The U.S. Exceptionalism Trade 03/25/25
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carl thanks so much welcome to the halftime report i'm scott wapner front and center this hour the u.s exceptionalism trade is it still on given all the uncertainty around tariffs and the economy we will discuss and debate with the investment committee today joining me for the hour josh brown stephanie link jim labenthal rob siechen is going to be on in just a bit with some new mega cap moves to tell you about as well but we'll start with checking the markets

We do have a mixed picture. It is a NASDAQ and S&P story today, thanks to a gain in the mega caps. Steph, I'll start with you. You know, we've rallied back. S&P, believe it or not, doesn't feel like it. It's down less than 2% year to date. There's a lot of uncertainty, obviously, around trade and the economy.

I thought our top story really should be this U.S. exceptionalism trade, which was all the rage some two months ago we came into the year. We're two months, three months into the year. We're two months or so into Trump 2.0. And we've had a lot of people suggesting on this network, in notes from Wall Street, that

other markets are going to do better than the U.S. now, that there's just too much going on here. Oppenheimer points out today European stocks are on track to outperform the U.S. this quarter by the largest margin ever. If that doesn't tell you where sentiment has shifted, I don't know what does.

So we overdid it on the upside of U.S. exceptionalism, and now we're overdoing it on the downside, in my opinion. I think U.S. is still a place to be. There's plenty of value out there beyond tech, but even within tech. GDP is not going into a recession. We're probably going to do 2% in GDP growth this year.

We're going to see double digit earnings, maybe not 14%, Scott, but maybe more like 9 or 10. And we're going to have margin expansion. And so you had the market correct. The multiples have come down. And a lot of stocks beyond tech are very, very cheap. You know, the last couple of weeks I have been buying. We talked about it, that I went from 9% cash to 3% cash over the last four weeks. And I have a lot of different ideas. I would fade Europe in a heartbeat.

I think that, yeah, in a heartbeat, because I think they're barely going to grow 1% in GDP. I think earnings are going to disappoint.

And at best, they're going to be mid-single digits. Margin expansion is a pipe dream, in my opinion. You're not going to be able to see margin expansion. There's just too much regulation in Europe. And the valuation is not that compelling. I would own some China. You know I do, via U.S. companies that have exposure in China. I think the transparency is way better from U.S. companies

with exposure to china so las vegas sands for example i'm keeping my eye on nsa lauder um keeping my eye on nike so there are a lot of names to be looking at if you want the chinese exposure but i still think the place to be is the u.s that's going to be a headline i would fade europe in a heartbeat says stephanie link josh i'll turn to you on that because jp morgan's trading desk has an interesting note out today saying that europe first the u.s is done for now anyway

Because the valuation gap is closed and they look at the comparison between, let's say, an SAP, which is 40 times versus a Google, which is 18 and a half, or Microsoft, which is 29. And that the Mag7 valuation is now looking cheap versus history. That Europe really benefited during the rotation out of tech. And that's done. And to Steph's point, that the market was just too extreme at the beginning of all this.

pricing in this U.S. exceptional trade under Trump. And it's already unwound. And they go to some other, you know, reasoning, too, that coming to month end, you're going to see a lot of buying coming into the U.S. as well. What's your thought on this? Because you talked, look, early on in the game about Europe. You raised your hand, said, hey, take a look at Europe and what it's doing versus the U.S. But what about now?

I applaud the contrarianism. Some would call it knee-jerk contrarianism. It's a very common thing on Wall Street. If everyone's zigging, therefore I should zag. I think it's too early. I don't think it's true that the valuation gap has closed at all. I think SAP is an argument from the extreme that happens to be a European tech, which is not the same thing as a median European stock.

And when these things take root, they tend to run on for longer than most people expect possible. I would not tell people sell all your US stocks and just buy European equities. We don't do that where I come from.

We've kept Europe as an allocation and added to it as that performance gap and valuation gap have expanded over recent years. And that's why we were positioned to be in it ahead of what's just gone on and we're not chasing it. So I would not advise people, yes, go chase Europe. But this notion that, oh, the rally's over, go back to the MAG7,

I think in the fullness of time, that's going to look ill-advised. It's not like European stocks just doubled. MSCI Europe is up 8% year-to-date versus the S&P negative 2. Let's all calm down a second about that performance gap. Because if you look out over the last year, U.S. is plus 12, Europe's plus 11. If you look out over two years, three years, five years, ten years...

There is no 12 month period where European stocks have done better than the US. By which I wanna state, I think it's possible that this rally, relative rally, is still somewhat early. And I don't think you wanna be taking profits just yet.

SAP at 40 notwithstanding. There are still lots of companies in Europe where the valuation gap is nowhere near what the historical averages have been. The other thing to keep in mind, Judge, unlike the S&P 500, which is still hyper-concentrated, even given the sell-offs we've had in MAG7,

MSCI Europe is highly diversified. The top 10 holdings in Europe only make up 18% of total exposure. That's versus the U.S. top 10. That's more like 35 or 36%. MSCI Europe, if you think about it from that standpoint, has...

is in a situation now where even with this rally, it's still underappreciated and under-owned. And something major has changed in the psychology of government officials and in the ideas about how important a strong capital market is in order for a country to not only grow, but have the capability of defending itself.

don't think this is like a moment that's going to pass tomorrow. I think there's a fundamental psychological shift underway where these companies in these countries have more room to appreciate. So I would not fall for the instinct to be contrarian just yet. Jimmy, Bank of America, their client flows, biggest net sale of U.S. equity since August.

You've had record tech outflows. Clients were net sellers for the first time in eight weeks. So the money continues to flow there. Jeffrey Gundlach was talking to me the other day about that very fact. He doesn't think it's over either. Listen.

I think that that's sensible given this re-industrialization concept in Europe. One of the things that might be an unintended consequence of all of Trump's rhetoric is, you know, he's making people think about how much can they rely on the United States for their weapons, for their defense, for their cooperation. And that's probably going to continue to make Europe very, very bullish versus the S&P 500.

All right. That's Jeffrey Gundlach to me the other day on Closing Bell. What say you, Jimmy? Well, I think Josh was kind of tilting at this. You have to understand what the composition is when you go internationally. This is not a tech-heavy continent when you look at Europe. If you're going to invest in Europe, just as an example, I know there's China, there's other places as well. You're really tilting more towards the value-oriented sectors, financials, industrials, energy, and materials.

Hey, I happen to like those, but just you have to know that's where you're going. You're not really going to get the alphabets and the Amazons of the world. Now, I'm a U.S. equity portfolio manager who occasionally buys a European stock on holdings. You may remember that, Scott. That is based in Switzerland.

As a member of our investment office, we do have allocations for our clients to international equities. But, and this is important, right now we are not adding to them. So that's our way of saying, hey, we believe in them for the long term, but we do think this rally has gotten a little bit ahead of itself. There is some fundamental basis to the rally, particularly the fact

that Germany has released its debt break and is now going to use debt to spend on defense spending. But you've got to understand that's a very long-term phenomenon. They don't just all of a sudden crank up the factories. They don't have the factories to crank up. What they're thinking about doing is taking idle Volkswagen plants and using those to build tanks. That does not happen overnight. It does, however, happen over years. And I think over years, you are likely going to have other opportunities to

add to international equities not sure i would do it right now let's also be clear we're not suggesting in any way shape or form get out of the u.s stock market and go into the european stock market there's not a conversation about that it's simply do you move from a dramatically underweight position which i think many investors have had for the last handful of years and

and just up your exposure. Now, you may look at what's happening with tech lately and say, no, because if tech continues to perform

That's where U.S. exceptionalism is the most exceptional in those companies that are leading the AI transformation. So why would I want to get out of those names now after they've already corrected when you may have had the worst of the earnings revisions, where the multiple corrections have already taken place? And if you look at the gains that we've had and the bounces that we've had, yes, they've gone from magnificent to mediocre of

of late. That doesn't mean that that's where the story is going to remain. - Hey, Judge. - Yeah. - I think it's important to understand the way portfolios actually get allocated.

over the last three years, if you're working in wealth management or even family office and to a lesser extent institutional asset management and you're talking to a prospective new client, you know what you're not showing them in a portfolio? You're not showing them Europe. Like you're not doing, oh, this is how you would have hypothetically done over the last three years. Oh, and by the way,

here's a 15% slug in Europe and a 10% slug in emerging markets. Nobody was showing people portfolios like that and winning business because Europe and emerging markets and to a lesser extent Japan, they were just a drag on returns. So the way people win business on and off Wall Street is to show people a portfolio that effectively has been constructed in a rear view mirror. So of course, overweight mag seven.

Overweight mid-cap growth, overweight large-cap growth. Hey, I won the business, what a miracle. Look at the portfolio I just showed people. That's about to change now. You're about to see people showing off a more balanced portfolio of value, of assets around the world, of different things other than Mag7 because the Mag7 have now been underperforming to a great degree for more than a quarter.

The longer this underperformance goes on, the more portfolios you'll see allocated to these other areas. And this type of thing could go on for years. So I'm not suggesting that there's going to be a new Mag 7 and it's going to be based in Holland.

That's not what we're saying. We're saying everybody presents prospective prospects with a portfolio that's allocated based on whatever just worked over the last 36 months. You've got now opportunities in international stocks that make a track record, a back test,

of a prospective portfolio recommendation look pretty damn good, especially given the volatility we've experienced here, which leads to increased flows to those areas and ultimately more dollars going into them. I know Stephanie's about to say, I don't do that. Okay, I know nobody does that. I'm just being honest with the way this really works. I'm not actually saying that at all.

I'm going to just say I think the best value internationally is India, which is down 2% on the year. Yes. It's down 2% on the year. Because that feels like a little late. They're going to have the fastest GDP growth of all of the countries that we're talking about this year. It's 6.3%. They're going to have double-digit mid-teen earnings.

earnings growth, margin expansion. They have 1.4 billion people in their population, 40% of which are under the age of 25 years old. So just think about this between now and 2030, the productivity and the growth that is going to take place there. So it's been a very good country to own in the last couple of years. This year, it's actually lagging. That's where I think you want to put your money. And I have money in there and I have for a while and I have been adding. Most recently, we talked about it.

So I do think that you have a prime minister there that's very pro-growth. You're going to see continued 6 percent-ish kind of growth. You're going to see $1.7 trillion of infrastructure spent between now and 2030. And I think that's going to be the driver of that country. I want to go back to the issue that may be the most pertinent towards, you know, whether this idea of U.S. exceptionalism and that trade returns in some meaningful way. And it does center around the mega caps, whether—

whether you like it or not um it does the biggest stocks in the market they're where all the action remains yes they've gone from magnificent to mediocre as we have suggested um you look at meta meta is the only one of the group that's positive year to date uh but the others are coming back a bit they're still down considerably from their

most recent highs. Tesla has its own idiosyncratic issues related to Musk and politics and all that. Nvidia is down 22%, Alphabet 18, Meta 15, Amazon 15, Apple 14, Microsoft 16. Those are the percentage amounts off of their most recent highs. I thought we should focus on Apple for a minute.

Because it has so many issues, all of a sudden it feels like they've bubbled to the surface around AI. They've had the executive change as it relates to that, continued China concerns, et cetera. We're worried about tariffs and everything else it would seem. Steve Kovach joins us now. Maybe one of those issues is going to get resolved.

or at least take a step forward soon? Potentially, Scott. So let's talk about Apple and China here because that is really weighing things down. We talk about American exceptionalism. Sure, Apple's an exceptional American company, but it's got this noose around its neck with China here. And look, Tim Cook,

out there in China ahead of this anticipated Apple intelligence launch in the country, possibly next month or more likely in May. Also late last night, Apple held a virtual session for Chinese developers where they walked them through Apple intelligence tools. Still no indication when they're going to be available for Chinese users, but

But look, this trip is coming at a real pivotal time for China. Sales were down 11% in the December quarter, way off the highs of what they used to do in the country. And the business has been struggling to grow basically since Huawei started selling competing phones again in China a few years ago. Let me put this all in perspective.

Apple did nearly $24 billion in sales in China in that big December quarter in 2022. It was 18 and a half billion that same period last year. And we all know Apple whiffed on that big AI upgrade to Siri that was supposed to launch this spring.

delayed at least until next year, possibly 2027. It's going to make Apple intelligence a much tougher sell to those Chinese consumers. Only those minor features so far. A bright spot, though, you're looking for some bright spots, Scott. Government subsidies. Those are going to be applicable to smartphones that

could give Apple's business a smaller boost this quarter. Cook actually kind of hinted on this the last earnings call that he expects government stimulus to help move more iPhones this March quarter. They also found that local AI partner in Alibaba for the launch of Apple Intelligence.

And in the meantime, Cook's playing the diplomat over there in China, saying all the things he needs to say on this trip. He praised DeepSeek's AI model, which, of course, was developed in that country. Also announcing some investments in clean energy and education. All of this, though, with the backdrop of the looming trade war between the U.S. and China. And we know that might get worse on April 2nd, so-called Liberation Day next week, Scott. Yeah. Steve, thank you very much for that. Steve Kovach. I mean, people have been drinking a lot of Haterade.

around Apple of late. You own the stock. Yeah, but I think this is all about whether you hate it or love it. In the stock market, it's about AI right now. You know, this stock has had a rally for 10 months since the Worldwide Developer Conference last June. The stock was well below $200. It then shot on the AI news that came out then up to $260. And since it's backed off,

again on AI news, on the delay to AI. Now today you've got a nice little rally. It's actually been about a two or three day rally on the news in China. So this is all about AI. And when I distill this down, they are behind in AI. Will they catch up? Of course they will. Of course they will. But it still seems like it's a little ways off. And as far as the China news,

Look, I just, as an observer in the world, as well as an investor, any investment thesis that has China as sort of the central growth story right now is to me a little suspect because of the trade war. It's just that sometimes you just distill this business down to its simplest elements. If my investment thesis is primarily on China, I'm not that comfortable right now. That's why I'm underweight to stock. I understand. But I mean, you represent China.

And that view represents what people have long held about this stock and why it was elevated for as long as it was, despite a premium valuation and less than premium fundamentals. The benefit of the doubt. You said it twice. Of course they will. Will they get it right? Of course they will. Well, now it's a show me story. Yeah. You know what?

I just want to add something tangential but related, okay? The stock now trades at roughly a 30 times multiple. That's still growth. You might call it Garpy, but what it doesn't do is get the crossover value investor. Yes, there are a few of us in the world left. Okay, I'm looking at Steffi, thanks.

You know, but if you look at an alphabet right now, 20 times, what's meta, Steffi? 20 times forward earnings, whatever. NVIDIA, 25 times earnings, 20 times next year's with a 50% growth rate. Those are stocks that can get crossover value investors.

Apple, Scott, remember 15 years ago the stock traded at 11 times earnings? That drew in value investors that then propelled it higher. If you look over the last 15 years, stocks been from one end, the lower left of the chart to the upper right. I just don't see that crossover investor coming into Apple right now. Amazon is cheaper than Apple, though, and you get better growth for Amazon. Probably almost all the other mags. That's the only problem, right? Amen, sister. I'm glad you mentioned that because we do have a buyer.

uh... a committee member who is buying some of these mega cap names amazon uh... uh... robs each involved more amazon robs each involved more invidia robs each and joins us on the phone now to tell us exactly why now well i've got a nice to be with everybody i've got guys uh... last week on the show we talked about being in an athletic stance and on friday that's exactly what we did corrections like these are historically great buying opportunities for long-term investors because

forward returns skew positive and you have to be ready to capitalize on that.

Along these lines, we used the weakness that we saw to increase our exposure to our highest conviction, current highest conviction, MAG-7 names. Now, we've been overweight Meta for a long time, underweight Amazon and NVIDIA. And we just think those two names offer an attractive combination of relative valuations, dominance, and durable long-term growth.

On NVIDIA specifically, obviously, Bellware AI, incredible edge in advanced AI chips, years ahead of competitors. Next-gen Blackwell is showing healthy momentum. And this is despite concerns about competition, export controls.

slowing capex at the hyperscalers, and you have a company that is going to track double their revenues in the next two years and produce a remarkable

100 billion in free cash flow. And as Jim just said, it trades at 25 times 25 EPS, 20 times 26. So on Friday, we entered the name. And we think it's a good buy. We're still not market weight, but we continue to increase as the market presents opportunity. I appreciate you calling in and telling us about it because it gives us a good segue. Rob, thanks. We'll see you back on the desk soon. I'm sure of that.

It's a good segue to those comments that the Alibaba chairman, Joe Tsai, made today. You bet. Warning of a bubble in AI data center build-out. He said the following, quote, I start to see the beginning of some kind of bubble. I start to get worried when people are building data centers on spec.

There are a number of people coming up, funds coming out to raise billions or millions of capital. There are a number, as you know, guys, a number of private equity firms that are making big investments in data centers, Blue Owl, Blackstone among them, KKR. There are companies that have seen their share prices go to the moon.

They've fallen back down to earth in some respects. Vistra, Vertiv, GE, Vernova, Eaton, Constellation Energy. Last I checked, they were all down today, maybe on these comments. NVIDIA is slightly lower, perhaps on these comments as well. What do I do with that from Josiah? There is some speculation. There's no question about it. But the names that I own, they're contracted out until 2030. And I

I still think that if we believe in the AI story, which we all do, you still do need data centers. We do not have enough of them. We have 11,000 around the world. We have 5,400 here in the States. You have to get at least double that just to meet up with the demand. And of course, you then need an upgraded grid, which Eaton has said 70% of the grid is over 25 years old.

and we have these mega projects. I don't know if they're ever going to be fulfilled, but $1.7 trillion is what Eaton has said is out there, and only 15% have started to be built. What price do you pay, though, for what you just said? I have been buying. What valuation? Because if you look at

I've got Eaton in front of me. The high 380, it's down to 299. Constellation Energy, the high 352, it's down to 224. I mean, you get my point. Yeah, of course. So I got slammed on the deep seek day because they got hit. And I started buying about a week later just to let the dust settle a bit. So, you know, these stocks were all down double digits. And I just feel like they're this is...

I think we're in like the second or third inning in this. And these companies have done a really good job in terms of managing expectations. And Eaton has a new CEO and he just talked about $21 billion of cash that he's going to be putting to work between now and 2030 between M&A and buybacks and dividends and that sort of thing. So that's kind of a little bit of a special story within.

GE Vernova is all about, it's being spun out and the margin expansion is enormous at this company. And I bought NextEra because I like the GE Vernova combination, the joint venture that they announced. So I think there's a lot of ways you can play it. You don't have to reach for the stars and buy these really super expensive stocks because these have all come down and I think they're very good valuations.

Steph, to what you just said, there's many ways to play it. If you're worried that there is some bubble brewing, I don't think so, or let me put it this way, if there is a bubble, it's in the inflating phase, I don't think it's imminently gonna pop, but if you're worried about it, play a hybrid name. I mean, think about something like Oracle, which right now is being brushed as an AI stock, but they actually have a software, a database company that gives you another piston in the engine, or Microsoft for that matter, there's a heck of a lot more to it than AI.

So again, I'm not that worried that we're imminently going to pop a bubble in data centers, but if you're worried that AI is a bubble, there's a lot of other ways to play it. Cisco Systems. Well, maybe we were on the precipice of something that has self-corrected in some respects. Josh, real quick, before we go. Yeah, we're about to get a really good heat check here on this theme when CoreWeave prices its IPO this week and comes public.

At the current valuation expectation, this thing will become in public somewhere between 27 and 32 billion dollars in valuation. You can kind of understand it because their growth rate over the last year is like 700%.

but it's a heat check because I don't think anyone thinks anything like that can keep going. CoreWeave is infrastructure as a service. So they build these massive data centers filled with the newest GPUs from Nvidia and then people come in and rent that compute. We're gonna get a really good sense of where the market's appetite is for that theme and it's not gonna take us very long to process based on how that stock opens.

All right. Good to know. I appreciate you bringing that to our attention coming up. Speaking of Josh, is the third time a charm? Well, he certainly hopes so because he is back in a stock he's already sold twice before. We're going to trade school with him next.

Under Biden, Americans' cost of living skyrocketed. Food, housing, auto insurance. Lawsuit abuse is a big reason everything's more expensive today. Frivolous lawsuits cost working Americans over $4,000 a year in hidden taxes. President Trump understands the problem. That's why he supports loser pays legislation to stop lawsuit abuse and put thousands back in the pockets of hardworking Americans.

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Auto insurance can all seem the same until it comes time to use it. So don't get stuck paying more for less coverage. Switch to USA Auto Insurance and you could start saving money in no time. Get a quote today. Restrictions apply. All right. Welcome back. Guess who's back? Back again. Slim Shady, Josh Brown. Tell us. Tell us about this third time. Hopefully a charm for you and...

Yeah. This is toast. And by the way, first time I've ever been called slim on TV, so thank you for that. Look, I...

I have traded this stock twice before, once successfully, once at a break even. But I think in the mid-30s and the fact that this stock has pulled back because of broader consumer-related fears about the overall economy and people eating out, etc., I think it presents an opportunity because when you go through the last earnings report that they put out on February 19th, you just have to come to the conclusion that they have figured it out

They are hitting on all cylinders and this is poised to become a really good business. They added 28,000 net locations in 2024. This is everything from like a counter service here by a muffin and coffee to the entire restaurant chain in all of the Marriott's and everything in between.

um and they have a take rate of about 56 basis points so you think of it as like a gross payments volume business and then you ask yourself how many other services can toast sell their existing payment processing company uh

customers. They're adding thousands and thousands of restaurants all over the country. And each time they do that, number one, they're making money from the transactions. And the number two, they can sell other services, everything from payroll to order management systems for the kitchens and you name it. So, uh,

It became a really good business finally over the last year. They've become profitable. They exceeded on basically every metric out there. I should point out,

Block just blew up the other day because their payments business is not doing as well. So Toast is doing something very special within their niche. Morgan Stanley named it one of their best ideas for this year. I think the company grows earnings by 39% this year, over 50% next year. It's trading at a forward PE of 31, and they've just completed their first full profitable year. So I think it's still relatively early to the story.

What was the issue, I guess, that caused you you got what was the issue that caused you to get out of this a couple of times? I know you got stopped out once. What were the concerns, I guess, on on Wall Street about this name that sent it lower to the point where you got stopped out? And then I suppose to the point where when you bought it back, you sold it again.

Well, two things. I have commitment issues, as many who know me know. But bigger than that, this was an unprofitable company in a tape where profitless tech was being punished. So some of it is the context of the environment. That's no longer the case.

This company is showing how profitable it's going to be right out of the gates, and it's pointing to a roadmap of more adjacent opportunities and enterprise, bigger customers, a bigger footprint in different regions. And that, I think, really transforms this from a stock that I want to trade to a stock that I want to consider a longer-term position.

I don't have a huge position on here. It's something I'll be adding to. I accept that this is a high beta name. It'll be volatile. But this time I'm willing to commit to it, given the results that we've seen over the last few quarters. I think they've finally transitioned from being a speculative, profitless tech company to really something that's becoming an institution within financial services. Like, they are a very important company to the...

customers who work with them. I don't think that's going to change anytime soon. All right. We'll keep our eye on that spiking stock. It is toast and Josh is back.

Again, coming up, we do have more committee moves. First, though, we get the headlines today with Silvana Hannau. Hi, Silvana. Hey, Scott. Good afternoon. China remains the top military and cyber threat to the United States. Now, that's according to an annual threat assessment published by the U.S. intelligence community. Now, according to the report, China has the ability to hit the U.S. with conventional weapons, compromise infrastructure with cyber attacks and target U.S. assets in space.

Reuters is reporting that U.S. officials have given Syria's foreign minister a list of conditions that need to be met in order to lift some sanctions against the country in place since the rule of Bashar al-Assad. Now, among the reported conditions that no foreigners serve in senior government roles, that Syria destroys its remaining chemical weapons and that the new government cooperates on counterterrorism.

And in the wake of Elon Musk's effort to slash the size of federal government, a new report from job site Indeed shows a spike in the number of federal workers looking for new jobs. According to Indeed, job applications from workers at agencies targeted by Doge are up 75 percent compared to 2022. There you have it. Half-time report. We'll be right back. CNBC News Update is sponsored by Morgan Stanley, where old school hard work means bold new thinking.

Under Biden, Americans' cost of living skyrocketed. Food, housing, auto insurance. Lawsuit abuse is a big reason everything's more expensive today. Frivolous lawsuits cost working Americans over $4,000 a year in hidden taxes. President Trump understands the problem. That's why he supports loser pays legislation to stop lawsuit abuse and put thousands back in the pockets of hardworking Americans.

It's time to make America affordable again. It's time to support the President's plan.

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All right, stocks on the move time. We'll start with Boeing today. There is news today that that company is seeking to withdraw its guilty plea agreement in the criminal case, according to the Wall Street Journal. Yesterday, of course, we had the news that Boeing won the Air Force contract to build the F-47. There was also news just moving moments ago that a Senate committee has called Boeing CEO to testify on April the 2nd in a hearing titled Safety First.

restoring Boeing's status as a great American manufacturer. You own the stock, Steph. If I recall, I think I'm right, you told me a couple weeks ago that this is your favorite stock this year. Am I remembering that right? Isn't that sad? This is my favorite stock. I actually said it in January, to be honest with you, and because it's been such a dog for the

for the last couple of years. But more importantly, they now have better execution. They have a new CEO and he is doing a really good job, especially with the FAA. Supply chains are getting fixed. We talked about GE saying the same thing. That's important as well. But most important is the 737 and 787 production rates are going higher

And that's going to lead to better free cash flow. And the CFO was quite bullish last week at a conference talking about free cash flow actually being positive for the second half of this year. So that's what the stock trades on, Scott. And even though it's up 23 percent from their March lows, it's still down 20 percent in the past year. OK, we can look now at Lockheed because when the news broke that Boeing had won that contract and Lockheed did not,

Jim Labenthal said overdone. Big stock declined. It was a downgrade of the price target by a lot.

right? By a lot. And you said, no way, Jose, too much. And now you are buying more shares of Lockheed Martin. Yeah. Look, clearly the loss of the F-47 was a disappointment for Lockheed Martin. Steffi, you know I'm happy about Boeing. I want you to do well in it. Lockheed Martin has a lot of other irons in the fire, okay? It does the C-130. It's got the SR-72, the Blackbird, the next Blackbird that it's working on. Who knows? Maybe it will

win the Navy's next generation fighter. That bit is still up. Could be a disappointment as well. But either way, this is just too cheap for a company that is producing the weapons the world wants. And I hate when those words come out of my mouth, but we live in the real world, OK? The real world has, unfortunately, guns and bombs being used. Lockheed Martin is a provider of those around the world at 16 times earnings, 3 percent dividend yield, I'm going to add to it.

All right, home builders. New home sales came in slightly below. Steph, you own D.R. Horton. Josh owns Invitation Homes. And Jonathan Krinsky put out a note right before we came on the air today, said he's renting along in the home builders, that there's been a bullish divergence into the best month of the year. Steph, what do you think about that? Well, I mean, the quarters have been abysmal, right? And so I'm actually encouraged, though, Scott, the stocks are green today after KB Homes actually disappointed.

And orders were down 15%, which is way worse than expected. But these stocks traded like nine, 10 times earnings. And for D.R. Horton, it's down 17% in the past year. So we know how bad housing is. All you need is interest rates to come down and 30-year fix to come closer to six versus seven. And I think we are starting to see some green shoots with existing home sales, with new home sales, with home starts. I think there's all little bits of green shoots as interest rates continue to drop.

Let's do Chipotle here. Oppenheimer's bullish on that. They met with management, the management team. They say, quote, we left that meeting confident that CMG remains well positioned to drive a traffic rebound in the second half of 25 and beyond. We also identify a clearer path for the margin story to flip from headwind to tailwind as the year unfolds. Their longer term growth targets remain, in their words, solidly intact.

That stock is down 20 percent in three months. I know. And it's not cheap, but it's at 38 times forward estimates. But it's down from its average of 50 times. And these guys have mid single digit same store sales growth, unit growth, pricing power. And on the margin side, I think marketing and digital infrastructure that they're putting out, I think, is going to help as well. So I think it's down just because high multiple stocks are down a lot. And I'm a buyer.

Quickly, Josh, Reddit, overweight reiterated. Morgan Stanley.

Yeah, I mean this stock is in a massive drawdown from its recent highs, although still looks really good versus the price it came public at. I probably should have bought some when it was close to $100. I didn't get the chance. Now it's recovered somewhat, but it's still very far from its January, February highs. I like it. I'm staying long. Small position, very volatile.

All right. Good stuff. Take a break. Mike Santoli, he's next. On the other side of this break with his midday word, we have news that is causing shares of Lyft to move. Deirdre Bosa brings it to us right now. Dee, what do we know?

Hey, Scott. So shares of Lyft, they're up about 5% on this Bloomberg headline that says that Engine Capital is said to have built a stake in the ride sharing company and is pushing a review for outstanding questions. Also says that Engine Capital is said to have a $500 million stake. This is about a $5.3 billion market cap company. Remember that CEO David Risher, he took over in April of 2023, took over for the founders of the company at a time when it was

really struggling and losing a ton of value. The stock hasn't done a whole lot since he took over, but there were these existential questions around the company. What was it going to do? Uber was only getting bigger and capturing market care. Risher seems to have stemmed some of those losses and recaptured some market share. He's also been signing deals with autonomous vehicle companies. But it was only a matter of time probably until an investor took a hard look at this

It is the smaller ride sharing company by far. It's only has operations in North America versus a much bigger Uber that operates all around the world. So shares are up about 5%. They were up even more on the news, but they've come down a little bit. Scott. You know, aside from the competitive issues that, you know, they've had, obviously, with Uber D that that, you know, of clearly, if you look back at that chart,

Once the Fed started raising interest rates and there was much more scrutiny on companies that traded for higher valuations that were lower in profitability, there was really a comeuppance. And this was caught right in the middle of that. If you look at the chart, it tells the story.

I mean, also remember that this was a company that was worth, you know, over $20 billion in market cap at one point, now down to $5 billion. Part of the interest rate story is this company was very unprofitable. So it was Uber for a very long time. But with these operator CEOs coming in place, Dara Khosrowshahi at Uber, David Risher at Lyft, they have focused on the balance sheets on the finances of the company.

A chart of Uber investors have been a lot more positive or bullish on the bigger company and partly because Lyft is just the smaller sort of little brother. It's not quite as profitable yet as Uber. So that's part of the story here. You're going to sell these unprofitable companies in a higher interest rate environment.

The question now is, can it turn that around, especially as it becomes more profitable? Yeah. Yeah. There are a lot of charts that look like that. Those growth at any price names that really corrected. Dee, thank you for that. I'll see you on Closing Bell a little bit later. Josh Brown, it just brings us back to Uber and why investors have favored that name. And some big investors have built new positions recently, like Bill Ackman.

Yeah, look, I think Uber, in a very undisputed way, has won the last war. But the new war still to come is going to be about who are the dominant players in AV. And right now, I think there's only three. I think it's Uber as the hub. And then I think, obviously, Tesla is going to launch this June. Waymo has already launched and has partnered with Uber. And Lyft...

doesn't really fit in. If you wanted to understand why Jeff Bezos was so willing to help fund the inauguration parties and to attend in person, and if you wanted to better understand what he's done with the editorial board at the Washington Post, one way to think about that is Amazon should probably buy Lyft.

There were rumors last year that they were interested or Lyft was talking or, you know, I don't know if it ever went past rumors, but think about how much money Amazon spends delivering things. What if you had an army of a million drivers who were rolling around town in their cars anyway, who could make those deliveries?

And in fact, Lyft is partnered with Amazon and Anthropic to reduce, for example, call center times amongst their own customer support staff. The other company that should probably consider buying Lyft is Tesla because they might have an amazing robo-taxi service, but they're going to quickly run into a problem where they recognize not every route should be automated. Some of these should have human drivers. Tesla hasn't got any. And this is a really quick shortcut where they can be

ambidextrous, so to speak, autonomous and human, depending on the route and the situation. So it makes sense to me that they're going to review whether or not Lyft should remain a standalone business. I wouldn't be shocked if they find a buyer. All right, we'll follow that story. Watch that stock throughout the day, of course. Santoli's next with his midday word. We are back with our senior markets commentator, Mike Santoli, sat down at Post 9. I would love your comments, your thoughts on Joe Tsai's comments about a potential trade

data center bubble. You've seen a lot of markets. You've seen your share of bubbles. Utilities are the worst today. There are a lot of stocks that seem to be moving in part, at least on those comments. What do you think? And of course, NVIDIA being held in check. I think there's just really these two currents now, these worldviews of there's an asset light way of doing getting where we need to go in the way of AI. And there's the you can't invest enough or even if even if it's going to be too much, we still have to participate.

AI infrastructure build out. And it's one of the reasons I've been saying for a while that I don't think that the market is ever going to have the AI infrastructure stocks on as long a leash as it did a while back. So there's always going to be this, you know, the clock is ticking on this. By the way, Microsoft shares are down on a 12-month basis.

They were the first in to say, this is huge. We're going to be an anchor investor in all this stuff. And the market is no longer giving them credit for that. And in fact, Sachin Devel has said kind of putting boundaries on how much they want to spend. So you have Alphabet saying, yep, it might be wasted on some measure, but we're still going to throw all this money into it. What is Alphabet valuation done? It's gotten compressed.

So I do think the market's expressing the sensitivities around. It's not to say it's game over, but everybody knows that as one of these tech revolutions happens, the economics, the profitability doesn't stay with the initial hardware build out players. Better not be game over, Stephanie. That's for sure. Right. I mean, Steph, like many investors, looks at the pullback and says the trend's not going anywhere. There could be two years left in it and it goes much higher from here. But I just think people are always going to feel as if.

Yeah. We just don't know for sure. Greenspan's irrational exuberance. It was in late 96. Four years. Yeah. Three and a half. Three and a half. But you get my point. I remember. All right. I'll see you on the closing bell of Mike Santoli. Finals are next. Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime Podcast now. We want to get back to Giorgio Bosa with more on that Lyft story we were discussing a few moments ago. D?

Scott, I wanted to give you an update. At the time, Bloomberg had said that engine capital was said to have a $500 million stake. According to a source, that is closer to $50 million. A $50 million stake is what we are hearing, not a half a billion dollar stake. And that could temper some of the gains that we've seen for Lyft stock. It's already down to just up about 3%. Back to you. OK.

OK, appreciate that update. Thank you. That's Georgia Bose. Hope you'll join me. Three o'clock Eastern time on closing bell. We'll have patient capital. Samantha McLemore with a Sarah Malik of Nuveen. I Yoshioka as well. We'll see what these markets do. Take you right up into the close as well. Josh Brown, your final trade is what? Oh, I wanted to give you guys again. Chevron staying long stock still looks really good to me.

Thank you very much. Again, new buy, just to remind everybody. Who's win? That's me. I know we've talked about this a lot, and we're kind of like, when will this ever hit? There's news today that billionaire Tillman Fertitta is increasing his stake. I'm not the only one who sees value here. There is value here. Just give it a little more time. Well, who else does? You talk to other people? What? I'm just kidding. Stephanie Link. Palo Alto. New position for me. Okay. Thank you. I'll see you on the bell.

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