Closing Bell - Closing Bell Overtime: Bear Market Officially Over? 8/11/22

Episode Date: August 11, 2022

Is there a chance the bear market is now dead … or is the really off the mid-June lows just a giant head-fake? Anastasia Amoroso of iCapital weighs in. Plus, Goldman’s Tony Pasquariello breaks down what he is seeing in this recent rebound. Plus, Barbara Ann Bernard of Wincrest Capital gives some top picks for your portfolio.

Welcome to All The Time. I'm Mike Santoli. In for Scott Wapner. You just heard the bells, but we're just getting started. In moments, we'll get a fresh read on the health of the EV market when Rivian reports results. We'll bring you the breaking numbers and the instant stock reaction as soon as those numbers hit. Also ahead, we'll hear from Goldman's Tony Pasquarello. He heads up hedge fund coverage at the big bank. What he sees playing out of the market right now. But we begin with our talk of the tape. Is there a chance the bear market is now dead? Or is the rally off the mid-June lows just a giant head fake?

Let's ask Anastasia Amoroso, iCapital chief investment strategist. Anastasia, great to see you here. We're going to pose an impossible question to you, which is in real time very difficult to say. But at today's highs in the S&P, you kind of recaptured half of the total losses from the January to June decline. Obviously, the market is seizing on this peak inflation story in such a way that says, look, maybe the economy is strong enough to handle whatever the Fed has left to do in terms of tightening. How would you read it right now? Aside from a change in market tone, has the opportunity set gotten better, worse? How would you say? I think it has a change in market tone has the opportunity set gotten better worse? How would you say I think it has I think we had a pretty significant reset and I think the narrative has shifted

So first of all, I like the technicals of this market I think what's really clear is that everybody that needed to sell must have sold in the first six months of the year and now you Actually having some buyers stepping in. I mean we saw the headline this morning For example that even hedge funds are starting to be forced back into this market they're covering those shorts even if they're not adding longs you've got you know now we're the 50-day moving average we're over a hundred day moving average maybe we test 200 day moving average which means a lot of the technical flows the CTA flows can come into the market and then you've got corporate buyback so

there's just kind of a lot of buy momentum behind this and you don't want to invest purely on that. But to your point, I do think the narrative on inflation has shifted and the narrative on the Fed has shifted as well. I mean, if you're the Fed, you're looking at the job openings numbers that are slowing. You're looking at the commodity prices that are falling. You're looking at the food index that had a major pullback in the month of July, not in CPI, but the UN one. So I think there's a lot for the Fed to say maybe we are justified to take it a little bit slower in the months ahead. And that's good news for the market. We did see treasury yields inching back up today.

Oil prices bounced. Just as we're celebrating the July inflation data, wholesale and consumer, it seems like we're going to at least have to get comfortable with whatever these levels are in terms of yields and commodities. I guess the question is, 200-day moving average in the S&P is what, 2% to 3% higher from here? It's close. And we did have a little bit of a sprint this morning to the highs, and then we rolled. So I just wonder if it tells you anything about where those buyers might remain. Well, I do think that 4,300, I think it's within reach, and I think we may test that.

But I don't know that we'll sustainably break above that. So first of all, you run into some valuation math that might be a little bit challenging. We're at 17.5 times multiple, $240 on next 12-month earnings estimates. And are we really going to pay that much more for that? And are we really going to see earnings revisions move high? I'm not so sure. And then what I will say is momentum for now seems to be on the upside for stocks and less.

And until something derails it, but we've got the Fed minutes next week, and we've got Jackson Hole in the weeks following that, and then we have to worry about the September CPI print. So I wouldn't be surprised, even though my narrative is more constructive longer term, I wouldn't be surprised if we try to run it up to 4,300 and maybe we didn't quite make it there and we have a bit of a pullback. But it doesn't mean we're going back to the lowest percent. Well, that is perhaps the point, is that the change in tone and maybe the better risk-reward type trade-off the market might have

presented recently might just shift your posture from, hey, you want to just take every selling opportunity you get to when you do get pullbacks to add to risk levels. Where would you do that, do you think, within the market? Yeah, I mean, in retrospect, $3,700 seems like a great place to be adding. And I think what we've discovered over the last number of weeks is that we're likely in this range between $3,700. I think that's where the support lies, given that math, and $4,300. So anywhere below $4,000, the closer we get to $3,700, I think it's going to be a great buying opportunity if we work our way back there. You mentioned the Fed minutesutes and Jackson Hole, when the Fed's going to kind of gather and give some kind of state of the world

and talk about their framework. Is there a chance, and this has been a big talking point this week, that the market is kind of rallying itself into a moment when the Fed says, great, now we can do even more than we thought we had to before? Look, I know you can look at financial conditions and you look at the market and say, well, the Fed may not want this. But in my opinion, the Fed chair gave us a pretty strong reaction formula. He said that we're at neutral. So that's one reason to take it a little more cautiously. Also, the tightening that we've added to the economy, it's acting now, but it's also going

to act in the coming quarters. So there's a lot of tightening in the pipeline so now that the economy is a little bit on the break let's just see how this plays out. And then he also said that to the extent that inflation data surprises the

upside expect us to do more. It didn't surprise to the upside we've got CPI and PPI that finally had a downside surprise. So I think if you apply that reaction function to it, I don't necessarily think that this is going to be the Fed that goes 75 basis points or something more. But Mike, we're still, again, another CPI report away from it and a lot of time to go.

Another CPI report right before the next meeting. And, you know, what let's say Vice Chair Lael Brainard has said on the record is that a succession of monthly declines in maybe core PCE or whatever inflation gauge they want to look at, that seems to be the standard for easing up a little bit. So no matter what happens, we're still going to be month to month for a while. Yeah, that's right. But again, this is not to prevent the markets from maybe finding some more solid footing. And the fact that energy prices have fallen, right, we can't just discard that because energy is such an important input into all many other parts of the CPI basket. And food, for example, if you think about agriculture and the energy component that goes into transportation and fuel and fertilizer, the fact that energy prices are pulling back now, that could bode well for food production. Prices resetting lower as well.

So I think there's a bit of momentum to this. And of course, the Fed is going to push back on it because they don't want those financial conditions loosening too much. But again, I think the math for now scores a little bit better for investors. Absolutely. They are looking at things aside from financial conditions. Financial conditions are the tool, not really the actual job. Let's bring in CNBC contributor Jason Snipe of Odyssey Capital Advisors and David Ellison of Hennessy Funds into the conversation.

Jason, just pick it up right there in terms of your own approach right now as to whether this 15 percent jump we've gotten in U.S. equities either creates a selling or buying opportunity for you? Yeah, we're at an interesting inflection point, I think, Mike. You know, obviously, as you mentioned, talking with Anastasia, how we've traveled back from the mid-June lows at basically about half of what we lost since January. I think obviously the news, this CPI news, the PPI news is very encouraging information and data points for the market as a whole and looking towards the Fed and Jackson Hole and obviously the commentary that we'll see next week. I think obviously this could be a situation where the Fed is saying to themselves, hey, maybe we don't need to go as hard as previously anticipated or telegraphed.

And I think obviously that's why the market has responded. But I would caution, I think there's really some sticky parts of the inflationary narrative that we haven't talked about, which is, you know, shelter costs are still up 5.7 percent. Wages are up a little over 5 percent. You know, these are these are parts of the markets that that are that are challenging and a little over 5%. You know, these are parts of the markets that are challenging and a little bit harder to float downwards in the other direction. So that's what I'm really paying attention to. But hopefully this is a beginning of a trend, you know, going forward, because obviously we're going to need a series of decreasing inflationary prints for us to feel a little bit more comfortable about the market from here going forward. Sure. And Dave, I mean, you focus largely on financials really right at the center of a lot of these debates right now,

both on, you know, do we have macro risks still shadowing us in terms of a descent into a recession? And really also what the inverted treasury yield curves are also telling us. How do you come down on those questions and whether, you know, the I guess a likely economic soft landing has or a possible economic soft landing has become more likely? Well, generally, you know, from the market perspective, I think you've had a great July for the for the bulls. You've had you know, the earnings were decent. Oil's gone from 120 to 90. And unemployment is very low. So you've had a good run here. Now the question is what they want now. The last thing they want, the last president of the tree that they want is a Fed pivot. And that's going to take a little longer to come. So I think the market may sit here for a while. But when it comes to the financial sector, I think the big issue is not rates. Rates have gone up.

The market doesn't care. Yeah, housing's a little weaker, but it was too hot anyway. I don't think rates are the problem. I think prices of things are the problem. And the question now for me, from a financial investor, is that if we're in a transitioning from let's say a zerp or a zero rate environment to a rate environment that can be two three percent at the short end four five six at the long end then you've got a financial industry that has pricing power for the first time in 15 years and that will translate into a pretty good earnings run here for

the next couple of years. Do you mean four or five, six percent at the long end in terms of government yields? Or is that, you know, going to be what banks can reap on loans? Because it's pretty unclear from here to there whether, you know, the current equity valuation framework would tolerate, you know, those types of yields in the short term. Well, I think, again, you've you got the private five-and-a-half now let's have a six percent by the end of this and other of the uh... the summer and so you're fed funds are going to be three banks maybe you're gonna funded too so you're gonna get more

stance let's remember you know if you look at bank of america their yield on assets at the end of the quarter was about 225 2.25 at the end of the quarter and that's below what the three-month t-bill is now so they've got a lot of way to go to get that yield on assets up now granted the cost of funds are going to rise but that margin should expand significantly over the next year or so. Anastasia, I mean, financials are fascinating in that sense because you look at the building blocks of how they earn their money and you look at the fact that consumers and companies don't look over leveraged and you say things should be great. But you also don't get paid for owning credit sensitive stocks into a potential economic, you know, soft patch.

Well, that's true. But this has actually been one of the turnaround trades that we've liked for the potential soft landing. And, you know, starting in June, we were thinking about how do you position what if the probability of a soft landing rises? And first of all, the probability has risen because we now know that what Powell is trying to accomplish is below GDP, below potential GDP and the unemployment rate that doesn't rise. And so far, that seems to be holding. The reason why financials benefit in this environment, of course, you've got the net interest margin expansion that is playing out, especially as the hike rates further. Then credit quality is really not deteriorating. And to your point, if you look at the debt service of the U.S. consumer today, it is half of what it was in 2008. So much

better shape. And then the last thing I'll say, what's really interesting, too, is financials have the optionality on better capital market activity. We have not seen that. But just in the last couple of weeks, it seems like there's more deals, M&A deals that are coming to the market. And there's also a lot of private activity. There's a lot of private equity shops that want to take cheap public companies private. So all of that should benefit the financial sector as well. Corporate credit has picked up as well. We do have Rivian's numbers. They are out.

Phil LeBeau has them. Hey, Phil. Hey, Mike. For the second quarter, these numbers are a little bit better than what the street was expecting from Rivian. A loss of $1.62 a share, one penny better than expected. And then revenues coming in slightly better than expected at $364 million. The street expecting revenues of $337.5 million. In terms of production, they produced more than 4,400 vehicles in the second quarter, delivering 4,467.

We've known those numbers for a while. It ended Q2 with $15.4 billion in cash, producing 8,000 vehicles as of June 30th. That's important because they are reaffirming their guidance for full-year production of 25,000 vehicles. That's going to be a relief for investors. However, there is new guidance from the company for the full year. The company now expecting a greater loss, a $700 million greater loss. They now have an expectation of an annual EBITDA loss of $5.4 billion. They have net pre-orders as of the end of the second quarter of 93,000 vehicles. That's an increase from the previous guidance in May where it was just over 90,000 vehicles. They're looking to add a second shift at the end of the third quarter. And they also are saying that the supply chain, it continues to be a constraint

on the growth of production. We'll be hearing more from RJ Scaringe, the CEO, coming up in about 45 minutes. He's going to talk about that because I'm sure that's the primary question many analysts have. Just where are the problems within the supply chain? How fragile is it, so to speak? Finally, they are confident that they are on schedule to launch the R2. That's the lower priced, smaller SUV in Georgia starting in 2025. So again, better than expected numbers, not a lot better, but a little bit better than expected numbers for the second quarter from Rivian. However, they are lowering their guidance, expecting a larger full year annual loss. Mike, back to you. Phil, thanks. Yeah, the stock trying to work through the sort

of push and pull within those numbers, it looks like this is a stock that has doubled off the lows, but still well off those post IPO highs. Jason, just in general, is this the type of situation that's going to come back into favor? Maybe it already has in some respects come back into favor in terms of long term secular growth story. We're not getting earnings right up front. It's not what anybody wanted a few months ago. But is it the kind of longer term opportunity that makes any more sense today? Yeah, it's a good question, Mike. Obviously, this is a tough trade. I mean, the stock's down 60 percent year to date, 200 times sales. Obviously, it's no earnings, as you mentioned. But this story is all about production and supply chains. You know, how are they navigating through supply chains? 25,000 cars is the number. That's what they're trying to reach. So that's going to be very important. I mean, this is a very nascent business. It's very early stage. So, I mean, for me, you know, these are names that are kind of in that art complex where it's just really hard to look at them as opportunities right now, you know, especially with the Fed's very much a part of the game and very much engaged. So I would fade it here, maybe look at it in a couple of quarters and, you know, going into next year and see what it might look like,

the environment, you know, to see whether these types of names make sense. Yeah, and Anastasia, I mean, I guess the question is we have the new law coming through that's going to at least to some degree help sentiment in this group, but this company is getting a fair amount of credit already for how fast it can grow at a $30 plus billion dollar valuation. Yeah, I don't want to comment specifically on the valuation of this company broadly, but I will say that my outlook for high growth tech stocks or high growth stocks period is a little bit better because we have seen so much money come out of this space. We have seen such

a big reset in valuations. And when I think about electric vehicles specifically, this is a really big inflection point for electric vehicles. I mean, globally, EV sales this year, the first quarter, up 80% year over year. In the United States, they're up 60%, 62% year over year. And if you look at the 2022 numbers, they've accelerated a lot. 2023, expected to do the same. So if you look at a company like Rivian, they're making X number of units, but that's going to grow pretty significantly and pretty exponentially over the coming years. So consumers have more EV choices.

The battery costs are going down. The break-evens are getting closer to the conventional cars. So I think we are at that inflection point in EVs. And, you know, when do you buy this in 2021 when valuations are here and when everybody did a SPAC? I don't think so. I think this is the time that you actually look at the electric vehicle space here. And just to kind of pull it back out to the broader macro, David, if you look within financials, if you actually think that the economy holds together, what specific parts of the sector seem like they've kind of over-discounted weakness? I mean, is it in consumer credit, some of the pure plays there, or capital markets? Or do you just

like, you know, kind of a general exposure to everyday banking? Well, I think, you know, I've been buying and have a, you know, pretty large position now in just the traditional commercial banks. Those are the sort of the it's a wonderful life wannabes from the old days that they take deposits and make loans. They've got customers. And the issue now, too, is what's the cost of funds going to look like if rates stay here? And I think the deposit franchises, which have been really a loss, have been worth nothing for many years because Wall Street could fund cheaper than the banks could if you included the branch costs. Now that's not the case anymore. And if they're able to hold those deposits at a reasonable rate relative to their yield on assets,

that's going to make them a lot more valuable in terms of their ability to generate earnings. And then it drives dividends and buybacks and the M&A activity. So, you know, I think it's important that, you know, we look at banks not just as an asset generator and we're about credit risk. We've got to think about, well, the liabilities are the real assets here. And those that can hold on to their cheap liabilities are going to make a lot more money than the others that can't. And Jason, before we wrap up, is there anything that these kind of rapid moves in the market has surfaced in terms of a chance to either lighten up or rotate into? I mean, industrials look like they're behaving better. It seems like there's some appetite for more cyclical exposure being evident in this market. Yeah, for me, Mike, I mean, really, it's been about energy.

We really like energy here and we've shifted towards overweight. I think the supply chain, supply demand, I should say, imbalance is really the theme that makes sense to us here. The Strategic Petroleum Reserve will be off the dock in October. I think that will play a role. So for us, energy seems really attractive and a place to be. All right. And has certainly had a pretty stiff pullback as well. Anastasia, Jason and David, thanks very much. Talk to you all again soon. Let's get to our Twitter question of the day. What is the best EV play right now? Tesla, Rivian, Ford or Nikola head to at CNBC Overtime to vote. We will share the results later in the show. Up next, Goldman's Tony Pasquarello joins us. He heads up hedge fund coverage at the bank. What he is seeing in this recent rebound and later three top value plays.

One money manager finding big upside in streaming sports and savings accounts. We'll bring you those names when Overtime Returns. We are back in overtime. Take a look at the market rally off the mid-June lows. The NASDAQ up more than 15%. And that's got many asking if the bear market already is really over. Or if this recent rebound is just a bounce on borrowed time. Let's bring in Tony Pasquarelli. He's head of hedge fund coverage at Goldman Sachs.

Tony, great to see you. Thanks, Mike. Good to be here. You know, your piece recently, you were kind of assessing the inputs that what's gotten us to this point. And you were kind of of the mind of don't chase it, but don't fight it. Does that still make sense after we've kind of regained almost half the S&P losses? I think so. I mean, I think the basic challenge for the market has been well-defined for a while now, which is the Fed has been tightening into a slowdown. I'm not breaking news.

That's still the case. Inflation's still too high. The Fed still needs to drain liquidity and tighten financial conditions. I think we've learned a lot, though, in the past six weeks or so. We've learned that the economy continues to be very durable and generate an enormous amount of nominal GDP growth led by the service sector and, of course, the labor market. We've learned that corporate America is in very good shape and making a claim on all that nominal GDP growth. And as of yesterday, I think we can breathe a little bit easier as it relates to the trajectory of inflation. Now, that said, the Fed is still

tightening to slow down. They still have their work cut out for themselves. We're still a long way from 2 percent core inflation. And so I don't think that dynamic completely changes. But in general, the narrative is a bit balanced today versus where it was coming out of the second quarter. And what does the speed trajectory character of the rebound tell you about what the setup was and what we can expect from here in terms of just the mechanics of it and how, I guess, washed out the market got? What's very clear is it's hard to identify who the sellers would be now. It's pretty clear who the buyers will be.

And so in the very short term, there's two clear places where we see sponsorship. One is corporate buybacks. So as we know, we've kind of cleared the blackout window as companies reported the second quarter. We expect $1 trillion of buybacks this year. So we are in the open window for that. And if you think about a Microsoft or a Google or an Apple, you know, these plans are $90 billion, $70 billion, $60 billion. And so there's plenty of ammo there. The other place we look is what we call the non-discretionary trading community. Think CTAs, vol control products, risk parity as a function of the rally, as a function of the turn down in realized volatility, and then some cross-asset correlation switches. That community, kind of non-discretionary funds are buying.

It's hard to find the incremental seller right now. So, yeah, those systematic strategies, they'll kind of follow along with the trend. And also they just decide how much exposure to have based on how volatile the market has been. And it's obviously calmed down quite a bit. I guess, you know, if you're out there looking for traps, it's, well, we've thought before that we were sort of in tune with where the Fed was going to go. You know, have we simply rebuilt the Fed's capacity to be vigilant on inflation beyond what we think right now, even though we think in the six month window, the market looks out. It looks like the Fed is going to be net friendlier than we expected a few months ago. Again, I think they can breathe a little bit easier because for the first time in what feels like a long time, inflation doesn't feel like

it's out of control. I think at 9.1%, that question was an open one. Like I said before, though, they've met one of their two objectives. They're at full employment, 3.5% unemployment, if anything's probably through full unemployment. They're still missing the mark on core inflation by over 2x. It's a long road from 4.8 to 2.0. And as a client who's been in the market for a long time put it to me, he said, hey, the hard yards in the war against inflation aren't necessarily from 5% to 3%. It's from 3% to 2%. Because that's where we're going to get into the how much has the world changed around

labor, deglobalization, et cetera. And so I think the Fed, again, they still have work to do. In our view, they're going to go 50 basis points next month, 25 November, 25 December, and that'll be three and a quarter come year end. I'm inclined to think we should still be open minded that they may have a little bit more work to do ultimately. Yeah, I mean, we can define what a Fed pivot would be, but that might actually qualify relative to where we were thinking about, you know, in the stagflation moment of a few months ago that, in fact, it was going to be unending, well beyond 4 percent. So you think that's priced in at this point? You mentioned it's hard to get from five to three. We're not at five yet, really, in terms of inflation.

Where would equities be at five? I guess that's the question of whether we've already priced in the good scenario. One interesting way to look at this is to think about it through the prism of financial conditions, which is how we think the Fed transmits their policy. The interesting thing is financial conditions today, our index, is easier, as we speak, than it was in early June. They blasted away 75 basis points in June, 75 in July, and financial conditions, again, continuing to ease. And so they clearly probably feel better about the outlook for growth as we do. 3.3 million new jobs this year. Seven months in, 3.3 million new jobs. As I mentioned earlier, the service side of the economy has held up

remarkably well. And so they can probably feel a little bit more confident in the doing, but like I said, it's going to be a show me story. Does inflation come down far enough for them to back off? And like I said, I think that's still an open question. Yeah, that's where the suspense is. Now, also in the category of mechanics, I mean, your Goldman Sachs most shorted stocks basket has just screamed higher.

Now today finally calmed down a little bit. We'll see if that lasts. Does that just mean that everyone's kind of off sides? And does that tell you anything about where people might be forced into next? Or is that an area of the market that might revive in a lasting way? What I find super interesting right now is how clean the discretionary hedge fund community is. And the quick sequence is obviously a very tough start to the brutal Q2. When we entered last week or through the course of last week, we saw the biggest degrossing, the biggest de-risking we've seen in 19 months. It was the second biggest on a data set going back six years. And so essentially, I think the trading community

has said, let's clean up the books on both the long side and the short side. Then, of course, we have the rally yesterday. We actually saw the biggest buying in three months yesterday. So a little bit of a chase. But I still think that crowd, the discretionary crowd, is relatively clean of risk. Where you have shorts, they're probably going the wrong way. The basket you referenced is up 30 percent in the past month. We all know what kind of balances we've seen in the likes of Coin and RBLX, right? So there's been some painful moves there. I think in general, the pain trade persists. The big question for me is, as the market grinds higher and we're dead in the middle of the range, as you pointed out, do people start to worry about the right tail risk? That if the market continues to grind higher and I'm under risk, what do I need to do to attend to

that? The tell in our franchise would be people coming in to buy upside call options, say on S&P or NASDAQ or say your favorite mega cap tech name. We haven't seen that in full force yet. That would be a pretty good tell that people are starting to reach. Yeah. Upside risk is also risk if you're in the business. We'll see if that materializes. Tony, great to talk to you. Thank you. Thanks, Mike. All right. Time now for a CNBC News update with Shepard Smith. Hello, Shep. Hi, Mike. Thanks from the news on CNBC. Here's what's happening. The Department of Justice is asking a federal judge in Florida to unseal the search warrant executed two days ago on former President Trump's home at his Palm Beach club and resort. In addition, a redacted inventory list. In other words, an at least partial accounting of the items taken. The Attorney General Merrick Garland made the announcement last hour and noted he personally

authorized the warrant. That five-page motion notes that the release is requested in the absence of objection from the former president. Just minutes ago, the Florida court asked the DOJ to learn the former president's position on the releasing of the information and get back to the judge in Florida by tomorrow afternoon. And still developing in Cincinnati, a police standoff with an armed suspect ongoing for hours now after that suspect allegedly tried to breach the FBI field office there this morning. Police say after he couldn't get into the visitor's center, the man took off in a car, a chase ensued, and during it, he exchanged gunfire with officers.

Cops say none of their officers were injured. The man is contained at minimum and is said to be no threat to the public by the Ohio State Highway Patrol. Updates on both of these developing stories on the news right after Jim C kramer seven eastern cnbc mike back to you chef thank you very much coming up a contrarian streaming play disney seeing a nice pop on earnings but our next guest is betting on a different streaming stock we'll bring you that name and don't forget you can catch us on the go by following the closing bell podcast on your favorite podcast app. Overtime, we'll be right back.

We are back in overtime. Disney leading the Dow higher today, posting its best day of the year after the company's earnings report. But our next guest is finding real value in another big name in the media space that is down 40 percent this year. Jonathan Boyer is principal at the Boyer Value Group. He joins us now on set here. John, good to see you. Yeah, thanks for having me. The stock we're referring to here is Warner Brothers Discovery. Clearly, it's kind of hit the skids not that long ago with a little bit of a revamped outlook. What do you like there? There's a lot to like about the company. It's hit all the skids not that long ago with a little bit of a revamped outlook. What do you like there? There's a lot to like about the company.

It's hit all the classic spinoff dynamics. First, it was there was a merger or spinoff with AT&T. AT&T shareholders ended up owning 73 percent of the company. And there was a lot of for selling by AT&T shareholders who had absolutely no desire to hold a levered entertainment company. And since then, you had the bad Netflix results, you had a bad economy. About everything that could go wrong went wrong. They just released their results, and they kind of kitchen-synced it and put everything bad possible. But it's cheap.

It has fantastic properties. There's great growth there, and they've done a fantastic job previously with Scripps in doing these synergies. So there's a lot to like there. Discovery had merged with Scripps, right, prior to this deal. You say it's cheap. I mean, do they have scale in streaming? Can they get it? Is it going to be a standalone, attractively profitable business? Yeah, I think it will be, But they're not just going for streaming. And that's what we like about it. They have and they've said we're not just a streaming company.

We're going to do theatrical, you know, regular linear TV. There's so much there that they're not going to, you know, put all this content on streaming for the benefit of just having more subscribers. They're being very disciplined, still feeding off the, yeah, the old cable ecosystem to a fair degree. Did want to switch over to sort of an entertainment play as well. Madison Square Garden, it's one you've liked for a long time, kind of, I guess, a some of the parts asset play, but what's the current case? The current case is right now the enterprise value is about $4.7 billion. The Knicks were just valued at about $6 billion. So essentially, you're getting paid to own the Rangers.

The Knicks are owned by the company, right? Yes. I'm sorry. The Knicks are owned by, as well, are the Rangers. So it's a sum of the parts play. Their sister company, Madison Square Garden Entertainment, is currently about to finish a project in Las Vegas called The Sphere. And we think it's likely that after that is done, James Dolan, who controls the company, will sell the teams. And what's really interesting is private equity has gotten involved in a big way. And it wouldn't surprise us to put a marker on one or both of the teams if private equity decides to take a stake. It's worth noting that Silver Lake owns about 9% of the company.

The Egyptian billionaire owns about 5% of the company. So there's a lot of things that could happen. Yeah, it's obviously hidden value, but there has to be a reason that the market won't pay for it now. Is there a tax liability? Is it just like you never know when this might happen? I think it's you never know what's going to happen. And with the Dolans, you have that Dolan discount. But we've been investing alongside them for a long time, and it's been quite profitable.

You just have to be patient. And most investors, as you know, want instant gratification. This is not an instant gratification stock, but a stock where you could conceivably double your money over the next couple of years. Plus, they're a huge beneficiary of legalized sports gambling. It's now their largest sponsorship category. So there's a lot to like. And I think, you know, whether they sell part or all the team. And the one thing to also note is the best thing that Dolan could have done over the past decade has not been to sell the team.

Essentially, it's just gone up and up and up in value. And it's been a great move for shareholders. Yeah, despite the fact that many people in New York have wanted him to do that for a very long time. Just quickly on the market in general, do you see it as being a target rich environment for a value investor or not so much? It's a great time if you can take a two to three year view. Could stocks go lower? Absolutely. But there are a ton of stocks that are selling less than 10 times earning that are very good businesses. I think what investors really need to be cautious about is to beware of false bargains. There are a lot of stocks that have gone down 40, 50, 60 percent

from their highs that are never coming back. And that's what an investor really needs to do. They need to do their homework and figure out which stocks they want to buy and which stocks have great prospects going forward. All right, John, thanks a lot for the update. Appreciate it. Great. Thanks for having me. All right. Up next, we're counting down to Rivian's conference call.

That stock on the move after its quarterly report. You see it threw up about a half a percent after early losses. We'll have instant analysis after this break. Plus, check out the OT move in Illumina. The stock plunging on results. We'll bring you the details when Overtime returns. We are back in Overtime. Rivian shares bouncing off their OT lows following results.

The company's call kicks off in less than 20 minutes. Let's bring in Gene Munster, managing partner at Loop Ventures. Gene, good to catch up with you on Rivian, which is a fascinating story. I mean, clearly markets saying this company has a viable future. The deliveries are coming through in decent amount. The issue is, you know, it's again a 30 plus billion dollar market cap. When Tesla had that market cap several years ago, it was already producing, I think, four times as many cars. So where is the market opportunity relative to the business opportunity that Rivian sees right now? Well, you still have to look two, three years out, Mike. And one difference between

Rivian and Tesla, at the time Tesla had $700 million in cash and was potentially going to lose all their cash. In this case, Rubin has $15 billion. The market cap is just over $30 billion. So we're 44% in cash at this point. So I think the dynamic is a little bit different. And the way I would kind of scope out the long term is, does this company have the muscle for escape velocity? And the answer is, these results would say we're not quite there yet. The most powerful part of these results is that they got $15 billion in cash. And that's an important piece in a relatively small workforce, which is more scalable relative to other car manufacturers. I think that's a big point. The piece that, two things that jumped out to me on the long-term, Mike, was first, they reiterated that $25,000 delivery expectation. But the second on the negative was the pre-order number, 98,000

pre-orders. It was 90,000 on May 9th. And that is a modest step up. Just to put some context around this is that Tesla Cybertruck, it's over a million pre-orders. I think it could be even close to 1.5 million. I think Ford, they might've stopped the lightning at like two hundred and fifty thousand. But ninety eight going from 90 to 98 just isn't enough meat there. And to bring it all together, I still believe that Rivian is going to find their way forward. But these results show that the company is still trying to get its sea legs. Yeah. So does that imply that only Tesla really has escape velocity in this industry right now? Because Rivian seems relatively far along. You did mention Ford, but that's obviously a different mix.

Yeah, I think Tesla is the clear potential winner here. You know, they have the production. They have the scale with Austin, with the gigafactories. Ultimately, traditional auto is in a tough spot. And I think we're gonna see that in the weeks and years to come, is it's just very difficult to build electric cars. This narrative that just because car companies

have built cars for a long time, therefore they're gonna be successful, I think misses a point generally. And so I'm very optimistic related to Tesla. I think there's a $2,500 stock long-term, a lot of controversy around that, but I think that they ultimately are best positioned for that escape velocity. And just to put some context into escape velocity, I talked about those pre-order numbers. We also track their lead

times on their products for their cars, and they're pushing nine to 12 months. Rivian is four to six months. So you have a much longer lead time. That's a sign that consumers want their products. Another piece that Tesla has is that their average Model Y and Model 3 is about $58,000. The average price of a Rivian is $80,000 and similar for other electric car companies. And to really hit that, you have to have production and you have to have a price point that consumers want. And so I think that it ultimately bodes well for Tesla over the long term. All right. Yeah. Scale is definitely elusive in this time of supply chain issues and all the rest of it, Gene. I appreciate your perspective. Thanks a lot. Thank you. All right. Up next, we're tracking the biggest stock movers in overtime. Steve Kovach, all over the action.

Steve, what's on deck? Hey there, Mike. Yeah, we got some more science. Demand is holding up for the high end consumer. Plus, we'll illuminate you on what's causing one health tech stock to fall after hours. And investors are hungry for another stock after the company beat expectations and Q2 earnings. We'll have all that for you when Closing Bell Overtime returns. We're tracking the biggest movers in overtime. Steve Kovach has all of them. Hey, Steve. Yeah, Mike, Apple shares are slightly positive here after a Bloomberg report saying the company will match the 2021 production levels for its next iPhone model, which is expected to launch as soon as next month. That report comes a day after we heard from Apple's assembler in China, Foxconn,

say demand for high-end smartphones remains strong, but demand for cheaper devices is slipping. And remember, CEO Tim Cook said two weeks ago on the earnings call, Apple will continue to grow despite a glut of macroeconomic headwinds. And meanwhile, shares of Illumina are down about 20 percent here after reporting Q2 earnings. The health tech company reporting a miss on the top and bottom lines with a dollar one point one six billion dollars in revenue and EPS of 57 cents versus the 65 cents expected for the quarter. Company also giving disappointing four year guidance, predicting four percent to 5% revenue growth versus the 15% expected. And finally, Toast shares soaring here about 7% after beating revenue expectations and forecasting a strong third quarter. Toast reporting revenue of $675 million versus $651 million expected.

Company also smashing expectations for third quarter revenue expectations. Mike, back to you. All right. Another pretty recent IPO that was beaten up, getting a little bit of a break there, Steve. Thank you very much. You got it. Up next, buying on discount. One money manager says the worst is over for this retail stock.

It's down 20% this year. We'll bring you the name in our two-minute drill. And coming up at the top of the hour, RBC's Halima Croft joins the Fast Money crew to break down what's next for oil. Don't go anywhere. Overtime is back after this. Last call to weigh in on our Twitter question of the day. We asked what's the best EV play right now? Rivian, Tesla, Nikola, or Ford? Head to at CNBC Overtime. To vote, we will share the results later in the show. Plus, our two-minute drill. Don't at CNBC Overtime to vote. We will share the results later in the show. Plus our two minute drill. Don't go anywhere. Overtime will be right back. Welcome back to Overtime. Let's get the results of our Twitter question. We asked what is the

best EV play right now? The winner was Tesla with 58 percent of the vote. I guess the incumbent in EVs is still the favorite. It's time now for our two minute drill. Joining us now, Windcrest Capital CEO Barbara Ann Bernard. Barbara, good to good to catch up with you. Let's talk, if you could, about, you know, the broad market setup at the moment. Pretty interesting crossroads. We were talking all hour about the S&P gaining just about half of its overall losses, seemed to act like we're past peak inflation and maybe past peak Fed hawkishness. Would you buy into that idea? Unfortunately, I don't think this rally is sustainable. And if you're chasing this rally at this point, I think you're fighting the Fed. The market got really excited when

inflation looked like it had peaked. But we've had two members of the Fed, Evans and Khashoggi, come out and say it hasn't changed their thoughts on the appropriate plan forward. So rates are still going up. And if you are betting that we are going to have a soft landing, unfortunately, you're betting against history. Eighty five percent of the time, tightening cycles have led to recession. And 100 percent of the time when you've had an inverted yield curve like we do today, we've had a recession. So 100 percent of the time when you've had an inverted yield curve like we do today, we've had a recession. So the thing that I think is important to put into perspective is even though inflation may have peaked, we must remember that inflation peaked in 1980, but stocks didn't bottom until 1982. So unfortunately, I just think it's a little

premature to be giddy. Yeah, market does sometimes get impatient to call the turns. So we'll definitely be mindful of that. Now, let's talk about individual names. One that you do like on the long side, Capri Holdings. What's the story there? Yeah, so Mike, at Windcrest, we look for longs that can double and shorts that can have. So we think Capri is a really interesting story. What is it?

It is a conglomerate of globally renowned fashion brands. And it includes Michael Kors, which is a middle market brand for all sakes and purposes, and Jimmy Choo and Versace. Those trade at different multiples. And so the market always wants to put the middle market multiple on this company when it deserves a much higher multiple in our opinion. So the company just reported sales grew 9% year on year. They reiterated their guidance of $6.85 for the year in earnings. And that puts this company on a 7.3 times forward PE. That's incredibly cheap for a company of this quality that's growing with

a strong balance sheet. And so the company is executing on its strategy to reduce its footprint in the U.S. and expand with the Versace brand in Asia where it's underpenetrated. And that's working. So how cheap is it? If you just put the right multiple on the right sales for this company, you're looking at 90% upside. So the luxury comps like LVMH, Prada, Richemont, Hermes, Montclair, they trade for an average of 5.7 times sales. If we give that to Jimmy Choo and Versace, I think that's totally fair. And then you look at the Coors business and if you value it the way Coach is valued at

an EV of 1.6, you're getting a $13 billion equity value and the company's at $7 billion today. So you're getting Coors for free. All right. Coors for free. Coors for free. Like it. Barbara, I appreciate it. Barbara and Bernard, we are out of time. That does it for overtime today. Fast Money begins right now.