Momentum Meltdown 12/10/24
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Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. We're at the New York Stock Exchange. Front and center today, the momentum meltdown. That strategy suffering its worst day in months. We're going to debate what it means to the markets and to your money. Joining me for the hour today, Josh Brown, Stephanie Link, Jenny Harrington, Joe Terranova. It's good to have you. We'll check the markets here where we do have, well, we're green now across the board, albeit slightly. So we'll keep watching, but we do really want to focus on the markets.

on what's happening in Momentum.

A meltdown, really. If you follow what happened yesterday, Joe, I'm obviously going to come to you on this. Because the MTUM had its worst day in three months, as did the JOTI, which was down 2% yesterday. Wolf Research talking about the nasty action in that factor, which they suggest means it's clearly stretched. At levels seen only two other times in the past 30 years, late 2002 and late 2008 into early 2009.

I'll go through some of the names that we've talked about so many times on this show that our viewers may have in their own portfolios now.

as a result of their own research or recommendations that they've heard on this program. Perfect. Take it. Okay. Stretched. I agree with the word stretched. I think that word applies to what we've witnessed in the momentum factor. I think you could also use the word extended. And when I say extended, I think that momentum has gone into certain areas of the market where I think extreme leverage and higher risk reside itself. However,

This Wolf Research Note talks about levels not seen since late 2002 or '08, '09. Well, what happened in late '02 and in '08, '09? The entire market at that point went down. So, we're going to isolate momentum as a factor during that period? How do we know momentum didn't actually outperform during that period? Because guess what? If I go back

And I study a single factor of momentum. And let's introduce equal weight S&P. Let's introduce total return. Let's introduce high dividend, low volatility, value growth, dividend aristocrats, quality, whatever you want. On a 1, 3, 5, 10, 15, and 20-year time frame, momentum as a factor outperforms. Okay. That's fine and good.

And I understand the point you're making. However, it doesn't help us understand the here and now. The here and now is that AppLovin was up 900% through Friday's close, and MicroStrategy was up 525% through Friday's close, and Palantir 344%, and Robinhood 227, and Carvana 374, and so on, and so on, and so on. So the question is,

A lot of these stocks that investors have been leaning in on, assuming that the momentum, you know, you never know when the momentum, the floor falls out until it's already fallen out.

Are we in a moment like that where these stocks are going to have a dramatic, more so than what we saw yesterday, reversal? Applovin yesterday was down 15%. Kava was down 12%. MicroStrategy was down 7.5%. Axon, which you have in the T, 6.5%. Constellation, you got in the T, 5.5%. Palantir, you got 5%. United Airlines down 4%. Howmet down almost 4%. Interactive down almost 4%.

What do you think? I think that when you invest utilizing a single factor of momentum, you leave yourself exposed for a scenario like we experienced in 2022. And that's why I utilize a quality factor. I identify based on price the top stocks in the S&P large cap universe, and then I overlay it with a quality factor, a balance sheet factor, a revenue growth factor. So some of the names that you mentioned are

I don't include those in the areas of the market where I don't think quality exists. And it's just a single factor of momentum. We'll talk about Applove in a second. You have that as quality and momentum because it's in the JOTI. Okay. And in fact, I believe this company is quality and it is momentum. This is a company that has an ad campaign.

tech platform. It's matching advertisers with publishers. Now it introduces machine learning AI, which is extending beyond the traditional business model, which is mobile gaming, into e-commerce. This is a company that is profitable. This is a company that generates free cash flow. This is a company that has a 76% profit margin. This is a company that

today trades at 105 times earnings. Okay, that's rich for some people. But over the next two years, if they continue the current growth rate- Are they going to grow into 100 times earnings? They are currently 100 times earnings. If they continue the current growth rate in 2025, the PE on this company is 64. The PE in 2026 on this company is 52. If they just maintain the current growth rate. So I don't think it's fair

to include just because these stocks are up 900%. I understand that's a staggering figure, but that doesn't mean this company is similar to another company that's not profitable, that is similar to what we experienced in 2021. I think you have to bifurcate and understand the difference. And no, I don't think momentum as a strategy is over. I just think you need to overlay momentum with a strong fundamental criteria. Well, Josh, I mean, bespoke

has a note out on the meltdown where they say all 26 of the Russell 1000 stocks that were up 100% plus on the year through last Friday were down yesterday and they were down an average of more than 5%. I mean, that is one heck of a meltdown.

Yeah, and they're all in the same ETFs and they're all held by the same institutions and mutual funds. So it's not surprising this type of thing happens. MTUM has had eight other days this year where it was down 2% or worse.

It's a little bit jarring to people who are new to the market because last year it had zero days like this. But this does happen and I think it illustrates the danger of waiting heavily toward one particular factor. But most people don't do that. So I think it's likely if you own some of these names in your portfolio, yesterday wasn't your favorite day of 2024.

I think to Joe's point, one of the ways to mitigate that risk is to not just be weighted toward momentum, but to augment that with a quality screen. And when that happens, you can say to yourself, OK, these stocks are for sale right now. Maybe it's rebalancing. Maybe it's profit taking. Maybe it's tax related. Maybe it's a combination of all of those things. But

But they're great companies and as a result, I think the momentum will resume. That's logical. The illogical takeaway would be to say, "Oh, that's it. They're all garbage now. Next. I need to find 50 new stocks to own." I don't think most professionals act that way. And as a result, these bouts of selling in these particular factor baskets run their course relatively quickly and then the storm passes.

I mean, the other thing you do to, I suppose, protect yourself, use those in quotes, is you have stops on the individual names that may be benefiting

you know, substantially on the way up and that you worry could get punished more severely on the way down. You got stopped out of Toast. Toast is on my list. Now, Monday it was down 1.3 percent, so not nearly as bad as some of the other names. But nonetheless, it's one of those that has doubled this year. It's up better than 100 percent.

And you got stopped out of it, so you're done. I mean, it's on pace for the worst month that it's had since October of 23. Yeah. It was a great trade, but one of the things that you'll hear me... One of the...

The terminology that you'll hear me use with trades is rolling up my stops. When you have a huge rally in a name, like think of my names over the last few months. We talk about the best stocks in the market. A lot of those stocks got caught up in this momentum sell-off because they are momentum. By the way...

the way you get to be classified momentum is that you've had huge price appreciation in recent period of time. That's how you become a momentum stock. So, definitionally, these are names where the gains have been huge and if you're responsible and you're managing risk, you don't have to use stops. You can use options, you can eyeball it, you can do whatever you want. But when you hear me say rolling up my stops,

I'm in names like Reddit and Trade Desk. And look at the charts of these stocks. If you have any kind of risk management in place, a day like yesterday might take you out of some of your names. So I'm out of toast.

It's OK. Stock worked. I might get back into it. I've traded it twice this year already. So this is a normal part of the process of managing risk and running multiple strategies. And if one of your strategies is buying breakouts, sometimes breakouts fail. I could show you a

There's a hundred versions of that story. It doesn't mean there's something wrong with the company. It doesn't mean you have to go back to the drawing board and rethink something that you did wrong. You're supposed to have trades that don't work. The other thing, Steph, is everybody has different strategies, obviously. It's looking at stocks that haven't worked and thinking that they're about to or could be part of a next group that might. That leads me to a new buy for you, which is Zscaler.

Now, I had to check, actually, a lot of these momentum ETFs because I was like, well, cyber, are these names part of that? And they're not. What about Zscaler? Why was that one? Zscaler is down 7% year to date. It is unquestionably the worst performer out of that basket of stocks, right? CrowdStrike's up 38%, Fortinet's up 66%, Palo Alto's up 32%, and Zscaler is down 7%.

Right. So part of my strategy in December, every December, is looking for the losers and hoping to see ideas and get fundamentals and valuations that make sense for maybe a 2025 rebound. So right now I have bought Zscaler. I am looking to add to Boeing, Las Vegas Sands and also Target. I mean, these are all names that have done

horribly this year and especially Zscaler because the total addressable market for cybersecurity is real. I think cybersecurity is going to be bigger than AI. Yes, you heard me say that over the long term. We have cybersecurity companies themselves that are having cybersecurity attacks. There are way too many vendors and no one is talking to each other. So I think you're going to see massive consolidation. Could Zscaler be that? Could it be consolidated

It could. But in the meantime, they beat earnings. They raised guidance. Billings were up 13 percent, 2 percent better than expected. Maybe expectations were higher for that.

for that, but I still think that that is very healthy. And operating profits rose 50% in the quarter. So to me, I think it does play catch up. Kind of reminds me, Joe, of Fortinet three years ago, right? Fortinet was a dog and I owned it, unfortunately, and it was very painful. I did wind up making money on it. It took a long time, though. I remember we talked about it a lot because we talked about it in the context of

Every analyst on the street was pounding the table on Palo Alto. Yes. And they were pounding the table on CrowdStrike. And Fortinet was off to the side having a pretty underperforming run, to which we questioned you about it on numerous occasions. Now, the stock woke up this year. As we said, it's up 66% year-to-date. And so I think in any given year, cybersecurity companies are going to have good years and bad years. And

CrowdStrike had a bad year up until recently, right? I mean, they had a terrible year. It was down 41% from its peak. That's when I actually bought it. Fortinet was last year. Zscaler is this year. But the point being is the total addressable market, the growth in this industry is real. And you're going to have, I think, something like the five largest players, maybe five to 10 largest players get bigger and bigger and bigger. Look at Cisco and what they did with Splunk. I mean,

That's a mature company looking for growth. And that's the one area that they said they saw a lot more upside. So I truly believe in it. I don't think these are momentum stocks. And by the way, there's nothing wrong with momentum stocks. On the way up, you can make a whole ton of money. Oh, yeah, there's nothing wrong with the way on the way up. The problem is down is a heart is hard. And that's where I have. I struggle because I am very valuation centric. Right.

So I go back to Zscaler. It's not cheap, but it's trading at 13 times EBITDA, where the group is trading at 15 to 20 times EBITDA. That's just the way it trades. You're like on a fast-moving escalator that goes into a little quicker speed and then a faster-moving elevator, which takes you down, which a lot of these stocks are witnessing. The question is, Jenny, what to do now? As we try and guide our viewers on how to think about this and, most importantly, how to invest around it, what it means for the overall market if you do have...

an issue that lasts a little bit longer. Krinsky at BTIG says it's splashing, it flashes a yellow light for the overall market. What was so unusual, he says, about the fall in momentum was that it occurred immediately following a 52-week high. So you reach the crescendo and then you go, you know, cliff.

He said that combined with an unusual breath anomaly is flashing a yellow light for risk overall. Right. And so I think that conversation and exactly what Steph just got into, you know, I'm buying Zscaler because it's the worst performing, the valuation's compelling. That's kind of what's top of mind right now. So I'll tell you, these are the two articles I sent to my team yesterday morning at like 6.43 a.m. The first one was from the Journal, and it said, dividend stocks are primed for a comeback in 2025.

The next one was from Bloomberg, and it said, as big tech profit growth slows, investors hunt for a new thing. And that's kind of where we are, right? Which is we know prices are up too much on things. And by the way, Steph, the story on cyber is so fantastic. You're 100% right. I look at it, and don't forget, we sold Palo Alto last year, but I look at cyber just a little differently because of the...

particular discipline in our strategy that needs a free cash flow yield, but we look at that and we're like, all right, you've got CrowdStrike at 82 times, Fortinet still at 40 times. It's still kind of expensive for us, but I think kind of out there, people are looking at taking things off the table. And Joe, I was on last week and you weren't here, but we were talking about Applovin and it being up so much. And I said, look, if that were my stock,

I'd be praying it holds until January 1st. And what I do after January 1st is cut that position and repurpose those funds into something that's not. I want to take issue with something that you said, because I feel like it needs to be debated a little bit. OK. You said we know that things are up too much. OK. We never know that they're up too much when they're going up.

Because we never want to sit there, not never, but rarely do I find where I hear, well, it's up 900% year to date, which is extraordinary. I'm going to take some profits in the name. We never actually face the music until the car goes off of the other side. We never actually identify the

that we know things are up too much when they're going up, do we? Well, that's a really tough one, right? And that's like the line between math and art and artistry in this business is I'll look at that and I'll say up 900%. I don't know what the valuation is right now, but if you told me, I'm sure I'd say like, that's too stretched evaluation. Like to me, I think I know that's up 900, up too much. It may not be.

And that's the debate. But I would say I know that's too much. The market overall... You have stocks that are up a lot this year. I don't find you going across the board of some of these massive winners that you've had and trimming them. Well, we have been, right? We've trimmed Uber. We've trimmed Meta along the way. But the case in point on that, too, would be...

would be DocuSign, which was up 27% last year. How do you look, and you go back in and you redo your work and you're like, okay, valuation is still reasonable on DocuSign. Growth is still manageable. So even though it's up 100 and change percent over the last 52 weeks, I think the valuation is still justifiable. So in that one, I'd say it's up a lot. I don't think it's up too much.

But it's a fine line between being confident and, you know, and you bring up a really, really, really important point on like, yeah, I say I know that. Maybe I'm wrong. You know, there's so many things that we're sure we know that turn out not to be correct. For example, let's show a year to date on Oracle, which is up 68% year to date.

You'll get a look at what I'm talking about here. The stock today is down more than 8%. Earnings a little bit of a miss here. They miss on earnings and revenue. The market doesn't like their guide. And the stock is paying the price, getting punished. Jim Laventhal joins us now. He owns the stock. So how are you thinking about this stock now in the context of the conversation that we've been having for the last 17 plus minutes?

Yeah, and it's an excellent conversation. So to answer your question, here's what I think. First off, I'm not selling the shares here. And more to the point, I think if you don't own Oracle right now, that this is a good time to start. Just start building a position. Now, the reason I say start is because there's not going to be any catalysts really to move it higher in the short term.

But what will happen, and the reason why I do think you want to have at least a toehold position here, is that as the animal spirits come back to whatever the trade is, whether it's software, whether it's AI, Oracle is still in that basket. The results last night do not deter it, do not take it out of that basket of meaningful AI players.

In terms of the results last night, it was a miss. However, let's put some context to it. Both revenues and net income missed by less than 1%. And I'm listening to the analysts today, and they're blaming it on foreign currency exchange rate or tax rates. I actually think there's a different narrative here and one worth paying attention to. Remember, this is Larry Ellison running this company. He's been running it for, what, 30 years now, maybe a little bit more than that?

he could have found less than 1% in revenue and less than 1% net income. I'm not suggesting that he could have done something illegal. There's always a little bit of discretion in when and how you recognize revenue and expenses. The fact that he didn't means one of two things.

Either he couldn't legally do it, but that flies in the face of all the deals they've made with everybody from Meta to Amazon to Alphabet, or having lived through the last time the stock got into a bubble in the late 90s and took 15 years to recover. It could possibly be that he's trying to reset expectations.

for a more strategic, normal level of growth through the coming year. At 28 times earnings, I think you should buy a small total position here. I see nothing in these results that says there's something fatally broken here. - Can I just ask you whether you think the fundamentals of its business currently, as it relates to AI,

justify the fact that it was up as much as it was going into the print or was part of that perceived froth that a lot of stocks related to AI had been getting and this one had certainly gotten the benefit of the doubt not to suggest that a lot of it wasn't worthy of doing so and obviously because of Mr. Ellison himself but do the fundamentals of Oracle make sense for a 70% move year-to-date?

It's a great question, Scott. And unfortunately, the answer is purely subjective. So as I just said, the stock now trades after the 8% decline at 28 times forward earnings. So to answer your question, I guess yesterday we can say at roughly 30 times forward earnings, it was too expensive. Today at 28 times forward earnings, I'll make the case based on the number of deals that they have with the biggest hyperscalers in the world.

that that's a fair multiple to pay, again, to start building your position if you don't own it. I'm not selling a share. - What's its average? I mean, what's its historical average of PE? - Five-year, yeah, five-year average is between 17 and 32. So it's definitely, you know, it's up near the top end of the range.

But in the absolute context of where multiples are today, I don't look at 28 times for a company that's building out AI infrastructure and monetizing it at the same time. I don't look at that and say, man, that's terrible. Actually, I see you're seeing 26 here. So I was getting 28 from 26 and a half. But I mean, the point is the same. The point is the same. I was suspecting that its longer term historical average was much lower than 26.

26 and a half. Like if you say over the last 10 years now, I don't know. I was I was just guessing. But Josh, you used to be in the name, too. Like you and Jim were in this together for a while. And then that that deviated. You got out and Jim stayed in.

Yeah, Oracle is a fantastic company. It's a come from behind story. They were sort of late to the cloud and then made up for lost time with massive CapEx. And they really did catch up. They're a serious player in all of the places that they need to be. But, you know, again, you got to pull the lens back. You look at you look at the last five years in this stock. It's up like almost 300 percent.

So a lot of the things that they've done in the cloud and preparing for the AI moment, they've already been rewarded for in terms of shareholder returns. So consolidation periods are okay. It doesn't have to make a new high every day. We've seen this with all of the Mag7. They have these periods where they're kind of, I don't want to say left for dead, but they kind of peak out and then a quarter goes by, two quarters go by, and

And something comes along that reinvigorates the story. I have no doubt that we'll see that happen with Oracle. Look at what we've just seen with Apple. Don't tell anyone. Apple's about to hit $4 trillion in market cap. Think about how long that story went, quarter after quarter after quarter, where people said Apple's in trouble, Apple's, you know. Part of my broader point, and I want to discuss it on the desk here, is that

There's a rolling effect, if you will, of stocks that have gotten a halo from AI. Many of the chip names did it, okay? They were the first to fall, right?

The divergence, as we've shown you almost every single day over the last at least week, if not more, was the divergence between the charts of the ETFs of software versus semis. What starts out over the last six months as a modest diverging activity becomes more broad as you get more recent, as you see the outperformance of software relative to chips really take hold.

Chip stocks, many, were getting a halo from AI until they didn't as much. They rolled. Is the same thing going to happen to software? It's a legit question, I think, to ask if you see what's happening in Oracle and then you wonder if many other stocks are at risk.

I don't think you could say entirely software stocks, but there are a lot of software stocks that have had a nice run, though they are seeing better monetization than some of the semiconductor companies. And I think that's why the semiconductors have rolled over. In addition, we have seen multiples re-rate in a huge way. We've talked about this all year long. How nervous was I that Lamb Research went from 14 times forward to 28 times in a couple of years' time? They had great results, but

But maybe it was fully recognized and given the new multiple that it's at that semiconductors. And I think that's why you've seen a lot of the rolling over because they're not delivering on the monetization. I think software actually is. And then there are pockets of software, which I just mentioned, that are actually doing a little bit better than people think and where there are strong trends. So I don't think it can paint the full entire breadth.

back to what you said in terms of like taking profits along the way. Do you know, like I regret selling Meta at $395. I made 333%. I was so excited about it. And what is it now? I mean, it's up so much more. So you never can say, you know, to apologize for taking a profit. But there are some times where I have, you know, seller's remorse. Yeah, of course. Well, you've got some moves coming up that play into this conversation in terms of

taking some of the big gains that you have and taking some money off the table and then buying more of something that you love and hoping that it's going to have a run. That's a tease to tell you that we do have those Stephanie moves coming up. Jim, thank you, man. It's good to hear from you today on the backside of this Oracle News. We'll be back right after this with these Stephanie Link moves.

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Okay, we're back. Let's do these Stephanie Link moves that I just told you we had. You sold Diamondback, right? That's the one where you got big gains in, right? Yes.

Yes, I was buying it in 2021, and I'm up about 145% in the name. Still a great company, still a pretty cheap stock, and they've done all the right things in terms of the shareholder returns that I was looking for, buybacks, special dividends, and that sort of thing. I think we're having an issue with your audio at the very top. Now I hear it again. I don't know if our viewers hear it or not. We're trying to figure this out. Is it me? I don't even know what it is. At any respect, I was just afraid that people didn't hear what you said initially. You bought it in 21? Yeah. Okay.

And you have big gains in it. Yes. Forgive me if all of you heard that from the start. I just want to make sure we're all on the same page. Sure. Go ahead. No problem. And look, Diamondback is a great company with a great management team. And they set out to provide shareholder returns and buybacks and dividends and also grow production and lower costs and just get better in terms of efficiency and execution. They did all that. But I'm up 145%. And I have a name.

That hasn't worked, which has been very disappointing. And that's SLB. I just have a hard time figuring out why it is down 20% when they have delivered for the last eight quarters, two years in a row. They've beaten. They have raised. They're going to grow EBITDA.

in the mid-20s, margins in the mid-20s. They have a digital franchise. They have a software franchise, which I think is a multiple enhancing situation that's not getting appreciated. And so the stock is trading, Scott, at 12 times earnings. And I feel good about those earnings because they've been able to deliver it. And if you believe in the Trump administration in terms of more production, then you're going to need more oil field services. So I'm banking on this one having a mean reversion trade increase.

in 2025. Okay. I was going to ask you when a name that has not performed like you thought perplexes you because you can't find the reason why maybe it's cheap like that for a reason. Like maybe there's something going on. I'm surprised if you would have told me that you sold it, that you threw your arms in the air and like, you know what? I can't figure out why this is down. It shouldn't be down like it is. It's cheap. It's for teens. Valuation to multiple is attractive.

I'm out, but now you're buying more. Well, I think that as I go through the fundamentals, if there was something that was glaring to me, if there's something that I didn't understand, if there was mis-execution, if they over-promised, under-delivered, if they didn't beat eight quarters in a row, like all of

All of these things just don't add up. But it also speaks to energy as a whole. I mean, very few of us have made a lot of money in energy stocks this year. Diamondback was one of them, to be honest with you. Exxon was another one. There are only a few of them. So I think this is an out-of-favor sector, a way out-of-favor company, and it's number one in the industry.

Well, I think that's the funny thing, right? At the sector level, you're right. It's out of favor relative to the rest of the market. So like the third worst performer of the year is a group. Right. But within it, it's kind of bananas. So anything like old school or major, Schlumberger, Exxon, Chevron, they kind of did nothing or were down. But then you've got the midstream guys, right? Kinder, Williams, One Oak. Right. Targa. Targa's off the charts. These are the ones you own? Yeah.

And they've been off the charts. And it doesn't really, to me, make sense either. I don't think that a Williams or a Kinder-- and this goes a little bit to, like, just get me to January 1 so I can realize some gains and trim these positions. But why would they be up?

60 and 75 percent of the year. That doesn't make sense to me any more than Flambeau doing nothing makes sense. There's just there's something in the industry that went kind of distorted this year without a bunch of without very good rationale. Within the energy sector, though, the MLPs are clearly where the strongest momentum resides itself. In addition to that, you could.

The reasoning behind it, you can- It's because there's not a great fundamental reason. Okay, so I'll agree with you on that, but I'm just acknowledging, look, I don't have any energy ownership. I have EQT, which I sold recently, and I think that's the right move. One Oak, you're right, has been really good. When I look at energy, the only name where I see really building momentum is a name like Baker Hughes. That looks good. You have Exxon Mobil that looks good, and the MLPs. So you're limited, from my perspective-

in that opportunity scope. Okay, let's get the headlines now with Silvana Hanam. Hi, Silvana. Hey, Scott. Good afternoon. The United Nations said at least 800,000 people have been displaced due to recent fighting in Syria. In an interview with the BBC, a spokesperson for the UN Refugee Agency said it adds to the 16 million people already in urgent need of humanitarian aid. The agency said it was trying to resume activities that were suspended by the fighting.

California Governor Gavin Newsom said the state has secured federal assistance for the Franklin Fire near Malibu, which has grown to more than 2,000 acres. According to fire officials, at one point, the fire nearly tripled in size in just one hour. The National Weather Service warned the fire's intensity is altering the weather around it and worsening conditions.

And more than 75 Nobel laureates are urging senators to vote against Robert F. Kennedy Jr.'s nomination as the secretary of the Department of Health and Human Services. In a letter, the laureates said Kennedy didn't have the relevant experience to lead the agency and cited Kennedy's opposition to vaccines and fluoridation in drinking water scabs.

I'll send it back to you. Okay. Silvana, thank you. Silvana Hanau. Coming up, calls of the day. We do have a bevy of bullish ideas for your portfolio, from chips to the cruise lines to the consumer. We'll go through them next. Hey, I'm Ryan Reynolds. At Mint Mobile, we like to do the opposite of what big wireless does. They charge you a lot. We charge you a little. So naturally, when they announced they'd be raising their prices due to inflation, we decided to deflate our prices due to not hating you.

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All right, time for the COD calls of the day. We start with Block today. It was named a 2025 top pick at William Blair. It's been named other... It's been named top picks at other firms, too, over the last handful of days. Bernstein, Deutsche, Morgan Stanley, and Josh Brown, who bought it, I don't know, what, within the last couple of months? Do I have that right? Month, two months? Yeah, yeah. What do you think about this call of top pick? I just...

I mean, I like it. I wish they would do that for all of my holdings. Look, I just think that this is an easy name to say yes to. And people are...

Stephanie and Jenny have made this point. People are now thinking about next year and thinking about what they might want to do differently, what sectors have been out of favor, where you might have had some opportunities created. But I think even people that are looking at the new highs list, like

it's just the time where people are out looking for new ideas and what's coming next and so this is an easy thing to say yes to and i'm not at all surprised to see it quite frankly abroad com staff target goes to two oh five from one seventy five city reiterates its by rating we expect the company to report results above consensus

driven by a recovery in the non-AI semiconductor business. - And that's exactly the key point. That's 35% of total revenues and it hasn't seen a recovery yet. We think we're seeing a bottoming. Hoctan was out throughout the quarter saying we're close to a bottom, so we'll have to wait and see. I think AI is gonna be fine, good, maybe. Hopefully it comes in a little better than expected. I also think the VMware acquisition certainly is on pace to do four billion per quarter. Problem is, Scott goes right back to multiples.

bought it at 14 times many years ago. It's at 35 times. When I bought it, it was yielding 4.5%. It's now yielding 1.2%. I'm a little nervous headed into the print. Jenny, UPS upgraded to outperform at BMO. Yeah, nice to see people are starting to appreciate that. So here's the bottom line on UPS, which is

It's over its pandemic distortions, which drove its earnings really sky high, made it hard for people to understand what they were really going to be going forward. And they're also, and this is really important because it was only a year and change ago, they're over their labor negotiations. So now you've got a clean story. And when you look at what analysts' expectations are for the next two years, it's like 15% to 20% earnings growth.

Stocks trading at 13 times. And we can say Amazon's going to eat their lunch, but I know we're all online shopping like mad, and I challenge you all to count how many of those packages are being shipped from UPS. It's not going to be a winner-takes-all in terms of package shipments. So I think it's just a nice place to sit. You get a 5% dividend yield here. Okay. Let's go to Bertha Coombs now for a market flash. A particular stock that's on the move. What do we know here, Bertha?

Actually, Walgreens shares are halted for volatility after a Wall Street Journal report citing unnamed sources, people familiar with the matter, that Sycamore Partners is in talks to buy Walgreens. Walgreens, of course, has seen its stock fall. The company has been undergoing a restructuring under CEO Tim Wentworth, who took over just over a year ago. The company had been talked about potentially selling off parts of the business. They've cut

back on a lot of their investments. Again, The Wall Street Journal says Sycamore Partners is discussing potentially a deal that could be completed early next year. Walgreens market valuation now is just north of $8 billion. Scott? Bertha, thanks. We'll follow that story for the remainder of this day. That's Bertha Coombs. Up next, Mike Santoli. He joins us with his midday word right after this.

Welcome back. We'll show you shares of Walgreens, which are now reopened up 23 plus percent on that Wall Street Journal story that our Bertha Coombs was just telling you about. The Journal reporting that Walgreens is in talks to sell itself to Sycamore Partners. There's the headline on your screen here. We'll watch that stock, certainly, which is getting a spike of better than 20 percent on that news. Mike Santoli is here. Our senior markets commentator sat down at Post 9. You were all over this momentum roll.

yesterday. What do you think about it as it's being widely discussed today for how strong that rollover was one day ago? It was dramatic twitch. And I think really the buildup to it was this very split market where you had people really pressing the small subset of stocks that were working as the majority of stocks actually had been pulling back.

It seems as if a lot of times these are just kind of a one-day mechanical wobble where essentially everybody basically has to kind of readjust the models and sort of reset for the next day. But bigger picture, I do think there's an interesting thing going on where the cyclical parts of this market for all this month, which is all of seven trading days, have been in pullback mode. If you look at transports and banks and broader industrials, they're down 2%, 3%, 4%.

And it's been very benign because there's been something in this market, a few of the big growth stocks that have been covering for it. So the market's getting away from that danger through rotation. I find it we're going to have to figure out what it's going to be for January, because January is a month where you often have these big mean reversion moves, right? Laggage of the prior year, get some relief and vice versa. And maybe some of that's actually getting done in advance right now. Do you have some calls that say avoid it?

in 25 as the factor. So I don't know. Momentum as a factor. Yeah. I mean, certainly at the beginning part of 25, that this is maybe the start of something that lasts for a little bit. Yeah, that's actually exactly it. In January, sometimes it gets really tricky. All right. I'll see you on Closing Bell. It's Mike Santoli. Up next, stocks that are stuck. We talked at the top of the show about all these names that have a lot of momentum. Well, next, we've got committee names that have had none since August 5th. They've not hit a new high since then. What gets them going? We'll go through the list next.

All right, we've talked a lot about momentum at the top of the program today, but there are some stocks we need to address here, which have had none. Pfizer, Josh, the last high for this stock was July of 2024. It is down 15% since August 5th. What do we think about this stock here? Yeah, this is the worst stock I own amongst all of my holdings, and I don't really see anything changing anytime soon.

And I think that's okay. As you recall, in the upper 20s, I sold half my position, but I'm not willing to accept defeat on the whole thing. I do think that there is potential here, and I also think that the stock is already very deeply discounting all of the myriad problems that the company has faced over the last couple of years. I think there's a path toward next year being better than this year. So staying the course would be my response.

Steph, Boeing's last high was December of 23. I mean, there's been so many issues here. We know that. Elanco's last high was June of 24, and Freeport's last high was May of

of 24. I like them all. I actually think Boeing 2025 setup was really good, especially with the new CEO. It always takes a while for a new CEO to get his footing, and I think he's got a proven track record. They have a $21 billion cash cushion capital raise that they announced. So they've got

three years of time in terms of getting the story straight. And then today we had good news. 737 Max production is back up. I think they're going to eventually get to 38 per month, which will be good for free cash flow as well. So that story I like for 2025. Unfortunately, it was a terrible stock in 24. Alonco, I still like animal health. What about Dow, Jenny? Last high was April of this year. It's down 18% since the August 5th low. So Dow and

And my other laggards, and frankly, I'm going to take Josh's Pfizer and put it in the same camp. I think what they really need is actually for the momentum to shift and for money to be repurposed out of stocks that are perceived as slightly overvalued or fairly valued and into undervalued. Because there's nothing really wrong here. And when you look ahead, you see that they start to generate $2 of earnings in a year from now, $3 of earnings a year after that, $4 of earnings a year from that. So you need the perspective to shift.

for this for the sight lines glad a little bit and for people to say hey here's a company that has really good earnings growth ahead and it's trading on future earnings about twelve and a half fifteen times so you can see we really need and a bigger market sentiment about sky works real quick it's not down fifteen percent since that low july twenty four was last night yet so sky works that's where the bomb

They need to come out and they need to say, this is not so much valuation, but they need to say that the Apple cell phone sales are good for them. And they need to get that message out because as sales to China have been weak, there's a lot of excitement about AI and the Apple phone. And Skyworks is not making that connection well enough, I think, for investors. And they need to say, hey, we benefit directly from this. Real quick, Supermicro, last high was March of this year, down 35% since the August 5th level. Yeah, I've spoken at nauseam about what to do with Supermicro. It's...

It's suspended. It's not just in the penalty box from my perspective as a holding position. All right. All right. Break and then finals next. All right. We're going to do finals in a second. But, Josh, I want you to talk about a recent visit you had with some pretty special, special group of people about your book. Tell us. Yeah, I got to talk to the folks at the Air National Guard, specifically the 106th Rescue Wing, who are based out of West Hampton Beach, West

out on Long Island. These are the people, Scott, who pull off the most daring impossible rescues when people are in danger from accidents at sea, natural disasters, and even in combat zones. And they are CNBC fans, they are investors,

And they were thrilled to talk about investing, trading and all the things that we do on the air each day. So big shout out to all of the people posted at the 106th. Thank you so much for hosting me and for watching the show. All right. Love that. Thank you for that. You want to give us a final trade?

The momentum in Amazon, unlike all these other names, continues. And I really think the stock wants higher. Staying long. All right. You have the same thing? What's up with that? My Long Island brother is stealing my final trade. Of all the momentum names that we look at, Amazon by far has the strongest momentum. It's up, I think, 8% in the last five days. Yeah. Well, it's been hitting new highs quite often recently. All right. Thank you guys for that. Stephanie Link.

American Express, they're saying very positive things at the Goldman Sachs conference about expenses, about T&E, about deregulation. By the way, JPMorgan and Citigroup also talking very positive about investment banking fees for the fourth quarter. Citi is up 1.5% as a matter of fact as we speak. Thank you for that. Jenny Harrington. All right. I'm going to go back to Organon. It's got about $4 of earnings, which means it's trading at about four times earnings, 7.5% dividend yield. All right.

Good stuff. I'll see you at 3 on the closing bell. The Exchange starts 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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