Closing Bell - Closing Bell Overtime: Eminence Capital’s Ricky Sandler, market momentum sustainable? 3/17/22

Episode Date: March 17, 2022

Top investor Ricky Sandler from Eminence Capital tells us why he doesn’t think the worst of the market sell-off is over. Plus, instant reaction to GameStop and FedEx earnings. Quadratic Capital Management’s Nancy Davis outlines how investors can play volatility. And, is it time to get bullish on emerging markets? Joe Terranova from Virtus Investment Partners weighs in.

Sarah, thanks. Welcome to Overtime. I'm Scott Wadner. You just heard the bells ring. We, of course, are just getting started in OT. We begin with our talk of the tape today, whether this newfound momentum for stocks is sustainable after another very strong day. This is the S&P right now is on track for its best week of the year. One day to go, of course, but that is how we are trending. It's a big question. We need an answer. And we asked super investor Ricky Sandler. He is the founder and CEO of Eminence Capital. He joins us now live. Ricky, welcome to Overtime. It's great to have you on this new program. Thanks, Scott. And congratulations on the new show. Good to be here. Thank you so much. It's really good to have you. I did note on Twitter a few moments ago, two years ago yesterday, you came on with me in the throes of the COVID

outbreak. Dow was down some twenty eight hundred points. You're unafraid to make a big call on the market. Things are obviously different now. There's a lot of uncertainty still out there. How do you see things today in the markets? Yeah, I mean, I think I think I see things cautiously. I wouldn't say bearish, but I think that we were entering a new sort of paradigm shift based on the Fed withdrawing liquidity, starting to raise interest rates, and that kind of all made a lot of sense. And I think the war and its impact, particularly on food and energy inflation, adds a whole new wrinkle besides the geopolitical risks. And so I think the market was going to have a tougher time even before the war.

I think that gets more difficult because it puts the Fed in a trickier position. Inflation is going up even faster in the near term. And they seem determined to be on a predictable path and not wanting to surprise the markets to the downside. So if I asked you, do you think we've bottomed here after three pretty good days now? And as I said, this what feels at least for the moment like newfound momentum, do you think that the worst of the selling is over? No, I don't. You know, I don't like to make short term predictions, but I think we see lower lows this year. I think the market probably ends the year, you know, here or lower. But, you know, it's not a total bearish outlook, but one where it's important to be focused on what kinds of stocks you're in. There's plenty of stocks that have profitability, durability, value.

It all matters today. I think we've moved out of the environment where kind of top line and narrative are driving stocks and back into an environment where the real fundamentals and sort of real value, of which growth is a piece, but the other factors on profitability and valuation are also important. Are you basically suggesting that ultimately the market, Ricky, buckles under the Fed tightening and this path that they're on, and they may have to be even more aggressive than the market is expecting because of where inflation is? So what I'm suggesting is I think it's going to be hard for the market to have continued strength when you're heading into a slowing economy, greater pressures on the consumer, and a Fed that is tightening. I don't think the Fed buckles and surprises the market.

I think they talk hawkishly, and eventually the market will lead the Fed. I think the one thing the Fed does not want to do is surprise the market to the downside, i.e. be actually tighter than the market expects and surprise them. So they've been talking hawkishly and they seem to be on this very predictable path. And it's possible that inflation runs higher than they think for longer. And they will just continue to be on this tightening path because I don't think they want to shock the market. I don't think they want to make a policy, make a mistake in that direction. So let me ask you this, because Lloyd Blankfein had a tweet about an hour or so, a couple hours ago that I thought was quite interesting. And I'd love your take on it as well regarding how hawkish the Fed either is or isn't.

We're putting it up on the screen here. The Fed's seven projected quarter point rate rises through 2022 is not so hawkish, said Blankbein. Real interest rates still negative to the horizon by itself. Current Fed policy is less of a tailwind to the equity market, but not a headwind. And a lot of the froth has already left the market this year. I'm wondering what you make of that on the same day that a closely followed strategist at J.P. Morgan, Marko Kalanovic, suggested that the areas of the bubbles had largely corrected enough and that that's over, too. What do you think about that? So we've definitely corrected some meaningful amount of where the exuberance was.

I personally don't think it's over. I don't think that we have cleaned out all of the excessive optimism on companies that are growing just top line, but not profits or companies that have large TAMs, but difficult paths to attack those TAMs. So I think we've had a good amount of the damage, but I don't think we're done with it. And so I agree with Lloyd's comment that we still have negative real interest rates, and that is one support for parts of the market that stocks are still a good deal compared to investors' alternatives. Companies should have pricing power and be able to at least retain nominal earnings growth and kind of purchasing power.

So I get where Lloyd's coming from. And I think the Fed is talking a certain game and putting out certain forecasts to just let the market know we're on this path. And the market might force their hand. If we get really high inflation prints, the market might start to price 50 basis points in one of these meetings. And then I think it would be OK for the Fed to go. But I don't think they want to.

They want to get more aggressive than the market expects. Let me ask you this. Do you think the Fed put is dead or is there some level of a market upset that would force the Fed's hand in a way that people aren't thinking about right now? I think the Fed's going to be focused on the unemployment rate as far as whether it's gone too far and not on equity prices. So I don't I think the Fed put is there if unemployment starts to back up and we're back through 4.5% and it looks like we're losing jobs. I could see the Fed easing at that point. But that's going to be their true north, not the stock market. Interesting.

Ricky, just bear with me one second. I've got FedEx earnings, which are just crossing right now in overtime. And I do want to get to that. We're going to show the stock moving in OT, if you will. The earnings were a miss. Revenues were a beat. And the stock looks like it's trying to figure out its direction. We have to pay close attention to volumes, obviously, given what the world looks like. You've got supply chain issues and a whole bunch of other issues to figure out what's going on in Russia. And Ukraine certainly may have had a bit of a factor, too.

And that stock has dramatically trailed a competitor like UPS. In fact, I'm going to get back to Ricky Sandler in a second. Let's bring in those Steve Weiss, who most recently bought FedEx. Steve, what's your take on what we're getting? The market's still trying to make sense of it, but what's your sense? So it came in as I expected. When I took in the note earlier, I expected them to beat on revenue and perhaps miss on earnings. They passed through most of the labor costs and the energy costs, oil, gasoline, et cetera. But yet there's a lag sometimes. So

I'm still going through the release, but I'm going to guess that's what happened. Volumes came in basically right in line, a little better. So the stock's at 10 times earnings this year. This doesn't really change my view on it. I still think you're at the front end of online commerce and frankly, the front end of industrial commerce continue to go through the pipe. So you'll see more price increases. Maybe if the stock trades down, you buy more. And if it goes up, well, then great job. But I still like it. It's what I expected. It's going down, and maybe it has something to do.

The guide may be a little bit light. And, Steve, I mentioned at the top, last comment before I get back to Ricky, this stock has just tremendously trailed UPS. Does this help turn that around, or is the jury still out on that? Well, they're essentially different businesses now. FedEx is a top-end business. Amazon is a low-market business. UPS is also primarily domestic, so you have other issues.

Two different ones. So UPS should probably trade a slight premium because it's got a yield that this doesn't have. But I like this. I like this one quite a bit. All right. We'll talk to you soon. I appreciate you calling into overtime, getting our news of the moment out. Back to Ricky Sandler now. Ricky, thank you so much for bearing with us. That's going to happen from time to time as we have this new program and earnings are breaking. So I do appreciate your patience. Back to our conversation. So given everything that you had to say, how does your positioning look? You run a long short strategy. Where are you net today? Yeah, our nets are somewhat below

average. Our long short ratio is below average. I think it's not at uber bearish levels, but it is below average. I think it is a stock picker's market. I think there's a lot of things that are still quite overvalued for the business prospects and even the hangover from some of the exuberance we had. At the same time, there's been a lot of damage beneath the surface of the market. There's been a lot of damage beneath the surface of the market. And so there's quite a lot of, you know, strong businesses, some growth, some durable value that I would argue offer great absolute value and across a range of outcomes. Obviously, you know, we don't know how the economy is going to play out, how the Fed is going to play

out. I try not to overly predict that, but have a view of a range of outcomes and then feel good about our positions across a range of those outcomes. I think importantly, with the Fed withdrawing liquidity, this market is moving back towards a regime where traditional bottoms-up fundamentals are going to matter. It's not just going to be top line. It's not just going to be narrative and tantrum.

That was an environment of a lot of liquidity and prior to that, an uncertain world. And so I think we are in a new paradigm as it reflects what factors matter for stocks. You know, I literally was going to bring up, and now we're showing them at the bottom of your screen, GameStop earnings are crossing the tape as well. And we'll have a look at the stock in overtime as it moves in real time. And you have gone after, at least on Twitter and maybe in your short book as well, some of this whole meme mania, if you want to call it that. And I don't know specifically your short GameStop. Maybe you want to address that as the stock is down some 11% or

so. But you've had a commentary running on Twitter from time to time about the AMC apes, about GameStop. It sounds like, more broadly, you're speaking about stocks like this in some of those areas that really got way ahead of itself. Yeah, itself? I think there are a number of stocks and a number of areas where retail investors have driven the stocks to non-fundamental levels and levels that can't be supported by fundamentals that will happen over the next one year, three years, five years. There's a whole range of things. There are EV companies.

There are meme stocks. And those represent a piece of things that were short. I don't like to talk about specific shorts. We have a very diversified short book so that we can navigate through squeezes and other things. But I do think this is one area where there's been a lot of demand for shares from retail investors that I think is going to come back to not look like such a good place to invest. And lastly, before I take another quick break, and then we get into some stock picking, and I want to talk to you about your long ideas and get some actual actionable names from you. How do you think about the retail cohort today in terms of the stimulus, if you want to put it that way, into the bull market? And what happens now in what becomes a more uncertain environment if that money leaves the

market and doesn't come back? What is the greater impact to the overall direction of stocks, if any at all? So it's two factors. I think one, you bring up a good point, which is they have been a very big factor in driving the market since the outbreak of COVID. And I think that more recently, they have been heavily exposed to some of these high growth areas that did well early but then have corrected. So I think there are potentially sizable losses, and them leaving would obviously accelerate that. In addition, we're coming up on April 15th in tax payments, and I know there's a significantly larger tax bill this year than last year or years past. So there could be some selling as retail investors look to meet their

tax bills. And they're a factor. And look, I'm a fan of the democratization of markets. And I think that retail investors are here to stay. But at times they move in groups and in mass into some of the same stocks and create certainly valuation levels that a fundamental investor would say is unsupported by what could happen to the business. Understood. OK, we will squeeze in a quick break. Sit tight, if you wouldn't mind. I want to get into some names that Ricky likes next. We'll talk about that. But first, our overtime Twitter question. It's when I asked Jeffrey Gundlach yesterday whether Bitcoin or gold is a better place to be right now, given what the Fed had to say. Maybe we'll ask Ricky,

too. He said Bitcoin did Jeffrey Gundlach. Now we want to hear what you have to say. You can head over at CNBC Overtime. Let us know. We're going to reveal the results before the end of the show. There's a buzz on the floor today. Joe Montana was here. We're back in overtime because the buzz is still going. Next. All right, welcome back to Closing Bell Overtime. We're back with Ricky Sandler from Eminence Capital. He, of course, is still with us.

Let's talk some ideas for our viewers, Ricky, if we could. Stocks that you have bought recently or added to outright. The MSOs, pot stocks? Cannabis stocks. You know, we think that the U.S. MSOs, particularly Green Thumb, Verano and Terrasen, they trade in Canada, they trade on the pink sheets. This is one of the next great growth industries that has stocks that are severely mispriced because there's still a large number of institutions that are not yet comfortable buying these stocks. And so even though they're legal, legally operated at the state level, we still have some some federal ambiguity, which is which is keeping people from buying them. So you have a big mismatch in stocks that are massively mispriced. Those companies trade at eight or nine times this year's cash flow, six or seven times out-year cash flow, maybe less. And the opportunity for that space to triple or quadruple over the next five to seven years.

And we can identify the winners and the leaders today. And so because they're not listed on U.S. exchanges and because there's some compliance concerns at traditional institutions, there's a big mismatch. And we expect that to change in 2022 as we get some safe banking regulation is something we think is quite probable this year. You know, my eyes got quite wide when I saw Coupa Software was on your list. That stock took it on the chin to say the least earlier in the week. Yep. And so we've been, you know, we owned a small position coming into that and we added to it significantly. You know, it's ironic. I think that the software companies are maybe some of the best places to be investing now.

If we're heading into a world of slowing economic growth where there's all sorts of inflation up and down the P&L, these sort of growth companies that don't have the same cost pressures, not going to have the same economic risks, are quite interesting. But because they were so over-owned and positioning was so far off, these stocks have traded poorly. So we have been adding to a few enterprise software companies. Coop is one. Salesforce.com is another that we've been adding to. And so I think that's an interesting space amongst all the tech wreckage. Enterprise software is a place where we're fishing a little bit. You know, Zillow has had its own issues this year for certain. That's another name that you have. What's attractive to you today about that?

Yeah, so Zillow owns the top of the funnel traffic. Two-thirds of all consumers looking to buy a house come to Zillow's website without a search. They kind of come directly. And we think that, and Zillow got into the iBuying space, which created, and they were late to the iBuying space and it wasn't their core business. So they did poorly and they pulled the ripcord. Rich Barton pulled the ripcord and exited that. And I think that upset a lot of growth investors. We were quite happy with that decision. We think the core business in providing a better consumer experience in searching for a house, in finding a broker, in all the attachments. I mean, it is a massive, massive TAM. If you look at just the brokerage pool alone is one hundred billion dollars.

But the size of the of the U.S. housing market and the ancillary service is tremendous. You know, Zillow has a low double digit billions enterprise value. It's probably trading at 12 times its current EBITDA. Founder Rich Barton has come back about three years ago and has really been pushing them into a lot of these ancillary services to provide just a great customer experience as consumers shop for housing. We're actually pretty constructive on the housing market itself. So we don't think that's going to be a negative. And Zillow is just a leader that has been through a classic boom bust for investors. And now people are kind of leaving it for dead. And we think the opportunity for this company to continue to grow its revenues well faster than the housing market and take advantage of its tremendous competitive position as the source of information for homebuyers. And finally, before I let you go,

I figured you had to be bullish on the housing space if you had Zillow on your list, along with Tempur-Sealy. Yes. So Tempur-Pedic is a phenomenal company. They dominate, largest player in the mattress market. I think this is a classic case of where it looks like it was a COVID beneficiary. So when they reported a little bit of a messy quarter, the stock sold off hard.

This company trades at eight times earnings, yet is the leader in a very defensible growing industry. We think that sleep has secular growth from health benefits. You know, the world, when I came into the business, people used to crow about how little they needed to sleep, and it was a sign of how strong you were. Today, people are taking sleep a lot more seriously, and Zillow is the strongest, best-positioned company in there. We think there's secular growth, great cash flow.

They're buying back a ton of stock. We think the CEO is terrific, and it is massively mispriced at eight or nine times this year's earnings. secular growth, great cash flow. They're buying back a ton of stock. We think the CEO is terrific. And it is massively mispriced at eight or nine times this year's earnings. I so much appreciate your time. And that stock chart really tells the story about what we're trying to do here in overtime. Ricky, the bells ring, the action, though it doesn't stop. Trade still happens. Stocks still move. And that's what we're trying to bring to our viewers. Thank you for helping us do that today. You got it, Scott. Thanks a lot for having me.

Good luck with the new show. You bet. That's Ricky Sandler of Eminence. We'll see you again soon. Coming up in just a bit, another sharp investor will join us, Quadratics Nancy Davis. She specializes in how to play volatility. You think that's a story these days? She made one of the best trades of the past few years not all that long ago,

which is why we'll ask her today what she sees now and where the best opportunities lie. We'll ask her in just a few minutes. Now we bring in our panel, more actionable conversations to have. Today it's Veritas Financial's group managing partner, Gregory Branch, and Hightower chief investment strategist and CNBC contributor, Stephanie Link. It's good to see both of you today. Gregory, I'll begin with you. Ricky sounded obviously a little bit cautious. He thinks that the gains today are not going to be the gains tomorrow,

so to speak. What do you think? I think that that caution is warranted. I think these market levels are anticipating a quick resolution to the geopolitical conflict right now and that they've largely shrugged off what the Fed did and said yesterday. If James Bullard had his way, we'd obviously had the 50 basis points, but we only got 25. So I think that that was something of a relief. But we're likely looking at the benchmark rate being, you know, a spot one spot seven five this year. So that suggests raising at each of the next meetings. I think that it is underappreciated what's going to happen as they hasten that balance sheet reduction that they'll likely start in May.

And just as Ricky was saying, at the end of the day, when we were awash in liquidity, that led to asset price inflation, which I candidly underestimated, looking for inflation to reach 7% by year end last year, which turned out to be right. I never would have thought that the market would have ended where it was because I underestimated that Fed put, which I do largely think now is gone. I don't think we have a policy to the rescue arrow in the quiver anymore. I think that if inflation continues to persist as it does, which I believe is possible and likely that will reach 9% in the next month or two, I don't believe there'll be a quick resolution. So commodity prices will continue to rise. And if that happens,

if the Department of Energy is right, we're looking at 112 average price per barrel through the second quarter, we're going to have continued fierce inflation combined with a tightening Fed, which historically has led to a recession or a bear market. And this this current market levels, these current levels are simply not pricing that in. I think your counterpart has a different take. Right, Stephanie Link? You've been pretty constructive on the market, even in the face of a lot of uncertainty. And that was before we've strung three decent days together. And who knows where we're going to go from here. But do you have a different view? Yeah, I mean, I think that there's a lot of there's a lot of momentum in the in the economy right now. When you look at the consumer, you look at jobs, you look at wages and you look at two point six trillion dollars in excess savings. You look at permits and you look at starts the housing market. You talk to Lenore,

you talk to D.H. Horton, D.R. Horton. They have good things to say about the longevity of the housing cycle. That's a big part of our economy. Industrial production is running up seven and a half percent. And that's in the in the face of higher supply chain problems. The Philly Fed was really good today. Initial claims are coming down. I mean, I can list a whole litany half percent. And that's in the face of higher supply chain problems. The Philly Fed was really good today. Initial claims are coming down. I mean, I can list a whole litany of things. And I would say the volatility we're going to still have. But at least we have one of the three unknowns now kind of past us or at least somewhat resolved. We don't know if the Fed is going to be able to engineer a soft landing. Nobody knows. But the fact that they're willing to say that they need to tighten 11 times, they know they're behind the curve and they're going to take action. I think they're

going to do four and then they're going to be more data dependent. But at least we kind of know. Let's put that to the side. We got through it. Now we have geopolitical issues. And of course, we do have inflation. And I don't necessarily think the 11 hikes, if they do do it, will solve inflation. We need supply chains to get better and they will eventually. But I think there's much too much momentum in the in the economy that I do not think we're going to see a stagflation situation or recession. We'll leave it there. Stephanie Link, Gregory Branch, I appreciate your time very much. We'll see you again here, I hope. Still ahead in overtime, your volatility playbook, Quadratic Capital's Nancy Davis

joins us. She made one of the best trades, as I mentioned, over the past few years. It wasn't all that long ago. She has a keen eye for volatility. She'll share her best ideas with you next. Plus, the travel trade. One top money manager making a big bet on the reopening where she is seeing opportunity right now.

We'll tell you in the two-minute drill coming up before we get out of here today. And don't forget, you can catch us on the go by following the Closing Bell podcast. Overtime's back after this. Welcome back. We have an OT alert on U.S. steel. That stock is under pressure. Take a look at that. It's down three and three quarters percent. The company is updating its guidance, now projecting earnings of two dollars and ninety six to three dollars a share. That's for the quarter. It's below the expected range of what was three dollars to three seventy eight.

So guidance a little bit light stock getting a little bit lighter as we speak here in overtime as well. Thirty three dollars, thirty five cents down three and a half percent. It's time for a CNBC News update with Shepard Smith. Hey, Shep. Hey, Scott. Thanks from the news on CNBC. Here's what's happening now. The White House, or I should say the House, voted in the past hour to suspend normal trade relations with Russia and its ally, Belarus.

That clears the way for higher tariffs on imports from both of those countries. The vote overwhelmingly bipartisan with only eight votes against. It still needs to pass the Senate. They're expected to take it up very soon. The WNBA superstar Brittany Griner will be in a Russian prison until at least May the 19th. Russian state media announced the court decision today. Russian authorities arrested Griner last month at a Moscow airport. Authorities say they found hash oil vape cartridges in her luggage. And 400 bulletproof vests destined for Ukraine stolen from a New York nonprofit. Police released surveillance video showing these groups of people pulling up to the facility and stealing the boxes full of vests

that gear donated by police departments in the New York City area. Officials say they were going to be sent to security and medical teams inside the war zone. Tonight, several hundred students at Morehouse College got a huge surprise on graduation day back in 2019. Their entire student debt was wiped clean. So tonight, we'll check in with some of them to see how big of a difference that gift made in their lives on the news. Right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. We'll be there. Shep, I appreciate that. Thank you so much, Shepard Smith. The VIX hitting its lowest level in a month today. There it is, just north of 25. Let's bring in Nancy Davis, Chief Investment Officer of Quadratic Capital Management. She's also the Portfolio Manager

for the Quadratic Interest Rate Volatility and Inflation Hedge ETF. That's called the IVOL. Welcome back. It's nice to see you. Hi, Scott. Great to see you. Congrats on your new show. Thank you so much. It's great having you on this first week. I know you've been looking for more volatility. It certainly has been more volatile. The question is, what happens now? Let's look forward. Are you still? Yes, definitely. I think interest rate volatility, I think VIX is equity volatility. So one thing for your viewers is anything with the options market has a vol market. There are lots of different volatilities out there. And I think interest rate vol, especially in the U.S., with such unknown monetary policy with the balance sheet and fiscal stimulus, is a pretty good opportunity. I think it's a good buy right now.

I'm not allowed to give financial advice, but I think as an asset class, it looks pretty attractive. Yeah. I mean, what do you make of what the Fed had to say, the path forward, whether they're going to be able to realize what the market has priced in or not, and then how that ultimately impacts the vol picture. Well, the hikes are already priced in, so nothing really changed with Powell's forward guidance. He had already tightened the rates market because the hikes had been priced in already. I think the thing that was quite unusual was dancing around the balance sheet and not really talking about it. It was kind of a kicking the can down the road

a little bit. I think that's the elephant in the room and how they let that roll off or unwind. We've never had the QT happen before, the quantitative tightening. So I think it's a good time to own fixed income volatility in portfolios. Beyond buying, let's say, talking your own book, right, the eye fall. And I can understand why you would suggest that people may want to do that. You also have a way of playing the flatter yield curve that may be a counterintuitive way of looking at it. Is that right? Yes, that's our BNDD ETF, BNDDD. That's also long volatility, long fixed income volatility, but it has exposure to the long end of the curve in case the Fed hikes a lot like what's priced in. That might actually cause the economy to slow and go into sort of more of a Japan-style

recession. So that's another strategy that we want to offer to investors, depending on their view on the market. We had Jeffrey Gundlach here with us to react to the Fed, and he always gives actionable ideas. Will you listen to what he said yesterday about his own view, and more specifically to the VIX, I would like to get your reaction to it. Here's Jeffrey. I've just gotten to the point in my career where I've seen this movie so many times. When the VIX gets above 35, I don't care how bad the tape looks. I don't care how bad geopolitics look. You're supposed to get more bullish. What do you make of that? And I don't know whether we're going to get back to 35 or not.

It sounds like you think we may. But what do you think? Well, the VIX is just equity volatility, specifically its S&P short dated volatility. So I think it is equity volatility is very mean reverting. So I would agree with Jeffrey that having the VIX tends to mean revert when it does spike. I mean, it's definitely just one type of volatility out there. I think the thing that he knows really well is that most investors are actually short fixed income volatility naturally in their portfolio from their exposure to mortgages. If you think about if you own a financial mortgage, the homeowners, the homeowners are the ones who are long the option to prepay whenever they want. They call that convexity correction or prepayment risk, which is just a nice way of saying short volatility.

And it's actually fixed income volatility that most investors are short naturally. What happens, though, if and Gundlach, by the way, also had a view on that the two-year may be topping out shortly as well and Scott Minard was on this week I mean you're talking about pretty keen bond minds that maybe the 10-year was in a range of two to two and a quarter that it was was topping out what happens if both are in terms of the kinds of strategies that you're recommending our viewers pursue well our strategies are really agnostic to the level of interest rates. We're another type of spread product. So we gain exposure to the spread between interest rate differentials. So it doesn't really matter necessarily where

interest rates are, whether they're 2 percent or 5 percent or 1 percent. It's really just the spread between short and long dated rates that we provide access to. We're going to see what happens. Nancy Davis, I appreciate you being with us here the first week of overtime. I'll see you again soon. Thank you, Scott. Great to be on. All right. You take care. Still ahead on overtime. Break out your passport. We're going global where you can find the next big opportunity overseas. A lot of people are now recommending that's the place to look. Plus, betting on the friendly skies. One top stock picker says investors should book a one-way ticket on this reopening play. We'll bring you that on some overtime movers.

You saw FedEx. The earnings earlier were a miss. FedEx was down more than that, so it's cut its losses there. You see FedEx is still trading lower in overtime, three-quarters of 1%. GameStop, earnings out as well. That stock's right now down seven percent. And we're taking a look inside those numbers to give you some more context coming up, we hope. LetterX, U.S. Steel, we just told you about that guidance cut.

The stock is down about one and a half percent, excuse me, four and a half percent right now. It was looking at a dollar fifty four down. And there's Coupa Software moving slightly higher today. Really got banged up earlier in the week. You heard Ricky Sandler of Eminence Capital mention that as one of his best ideas, a stock that he has been adding to and did add to as that stock did pull lower. Up next, we're talking emerging market opportunities with rates going up. Is this the place you should be?

We will debate that. And don't forget to vote on today's Twitter poll. What's a better place to be through the next Fed decision, Bitcoin or gold? If you caught the show yesterday, we asked Jeffrey Gundlach. Now we want to hear from you. Go to CNBC Overtime at CNBC Overtime to weigh in. And while you're there, give us a follow. That way you can play all the polls. We're back in overtime in a few. In today's halftime overtime, another widely followed market voice pointing out a potential opportunity outside the U.S. in emerging markets. This time it's Wharton's Jeremy Siegel. Kalanovic mentioned emerging markets. What is that, 8, 9, 10, 11 times earnings?

I mean, that's almost, you know, depression levels. Well, he was talking about Marko Kalanovic of J.P. Morgan, Jeffrey Gundlach also looking at it. So let's ask Joe Terranova, one of our halftime investment committee members. It's good to have you at Overtime, Joe. Welcome. It was Marko Kalanovic today who, who in his note said there are great opportunities in high beta beaten down segments and one of those included emerging markets. What do you think? Because you've invested in the space through the IEMG in the past. What's the story? Well, first of all, the professor is correct when you're looking at the emerging markets, whether it's the IEMG or EEM ETF.

It is incredibly cheap relative to the S&P. It trades at 12 times earnings. Both of those ETFs, which I have owned previously and was recently stopped out of it from a risk management perspective, they're going to give you significant exposure to both China and Taiwan, over 40 percent. Now, I think the right strategy is to be right now investing towards the emerging markets. But I don't want to be solely concentrated, Scott, towards China and Taiwan. I want to have an approach that's incorporating a lot of global economies that are isolated and really immune to the Russia-Ukraine conflict, not importing significant amounts of oil.

So let's give consideration to Latin America. You could look at the ILF. That's 60% exposure to Brazil, 24% exposure to Mexico. And then an additional way to capture some of the emerging market investment thesis as we move forward is the emerging market debt market, EMB. That's the Emerging Market Bond Fund. Scott, there you're going to find Mexico. You're going to find Indonesia. And what's interesting about Indonesia, 5% of the holding there, is that there you have a steeper yield curve and lower inflation. So I want to take the Jeffrey Gundlach approach, which incorporates diversification. It's thoughtful. It's judicious. I want the IEMG,

but I also want to include the ILF and the EMB. And no matter what you're going to pick, you're going to have to be able to stomach some volatility, maybe more so than even here in the United States. You are going to have to stomach some volatility. And you're also, when you're allocating towards Southeast Asia, having to deal with rising COVID numbers. But also, Scott, remember this. July 6th, President Biden and his administration, by that date, the review of necessity on President Trump's tariffs for your expiration. That has to be answered. There's $300 billion worth of tariffs. There's a chance that they could be relaxed, vacated, and that would lead to a tremendous amount of upside for the emerging markets collectively as an asset class. Halftime, overtime. Appreciate you being here, Joe.

We'll see you soon. That's Joe Terranova joining us now. Up next, Santoli's last word, the potential sell signals he has in his sights. He's going to tell us next. Mike Santoli here for Santoli's last word. What do we have today? Well, look, the market has made a decent case that this is some strong buy-the-dip mentality at work, up nearly 6% in the S&P over three days. We talked on Monday about how there was a high burden of proof for the bulls. Well along the way of meeting that burden, I would say based on how credit markets have behaved, the decline of volatility.

However, this is a market, I've been saying this in recent years, it just rushes up to its next test. It doesn't just kind of play around in a range. And this test is almost here. Half a percent higher on the S&P is the 50-day moving average, which is declining. Remember, everybody, as we saw this correction unfold this year, said we're no longer going to buy the dips rally. We're going to sell the rips rally. So that would be an intuitive area where you'd have people attempt that. And still, we're trapped in some kind of a trading range until further notice, whether it goes up to 4,600 or not. It's kind of interesting that we're here in a hurry when three days ago we were saying, are we going to be breaking 4,000? Well, because you had broken 4,200 when we had been in a pretty good channel there. And it was like, OK, are we going much lower?

And now you're back above 44. Yeah. And so the risk reward obviously is a little more balanced here. Of course. I don't know that we've used up as fuel all the negative sediment that had built up because it really was significant. Even the polls today said people are still very pessimistic. You've got options expiration tomorrow. That was seen to be an upside gravitational pull. Maybe we used a lot of that up. And then you have month end coming. March has a history of being an inflection point month if it's been trending in one direction. So we'll see. NASDAQ, you mentioned the S&P up for its three straight days. I mean, the NASDAQ is up 5 percent this week. And now you have and you do have more people

coming out suggesting that maybe the bottom really is in. Yeah. And the Kalanovic note today, I thought was so interesting because he pointed specifically to the bubble areas. That's right. Of the market, that the valuations had come down. And that's going to be the real test. The most crowded areas perhaps become the areas people had just exited most aggressively. And so therefore, maybe opportunity. I buy that there's a relative opportunity there as a trade. I mean, I think ARK's up 20 percent already off the low. The question is, I also remember 2000 to 2002 and stuff didn't get cheap, cheap, cheap until it was like nobody wanted to talk about it. So I don't know if we have to get there. Look, we sat here yesterday at the at your Santoli's last word and suggested, no, make no mistake, the Fed was hawkish today as people tried to read between the lines a little bit and suggest otherwise. Lloyd Blankfein

says maybe not so much. And he tweeted that, as I mentioned earlier in the show. Hawkish in words, without a doubt. I think that was the effort was to portray a hawkish stance. But no, I do agree that if you pull it apart, if you're talking about 4% inflation by the end of the year and you're talking about six rate increases, it's massively negative real yields. I don't know how much support that gives. I still think that, you know, valuations are going to be hard to rebuild back to where

they peaked. But, you know, we can go up 8 percent from here in the S&P, still have a down year. So that's an interesting middle zone. It's an interesting take by Lloyd. He usually sees things in ways that a lot of other people don't. Thank you. Yeah. Mike Santoli with his last word today. Up next, three big bets on the reopening. Your two minute drill is just two minutes away. Let's get results from today's Twitter poll, and it is close, but Bitcoin is the winner. 52% of you said, which is going to do better through the next Fed meeting? That Bitcoin is going to be it over gold, 52 to 48. So you agree with DoubleLine's Jeffrey Gundlach, who we asked that same question to yesterday and inspired today's poll. It's time now for the two-minute drill.

Top stock picks just before the clock runs out on us. Joining us now is Paine Capital Senior Wealth Advisor Courtney Garcia, also a CNBC contributor. You're on the clock. It's great to have you here. We're talking reopening trade. DAL is the first one we're going to do. And that, of course, is Delta Airlines. Why?

Yeah, and actually, I've been on here recently talking about airlines. And I think this is still a really good play right now because you're seeing those really increased demand towards travel that's going to happen this summer and even just this week alone your airlines really started a bounce on the fact that they expect their earnings to go up and demand to be higher than they expected in the first place but that balance is still well below where they were previously and delta i like it just generally was one of the strongest balance sheets pre-covet and that still is the case now and interestingly enough they're actually showing that their revenue per seat this March is going to be about the same what it was in 2019 in March pre-COVID levels. And that's happening the same time that inflation

is now at 40-year highs. So the idea that consumers aren't going to be spending on money on travel because inflation is kicking in is clearly not coming to fruition here. And it's just more of a reason of how much demand there is toward travel. And I think Delta is a really good way to play that. So I'm going to ask you about the relationship between that stock and what's happening in energy as it relates to a specific name. But before I do that, you do have another travel related name, and that's Expedia. Yes, which same idea here. You're going to have this this increased demand towards travel. What's happening, though, we saw this in the retail sales in February, is consumers are spending. The idea is they're going to be spending money on

services as opposed to goods. And so you want to be looking at travel, hospitality. Expedia is very much a beneficiary of that. And I do like a couple of things about Expedia. Number one is they will actually cut their costs annually by about $950 million, which is really going to put them in a position as labor costs increase, they can absorb some of that. And they also have a collaboration with Trip.com, which is one of the largest online travel agencies in China. And the Chinese traveler could very well be about a third of the travel industry bookings in the next five years. So having some opportunities like that, even in emerging markets, I think is really optimistic

on their end as well. And how about ExxonMobil? Obviously, with what's happened in oil prices, you know, it seems to be a good play. And a lot of those stocks have done quite well. The question is, are they topped out along with oil? Right. And that's the question. We all know the oil is doing fantastic. The price of it is up right now. But what happened is if we rewind two years ago, oil actually went negative for a short period of time and it forced all these energy companies to become a lot more lean and mean. Exxon very much being one of those. And so they've really cut their costs on their balance sheets, have a lot of free cash flow. They're actually expected to double their earnings potential by about 2027. And their profits are already higher than what they were pre-COVID. And keep in mind, they do

not need oil prices to be this high. Their break even on oil is, I think, around thirty five dollars a barrel. So they do even if oil prices were to come down, they still have a lot of room to breathe there. Pretty interesting. Fourteen buys, 17 holds on Exxon, something you don't see every day. I appreciate you being on very much in the two minute drill. Courtney Garcia, we'll see you again soon. Thanks so much for having me. All right. In overtime, we do have the best week for stocks of the year. Three up days in a row. Where does it go from here? I'll see you tomorrow. I'll send to fast money right now.