Closing Bell - Closing Bell Overtime: Countdown to CPI 2/13/23

Episode Date: February 13, 2023

A lot is a riding on tomorrow’s CPI, with investors wondering what different scenarios could mean for your money. Lauren Goodwin of New York Life gives her take on what’s at stake. Plus, top financial advisor Rich Saperstein gives his outlook for stocks. And, Josh Bennett of Weatherbie Capital breaks down some under-the-radar growth plays for your portfolio. 

All right, Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapney. You just heard the bells. We're just getting started from post nine here at the New York Stock Exchange. We're going to get Palantir's earnings momentarily. Our reporter standing by with the latest there. We'll show you the stock move. It's up 10 percent in a month. So there's a lot perhaps riding on this report today. We've also got top rated financial advisor Richard Saperstein here with me today. We'll get his best bets in this market. We begin, though, with our talk of the tape, all that is riding on tomorrow's CPI and what the various scenarios could mean for your money. Let's ask Lauren Goodwin of New York Life. She's with me here at Post 9. Welcome back. It's good to see you. So the bears, you know, their argument, right? It's don't fight the Fed. The bulls are like, don't fight the tape. And the Dow just had its best day of February. You're near 20% off the low. What side are you on?

Don't fight the Fed. Don't fight the tape. I can't fight the Fed, Scott. I can't fight the Fed. And there's two reasons for that. The first, of course, is the obvious one, which is that interest rates are still moving higher. And while the bond market has gotten on board more or less with what the Fed is saying it will do over the past week or so, that's two more 25 basis point hikes and then a cut not until the later half of this year. I

disagree with that second part, but we can talk about that later. But the other reason I don't fight the Fed is that the Fed's policy is starting to work. And I'm seeing clear evidence that the economy is slowing. And that combination is not an environment where I see upside potential for earnings from here. And it's been a tough earnings season. So got to be in the bear camp. But what's this rally then about? Why is the Dow, as I said, near 20% off of its low? Bond market has sort of moved more into alignment with where the Fed is.

It's the stock market that some suggest is still delusional about where we are. Yeah, and I'm in that delusional camp a little bit. The stocks are seeing a Fed pause window, a combination of relief from the Fed nearing the end of its hiking rally and hopes for a soft economic landing. Isn't it near the end, though? It is. But rates are still moving higher. And I think, effectively, stocks are struggling, as is typically the case with, again, two

things. One is that it's always a soft landing until it isn't. Every recession over the last 60 years, we've had language around soft landing until the second half of economic dominoes started to topple, and we just haven't gotten there yet. What happens if the CPI is good tomorrow? You mean as if it moves lower? Yeah. It's another, I think, great day or good momentum for that soft landing story, which is good for growth equity. But doesn't, I mean, at some point you have to put the puzzle pieces together and it amounts to a picture, right?

I mean, at what point do you go as far as to say, you know what, I actually think that a soft landing or even no landing, as some are suggesting, is more likely and I need to change my direction on stocks. Yeah, so here's where I struggle with the soft landing story. This late cycle economic dynamic that we're sitting in, it's full of mixed data. Again, that's pretty typical. So you have some areas of the economy, the interest rate sensitive sectors like housing, manufacturing, already falling out of bed. But other areas like the consumer and services doing really well. Again, that's pretty typical.

That's just a matter of timing as opposed to data really being mixed. Okay, so you think that the consumer is going to roll over. I do. It's just a matter of time. I do. That's like that leg of the stool that breaks and then the stool falls over. That's right. The consumer has been so resilient.

We've been hearing it from retailers all throughout this earnings season, resilient from savings that have accumulated over time that have given the consumer a bolster, high wages as well. But we're seeing early signs of those sources of resilience fading. We're not getting more government support as the economy slows. We know that to be the case. And then things like the savings rate ticking higher and consumer credit moving higher as well, defaults moving higher. And so those early signs that consumers starting to have trouble to me suggest that that domino, while we might have a couple more quarters before it totally topples, it's on its way. Okay. So similar commentary from Morgan Stanley's Mike

Wilson, right? He's been in the bear camp. He had a note out today that it's time to start positioning for the end of the bear market rally, right? So he thinks it's going to end soon. You might as well start positioning for it now. Do you agree with that too? In other words, if you look at what's run a lot to start the year, start to fade that as reality sets in, so to speak? Yeah, I love it. Some of the sectors that we were talking about right at the beginning of the year before this rally really took off. Things that were expensive like defensive equity sectors, value equity. Those are exactly the type of sectors that I'll be leaning into. In fact I'm using the price action that we've seen over the past six weeks to take a little off the top of growth year long duration assets and move it into even equity-like risk

in bonds, high-yield bonds as an example. So really trying to leverage some of the duration-sensitive move up, moving into areas I think are more resilient. So you're going back to the 2022 playbook. That's exactly what it sounds like. That's right. So you don't think that this move at all in technology is or growth is legitimate? Look, I mean, I'm looking right NASDAQ up another one and a half percent today.

It's legitimate in the part of the story where the market is leaning into this relief from multiple compression, just the sheer gravity of the Fed's interest rate hikes and what that's meant for valuations. But at the end of the day, valuations long term have to do with interest rates and cash flows. And we've seen headwinds for both of those things, even within this rally. I'm taking notes as you were talking. It's not because I wasn't listening to you. It's because Frank Holland is ready with Palantir, which is out with earnings. Frank, what do we have? Well, there's got Palantir shares falling right now, Dan, about 5 percent, falling a beat on revenue and a beat on APS. The company reporting a profit

for the first quarter in its history. I spoke with CEO Alex Karp, who said Palantir is already employing artificial intelligence to help the U.S. military. And he said the interest in AI by commercial customers, especially in the U.S., was a tailwind, U.S. commercial revenue growing by 67%. He added there is growing M&A interest in Palantir and said, quote, we built AI to train the algorithm in the context of an enterprise with technology that no one has, but everyone will need. So a lot of demand for AI. However, guidance for Palantir, less than what the street is looking for,

for both the current quarter and for the fiscal year, now shares of Palantir actually up 11 percent after investors digested that report a bit. And again, CEO Alex Karp saying a lot of people are interested in perhaps acquiring Palantir. He didn't make it clear whether or not he wants to sell, but says the interest in AI is also a tailwind for their business. Back over to you. All right. I mean, that's a stock that it was funny because, you know, initially what you said, and then we see the stock turn around, start ripping up 11 percent. Frank Collin, thanks so much.

Now it's up 14 percent. So we better stop saying the numbers because it looks like it's just elevating as we speak. We'll keep our eye on there. We'll hear from Frank again if we have to. Emblematic of kinds of stocks that have run a lot, right? Stock was up 10 percent in a month. Now, maybe on the idea of what you were talking about, that the Fed's going to cut, right? You don't think there's going to be a cut at all this year? I don't, no.

Not at all in 2023? That's my base case, no. Yeah, why not? I don't think there's going to be enough evidence that, look, the Fed has a checklist. Things like inflation moving durably towards its target. We might get there. Wage growth needs to be absolutely under control. We might not get there. And that's from a base case perspective what I'm looking at. I mean, Goldman today took their recession probability down to 25 percent. Jan Hatzius did.

Consensus is like 65 percent. Here's again my challenge with the soft landing narrative. We often think about recession as being the worst case scenario, but they play an important role in reducing imbalances. And in the past several recessions, that imbalance has been some sort of leverage. In this economic environment, it's inflation. And I'm not sure a soft landing is the way that we remove that excess from the economy. And so if we are moving towards a soft landing, Fed's going to keep moving. Because I was thinking, too, like when you're

talking, I was like, oh, yeah, well, valuation maybe is what gets reset in this kind of environment. And it largely has. But let's expand our conversation here. Bring in Anastasia Amoroso of iCapital, Emily Rowland as well of John Hancock Investment Management. Ladies, it's good to have you join the conversation. Anastasia, to you, you heard here, Lauren is obviously negative, but you think that this market can rally into the second quarter. Well, I do. And I think that's because the markets are embracing a soft landing scenario. And I actually have I see some legs to the soft landing scenario. So first of all, what does that look like? What is the soft landing? Well, that's when the economy is growing below potential, when the unemployment rate is not rising, when the Fed is close to ending its hiking cycle, when inflation is easing.

And when you add up all those things, that's exactly what we have today. And Scott, if you think about inflation and let's say it rises 0.5 percent a month over a month tomorrow, no matter almost what that month over month increase is going to be, the year over year inflation is set to be falling for the next few months. So inflation is set to be falling for the next few months. And then growth in the meantime is sort of stabilizing. You know, one of the things I think the bulls are also embracing here is that PMIs have corrected a lot. But guess what? The new orders component actually ticked up. Consumer confidence has plunged. But guess what? Consumers also started to feel more comfortable.

So you put all the pieces together. And that's what gives, I think, some legs to the soft landing narrative. And I think stocks can rally. Having said that, and sorry, just one other quick thing. The fact that the markets have also repriced the Fed funds rate expectations to be above 5 percent, to be 5.2 percent, that's really great. So that's what gives me hope near term. But I do think that Lauren has a point that as we look to the back half of the year, inflation may actually start rising again. And that's going to be problematic for stocks. So it's almost like we do have a little bit of a point counterpoint. What do you make of what she said? She certainly seems like she's on a different side of the boat as you are, at least in the near term. You guys may come together later in the year as it perhaps does

get more dicey. We do fall into recession. Who knows? But it's a near term perspective that differs, too. Yeah, absolutely. I mean, look, late cycle investing is hard. That's what it comes down to. And again, I think this is all a function of timing rather than reality. And what Anastasia is saying is true in terms of what we're seeing right now. When I look ahead, again, I already see signs that the bulwark of the U.S. economy, being the consumer, is starting to topple, starting to fall out of bed. And I am concerned for the fundamentals of the economy, that earnings growth ahead. Emily, don't fight the tape or don't fight the Fed. You choose. Which is it?

I'm in the don't fight the Fed camp. And I think one of the things that investors are underestimating right now is the lagged impact of Fed tightening. It takes three or four quarters for changes in monetary policy to actually filter through to the economy. And don't forget, the Fed just started raising interest rates in March of last year. So I do think that that lagged impact is going to come back and bite investors. And the other point that I would make is really around earnings. The one thing that we haven't talked a lot about is the fundamental side. And we all know that over time, stock prices follow profits. Now, profits are only down about 5% from their peak last summer. In a typical recession, we see more of a re-rating to the tune of 20 plus percent. And earnings estimates continue to moderate. We think revenue growth becomes challenged. There's going to be a

war on profit margins this year. That's going to impact corporate earnings. And it's going to be hard for this market to find legs in an environment where we're trading at 18 and a half forward earnings on really aggressive earnings expectations, two and a half percent this year, 11 and a half percent in 2024. Hard to see that playing out. But Emily, I mean, at what point do we actually say this time might be different? Right. That, yes, we totally get the Fed has embarked on this incredible tightening regime, dealing with inflation highest in some 40 years. But has the economy ever been as strong as it was, as it is now, apparently, at the time that the Fed is doing all of that? It is. In fact, unemployment is always the last shoe to drop, proverbially. So you start in terms of these economic downturns.

Again, corporate margins get pinched, layoffs start, the unemployment rate rises. But unemployment, as well as inflation, by the way, is a very much lagging indicator. And we don't let friends use lagging indicators. We like to use the leading indicators, which right now are flashing recession. You have the yield curve inverted to the tune of 80 basis points. It's hard to say this time is different. We've never had the yield curve even remotely this inverted without a sign of a recession coming. We see the leading indicators, negative 6%. Credit conditions are tightening per the senior loan officer survey. So all the conditions are in place. If you're looking to put money to work right now, do it in higher quality assets, more defensive assets, value and bonds.

Anastasia, I think you heard Lauren say that she likes the 2022 playbook, right? Don't believe the hype, so to speak, of the laggards of this year, which were winners last year. You know, the winners this year, like technology, which has been the leadership group, communication services, et cetera. Just go back to what worked last year. And that's going to work in the long run this year. Do you agree with that? Well, I think so far the performance this year has been, of course, the exact opposite of 2022. And my point is that if you think that the Fed is approaching the end of the tightening cycle and you think that we're in late cycle, we may have this period of, call it euphoria, call it, you know, exuberance that we have a soft landing that may actually extend the rally that we have in some momentum stocks. So what I'm saying is I would for now

actually stay with that momentum, ride that a little bit more, especially as some of the data is starting to rebound. And then, you know, as maybe we approach some of the overbought levels, maybe you'll pare back some of those, you know, gains that you've had in momentum stocks. Maybe you sell calls on them a little bit out of the money and you collect that premium and you buy the put option. Because, Scott, one of the things now is the VIX has fallen a lot. And so volatility is once again an expensive. So, you know, if you do agree, I think with what all of us are saying, which is maybe in the back half of the year, you may need to have that protection once again, that you could actually buy that at pretty

inexpensive levels right now. And well, Anastasia, what's what's at stake tomorrow morning? What's forgive me, but what's at stake tomorrow morning here? Right. To your point of view, that this rally can move on into the second quarter? Well, does that all get upset if it's a hotter than expected CPI tomorrow? I mean, unless that month over month number comes in at something like one percent, I really don't think that the rally is at stake. Because if you model the year over year CPI, given all the different speeds of monthly changes, again, it would have to be 0.7%, 0.1% in order for the year-over-year numbers to start to creep higher. But if you look at all the variety of scenarios, no matter if it's a 0.3% change or a 0.5% monthly change,

I'm looking for the year-over-year inflation to continue to fall in this particular print and in the next few months. So that's what I'm saying. That's why I think this rally may actually continue, because the monthly change at this moment doesn't matter. But when you get to mid-year and you start compared to a different set of data, what I mean by that, the reason why year-over-year inflation is easy now is because you're comparing that to the first half of 2022. Well, guess what? Inflation was annualizing at 13% in the first half of 2022, so no wonder we're starting to see the slowdown. But in the second half of 2022, inflation was annualizing 0.33%. So this is going to be a much tougher comp, and that's why I expect the year-over-year numbers in the back half of the

year will actually start to creep higher. What I think I'm saying also is that that's most likely the direction of travel, but the markets may not look that far. The markets may focus on this near term trajectory, Scott, which tomorrow is likely to show the year over year inflation easing. How much more does the Fed hike, do you think? Is there one more? Is there two more? There's two more, and I think the risk is to the upside rather than the downside. Because of what, the jobs report? Did that change your perspective on where this whole road was heading? No, actually, well, it's a strong jobs report. I think it probably overstated the strength of the labor market for January specifically. I think what we may be seeing, though,

is a warm winter juicing the data a little bit. And that may be true in inflation as well. I mean, look, we've seen energy prices move a little higher. We've seen some of the disinflationary pressure from goods actually roll back, things like used cars. And core services, which are wage-driven, that's what the Fed's really worried about, and that's what I'll be looking at most closely tomorrow. Those haven't even started disinflating yet.

So you may have a few months where actually the trend stabilizes instead of continuing to move lower. And even if that's temporary, time is not on the Fed side or on the market side, if that's the case. So, Emily, tomorrow morning, what's what's all riding on it? Anastasia says that. I mean, maybe the rally is not all hanging on the CPI tomorrow morning, like most people may think. What do you think? Yeah, I would disagree and push back a little bit on the idea that the market's not going to react to a one percent month over month inflation number. We do expect it to go up. Point five percent is is the base case right now so that's already kind of baked into expectations but i think one percent would be a pretty big surprise and of course you're seeing

higher commodity prices again that renews right renewed rise higher into things like used car prices but what i think would happen in that scenario is that you'd see another big jump into your treasury yields we've already seen a big re-rating there based on the idea that the fed now has to hike two more times instead of one. You may see the dollar strengthen. If you want to know what's going to happen across assets, watch the dollar. There's a complete inverse correlation of risk assets. When the dollar is strengthening, everything's down. When the dollar weakens, everything's up. And it really comes back to relative central bank tightening. If you see the kind of idea surface that the Fed is going to have to hike or be more aggressive than other central banks globally,

that leads to a bid for the U.S. dollar, which I think would spur a risk-off environment. So watch the dollar really closely here. The Fed was counted out before as being the most aggressive central bank, but they're potentially back in this game. I'll give you the last word, Lauren. Since you started this whole thing out with don't fight the Fed, let's talk credit for a minute. You like credit better than equities? If so, where along the credit sphere should we look at? I like credit a lot. And I love the question because opportunities abound in this environment. We've been speaking negatively in terms of economics, but bonds are finally a part of the picture. That's actually one part of the playbook that's different from last year. I expect correlations to normalize for bonds and stocks,

both to add value to a portfolio. Within credit, I really like the areas of the market that are beaten up from last year, but also have strong economic fundamentals. In my view, that includes high quality segment of the high yield market. We heard a vote for quality earlier, which I agree from last year, but also have strong economic fundamentals. In my view, that includes high quality segment of the high yield market. We heard a vote for quality earlier, which I agree with, but high quality across asset classes. I'll throw munis in there, too. Oh, OK. I think our next guest might do that, too. It's good to see you here. Thank you. That's Lauren Goodwin joining us right here at Post 9. Anastasia, Emily, we'll talk to you soon. Thanks so much. Let's get to our Twitter question of the day. We want to know how will stocks close tomorrow following the CPI higher or lower?

Remember, how will they close? Because it can be volatile. We've already learned our lesson multiple times on that. Head to at CNBC Overtime on Twitter. Vote. We'll share the results a little later on in the hour. We're just getting started, though, here in overtime. Up next, top ranked financial advisor Rich Saperstein joins me live here at Post 9. What he is telling his clients right now and where he sees the next big opportunities. We're live from the New York Stock Exchange. We're back in overtime right after this. We're back in overtime. Stocks rebounding to start off the week of trading with all three major indices coming off a losing week.

Our next guest says it is still time to remain cautious. Joining me now at Post 9, Richard Saperstein of Treasury Partners, one of the top-rated financial advisors in this country. Are you still Mr. Negative? Nice to see you. Welcome back. Thanks for the intro. Okay.

But are you? I mean, you've been really negative. Yeah. So, look, we look at this as a pivot rally where 22 was fears of inflation and the reaction function of the Fed. Now this year, that's passed us and we have a rally going on. But it doesn't really take into account that we're going to have a business cycle. And the business cycle is being indicated by look at M2 is negative. Profit margins are down 150 basis points. There's four leading indicators. Three of them are pointing to slowdown.

Profits are down. So we expect the business cycle to occur in 23, leading the lower EPS and a weak stock market. So you are really almost identically positioned, at least how you're thinking about this market, to Mike Wilson at Morgan Stanley, who says almost the exact same thing. Don't believe the hype. None of this is based on fundamentals, not this being the rally that we've had to start the year. It's been positioning. It's been short covering. Everything is going to happen. As we said, it's just maybe pushed off a little bit more than people thought, including ourselves. Agreed. And I think if we take a longer term view, we have the ability to opt in or opt out. So the market was up 100 percent for the three years ending Dec 21. Last year was down 20.

January, it's up another eight. So there's a lot of volatility. As you know, last year, we basically reduced equity exposure in client accounts five to ten percent across the board and then we added municipals we talked about that in october you still like those yeah but the window closed on what we did they were we were able to lock in yields of four four and a half percent tax free for eight to ten years so that's over now we have to focus on what to do going forward and we're still not comfortable with bringing on more equity exposure. So you're still sitting on a pile of cash, which I think the last time you were here said was the most you've ever had. Yeah. So we deployed the cash across the

board into municipals. In strategies that we run, we still have an elevated level of cash. We're comfortable with it. What gets you back into stocks? Well, I think there's a couple of things we have to look for. First of all, the tightening cycle won't end until the Fed funds rate is above the inflation rate. So we're still about 150 basis points away from that. You think they're going to go 150 basis points more? No, I think inflation will continue to come down. OK. And I think at some point they're going to meet. Yeah. Right. And that would be an indication that the Fed is at the terminal rate. So figure another 50 basis points on funds. Okay. But I think the other thing we have to consider is the business cycle. And we talk about hard, soft landing, real rate of return. The guy on the street doesn't care about that.

The guy on the street who wants to expand his business had a loan, let's say, two years ago. The cost of capital was Fed funds plus 300 basis points, or 3.5 percent. Today it's Fed funds plus 500 basis points, or 10 percent. So that grinds the economy to a halt over time. That's what we're seeing, and the data suggests we're going to see a business cycle. What about, I mean, the consumer and the strength of the labor market would suggest that there's a longer runway to that cycle than people like you want to suggest there is. Agreed. There is definitely strength in the labor market. You still have,

you know, a lot of optimism and obviously it's not reflected in the data. So the market's moving, data's going another way. Okay. so here's what I sort of see as a disconnect between your, at least part of your positioning and your perspective. Microsoft, you love that stock. You say it's your top pick for 2023. Yeah. In an area that has a lot of skepticism around it that doesn't seem to fit with your point of view on the overall market. How? Okay, so we're long-term holders of Apple, Microsoft, and Google. All right. Microsoft has great advantages because you have the cloud, okay, which has 70% gross margins. They have 23% of the cloud business, which is, they're behind Amazon, which has 32% of cloud. Software,

which is a recurring revenue business, and gaming. So when you look at Microsoft, $60 billion of free cash flow on a $2 trillion company. So it's a roughly 3% free cash flow yield on the company. The company is going to continue growing with high gross margins, great product penetration, excellent CEO, and it is our number one stock for the year. Aren't you making the case for most of large cap tech? Yeah. Even as you hate on the market? Yeah. So there's the market call, but we still are fully invested. Our clients still have

35 to 50 percent of their portfolio in equities. So it's not like we're out of the market. We just scaled back our positioning and added munis at tremendous rates last year. But you're also, in a sense, making the case that if you are putting your money into the stock market, go towards quality. And these are the areas that you want to look, which suggests that do you think that the tech move of this year is justified in, for lack of a better word? The tech move in high cash flow companies, yes, but there's a tremendous amount of companies that are still negative cash flow, and they had tremendous moves this year. So last year, if you take the 10 stocks with the greatest decline in the S&P, down 40% on average, or up 30% this year. But seven out of 10 of them have negative earnings revisions. So this is a pivot rally, which we're not really participating in. So what

do we do? We're basically looking for high cash flow. That's basically you have high cash flow tech stocks, oil sector, and then we have a deglobalization. So you're not deterred by energy's underperformance to start this year? No, not at all. Energy is, you know, let's call it 11 percent of the S&P's profits, but only 6 percent of market cap. The SPR releases are over. Asia is going to pick up with the China reopening. Demand's going to increase. I don't see our scenario is not that oil is going anywhere outside of 70, 80 bucks a barrel. And you have free cash flows anywhere from 10 to 20 percent, which is an amazing return opportunity in owning oil stocks. So let me ask you lastly, and then I got I got to go. So with the mountain of cash you're sitting on, when you when you the part you haven't put into munis and other parts of credit, when you do deploy it into equities, what's the first place you're going?

It depends on where we are in the cycle and what's come down. But I think we have to look at the market earnings at 220 estimate this year. We don't see it happening. And stocks are pretty vulnerable down to 3600. At that point, we'll reevaluate. 3600. OK, well, we'll see. It's good to talk to you. Likewise. All right. That's Richard Saperstein joining us right here at Post 9. It's time for a CNBC News update now with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening at this hour. There is no indication extraterrestrial activity is responsible for the three unknown objects shot down in recent days over the U.S. and Canada, according to the White House.

But President Biden is creating an interagency team to look more closely at unidentified aerial objects and what they might be doing. Even though we had no indications that any of these three objects were surveilling, we couldn't rule that out. And so there, you know, you want to err on the side of safety here in terms of protecting our national security interests. The official who oversees the U.S. Capitol complex has been fired. An inspector general report accused Brett Blanton of administrative, ethical and policy violations. He denies doing anything wrong. And the New York Times reports that in places where recreational marijuana is legal, including New York City,

vets are seeing a steady increase of dogs eating cannabis that's been discarded on streets and sidewalks. While most recover, symptoms like loss of balance and nausea could be scary for owners, not to mention for the dogs themselves, Scott. Yeah, Bertha, no doubt. All right, Bertha Coombs, thank you so much. Up next, under the radar growth picks, one portfolio manager highlighting some key names he thinks can weather a potential market downturn. Those stocks are straight ahead when we come back in overtime. Welcome back. Growth is beating value so far this month. And our next guest says some areas of the growth trade can be great for waiting out a market downturn. Let's bring in Josh Bennett,

senior portfolio manager, Weatherby Capital. It's good to see you. Welcome back. Thank you. Let me ask you just a simple question. Why is growth outperforming this year after being such a laggard last year? Sure. Last year was a very difficult year for all portfolio managers and particularly for growth. And I would say within that, small growth was challenged even more. So I think what you're seeing is you're seeing, to some extent, a relief rally in the exact stocks that got hit hardest last year. You're seeing a lot of those rallies. Some are quality. Those are the ones that we want to own. Some are low quality. Those are names that

we think won't survive or won't stay at those levels. Yeah, I mean, it's been pretty remarkable the degree to which some stocks have rallied. I mean, we were just talking about Palantir, for example, is up like 20 plus percent on the back of an earnings result, a stock that was already up 10 percent in a month with a lot of those names. How do you discern what's quality within that universe and what's not? Sure. Because not all, you know, even if you're not profitable, some stocks may be deemed to be quality. That's right. We look at quality across several metrics. But one that we're looking at now is we're looking for more and more companies that instead of having to wait three years or five years to generate free cash flow, for example, we think that they can

generate free cash flow in the next, say, one, two, or three years, or they're generating cash now. They've proven to be good deployers of that capital. So quality management teams that do what they say and deliver on their promises, companies that generate significant free cash flow, companies that are more predictable. So we look for companies that have higher recurring portions of their business that you can count on revenues coming through as they expect. And therefore, when they guide, you can put a little bit more weight on that guide and you can see what the potential upside would be. Still, they're all longer duration assets, if you want to call it that,'s still susceptible to moves in interest rates.

How close are you paying attention to the CPI tomorrow for this sort of portfolio that you run? Yeah, so we are bottom-up stock investors, so I'll start with that. But I will also say that as a portfolio manager, you would be ignorant to not be watching the macro news right now. So the CPI number tomorrow will be important to watch. But when we invest in a company, we're really looking out three years, five years, even beyond that. So while the CPI matters tomorrow in terms of understanding where are we in this cycle, it's not going to drive a stock decision to buy or sell tomorrow. Let's give three names and tell me about each. Planet Fitness, number one on your list that fits the profile of what you're looking for. Why? Yeah, what's

interesting about Planet Fitness, I think most people know the brand, is that as people are coming out of the pandemic, they want to get outside. They care about health and fitness. They saw through the pandemic that health and fitness is more than just looking good. Health and fitness matters for a lot of reasons, including fighting things like COVID-19. So Planet Fitness is much more differentiated than we think people realize. Planet Fitness is a stable growth company. They have over 2,000 fitness centers, 16 million plus members. So strong, strong scale. Now, what that scale does for them is it enables them to invest in marketing. So they sponsor the New

Year's Eve event every year. Most people have seen them there, but they also do extensive TV advertising. And they also can invest in technology. They have the best app out there that allows people to sign in and sign up as a new customer, but also to work out when they're not at a plant fitness gym. Tell me about First Service Corp. before we go. Yeah. First Service Corporation is a real estate services company. This is in that category of highly predictable recurring businesses. They just reported last week, very strong quarter, that half of their business that does property management

services, people are moving to plan to manage communities. FirstService is number one in that business. The other side of their business, they have branded services that take care of restoration, for example, with Hurricane Ian last year and then now the Texas freeze or the West Coast freeze. FirstService is doing the restoration of homes from that. So highly predictable, recurring nature business, and 19% compound annual growth rate for 25 plus years. So talk about a company you would think is boring, but it's actually quite exciting from a growth perspective. All right, we will keep our eyes on it. Thank you for being here. Excellent. That's Josh Bennett joining us right here,

Post 9. Up next, we're drilling down on energy. That sector struggling recently. But one halftime committee member says it's not all gloom and doom for oil. We'll debate it in today's halftime overtime. We're right back. All right. In today's halftime overtime, going back to the well, the energy sector has been stalling recently. But a big call from BTIG's Jonathan Krinsky sees the sector regaining its leadership position from last year. And according to Virtus' Joe Terranova, the building blocks for an energy bounce are now in place. I will certainly hope that he's right. Do I think he's right? I think the early signals of it are, yes, present in the market. Last week, you had a 5 percent recovery in the energy equity names. I think

that's the initial stages of something that could be building specifically towards oil. All right, joining us now, Serity Partners Chief Equity Strategist Jim Labenthal. Jimmy, so what do you make of this call that Krinsky has made, that energy is going to resume its leadership role in the market just like it had all of last year. Yeah, I agree with the call. Let me give you the fundamental story here is that the supply demand imbalance of the last year or so is still intact. It's only been papered over in the last year by strategic petroleum reserve releases, which are done. Now you've got China reopening. The recession,

the long-awaited recession here in the U.S. is anything but inevitable. And you've got Russia even curtailing its supplies. So the supply-demand imbalance continues. I think if you were going to get bearish on crude oil, if you're going to get bearish on energy stocks, you'd have to predict the unpredictable, which is some sort of benevolent end to the war in Ukraine. Again, that is unpredictable and I'm not predicting it. So I see the fundamentals intact. As far as it having stolen recently, I do have to point out that the XLE is only down 5 percent from its high. ExxonMobil is only off 2 percent. I still feel pretty good about this sector. Sure. But you would obviously understand and admit the fact that while it was the overwhelming leader of last year, it certainly isn't to start this year.

I would definitely agree with you, Scott. But as an investor, I would tell you that at no point this year have I felt discomfort with being overweight by a factor of two in the energy sector. Sure, I would love if it had shot through the roof, but this feels to me much more like a consolidation phase, a setup for the next leg higher. What happens if crude oil gets a six handle on it as concerns about a recession may be materialized more than they have to this point? Well, that would be extraordinary because the U.S. government has announced that at $72 a barrel, it's going to start refilling the Strategic Petroleum Reserve, and they've got a lot of refilling to do. So there is a floor on crude oil, in my opinion, at $72 a barrel for quite some time.

And actually, at that level, $72, I think the energy majors are going to make money hand over fist. They're going to return it in dividends and share buybacks, which we've already been seeing. What's your favorite name in this space right now? Well, you got to pick your poison here. I think for the average investor, ExxonMobil and Chevron Texaco are just a really easy way to play it. For a real safety-minded investor, Kinder Morgan. Now, my favorite is Transocean. This stock was almost on death's door a couple of years ago when oil was at negative dollars per barrel. But now they've made all these announcements that their rigs are getting massive day rates. They're bringing some rigs back from idle status. There's demand to drill and it's going to inure to the benefit of Transocean.

Jimmy, appreciate you spending time with me. That's Jim Labenthal. We'll see you soon. Good to see you, Scott. All right, we have a 13-F alert from Seth Klarman's bow post hitting the tape. Christina Partsinova is following that for us this evening. Christina? Yeah, we're seeing a few big bets, but I want everybody to know that this is representing Q4, so not the current quarter right now, so positions could change. But what are we talking about?

We're seeing 190% increase in Alphabet Class C shares. We're also seeing other big cap techs like Meta, so 151% increase in Meta. And then they also increased Warner Brothers by 7%, which doesn't sound like a lot, but they have a substantial position in that company. Therefore, a 7% move is pretty big, is substantial. And I want to just talk about the increase in Amazon. They do have a smaller position in Amazon, but they increased their position by 300 percent. And then another standout, they had a big position in Corvo, which is a semiconductor name, but they decreased that

by 15 percent. So we are seeing some big moves in tech like Alphabet and Meta and then a big drop in Corvo. So those are the standouts right now. All right, good stuff. Thank you for that, Christina Partsenevelos. Coming up, we are tracking some big stock moves here in overtime. We'll bring you those names after the break when we come back. All right, let's get another check on shares of Palantir. They are surging just slightly off the best levels of overtime, reporting its first profitable quarter

ever. A lot of optimism around AI there, the guidance they gave. Certainly the street seems to like that. We are tracking some other big movers as well here in overtime. And Christina's back with that. Christina. Well, Scott, we still want to travel and that's reflected in Avis Budgets Group's latest earnings report. The car rental company beat on earnings and revenues due to strong demand for both leisure and commercial. Management in their earnings report just said that the trends are continuing for Q1, which is the current quarter, for both categories,

and that's helping car shares up 3.5% right now. Network equipment company Arista Networks posted a 20-cent earnings per share beat, which is pretty substantial for the fourth quarter. Revenues and Q1 guidance also came in a little bit higher than anticipated. And you can see shares are up about half a percent right now. But I have a few other names to go through. We've got Latisse Semiconductor posting a small beat on the top and bottom line.

Q1 guidance also a little higher than anticipated. So that one's about three tenths of a percent. And last but not least, Cadence Design, another name in the chip world, moving higher. You can see shares are up 3% on their Q4 earnings report. And last but not least, Israeli firm SolarEdge giving up its games after a big Q4 earnings and revenue beat. Total 2022 revenue for the solar inverter company was up 58% year to date, or year over year, I should say. But shares are down about 1% right now. Scott?

All right, Christina, thank you very much. Christina Partsinevola. Still ahead, Santoli's last word. Find out what he is watching as we gear up for that big CPI report release over time. All right, bye. All right, let's get the results of our Twitter question. We want to know, how will stocks close tomorrow following the CPI higher or lower? The majority of you saying lower.

53.5 to 46.5. Let's get to Santoli's last word. That's the wisdom of crowds right there. It's basically a coin flip. I think that's interesting, though. A slight weight. Predicting lower. Perhaps because we were up today.

I wonder if that's why. You figured there's going to be a little bit of give back. We have a propensity for running into this number every month. Yeah, that's the thing. So, I mean, a month ago, there was actually kind of a modest reaction on the day of because it was more or less an on target one. I also think there's a means in which the suspense might have been dialed down only because of the way bonds have repriced in the last 10 days. So if we went into it complacently thinking, oh, inflation's under control, Fed's just about done, which was pretty much the sentiment a couple of weeks ago before the jobs report, that might have left you more vulnerable to a little bit of a jolt tomorrow.

But as it is, the two-year yields from 408 to 450 in 10 days, the 10 years from 340 up to 370. So we kind of built in a little bit. Interestingly, too, the curve, if you look at the end of the year, is no longer pricing in a cut as of today. So we're no longer pricing in the Fed pivot. And I think that's interesting that stocks were up 1.1 percent today. Stocks got back almost to the tick last week's loss today. Right. And it's not because everyone expected a dovish turn. It was more just because we needed to see that the Fed was going to be more predictable and more measured. OK, so then how do you address the debate that we had at

the top of the show here today that don't fight the Fed, which is easy to understand, versus don't fight the tape, which may be a little harder to put that story together, given everything that's going on. Well, I think neither one requires you to... Fighting the Fed right now does not mean being bullish in the face of everything, right? Because that's what you would think. You'd say buying stocks right now equals fighting the Fed

because the Fed's not quite done tightening. I don't really buy into that. And the risk is to more tightening than we think. Right. But I still think it's like they're closer to the end than the beginning. I'm open to the idea that the market has maybe grown a little too comfortable with that possibility that they're just about done. But I don't think that it's really an aggressive battle between people owning stocks this year and reasonable expectations for what the Fed's going to do. Now, even the tape you could argue with, right, because the tape looks

constructive. It looks like it's proven a little bit. You got all these good triggers that we're firing this year that said we got this great supply demand picture, breath, momentum signals. We've come too far in some respects to go way back now yes that there's built up enough of a cushion in time and price that it looks okay um but still even with that it's not as if you've got complete breakaway you know upside at this point it's not like it looks like it's going to accelerate from here just because you do have you know the valuation situation and and what's been leading on the tape. Right. That's part of that's part of the skeptical story, too. Yes. Some of the frothy stuff, I guess that's true.

Although if, you know, Microsoft just goes up three, four percent every day, then the S&P is fine. Yeah. So I guess we'll see what happens tomorrow morning. And you think there'll be an immediate reaction, but not the last one. No, no. There's going to be definitely some twitching around, I would expect. And then we're going to have to absorb what the Fed speak response to it is. And we are going to get more numbers, though, before the next Fed meeting. That's another reason it might not be make or break tomorrow. I feel like we've kind of become anesthetized till the Fed speak anyway. Yes. Like focus on Powell and, you know, drown out the noise. Especially because they're all just

kind of reiterating themselves. All right. Good stuff. I'll see you tomorrow. That's Mike Santoli with his last word. I'll see all of you. Fast money is now.