Closing Bell - Closing Bell Overtime: Can stocks get back to new highs? 3/23/22

Episode Date: March 23, 2022

Stocks close at session lows. Josh Brown from Ritholtz Wealth Management explains why rallies are “guilty until proven innocent.” Meanwhile, Fundstrat’s Tom Lee says stocks can still go higher. And, Michael Santoli’s last word - can Apple hold its “safety premium” among big tech?

Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We, of course, right here are just getting started. In just a moment, I'll be joined at Post 9 by top strategist Tom Lee. He makes the case for why stocks can still go higher. And that brings us to our talk of the tape today. Is the unthinkable possible? Can stocks actually get back to new highs? Don't look now, but even with today's pullback, it's not like we're all that far away. A few big bursts, a bit of better news. You never know. Let's ask halftime investment committee member and the CEO of Ritholtz Wealth, Josh Brown, is with us. It's good to see you here in overtime. That really is

the question. I mean, we had an ugly close. Are we already on thin ice for a rally that started to feel pretty good? I mean, I think so. I wouldn't close my mind off completely to new highs at some point this year. I think it's going to be really tough this spring. The headwinds seem to be multiplying, not dissipating. That being said, we are going into today, we really had five of six days up more than 1% each for the S&P 500, which is extremely rare.

That is like if you're going to talk about a textbook snapback rally, that's pretty much as good as you're ever going to see in terms of being orderly, having a lot of participation, being relentless. That's what it was. Today reverses that. It's too soon to say permanently. However, I think it's really important that we understand that that's happening in the context of oil prices pulling back, which I think is what we used to say stocks wanted. So there's a lot of mixed signals out there. I want to revisit the home builders. I think this is the number one signal, stock market based signal that there is right now.

And I heard Sarah's last guest, Mr. Kim, respectfully. I disagree. I think the stock market is screaming and not taking the data points that he was sharing as being the important part of the story. You look at a ratio chart. Why do you think the homebuilders are so important? And I should note, as you bring that up, Josh, the XHB is pacing for its 11th negative week in the past 12. It's only had one positive week this year. We know that a lot of the stocks have been under pressure.

And by the way, we're waiting for KBH, that's KB Homes, with their earnings, which we'll bring to you. And maybe that tells the story of what Josh is saying now. But go ahead, Josh. Why so important? Very succinctly. Whether you want to use the XHB, which is very broad and includes things like paint companies and home renovation, or you want to straight up look at ITB, which is actually home builders themselves. You look at those stocks on an absolute basis, they look terrible.

You look at them on a relative basis to the S&P, they look even worse. You do not want to see home builders fading relative to the S&P and underperforming in both good markets and bad, if in fact you think that this recovery has a lot more to it. So I think that's a very troubling signal. Historically, you don't want to see home builders at 52 week lows if you're still thinking that this recovery has a lot more to it. So I think that's a very troubling signal historically. You don't want to see home builders at 52 week lows if you're still thinking that we're relatively early in the economic expansion. That's very, very late cycle. Do you think that these have been real buyers, so to speak, in this market leading it back or is this all or the majority just short covering? The short covering the people that the people that i know you're gonna have adam parker on uh at some point like the people i

talked to in strategist land would tell you almost everything you see intraday is related to positioning i think you had a lot of people in late february take risk off or actively put on hedges because of the the the radical different sets of potential outcomes anytime there's a conflict. And a lot of those people have egg on their face right now. And you see them start to, all right, what could I chase here that doesn't look like a chase? And I think that benefited the FANG stocks, et cetera. But if positioning is that important, then understand something that cuts both ways. And if March ends up another down month, nobody's going to want to be seen as somebody who chased this six day rally. So it cuts both ways. It's treacherous, very difficult for a

regular investor from one day to the next to play that game. I'm bearish. I'm bullish. I'm bearish. I don't recommend it. This is not for you. This is algorithms doing battle with other algorithms. Sit back. Don't focus on day-to-day activity. So you made the point at the outset here that you wouldn't be surprised, given everything you said, if some point this year we did make it back to new highs. What's it going to take to get there? You can't, right, you can't say never,

because the truth is, earnings are going to be good this year. They won't be as powerful as they were off the lows. They'll be good. And by the way, you look at the history of bull markets. My friend Ryan Dietrich at LPL likes to take a look at this. We've had 11 in the post-World War II period. And on average, the third year of the bull market, which we're just starting, right? By the way, today is the two-year anniversary of the bottom from COVID, March 23rd, right? So it was the most powerful, fastest bull market ever, up 114% off the low at its peak. 18 months was all it took for the S&P to double. It's extraordinary. But that's two years ago that started. We start

year three today. What does history tell us about year three of a bull market? It's not great. It's an average return of about 5%. That's not the end of the world either. So if this is the year that we have to digest a double in the S&P for most investors who have been around, that's okay. I don't think you could rule out new highs later this year. If I have to bet, I think we revisit those lows from late February and quite frankly, very good chance that we take them out. And I think that that's a reasonable point of view to take purely on technicals. It matches with what you've been saying, whether it's here or in halftime. Your big advice to people was take advantage of the pop in stocks to get out of positions that you've

been in. And I'm thinking of things like the ARK stocks, which, yes, have rallied a long way back. I think your argument would be, yes, nice rally. You would use it to your advantage because those stocks are never getting all the way back to where you may have gotten it in the first place. Right. Think about what it would take. Keep in mind, how did we get the massive rally in the market? The Fed had to print $5 trillion in addition to dropping rates to zero, in addition to flooding everybody's bank account with capital, in addition to there being no sports to bet on and nothing

really to do other than trade stocks. Show me how we get back to that environment and I'll tell you, okay, you can go back to buying the no earnings club. No worries. How do we get back there? In fact, one of the worst places to be, I don't talk about ARK anymore. The IPO index, the ETF is IPO. Pretty easy to remember. Remember, look at that as a as an indicator for risk appetite. Tell me the story that makes people all of a sudden say, oh, you know what? I liked what I was doing two years ago, betting on 50 billion dollar companies that weren't going to earn money for nine years. That made sense. Let me go back to doing that. It's not going to happen. So if you can't make up the story for why that will happen again, then yes, Scott, use big rallies in the market, whether it's short squeezes

in these stocks. I don't know what's going on. But ask yourself, am I being unreasonable waiting to get back to even? The market doesn't care where you bought. Yes, you're being unreasonable, waiting to get back to even. The market doesn't care where you bought. Yes, you're being unreasonable. Fix your life. We'll make that the last word for Josh Brown. We'll see you on the half. Good having you here. That's Josh Brown joining us.

Do you agree or disagree with him? Let's bring in our panel. Requisite Capital's Bryn Talkington, who's also a member of the Halftime Investment Committee. Trivariate's Adam Parker joining as well, as Josh said he would. Let's discuss this. Adam, he said, wouldn't be surprised to revisit the lows, perhaps even breach them. Are you looking for the same thing? Yeah, I'm not sure about that,

but I definitely agree with Josh on the whole profitless club. Some of these businesses probably won't revisit where they were. All our work at Trivariate shows after a growth stock sell-off, you have to buy margin expansion and positive free cash flow. So these things that have popped back up, I agree with them. I think you should sell them. The part of the market that I always want to buy the dip in here is going to be energy and metals. And as you know, for the last year, Scott, we've been massively bullish on those two parts of the market. I continue to think that demand growth will exceed supply growth for the next 12, 24 months. And those stocks can still go a lot higher. So I'm probably buying dips on those,

but I'm selling the tops on the profitless companies. I agree with Josh. Let me ask you where you started, though. I'm not sure about that. You said is that like you literally don't know or you disagree with what he's saying? I literally don't know. I kind of wrote a few weeks ago, I thought we were kind of 80% of the way through the correction. So maybe we could get back to lows. But I tend to agree with the overall summary that we're going to have earnings growth this year. And I think we're probably going to have earnings growth in 23 versus 22. And if that's the case, I think assuming we have mid single digit S&P return this year is reasonable. So we could get back in the second

half of the year to a plus market. That's actually my base case. But it will take the Fed sort of threading the needle. It will take a U.S. consumer remaining fairly robust, and it will take corporate earnings growing. And I think that's still the base case. So whether or not we test lows on technicals or not, which I think was the main reason Josh gave, I'm just not a strong technicals guy. If I look out six, 12 months and earnings grow, the market will recover. Is Bryn the mountain simply too high to climb? All of those things that Adam says have to fall into place. Are they just too many? And we keep getting extra ones by the day. And so if you look at the U.S., first of all, you know, we're 70 percent consumer driven. And so if you look at the U.S., first of all, you know, we're 70 percent consumer driven. And so if you look at the trifecta of headwinds for the U.S. consumer, you have high housing and rental prices.

You have high energy and you have high food and high food prices going higher. And so I think as a consumption based economy, as the year goes on and those three things continue to be high, I think the consumer will pull back. I think GDP will come down. I think that we would be very happy to end the year flat, meaning where we started the year and where we ended the year. And so, yeah, I think this mountain is high. I mean, you can pick seven different reasons. And I do think technically, just going back to that, you know, we didn't see that 90 percent down day washout, which historically has been a good a good predictor of when you've actually seen a bottom. So I wouldn't be surprised. But there are definitely pockets of places to make money in, Scott. Hey, I mean, Kramer makes the argument, Bryn, that when historically you have this kind of retracement, 50 percent,

the signal has been all clear. Who knows if it is now because we have existential threats to worry about. We have geopolitical concerns that are extremely serious. But what do you make of that? Sure. I mean, I'm sure you've looked at that data and that data could be sound. I think, though, as an investor, I'm an asset allocator. I have to think, where can I make money for our clients today? And I think that, you know, I've been talking about energy for two years now. You know, by the dips on energy, the cash flows of those companies are going to continue to be so strong, even at $70 to $80 oil. And they're so under levered. You know, doing covered calls.

If you have positions that you like in tech stocks that are down and you're not going to get a lot of capital appreciation, sell calls on those. Right? We like something like a uranium where appreciation, sell calls on those, right? We like something like a uranium where you can sell calls and we are bullish that long term. So I think as an investor, if you're just sitting there just waiting for capital appreciation to happen all the time, I think this year can be a disappointing year for you. Yeah. Adam, you know, you've made the case that you don't think the Fed's going to be as hawkish as people think. I got Bullard on the tape just before I started this conversation with you saying, and it's not a surprise, but nonetheless, he continues to say it. We got to go faster. Powell seemed to lay the groundwork for 50 at

maybe more than one meeting. And by the way, with the rally back, doesn't that embolden the Fed to say, you know what, our message is getting across. The market gets it and the market can absorb it because the economy is as good as Adam Parker says it is. So we can do it. It's possible. You know, I think if I agree with Brent, the economy will probably slow later in the year. You'll have some areas where inflation will slow. You've seen it with used cars. You'll see it elsewhere. So the question will be, do they continue to want to do that and raise rates as the economy's slowing? I still think it'll be less than seven. But I think more importantly, what's in the price? You know, a part of the kind of profitless market I think

is the most attractive, Scott, is biotech. And if you want to be speculative, why don't you buy that innovation at all-time lows on price to sales with a pipeline that still looks the same and cash flows that don't really appear? So I still think I agree with Bryn. You can buy stuff here independent of what the Fed does, and that's really what we're more focused on at Trivariant. So in the go-go growth stuff, I'd buy some biotech in energy materials. You're buying every dip because demand growth is going to exceed supply growth. And in other parts of the market, it's got to be margin expansion pricing power. Don't buy companies where the margin expectations are too high. Bryn, quickly and lastly to you, for somebody who owns some

high growth stocks through the ARK funds, the innovation fund specifically, what do you make of this comeback in tech? Is it sustainable or not? I think it's going to be a journey. I don't think it's going to be a race. It's going to be a marathon. There's been a lot of damage done. But I do think long term, there's some wonderful names, Tesla, Coinbase, Square. They've really come back nicely. And I think that's a good sign to see those companies come back so strong when you do have those rallies. But once Parker, I'll talk to you both again soon. We are getting those earnings now from KB Home and Not Pretty. We're talking about a miss across the board from an earnings standpoint, top and bottom line. Miss a stock that has already been under pressure, a sector that has already certainly taken some pain. And there is the stock now in overtime down about two and a third percent. Josh Brown was just talking about the housing space as a real worry point.

You did have some housing data today that, frankly, was not great. It was already weighing on the builders. Sales had missed. You know about the fact that interest rates are up. Mortgage rates, by the way, the 30-year fix is up 44% year to date. All of that await on home builders like KB Home, and it's showing it, you on the screen here, in the OT. That stock is decelerating by about 3%, and we'll keep our eye on it. Let's get into instant reaction now to the quarter. Joining us on the news line is

Pete Najarian. He's the co-founder of MarketRebellion.com. You're not specifically in this name, Pete, but you are in others, and you do have thoughts on housing what do you see i do and i think they're all just enough different that you can actually look at it that way scott we're talking about one of the smaller home builders in kbh you got a three billion dollar market cap they are levered you look at something like a dhi you're looking at a company that's about 30 billion and not levered matter of fact great free cash flow i think a lot of this has to do with the velocity of the move that we have seen in rates, obviously. I think that's a big part of this. It's not the entire story, but that's definitely part of it.

There's been some squeeze, obviously, with inventory. Supply chain is going to be starting to loosen up a little bit, it seems, and that's absolutely part of the goal. But I think that this is going to be a struggle for a while, Scott. As we look at rates, obviously, you start to see people maybe step back a little, and I think that's what we're seeing now. As a matter of fact, in the ITB, I heard Josh bring up that ETF. That's the construction ETF that literally does cover the homebuilders,

and DHI being about 14% of that. But they were buying some May 60 puts in there today, Scott. So it gives you a little bit of a sense that there was a little bit of weakness potentially expected in this call. I will say that if we did have some option buying in multiple different names as we got closer to the end of the day, they're going to be wrong because KBH really did absolutely miss in a big way, and I think that's going to reflect very poorly on the smaller names.

I don't know if the bigger names are going to see the same weakness that we're seeing in KBH right now. KBH down 4.5% as we have this conversation. Just to button that up, the ITB, which you're specifically referencing, is down nine weeks out of the last ten. Talk about an ugly picture and a troubling foundation, if you will. Pete, before I let you go, I understand you did make a late day move in a big name stock, AAPL. What'd you do? Yeah, this is one of those names that we've been talking about yesterday. It was a final trade for me because we had a lot of activity in there, Scott. They were buying upside today. They were buying even more upside later into the day. As a matter of fact, 28,000 of the April 1st 175 strike calls

were being bought today. Stock was a little higher because very, very000 of the April 1st 175 strike calls were being bought today. Stock was a little higher because very end of the day, the stock did take a bit of a dip off that 171.5 sort of area. But it just continues to make me feel more and more comfortable with the positions that I have. I rolled some of my deeper in-the-money calls, taking a little bit of the risk off of the trade. But I did buy these calls as well today. So I'm loaded up with calls to the upside. I'm obviously looking forward to see what we see the next couple of days. Apple hung in there pretty daggone strong all day, Scott. I thought that was pretty important.

We'll obviously be talking about this tomorrow because I'll see you on the half. It's incredible, really, the move that this stock has had. Maybe the most important in the entire market, Pete, if you factor what's really at stake, the most valuable company on planet Earth getting down to 150 on March 14th. And here we are barely a week or so later, nine days, and it's back at 170. Yeah, it's pretty incredible. And we talk about velocity all the time. That's a very big velocity move for the biggest stock in the market. That's unbelievable. I'll catch you on the half, Pete. Thanks for being an OT. That's Pete Najarian. Let's get now to our Twitter question of the day. We're asking, what are the odds, do you think, of a recession in the United States?

25 percent, 50 or 100? Does the Fed have no choice but to put us there? Cast your vote at CNBC Overtime. We'll have the results later in the show. Just after the break, the bull case for stocks. Fundstrat's Tom Lee is here at Post 9 on why he sees even more upside ahead. Look forward to that conversation. And later, our MVP, our most valuable pick, Roku, losing nearly half its value this quarter. One top analyst now says it's time to get in. We'll talk about that when Overtime returns. We're back in Overtime. Few strategists have been more consistently positive on stocks than our next guest. And he continues to make that case. Tom Lee is Fundstrat's co-founder and head of research. He is here, as I said,

at Post 9. And it's great to see you in person. Yeah, great to see you, Scott. But what you said was your first in-person interview since 2019. That's right. So, you know, for the last three years, everything's been virtual. Well, it's good to have you here. And look, you told me the other day, you admitted that you've been a little too bullish at times on stocks, but yet you sit here today and you continue to make the case that they can go higher. Yes. I think stocks are definitely going through a very difficult period because we know the bond market is quite hawkish and the Fed has to meet market expectations there. And we know that

consumers are going to be taking a pretty big hit from commodities and fuel. But if we avoid recession, which is our belief, then stocks have discounted more than a recession. Because when we look at investor positioning institutionally, they have more cash than they did in 2009. Consumer confidence is as low as it was in 2009. And then if you look at retail sentiment, it's as bad as 2009. So people are pricing in, I think, a calamitous scenario. And that's when stocks can start to rally. I mean, isn't it just a matter of time, though, before earnings slow, before the consumers start spending less? I mean, how can all of this not transpire in the kind of

backdrop that we have? Extremely high inflation, a hawkish Fed, et cetera, et cetera, et cetera. Yeah, it's a great question. And we won't know for a few months. That's, I think, what stocks are going to sort of be worried about. But isn't that the base case? Isn't that the base case that earnings are going to slow, the consumer is going to slow, the economy is going to slow, by the very nature of what the Fed is going to do? That's exactly right. But that's also why 40% of stocks are in a bear market.

So I think the market has now said over half of the S&P should be derated by 20%. And we know that consumer balance sheets are in great shape. Goldman had a great report showing that even in the bottom two quintiles of income, they have 12% excess savings right now. And if consumer debt levels, which are really low, means you may not see a contraction even though prices are high. So we could see a positive surprise coming out of the consumer. And war times are generally good for economic growth. So I actually think we could have some positive surprise in the second half. So I think as much as people worry about things getting bad, things could actually get better.

Let's talk about this current rally that we've experienced today, notwithstanding. What's it about? Are these real buyers? Is it reliable? Is it simply short covering? Bear market bounce? What is it? To me, if I guessed, it feels like position squaring.

I think people got bearish, went to cash, and then they realized things are so bad that you have to be somewhat re-risked. I don't think there's a lot of conviction. I think today is an example of that. But we can see leadership, too. I mean, basic materials is a structural long. And then I think we're seeing, as you guys were talking about, some pretty good relative performance of things like FANG. So I think FANG is going to be one of the groups that people realize doesn't get hurt by higher prices. And the multiples have come in. And in the second half, they're going to be, I think, really strong stocks. I mean, if you talk about, you know, changing positioning,

that has a connotation with it that it's a longer lasting potential move. This is not simply short covering. It's literally people changing positions because they got too bearish. That's right. In fact, you know, Ryan Detrick actually has some great stats. This looks a lot like the position squaring that took place on April 2020 and 2009. So in a way, people got into a deep recession position. They need to re-risk, but then there's better resilience, and then suddenly people want to buy stocks again. I don't know if we're at that point. You know, it might take a couple months, but I think stocks are definitely surprising to the upside. I think one of the principal parts of your narrative is that inflation, as bad as it has been and as bad as it remains, could be rolling over. And you look at a

freight index. I want you to explain why that's important to you and why you flagged that as a principal thing you're looking at. Yeah, it's a little complicated, but, you know, the inflation that we saw last year was due to supply chain glitches. So let's say that was the event was movement of goods. And cash freight index is a measure of that because it skyrocketed. Well, that's rolled over so sharply. It's now a negative year over year. And historically, that leads CPI by six months.

So I think the goods inflation that we had hitting us last year is now diminishing. This year, what we're dealing with is now this spilling into services and now oil risk. But if those actually start to plateau, then we're sort of saying the inflation picture is probably a little better than the Fed was worried about. And that's kind of a dovish development. What if I say, OK, but labor costs show no sign of slowing down And we know where borrowing costs are going to. That's going to slow corporate activity. Yes. Ironically, borrowing costs haven't risen as much as inflation.

So actually, the cost of money has gotten cheaper this year. So we're actually more negative real rates. Today, if you borrow money, you're borrowing at negative 5%. So it's almost positive for corporates to borrow money today because they can earn more money. That's actually good for risk assets. Historically, that's when stocks can actually see PE expansion. So as bad as it sounds, it's actually marginally positive. You need to make calls at times when the world seems uneasy. You can't wait for the market to be at all-time highs to say, yeah, I said we're going higher, so I totally get it. I just wonder if, in some respects,

you ignore some of the risks that are on the table that may be insurmountable. As I was discussing with Adam Parker, the Fed is going to be aggressive. We know that. And by virtue of the move that we've seen in the market, and if it does continue, don't they get emboldened by that? Yeah. I mean, the market's pricing in seven hikes. That's consensus. That's what the Fed futures are saying. If there are fewer hikes, as Adam was referring to, that's a positive development because we're going to be reaching the end of that hawkish cycle sooner. And, of course, rates could be capped a lot sooner.

Our technician, Mark Newton, thinks the 10-year is going to sort of hit 250 and then actually start to descend. That will be good for PE as well. Hey, look, Scott Minard was on in the first couple of days of these new programs and suggested two, two and a quarter. I mean, maybe that becomes the top on the 10-year. So he's not the only one thinking that. If, in fact, that is the case, what does it mean for the tech trade? It's great for the tech trade because now you're paying, you know, 45, almost 50 times for a bond. You know, face meta at 16 times looks like a bargain. I think the idea of TINA comes back strong in the second half. And especially owning U.S. stocks. I mean, it's probably the safest

place to put money today. I wouldn't really, if I was an Asian wealthy person or a European wealthy person, I'd be putting capital in the U.S. Quickly, how quickly are you focused on a stock like Apple, which we had made the point, and I just did with Pete Najarian, the move that it's had from 150, which was really a perilous point. And we noted that on the very first day of overtime, that you have to watch what's happening with Apple, the biggest stock in the market. You can't have that breakdown. Well, it's gone the opposite direction. Yep. That's right. It's a bellwether. It's a great company. It's now acting very strong and it's kind of benefiting from supply chain easing. So I think in a lot of ways, if Apple's strong, I don't think you can be that bearish on

the S&P. All right. It's great to see you in person. Yeah. Great to see you, Scott. Thanks for coming down to Post 9. That's Fundstrat's Tom Lee. We have breaking news now. Shares of Spotify are popping in the OT. Our Julia Borson is going to tell us why right now. Julia. That's right.

Spotify shares are moving higher. They're up about 2% after hours on a new deal with Google. Now Spotify subscribers will be able to pay through Google's app store billing system and what Google calls a pilot for in-app billing choice. Now, for years, Spotify has been unable to have its subscribers sign up and pay directly through Apple's app store or through the Google Pay Store as Spotify has battled those app stores' demands for 30% of payments processed through their platforms. Now, Spotify will be paying Google less than 30%. It's unclear exactly how much. We don't have an official number on that. But this deal shows a settlement of that conflict with Google

and highlights the ongoing conflict between Apple and other app developers over fees. Spotify did side with Fortnite parent Epic in its lawsuit against Apple. You see Spotify shares now are up over 4%. Guys, back over to you. All right. Spotify with a nice pop there, Julia. Thanks so much. Time for a CNBC News Update now with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. Air Force One just touched down in Brussels. President Biden there to attend a last minute emergency meeting of NATO leaders. He'll also travel to Poland. It's become the epicenter for refugees escaping Ukraine. National Security Advisor Jake Sullivan says more sanctions against Russia will be announced after the president consults with

his NATO allies. Judge Katonji Brown Jackson, supported by Democrats and grilled by Republicans during the final day of questioning on her Supreme Court nomination hearings, the most heated exchange between the Republican Lindsey Graham and her. For the second day in a row, Senator Graham accused Judge Jackson of being lenient in her sentencing of child sex offenders. We have a fundamental differences

of how you deter crime. I think the best way you deter crime when it comes to child pornography is you lower the boom on anybody who goes on the internet and pulls out these images for their pleasure. Senator every person in all of these charts and documents, I sent to jail because I know how serious this crime is. Judge Jackson's hearing continuing now. And the family of Madeline Albright releasing a statement this afternoon after the death of America's first woman to serve as Secretary of State. The family saying they lost a loving mother, grandmother, sister, aunt,

and friend who died surrounded by family and friends. Her family says Dr. Albright died of cancer. The immigrant from Czechoslovakia and champion of democracy was 84 years old. Tonight, we're live in New Orleans where a powerful tornado tore through parts of the city. The victims and the cleanup on the news. Right after Jim Cramer, 7 Eastern CNBC. Scott, back to you. We'll be there. Shep, thank you. That's Shep Smith. On Kramer, 7 Eastern CNBC. Scott, back to you. We'll be there, Shep.

Thank you. That's Shep Smith. On deck here, halftime overtime. Earlier today, Joe Terranova calling Amazon the most attractive FANG stock right now. Jim Laventhal disagrees, which is why we'll debate it coming up. Plus, the staycation trade, the one stock that could benefit from changing travel trends. We'll tell you about it in our two-minute drill. We're back in the OT after this.

And don't forget, follow the Closing Bell podcast on your favorite podcast app. Overtime, we'll be right back. In today's Halftime Overtime, Joe Terranova's bold call that Amazon has the most upside potential within the mega cap tech space. It's not a matter of if, it's a a matter of when I will get into this stock. This stock has the most potential for upside of the fangs. Obviously, it's going to be splitting here at the end of the quarter, and it's about to retake the 200 day moving average, which it hasn't been above since the early days of January. Now, let's bring in Serity Partners, Jim Labenthal, to see if he agrees with that call. And I'm told, Jim, that you it's nice to see you, by the way, that you don't that you

think Apple will be the best performer of the Fangs. Is that right? Yeah, I hate to give you a nuanced answer, but I heard what Joe just said, and I'm more in agreement than disagreement. Where I disagree, Judge, where I disagree is obviously I own Apple and Google, but I don't own Amazon right now. But Joe chose his words carefully, and I agree. He said he's going to be in it at some point. And I think I am, too. Here are the facts. It has flatlined over the last 20 months.

The last time I saw an underperformance like that was Google in 18 and 19 versus its Fang brethren and then it rapidly and massively outperformed. The big thing that I look about with Amazon is the forward multiple. On next year's earnings it's 45 times and I have to ask myself, is that something I'm going to wait to get cheaper? Not likely. The problem for me, Scott, is I have to sell something. You know I'm all in. I have to sell something to fund this. And at this moment, on March 23rd, there's nothing I want to sell. But stay tuned, because pretty soon there will be something I want to sell, and Amazon is at the top of the list to buy. Right here, this price looks reasonable to you. If you did have some money to put to work? You'd feel comfortable doing it at this level?

Yes, but here's what you do. Let me be clear. You start a position. This isn't a level at which you go in whole hog. This stock has had so many false breakouts. You know it as well as I do. How many times does it come up on halftime report? And it'll come up on overtime report, too, as it is right now. So I don't think you need to rush in and load the boat. But, yes, if you don't own it, this is an okay time to start building the position. Very similar to what I did with Salesforce. Now, the stock has come down Salesforce, but that's one I will be adding to. That's the sort of cadence that I want to do with an Amazon when I start building it.

I got you, Jim Labenthal. Thank you for being at Overtime. I'll see you soon. I know on the half coming up, our most valuable pick. Needham's Laura Martin has seven reasons to buy Roku. She makes her case for you right here. We are tracking the trades with the late move. Oh, I'm not even going to tell you the stock. Oh, we just showed it. Now I have to tell you a late move by one of our committee members in Tesla. We'll tell you about it when the OT comes back. It's time now for our most valuable pick. Take a look at Roku. Need them out with a positive

note today. They have seven reasons why you should buy that stock. Laura Martin is the analyst behind the call. She joins us now. You could only find seven? Yeah, exactly. I thought about starting at five, but I thought seven sounded like a luckier number. Of the seven, which are the two, three that are most important for me? The two that is the most important are the Roku channel, which is their captive advertising AVOD channel where they sell 100% of the ad revenues now at 80 million viewers and 60 million U.S. homes.

And it's their top four app and is by far their most valuable property. So that's going to drive upside. And then the second key point is when you pay for the multiple here, they're basically their unit economics in the US, which is their most mature market is growing 50% of their revenue line and 20% of a DOM margin. And they're spending all that cash rolling out Mexico and Brazil and Germany and France and the UK, which increases your total addressable market and elongates your growth trajectory, which adds value to the ultimate entity. But meanwhile, it hurts your reported earnings and your profitability. You know, it's stunning when I look at this stock and I see that it was at $, excuse me, $490. Now it's at 125. What's the likelihood it

gets anywhere near close to that ever again? Well, ever again is a long time. Never is a long time. But I would say all these stocks are down 50 to 70 percent. The streaming world, the advertising based world in a face of rising interest rates. These these stocks without current cash flow trade like long duration bonds. So, you know, when rates stabilize, all these stocks should be able to have multiple expansion from here. You think it's literally that that tied to the movement in interest rates because there's some of that's been debunked, that rates are so closely tied to these long duration assets like some of these higher growth technology stocks and they just got so fundamentally uh or the stocks just got so crazy ahead of the fundamentals that here we are yeah i think part of it was covid because we all

got locked up things like netflix and and roku were the beneficiary of those lockdowns and now we're unwinding from that so the growth is slowing compared to the COVID period. But I do think starting in 2022 and 23, we're back to normal fundamental growth. And it just we have to wait for the multiples to re-expand for these ad driven names. Laura, I appreciate your time. That's Laura Martin joining us today from Needham. Coming up, halftime committee member Steve Weiss making a late day trade. He'll join us next to give you those details. Plus, Apple, a rare bright spot, as we said in today's session. It's the topic of Mike Santoli's last word as well. We have an alert on Tesla in the O.T. Steve Weiss hitting the sell button on some calls. He joins us now on the news line. What's this about? Well, Scott, I bought the college yesterday when they were revealing or Musk was introducing the plant in Germany, opening it up.

That was a good opportunity, particularly with the production numbers just going to be incredible, up to 1.4 million cars per year with all their facilities. But given my market view, which is cautious to say the least, when oil started spiking today, it was a good time to hit the exit. There's a great gain up about 150% overnight. I'll take that every day. So if you trade, you've got to trade quickly in these markets, otherwise profits just evaporate. So this is a larger market call along with a tactical one in the Tesla options as well, just selling the rips, essentially.

Exactly. You know, you're buying the dips, you're selling the rips. This one didn't really dip, but it didn't absorb the good news. It traded up in line with the other stocks that recovered. So nothing was in it for the plant opening, which I thought was going to be a big event. It turned out to be. So, look, I think the stock could recover. It doesn't matter about valuation on this one. But, again, with my market backdrop, I just can't stay in trades too long. And this was long enough. You know, you just don't want to be greedy. It's not a market to be greedy.

It's a market to be tactical and to take profits when they arise or cut your losses. I also bought the SMH yesterday and, you know and sold the remainder of it today at a loss. So they don't all work out. Just have to control risk. Wow, that's quick. In and out of the SMH. Well, yes, it was just to get market exposure. Was the reason I bought it.

Not any real view on semis here. I've got enough semi exposure with on. So quickly, you know, just quick trades here and there. I would have loved to have stayed in longer, but oil just didn't cooperate. Yep. I got it. All right, Steve, thank you. That's Steve Weiss joining us up next. Is Apple the ultimate safety trade? Santoli's last word is coming your way next. Let's bring in Mike Santoli for Santoli's last word today. It's it's Apple. It is Apple. And kind of asking the question, maybe why it's held up so well, if you looked at the Nasdaq stocks, Nasdaq 100 stocks that are closest to their all time high.

Apple's really the first mega cap growth stock in there. It's a lot of staples in there. It's constellation breadth. Why is that? Obviously, there's kind of a bulletproof balance sheet, safety, quality trade going on there. Not a lot of change in the fundamental outlook, even though maybe they could have been tripped up by some of the supply chain stuff in China. What is interesting is it's now trading valuation wise at a premium to Alphabet by a few by a few P.E. points. And that's not been usual over the course of the last 15 years. That's the iPhone era, really. And you see it happens in times of market stress. 2009, again, a couple of times in 2020. It has always been the case that Alphabet gets back to a more premium multiple. So it's worth

asking the question if there's some convergence here that might go on or if something different is happening with Apple. We'll point out year to date buyback and dividend stocks are outperforming the S&P. Of course, Apple, one of the biggest of those. Are you surprised that it's worked its way back towards a new high the way that it has? I mean, it was at 150 on the 14th, the day we started this. Surprising, maybe the speed of it. But what was really interesting is if you went back and looked at how it traded relative to its own 200 day average, it just cracked right below it real quick, you know,

kind of trap for people who thought it was going to be breaking down. And that coincided exactly when the overall market was getting stretched to the downside, and we got this bounce in the last six days. That's why it's so interesting. It may have saved the market from having a deeper upset. And it contributed. So interesting. No, it's fascinating. It definitely is also one of those, you know, the market's going to do the thing that kind of keeps the maximum number of people off balance. So before Apple goes back toward its highs, it's going to look like it's breaking down. And that's exactly what happened last week. Yeah. So let's see how much staying power this now has for direction on whether the rally. You know, sometimes Apple likes if the overall market is in kind of melt up mode. Apple sometimes sits it out. It kind of goes on its own clock. So

we'll see if the rest of the FAANGs maybe have a little catch-up. All right. Good last word, Mike Santoli. Thank you very much. Our two-minute drill is coming up next. Three top picks for your portfolio and another quick check on KB Home. Reporting earnings during the show, a miss on the top and the bottom line. You see what the stock is doing. It's down close to 4%. We're back right after this. All right, welcome back to Overtime. Let's get the results now of our Twitter question of the day. We asked, what are the odds you think the U.S. economy is going into a recession or not? 25%, 50%, or 100%? Most of you putting the odds at 100 percent, which is kind of surprising. Where's the optimism? I guess we're going to have to wait and see what happens.

It's time now for the two minute drill. Three picks for your portfolio. Joining us now is Joanne Feeney, advisors, capital managing partner and portfolio manager. It's good to see you. Welcome to Overtime. Hey, Scott. Good to see you as well. Let's talk about some of these picks you have. You do have three. Broadcom is at the top of your list. Why? Broadcom is something we've owned since I joined the firm back in 2015. It has deep moats around it, provides connectivity chips for the data center, for the iPhone, and it offers a very nice dividend. We have a lot of clients who want to see both growth in their portfolios and income. The income helps them sleep at night. And Broadcom has delivered very well, raising their dividend every year since they started offering it in December. So

really a core position at the firm and a lot of our different strategies. How closely tied is it to how Apple moves? You know, the Apple side of their business is, you know, 15, 20 percent of their revenue. So it is tied to them. But they've diversified away from that exposure every year as that's grown as part of the business. Now they're in data centers more broadly. They're now in software. They're in security software. So they've become more diversified, which is one of the reasons why the multiple has expanded over the years. And we expect the multiple to continue to expand. So pretty well diversified at this point. KTOS, Kratos, a defense play? Yeah, Kratos makes drones, targeting drones, surveillance, swarming drones, wingman drones.

And what we expect there, obviously, it's a nice defensive position to have in a portfolio, given all these geopolitical risks. But we also see it as an appreciation opportunity because we see defense spending rising around the world. And we also see an increasing share of defense spending going towards drone technology, which is a reason why we bought it several years ago. We think it's going to be a good position to keep holding for the long term here. Tell me about your last pick, which is Six Flags. As you hinted earlier, Scott, it's a staycation play in some ways. Six Flags Entertainment really suffered during COVID. And now, you know, as things reopen, people have to remember that the reopening trade is still worth looking at. Six Flags offers rising earnings. Their free cash flow has turned

positive. It's going to be growing and we see it on with their subscription business is really generating a lot of loyalty among their visitors and even though the consumer is being constrained now because of high inflation this is an opportunity because when consumers find that their budgets are constrained and they don't want to take long expensive vacations they do the staycation and they tend to go to theme parks

there also with that cash flow reducing their debt which is a bit high at this point long, expensive vacations. They do the staycation and they tend to go to theme parks. They're also with that cash flow, reducing their debt, which is a bit high at this point. But they're really good managers of that. And, you know, it looks like a good opportunity going forward. Got to go, Joanne Feeney. Thank you so much. That does it for us in overtime. We'll see you tomorrow.