Nvidia: Breakout or Breakdown 1/7/25
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Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour. The NVIDIA reversal, that stock at a record high. It passes Apple to become the largest market cap company on earth and then rolls over. Look at that, down 5% now. We will debate where the most popular name in the market heads from here. Joining me for the hour today, Josh Brown, Stephanie Link, Sarat Sethi, and Brian Belsky. I want to show you the market because we do have a developing story.

Especially in the Nasdaq. Take a look. It's a roll here down one and a half percent. And maybe as interest rates are creeping up today, that becomes a big part of our story. There is the 10 year at 468. We could show you the 30 year as well at 492. That's the highest since November of 2023.

The VIX is up. There's obviously, Josh, some uneasiness as rates continue to rise. I thought the price action today in NVIDIA is worth starting with. You had all this optimism last night around CES and that speech by Jensen Wong. And here we are with a rollover. What do you make of that?

So it's a good question. I try not to make too much of it. Keep in mind, this is a stock that has been on an unbelievable tear. It's gone up a lot. It's not completely out of character for Nvidia to have a negative 3, 4, 5% day. It does happen. But I do think a lot of people pile into it knowing that Jensen Wang is going to make a keynote address. They expect to be wowed by the technology itself, which I think we could all agree absolutely.

absolutely accomplished, the wow factor. But then it's like, all right, the trade's over. Let me get out of this. I made whatever I made. This is very common. This is by...

buy the rumors, sell the news. So I would just leave it at that. If you tell me this is the start of the next 20% drawdown in NVIDIA, okay, that's a different conversation. I don't think we can extrapolate today's weakness into something like that. You know what I find interesting, though? I was almost going to start the show asking you if you thought this was the next, just to use your words, 20% breakout.

for the stock because, you know, what happened into CES was notable. The stock had basically been dead in the water for a while. It's been picking up lately. Past history would suggest that the stock not only gets a CES bump, but in the subsequent days as well. Jensen Wong's not done speaking out there, but this is a notable rollover. And I was going to say, is this the breakout or the breakdown? I don't know. Maybe the market's voting right now with its hands saying that

Stock was up a lot in a little bit of time after doing next to nothing for a while. Maybe here comes another breather.

I think it's tough because people anticipate these things and they trade far ahead of when you would think there would be profit taking or maybe the CES bump is what happened in the 10 days leading up to CES rather than in the three days after which people have become historically accustomed to. So it's really, really difficult to look at the price action and try to read into the thought processes of

I don't know, 100 million people who are buying and selling the stock for various investment portfolios. I think the thing that's worth saying is that you did not hear anything at all in this keynote address giving you some sense that there was some slowdown in...

or demand or that there were any hiccups in this story. If anything, we're now thinking about 26 and 27 and the onslaught of physical AI announcements that will be coming. This year is the year of agentic AI. I think that's pretty clear. There's a consensus in Silicon Valley that this is the product people will buy and pay a lot of money for right now.

the robotic stuff is a year later or a year after that. But what Jensen Wang did was he waved the checkered flag. He's not, he's, he's not doing things in order. He's showing people what they're going to be selling products into 18 months from today. And look, if you're a longterm shareholder in NVIDIA, as I am, it's now my largest position again, uh, because of how much it's just gone up. Uh,

I could live with 5% pullbacks. They don't affect me. They don't faze me. So, Rod, I mean, the stock, you know, over the last couple of months is down 4.5%, right? It's kind of doing nothing.

for a while. This month alone, it's up 5.5%. So you get the rollover today. To Josh's point, it's not like, you know, Jensen Wang was on the stage last night and announced that there was anything wrong. Au contraire, mon frere. I mean, it was the exact opposite. Dan Ives talking about what happened yesterday, a slew of new AI technology.

PCs that will further stretch their enormous technology lead versus the rest of the semi and big tech landscape. Goldman highlights the company's ability to innovate at industry-leading speed across hardware and software. Stiefel, the developments is further deepening the company's competitive moat. The superlative after superlative after superlative about what this company has going on.

But yet you have the role in the stock today. Do you think it's related as big tech is down because of the moving rates? I do. I think you're getting some movement out of some of these mega growers, right?

And again, it's interesting because it happened on the announcements that were really good. I mean, you're talking about a company that is going back to gaming, it's going back to robotics, and it still is so strong in AI. So I think what's going to happen is it's going to probably be dead money or up and down until earnings. And that's where 2026, 2027 earnings are going to be really, really important.

And because you don't have as much recurring revenue in a stock like Nvidia as you do as some of the others, I think the execution story is going to be really important. The story itself is fabulous, right? He has laid out, as Josh said, what is the roadmap for the next three to five years? Where are we going to play? And these are all the players. And Scott, if you remember back in 2016, Nvidia was a gaming stock. Nobody thought it was an AI stock.

So, I think this is kind of a really good way to say, hey, if I'm going to own this stock, it's trading at what, 30 times earnings. So, it does have to execute and it does have to say our earnings momentum is going to increase. Seems like, Steph, if nothing else, this broadening trade, if you want to call it that, has got a lot of problems. You can't have rates rising like they are now and think that the market's going to broaden out, that the breadth is going to all of a sudden turn good. Well,

Well, that depends on why rates are going higher. And rates are going higher today because we had an off-the-charts ISM services number today. We had an ISM manufacturing is quietly recovering. JOLTS was so surprisingly strong. So the economy, well, last week, the Atlanta Fed came out with the GDP number slowing to 2.4%. After these numbers today, the number is going higher. And of course, the problem with higher growth is that this inflation rate

The stickiness has continued. So, look, the sell-off in Nvidia, the stock is up 188% in the past year. It trades at 48 times earnings. Fine, if they're going to grow into that earnings, go for it. But 91% of the sell side have buys on this thing. That is really, really a popular trade. And we all know, I'm the only one on the desk that doesn't own it, but I own Broadcom, so I'm fine with that. But everyone owns Broadcom.

So I think that this is a sell the news thing. AI fundamentals are still incredibly strong. And so if you see a pullback, I mean, you want to look for opportunities because, I mean, if you listen to what all the companies are saying, it's that you're seeing a 30% increase from AI, a 30% increase in productivity and efficiencies from coding, right, and engineering, a 20% decline in costs on the fulfillment side. Remember, Amazon had that meeting about a month and a half ago, and they talked exactly about

all this and the power of it. And you're starting to see monetization from the big players. That's why. But that's why you've had money going back to the big cap tech. My point is, is that you're going to look for opportunities. NVIDIA is up a lot. It's over owned. It's not up a lot in the last couple of months. It was up a lot. But up 188% in a year, Scott. That's huge. Well, there are a lot of stocks in this market, though, from the growth space that make that gain look palpable.

Well, I mean, some of them, but for the most part, tech had an amazing year last year. Mag7 had an amazing year last year, especially in December, right? And then they slowed down a little bit. So, I mean, I think you see this rotation happening within technology, but I don't think you want to be afraid of when these things pull back.

My point of giving you these stats on AI is that it's real. We are all talking about the trillion-dollar total addressable market. It's real. It's coming. And maybe also, according to NVIDIA, it starts to expand into other products around the world, quite frankly.

It's just a bit extended, in my opinion. By the way, so is Broadcom. So is Broadcom. Sure, but the problem I want to go back to is this issue of everybody coming into the year all bulled up on the Trump policies that are expected or hoped for, and thus...

calls for the broadening trade is finally going to happen in more of a magnitude. The broadening should happen if we can continue to grow at 2 to 2.5%, 3%. Well, not necessarily if interest rates continue to go up. That's the problem. Interest rates are going up because of better growth. Well, interest rates are going up on the prospect of higher inflation. That's the problem. And a bigger deficit. It depends on what you think inflation is going to. If it's going to stay around 3%,

That's not horrible. If it goes to 5%, that's pretty bad. I'm not thinking that we're in that camp. A lot of it has to do with going back to AI and the productivity gains that you're seeing. You cannot have a market that did all the work that it did on the expectation, tell me what you think, of inflation coming down closer to target, and then now tell me that 3% is okay. It's not okay. It's not okay. You can't start reversing the course of inflation and think that it's okay.

This is a tug of war between daily trading, near-term trading, longer-term trading. I think what people are missing is, welcome to normalization. What's the 10-year Treasury average the last 75 years? 5%. I think we need to, as investors, prepare for 100 basis point range, whether or not it's 4% to 5%, 3.5% to 4.5%. I think the thing that I think most people are missing, and you were very salient in your point, Scott, is that the broadening out trade, I think, is a longer-term perspective.

But when people are nervous, what do they do? They go back to liquidity. It happened in the 80s, 90s, the last couple decades, and it's happening right now. So what's the liquidity trade? Large cap tech. So you're nervous about, oh, the good news is bad news, bad news is good news. What do you do? You go right back into the liquidity trade. The benefit of the doubt trade. Exactly. Exactly. So from a fundamental perspective, let's look at NVIDIA, right? So you bought the dip.

because of CES. Great. Now, it became the largest stock in the world for a little bit, and then for about five minutes. But here's the issue with NVIDIA. Amazing name. Love it. But relative to the other big mega caps, it by far, from a fundamental perspective and technical perspective, is the most volatile.

So you have to be able to live with these ebbs and flows. Now, so I think that's why from a longer-term perspective, what's going on here, whether we start to see the semblance of a range happening in rates when people are worried about inflation or rates going higher, they're going to seek the liquidity trade full stop. Steph, you have some moves I want to talk about because maybe they reflect your perspective.

view on what you think is happening in the market. You sold DuPont. You want to tell me about that before we discuss some of the other moves that you made? Yeah, I mean, I needed cash, to be honest with you. I have a very low amount of cash and I wanted to buy other things. And so DuPont, I love the spin, but the spin is going to happen in like 12 to 16 months. And so I think you have time. Also, 53% of their revenues are overseas. And I worry a little bit about the strong dollar.

And so the near term in terms of earnings risk could be substantial. Not to mention China is about 20% of their revenues as well. We all know what is happening in China. And so I just, I was kind of flattish on the position, Scott. So I took that and I put it into Diamondback. I've re-bought

I've owned that for years and I sold it for a nice gain late last year. And I just think the stock, the valuation at 11 times forward estimates and this company doing a fabulous job in the combination of growing production and also keeping costs low. The free cash flow is enormous and they're going to continue to return that to shareholders. And most importantly, this Endeavor deal that they did is going to be $2 billion accretive

between now, two billion each year between now and 2030. And that's a nice tailwind, no matter what happens on the energy front, in my opinion. - You bought more Boeing. - I did, 'cause we talked about this late last year and I was restricted for a while. But I think the worst is behind the company. I think this is a 2025 story, my favorite one. And so if I believe that, I actually wanna put my money where my mouth is. And by the way, I did trim a little bit of GE to buy the Boeing.

I still own a lot of GE. But I needed some cash, right? Like I said, I'm very low. But I think the worst is behind the company. You've got a new leadership. You're seeing changes almost every day in terms of the leadership. So the new CEO is bringing in new people. And

and the ceo has a proven track record of strong execution but most importantly they just raised 21 billion dollars in capital and it gives them three years to buy them time to get through some of these problems in the meantime the 737 the max series is on pace to get back to 38 per month and therefore if they can and they can do 400 planes this year and they can deliver them free cash flow the guidance is probably too low i think they could maybe even do

flat free cash flow. And you're going to see something like six or seven billion dollars in the next three years in free cash flow growth. And I want to be part of that. OK, so you bought more Nestle. I did. Why do you do that? Because it's got the stocks down 82 bucks. It's down over 20 percent of last year. The multiples at 15. It hasn't seen 15 in over a decade. Why is it down that much? GLP? No. Combination of resetting guidance, new CEO.

And really, yes, the overhang of all these stocks with GLP and consumer staples being out of favor. You've got a 4% yield, a solid, really solid balance sheet. And look, their growth drivers are coffee, water, life sciences. Really not that...

salty snack kind of effect that you're getting with the GLP. So a world-class name at 15 times earnings with a 4% dividend yield, I think you've got to add to it at these levels. Let's take a look at shares of Apple, too, while we're at it here. Because on many days, that may have been our top story. The fact that Apple got downgraded to sell today, which doesn't happen very often. It was Moffat Nathanson. And their commentary, I thought, was worth reading to you as well.

Much has been made of the fact that Apple shares have moved steadily higher over the past few months in the absence of any real news. But that's not actually correct. In fact, there's been a great deal of Apple relevant news. It's just that all of it's been bad.

which is why they downgraded today. 188 is the price target. That's considerably lower from the 243 that it is currently trading. Josh, you want to take a look at this one for us because it's not every day that a stock like this gets cut to sell. And look, I mean, you want to take issue with what they have to say.

So when I sat at WWDC with Steve Kovach, that was the Energizer, which got the stock moving again. Right. I've been sitting around for a while, not really doing much. WWDC happens out at Apple Park. Next thing you know, the stock blast off up to the right, hits new highs. All the while, we've been hearing reports about a slow uptake in an upgrade cycle. So are they right?

Yeah, I don't disagree with this call at all. I don't understand what the fundamental drivers were behind the Apple rally that happened. It really felt like after Thanksgiving, just for some reason, everybody decided they had to buy Apple. Maybe...

to try to keep up with the rest of the index. I don't really get it because there hasn't really been any fundamental reason for Apple to have added that much in dollar market cap in that compressed of a period of time. So maybe some of that's being unwound now. The stock is already fairly off that high for Apple.

And maybe it will have a retracement during the course of the next quarter or two. This is not a name that I think from today's level is poised for any sort of outperformance, barring an announcement that nobody is considering. So if we're just going by what we think the earnings outlook is for this year, what we think of the current iPhone upgrade cycle, the company's doing great.

Everyone knows that, and the stock is in the most expensive decile of its own valuation history. So forget about Apple versus the S&P. Apple versus itself, all time, this is one of the most expensive valuations, starting valuations,

to have ever been available to investors. So I don't totally disagree with the call. Now, I'm a long-term investor here. I own the stock for longer than some of our viewers were born. So I don't need to react to a downgrade, but I totally get it. And I'm not particularly excited about the next 90 days of the stock price. Yeah, we're at the lows of the session, Brian. What do you make of this call? Do you agree with it or not?

I didn't hear many people who own the stock complaining on the way up. Of course. I also didn't hear many people saying that it was, or they were trying to, you know, hard to find catalysts for why the stock was going up.

other than sitting at WWDC where they said Apple intelligence. Right. Well, I don't disagree with, at least in near term, directionally. Stocks had a big run. Remember, last year it kind of tripped on itself the first half of the year and then it kind of took over the performance of the technology sector the second half of the year. And I think remember, too, that we had a lot of weakness in December with respect to tech stocks and I think going back to the liquidity trade, I think that's a big part of it, but people are going into Apple.

And I think indexing toward the end of the year. Now, we're longer term investors. We're aligned with Josh. We've owned it a long time. It's our largest position across multiple portfolios.

So this is one of these situations where we'll be looking to see where the stock settles in and we will probably add more. This is a good call by Moffitt Nathanson. By the way, Craig Moffitt is going to be on the exchange today. I think it's a good trade. Talking about his call. It's a trading call. It's not an investing call. So it's really to say, hey, if you've got money, probably not the area to put to work at this level. There are other opportunities. And if it does pull back a little bit, you could add to it. Do you think that...

that the run from, I mean, if you show another chart from WWDC to now, do you feel like that was a justifiable move? Steph has been selling, shaking her head, no, it wasn't justifiable. That's one of the reasons why she was selling. We'll get her take after yours. Yeah, I think there's a lot to be seen. Their execution has to be superlative. And they really have to show that AI is taking over and the people are buying more phones and

and spending more money. So it's a very expensive stock, but it's a stock that a lot of people hold because you want protection in your portfolio. - Stock went from 150 to 250. - I know, I know. And I sold it in the fall after I was buying it in the spring. And so it went up obviously a lot more since I've sold it, but I just didn't understand

When I sold it, I was up about 35% from when I bought it in the spring. And you're talking about iPhone growth this year, 2025, 4%. That's the expectations. And next year, 6%. And I'm not willing to pay 33 times forward estimates. Now, I know services is the bright spot.

But it really is still quite small in terms of the total revenue percentage, about 24% of their total revenues. And I also think that you have China risk. That's 20% of their revenues as well. And so I just didn't think the risk reward is that great, and I just don't think that

the phone, this version is going to be the super cycle. And the numbers are clearly telling you that in terms of consensus. And consensus may be wrong, but they're not going to be off by 10 percent, 15 percent, in my opinion. So I just took money off and put it elsewhere. I got another call I want to get to a stock that's up a lot in a very short period of time. It's Tesla. Belsky, I'm coming to you because you are downgraded today at Bank of America. The target

is 490. Obviously, you take a look at where the stock is currently trading now. It's up 65% in three months. I think everybody at this point knows the reasons why that the stock has gotten a big bump. Now, down recently because of the delivery mess. But what do you do with the stock here?

I think it's a trading call again. I think they're making a trading call and I think they'll come back to it after you see some sort of a pullback. I mean, we think from the consumer discretionary sector, a sector that we're overweight, both the United States and Canada, Tesla is going to be part of that longer-term barbell. So, again, we initiated a smaller position. I know you love when I say that. If we see some sort of a double-digit pullback... Do you only initiate a very big position when the stock has gone up a lot?

IS THAT -- NO, NO, NO, NO. IT'S DOWN A LOT. VERY TINY POSITION. LISTEN, BROTHER, THIS STOCK WAS UP 50%. I'M NOT GOING TO CHASE -- IF I ASKED YOU ABOUT PALENTIER, YOU WOULD BE LIKE, IT WAS ONE OF OUR BIGGEST POSITIONS. IT WAS, ACTUALLY. WE DOUBLED DOWN ON PALENTIER. WHEN WE GOT INTO PALENTIER,

Palantir, thanks to Dan Ives. Thank you, Dan. We had a huge position, so we have a big tracking error on that. But on Tesla, when a stock's been rallying like that, man, it's really difficult to say, I'm going to put 6% of the portfolio, and you just can't do that. So guess what? If this stock's down 10% or 15%, I'm coming back in. All right. We'll take a quick break. Coming up, a Josh Brown hot take on why getting paid to wait might not always pay the best dividends for your portfolio strategy. We will explain. Well, he will.

First, our call of the day. Halftime's back in two. Global markets, up to the minute, front page news. Wake up to Frank Holland and Worldwide Exchange. Weekdays, 5 a.m. Eastern, CNBC. Live ambitiously.

We'll do our calls of the day. We start today with Shake Shack upgraded to overweight from equal weight target to 159 from 125. That's Barclays. Josh, to you, comp compares relatively modest and valuation no longer outsized relative to high growth peers. We expect shares to continue to outperform this year.

Yeah, I almost feel like a parent watching this company grow up. I bought it the day it came public, have never sold it. I've added to it on weakness. It's been a spectacular winter. I'm not selling any of my stock, regardless of how much it's up, because I genuinely believe that where this company is right now is in a place where they can really focus on margins and they can really scale this business and it can join some of the more gigantic companies

players in this space as one of the premier names. It's tiny in comparison to a McDonald's or a Chipotle or a Starbucks, but it's every bit as good of a story as those stories were earlier in their lifespan. Rob Lynch is the new CEO, joined the company having grown Papa John's to 3%.

thousands of units. This is just hundreds of stores, but it's global and it's growing and it's the high quality option anywhere you see it. If you know anything about food, that's where you're going versus any of their competitors. And I think it's going to continue to work. All right. We watched that one. Snowflake.

Steph, upgraded today, overweight, target 200, Wells Fargo. They say shares appear more favorably positioned heading into 2025. More favorably positioned or that it's down 31% since last February. It's really been a dog, but I do think that 2025, the setup is really well, is really good. And that is because they've got a whole new product cycle. Remember, product revenue grew last quarter 29% year over year. That was the best in two years. And the bookings are actually accelerating so dramatically.

pretty decent visibility. Still a show-me story, but I think the new CEO has his footing, and I like the story. Surat Freeport cut today to market perform from outperform. That's at Bernstein. The target goes to 46 from 51. So

Still optimistic from here, but not quite as much. No, and the stock was 52 in the middle of last year, and we were all holding it and buying it at those levels. I still like this area. I like Freeport and Tech Resources, both of them as copper plays. The demand for copper for the next three to five years is going to be extremely high. We have not built, we have not found or created a copper mine in 10 years. And if you look at where the demand's going, which is EVs, data centers, all

all the things, even new homes, it's just going to be extremely large. And that's just secular growth non-ex-China. If China ever wakes up, you've got option value, but I'm not buying it for that reason. I'm buying it because I do think that this company can create really great cash flow and earnings. It's just going to be a play that's going to take some time. Okay. Let's talk Lulu.

Mr. Belsky? Yeah, let's do it. Upgraded to outperform from market perform. The target's at 460. It was 360. That's at Bernstein. They expect to see an inflection in America's growth, stronger higher income consumer, easier comps. What do you think? I mean, this stock hadn't really done anything. And this looked pretty darn good for the last few months.

I think it's true. And you know, we are overweight consumer discretionary. I talked about Amazon and Tesla in the prior hit, but at the end of the day, Lulu is our largest overweight on a relative basis in consumer discretionary. Here's why great management, great product, other companies in their space have clearly tripped on themselves. IE Nike. A lot of people are trying to play Nike as a value play. I think you buy stocks because they're working fundamentally and Lulu clearly is.

And their CEO has a great vision and their product in terms of what's happening in North America, I think is exquisitely positioned. This thing looks like dead money for a while.

Well, they got some things wrong for a while, especially with some of the merchandise. And I think with their chief product officer kind of moving on, they're kind of centering more on what they're really, really good at. And I think that's what you're going to be seeing over the next year or so. All right. Surat, tell me about Disney. Upgraded today to buy Target to $147 at Redburn. Years of cord-cutting pressures. Disney finally at a point where streaming profit growth will more than offset the linear TV declines.

Is that what the whole story is built on from here? It's not the whole story, but it is a very important part of the story. It's a very important part of Disney. It's an important part of Comcast. You need streaming to start making money. You can't have this loss leader that you're going to get this valuation for. It's going to hurt your equity.

And I think Disney's was dead money for a long time. It is one of our large positions. So it's not a small one. Good luck. And look, it's not, I think you've got Catalyst ahead. You've got Iger there who's going to hand it off to somebody else. You know, James Gorman. They have to get that right this time. They do. They have to get it right. And the stock is not expensive. It's not cheap. But I do think there's a lot of secular tailwinds behind it. How about United Airlines?

which has just had a remarkable 24. I think it was up more than 100%. Today, the target goes to 115 from 105 at Bernstein. The target to 137. They're even more optimistic over at Wolff.

Sharath, you have United. I do. And I will tell you, I am selling my United and moving into Delta. I think Delta- You're selling your United. I am going to be out of United very soon. And Delta is going to be my one and only airline position because the management at Delta, the routes they have, the service they have, the quality of the airplanes and the product is far superior than any of our U.S. airlines. You just dropping that little nugget on us. So, by the way, I'm selling United out of it. I just, you know-

That's the January. So therefore, no position. It will not be a small position. It will be no position. When are you going to do that? Over the next few days. Okay. You have Delta? Yeah, we have both. By the way, Delta's target today goes to 77 and 75 from Wolfe and Bernstein, respectively.

He's spot on. Delta, by far, is the best airline. United's great because we own it in our small mid-cap portfolio. An amazing, amazing company. But those two, you absolutely have to own both those companies, I believe. So keep the position. You guys trying to have dinner with Ed Bastin? I mean, it's the best. Why wouldn't we? Why wouldn't we want to have dinner with him? I know he probably is. I know it's the circle. Delta, by far, is a great option.

The fleet is good. They're expense control. People forget that they have their own refiner. I mean, all these kind of things that from a secular basis is by far the leader in their life. And the other thing about United, it has recovered really well. It's done everything you want it to do. I just think the next leg is going to be tougher for them, especially as Asia has to grow. And that's where they have the expense issues.

All right. Seema Modi has the headlines for us. Hi, Seema. Good afternoon. A New York appeals court is moments away from hearing President-elect Trump's bid to throw out his conviction on criminal charges in his hush money case. His legal team asked the court to dismiss the case ahead of his scheduled Friday sentencing. The last-ditch motion comes after the judge in the case rejected Trump's attempts to delay the sentencing pending an appeal.

China says a 7.1 magnitude earthquake that struck near one of Tibet's holiest cities today killed at least 126 people. Some 1,000 homes were destroyed by the quake. According to Chinese media, many people trapped inside the rubble as first responders work to rescue victims amid aftershocks.

And get this, about 15 million Americans will see around $49 billion of medical debt disappear from their credit reports. A finalized Biden administration rule bars that information from appearing on the reports, which means lenders won't be able to factor that debt into consideration when they decide on issuing a loan. The move expected to raise affected credit scores by about 20 points. Scott.

Scott, send it back to you. All right, Seema. Thank you, Seema Modi. Coming up next, Josh's cautionary tale on dividend investing. We'll do that in two minutes.

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All right, welcome back. The new year kicking off. A good time now to look at your portfolio allocations. And today, Josh Brown ringing the alarm of sorts on being invested exclusively in one stock strategy. Josh, what's your hot take today?

That's right, Scott. I think this is the time of year where we're hearing from investors who are allocated elsewhere and looking at their returns and wondering why they're underperforming the major indices to the degree that they are. A lot of this is just being in the middle of a bull market. Some would say toward the end of a bull market. But suffice to say, you have 15%-ish average

returns for the S&P 500. The NASDAQ, obviously, substantially higher. And you find a lot of people who got back into the market after the great financial crisis or sometime thereafter, but they allocated so heavily to the dividend factor that they really missed out on a lot of what else drives market performance. So I am pro-dividend. 75% of companies in the S&P 500 do pay a dividend. But

when you actually analyze it as a standalone factor, 54% of the time, it trails the performance of the S&P 500 over all 12-month rolling periods going back 30 years. So I think when you look at the way companies are now allocating capital, you go back to 1993, on average, companies used 36%.

of their retained earnings to pay out dividends. That number's pretty constant. What's changed since 1993 is that the cash used for buybacks has gone from 17% to 71% of all corporate cash, and that buyback strategy is a thing that companies are doing in response to the fact that it's a better deal for stockholders. You're not being double taxed

the way that you are when you're paid in dividends, right? Because a corporation gets taxed, then they pay out a dividend, you, the investor, gets taxed. So,

I guess it's not really alarm bells. It's more just me saying, look, I understand the psychological importance of getting a dividend. You feel like it's, it's some cash being returned. You love seeing it hit your account. Maybe if you're older, you would rather live on the dividends than have to sell stock every year. I understand it all. But with a dividend only strategy, no Berkshire Hathaway, no Amazon, no Nvidia, uh,

Some of these companies that pay dividends now didn't for the first 20 years of their existence. And you lose out on thousands of percentage points in some of the most important publicly traded companies today. So it's not anti-dividend. It's just be aware that there are huge opportunities in the market to not just focus exclusively on that one strategy.

You want to engage, Belsky? I sure do. I love you with all my heart, Josh. I do. But I completely disagree with you because I think that when you take a look at dividends, you can't look at dividend yield. You have to look at dividend growth, which we've shown through the way that we manage money. In fact, dividend aristocrats, the DVY, was up 12% in the U.S., up 15.5% in Canada.

the respective portfolios that we run, we're up 20% in Canada and 17% in the U.S. Here's why. Because we focus on dividend growth. 60% of the portfolio should always be those core names that have never cut a dividend. 30% should be the names that are growing the dividend, and 10% should be the names that are yields above that. If you're buying companies just because of dividend yield, you can, will, and should underperform. That's what you're looking at in terms of the factor, Josh. I don't disagree. So it sounds like you agree.

I don't disagree with respect to the yield part of it and paying the dividends, but we reinvest the dividend. It's a longer-term fact. And oh, by the way, too, we've had this amazing run in momentum. And as we normalize, again, I've said it before, we're going to be involved in different types of strategies, one of which is going to be dividend growth. Another is going to be value. Another one is going to be small cap. So I think now is not the time to be leaving dividend growth at all.

Josh, I'll give you the last word and we'll move. I didn't say a word about dividend growth. So I don't have any data on that. I'm talking about the dividend factor, which waits toward high dividend. Correct. That's the data that I have. Companies pay a high dividend for a reason. We don't disagree. Companies pay high dividend for a reason, right? Because they're not growing. You know, by the way, you don't want to buy those anyway, because fundamentally they're not working. Well, companies pay a high dividend for the most part because their share prices have collapsed.

- Correct. - And usually that's indicative of a disruption risk or a fundamental problem at the company. A lot of companies pay high dividends on their way to slashing the dividend entirely in order to survive. Brian, I think the key thing that I wanna get across, when I say,

investing to the exclusion of all other strategies. If you were to wait based on shareholder yield versus dividend alone, meaning dividend plus buyback, your results, this is not my opinion, quantitatively significantly better. Correct. There's this idea that dividends inherently are less volatile stocks. Completely false. The dividend index has a standard deviation of

18.9% versus a standard deviation of 19.2% for buyback stocks, for example. So there are a lot of misnomers about the dividend theme. My point is it should not be the only reason why you're selecting the equities that you're selecting. All right. Good stuff. Good stuff, guys. Santoli, he's next with his midday word.

Senior markets commentator Mike Santoli here now with his midday word. What's on your mind today? You know, it's really erratic tape below the surface. It really is. You know, it's not necessarily easy to really tease out some of the thematic stuff. Obviously, you got the somewhat hotter than expected ISM services and jolts that seem to have this yield move. But it doesn't really explain why.

There's all kinds of kind of low-quality NASDAQ stocks flying, and the volumes are so high. And Fubo is trading 300 million shares again today after yesterday was the news. So it's interesting on some level that we don't really have this sort of linear line. Like, Nvidia down 5% should not necessarily be the first thing that reacts.

yields where they are. So all that being said, I still think we're trying to sort out what the new year flows mean in terms of leaders versus laggards of last year, if there's going to be any kind of a turnabout there. Banks are a pretty clean story, and I think the market keeps treating them that way of the cyclical groups they've managed to

hang in there pretty well but down you know it it sort of shows you that yesterday it seemed like all you needed was a couple the mega caps to work in there but I'm one consistent thing though is breath eroding throughout the day and that happened yesterday's happening and today we'll see if that means maybe the move in yields now just increases and the reads today on on the employment a front increase the importance the jobs report now for sure and a bank ever gonna get obviously ADP is like the preview and and and job support

I mean, these yield levels and the real yield levels that we're seeing right now should be attracting buyers. You would think that they're getting to a point where they're going to settle out a little bit. It just hasn't happened yet. Okay. I'll see you in a couple hours.

On closing bell, meantime, President-elect Trump had been speaking down at Mar-a-Lago within the last hour. A number of topics, including commenting on Meta's plans to reverse its fact-checking policy. Eamon Javers covering that for us. Eamon, what do you say? Well, Scott, that's right. Remember that Meta announcement this morning, also the Meta announcement last night that it's going to add UFC CEO Dana White to its board. Dana White, of course, a big Trump supporter and a close protester.

personal friend of Donald Trump. Here's how the president-elect responded to a reporter's question about Meta's announcement earlier today. I think they've come a long way. Meta, Facebook. I think they've come a long way. I watched it. The man was very impressive. I watched it. Actually, I watched it on Fox. I'm not allowed to say that. Say it. Do you think he's directly responding to the threats that you have made to him in the past? Probably.

So you see the president-elect there saying that he thinks that Mark Zuckerberg is responding to the threats that he's made to them in the past. Now, just a quick reminder of what Trump has said about Mark Zuckerberg. Last summer, Trump accused Zuckerberg of interfering in the election, interfering in terms of Facebook's algorithm, anti-conservative, anti-Trump messaging on that service. Trump said that he believes that the Metta chief executive should spend the rest of his life in prison

if he interfered in an election again. Now Mark Zuckerberg appointing a strong Trump supporter to his board and announcing he's going to abandon these fact-checking policies, all things that are being welcomed with open arms by MAGA supporters today. And of course, as we just saw, welcomed with open arms by Donald Trump himself today. Scott, back over to you. Amen. Thank you. All right. Appreciate that. That's Eamon Jarvis for us down in Washington. We're back right after this.

Got some stocks on the move today, starting with Reddit as a new record high. That was yesterday. Stock up 148% in three months. Josh, a stock you own.

Yeah, this stock did better than any stock in the S&P 500 last year, including Palantir. It's a recent IPO. It was very under-owned. And then when they announced the September quarter, this thing just went absolutely bananas, gapped higher and kept on running. I think the theme for 25, with a name like Reddit, is going to be the monetization of what can only be considered...

one of the biggest treasure troves of user-generated data anywhere in the world. 19 years worth of hundreds of millions of people commenting on every subject under the sun. And Reddit can sell that to the LLMs. The LLMs are starving for data like this.

And so I think not only do you have the ad business, but now you've got the search business and you've got this AI business, which is fairly nascent. So I'm staying long. I do have a stop loss in here because of how much it's gone up. But I do think this will be a good story going into 25.

It's a rock Pepsi, new 52 week low. No dividend, by the way. Sorry. Pepsi does have Pepsi does have a dividend again, close to four percent multiples compressed. Again, one of these high value branded companies that has great distribution. You've got salty snacks, but you've also got the sodas. I think you have to have this as part of a diversified portfolio. Quickly on AbbVie, they cut their outlook.

You know, we like it relative to the other big pharma, but we like the dividend. We love the value in the name. All right, good stuff. We'll do finals next. All right, I'll see you at closing bell today, 3 o'clock Eastern. Liz Young-Thomas, Jeff DeGraff, Rashawn Williams, Ayako Yoshioka. We'll take you through the final stretch, see what happens. I mean, we've had a significant role, especially in the NASDAQ today, and some of the biggest tech names within the market. So I'll take you through that. Josh Brown, final trade. Remaining long shock, long-term holding. Thank you. Brian Belsky.

Financials, financials, financials. Synovus Financial, SNV. Man, there was a call today. Wall Street's pretty bullish. Earnings next week, by the way. Yeah. Don't forget about that before we get started here. All right. Surat Sethi. Comcast, nine times earnings. Cattle is coming up, spinning off cable. I think you got to own it. And you still own it? Still own it. Good size.

Big stock. Big stock. Big position. Big position. All right. All right. Stephanie Lake. Morgan Stanley, I think when they report on the 16th, it's going to positively surprise on the fee growth. Could be 70% for equity capital markets. All right. Good stuff. See you on closing bell. 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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