, uh, couple of handfuls of, of, of minutes, Steph, stay with me here for a minute too. Cause Rob, you, you're buying this too. Uh,

I got the word that we haven't bought it yet, but we are looking to buy it. We own a very small piece. We sold it at much higher levels a while back. It's tough for me to bet against UNH. I mean, this is one of the most well-run businesses out there, to Steve's point. Incredibly operationally efficient. Yes, it's a longer-term turnaround story, but we'd be more inclined to add here and likely will.

versus being a seller. - Can I give Labenthal a shout out? - Yeah. - Labenthal sold it over 400. I'm not sure where over 400, but he sold it because he had a different view of how the company was going. So just a shout out to Jim. - Yeah. Steph, I'm wondering if you have a reaction to the insider buys, which are, you know, at least three that I see and how willing

how long you'd be willing to stick around for a turnaround. You're not afraid to buy into a turnaround. Gosh, we know that. Not just where you think that a CEO can make a big difference, whether it's a 3M or a GE with Larry Culp, for example, but when there's real problem, like a Boeing, for example, where you've owned the stock for a long time, you were willing to stick with it

I would suggest that situation was a little bit different than this in that, you know, it's a duopoly, which obviously helps. And they had quality control and safety issues, which can be fixed with perhaps better oversight and leadership. But this could take a while just given a lot of the smoke around it.

Yeah, I mean, I think it will take a while, but Boeing has negative $2.2 billion in free cash flow today, and they've seen a massive improvement over the last couple of years, and it's going to get better, and that's why I own it. But UnitedHealthcare, I mentioned, has $25 billion in free cash flow. You could do a lot with that, with that kind of cash, and I expect, as I mentioned, I expect

the company will announce another buyback, another big buyback, because this company is still the leader in the industry. They will fix. This is fixable. This is fixable. It's just going to take time. They've got to reprice and they're going to reprice and they'll do that.

this year and then that will help 2026 earnings. So I am willing to wait a while, especially when I have a new CEO who actually has been a huge leader and was really responsible for taking this company to the next level under his leadership.

All right. Steph, I really appreciate you calling in. I mean, it's a story that's changing a bit in real time. You can see the stock move. Links are buyers. Some insiders are buyers within the last 20 minutes or so. We'll continue to follow that as well. Silvana Henao joins us with the headlines. Hi, Silvana. Hey, Scott. Good afternoon. DHS.

Secretary Kristi Noem says former FBI Director James Comey is under investigation for a social media post that several administration officials called a potential threat to President Trump's life. In the now-deleted post, Comey showed seashells on a beach forming the numbers 8647. 86 is a term commonly meant to get rid of something, and 47, a potential reference to President Trump. Comey denied it.

It was meant as a threat and deleted the post. The man convicted of trying to stab Salman Rushdie to death was sentenced today to 25 years in prison. During the sentencing, the defendant said he believed the acclaimed author of the satanic verses was a hypocrite and a bully. Rushdie had been living under a religious edict issued by Iran's supreme leader calling for his death since 1989.

And populations in 68 major U.S. cities grew in 2024, reversing pandemic-era declines. That's according to new data from the Census Bureau, which found New York, Houston and Los Angeles leading the way. And experts say the population recovery was primarily fueled by immigration. Halftime Report will be right back.

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Join the club. Join the club and save at CNBC.com slash join gym. Terms and restrictions apply. All right, we're back. Let's do these moves. Kevin Simpson going to the Dow. Coca-Cola, you bought it. Why? We're going old school, Scott. Give me a 13 multiple in this world, a 3% dividend. 53 years of rising dividends is something that we love.

We're getting about a 3% yield. They're raising it about 5% each year. Pepsi's not even in the top three sodas anymore, which I thought was fascinating. And Coke has the Coke, Coke Zero, Diet Coke it takes and kind of appeals to three different palates. We're also getting into the young person's world of

healthy sodas, healthy drinks and sports drinks. We like it, nice boring name for us. - Okay, you like Cisco earnings, I guess enough to buy more of that stock. - We actually bought it on Wednesday before the earnings. - Oh, you bought it in a number, okay. - We got a little lucky. So we got into it at 61. We thought the earnings would be good. We've seen some of the larger tech companies really do surprisingly well in Q1 earnings.

and the Splunk acquisition for the first time is really absorbed into it. Free cash flow is unbelievable. Again, dividend, dividend growth, but ironically, it's in the growth strategy as opposed to the dividend strategy at the moment. You sold Target Resources, that's TRGP.

Tell me more. This is like a liquid gas company. We had this in the growth strategy as a trade. We bought it at 161. We wrote calls against it. We sold some at 201, some at 202. Kind of rolled over. We got stopped out at 161. It's back at that 164 level or so where we initially bought it. We made a little bit of money, but just like with UnitedHealthcare in a more compressed environment, it's all about risk protection and risk management. All right. Mike Santoli's Midday Word is coming up next.

We have a news alert, and Julia Boorstin has that for us. What do we know here, Julia? That's right, Scott. The Federal Communications Commission has approved Verizon's $20 billion acquisition

acquisition of Frontier Communications. This came after Verizon dropped its diversity policies. Looking at the approval document here, they say we find that certain public interest benefits are likely to be realized, including the upgrading and expansion of Frontier's fiber network. And they conclude that granting the application serves the public interest. We see Verizon shares are up nearly 1%. Frontier Communications shares up just fractionally. Back over to you.

Okay. Julian, thank you very much. That's Julian Borson. You own Verizon, yeah? Yeah, we think it's a good thing. It definitely expands their fiber network, as we just heard. But I think more broadly speaking, when you see acquisitions, when you see deals getting done, that's going to promote the entire M&A world.

We own Goldman Sachs. We own JP Morgan. We like seeing M&As. We had IPOs here. It's been great. So I think this is a step in the right direction for a lot of companies. They should be excited about it. I mean, Verizon, after not doing too much, give me a one year real quick on that before we take a break. I think it will show what I'd like to see. Not the intraday, but I mean, that pretty much tells you the story where the stock was about a year ago. But it's had a nice move, certainly since the beginning of this year. Year to date, a nice winter there. Santoli's next.

If you can do it, good for you. We are back. Senior Markets commentator Mike Santoli is here with his midday word. What do you make of the news from D.C. about the bill? A surprise in some respects. And the market being just fine with it, if not

maybe a little bit pleased. Yeah, I mean, there was a little bit of a hint even earlier this week when it was suggested maybe it wasn't going to get a clear path, that maybe you've got to bid in bonds. I try not to knit the day-to-day action too closely, the long-term structural deficits, but I do think that the big picture is that we are not going to have as much fiscal restraint as you might have thought worst-case scenario was if you're, from a macro perspective,

six weeks ago.

when you thought it was going to be max tariffs plus Doge is actually saving money, a lot of money. So I think the market's going to be probably fine with how it settles out. I'm not saying it wants a wider deficit than we're now contemplating. But for now, the bond market behaves, stock markets are fine. And I think the stock market the last few days has definitely proved the don't short a dull market rule. You know, it kind of has this kind of uninspired open and then it's just this slow grind higher. And to me, it's just a measure of

how much systematic and professional investors feel the need to top up equity exposures. It's not any more complicated than that. The macro is fine. No reason to really get too worried about it in the short term. Got an expiration. We'll see what we got next week. Yeah, you've been making that point too throughout this week. I'll see you on Closing Bell. That's Mike Santoli. We'll do finals after this break.

We have some lineup at 3 o'clock today on Closing Bell to close this week. Jeremy Siegel, Tom Lee, Cameron Dawson, Dan Ives, and I hope all of you. I will see you in a couple hours. Brenton, final trades, what? No. Earnings come out end of the month. I think stock marches towards 122. Thank you. Rob Seachin? UNH for the reasons we talked about earlier. Okay. Kevin Simpson?

Boeing. It's been a huge week for Boeing, and we like the trajectory. Okay, and Weiss? I added QXO. Brad Jacobs now is beating supply, and over the next 10 years, this will be a monster. All right, good stuff. Good weekend, but I'll see you on Closing Bell at 3. The Exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

Thank you.

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