Closing Bell - Closing Bell Overtime: How To Play The Latest Record Close For S&P 500; How Big Tech Is Progressing On Its Home-Grown AI Chips 3/27/24

Episode Date: March 27, 2024

The S&P 500 powered to a record close. We have the names for you that still have room to run higher. BD8 Capital’s Barbara Doran and G Squared Private Wealth’s Victoria Greene break down the market action while Gabelli Funds CIO of Growth Howard Ward talks growth opportunities outside of big tech stocks. Loop Capital analyst Anthony Chukumba reacts to earnings from RH as a read on the high-end consumer. Mercer US CIO Olaolu Aganga on her favorite spots in emerging markets and how to invest in China. Plus, our Kristina Partsinevelos is in Austin, TX to check on the progress hyperscalers are making on their home-grown AI chips.

Well, we just got it. A record close for the S&P 500. It's the benchmark index and the Dow snapped three-day losing streaks. That is the score crowd on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, the NASDAQ also snapping a two-day losing streak, led partly by semiconductor names like Marvell, Intel, and OnSemi. But the S&P tech sector is in the red. Utilities and Energy, the big winners there today. Coming up, Mercer's U.S. Chief Investment Officer on the recent market swings and where in the world she sees the biggest opportunities right now. Plus, we will have instant analysis of RH's earnings and the insight that that has on high-end consumers as those numbers are out, plus what it means for housing. But first, let's begin with our market panel. BD8 Capital Partners CEO Barbara Duran and G-Squared Private Wealth CIO Victoria Green.

It's great to have you both here. Barb, I'll start with you. S&P 500 settling here. It looks like at 52 forty eight. We're coming up on the end of the month. We're also coming up on the end of the quarter. We've had five straight months of gains for the S&P. Can it continue here? Are we really poised for a pullback? Well, I think people have been looking for a pullback since the beginning of January after such a big run at the end of the year. But it's a bull market, and bull markets tend to make new highs.

I think the question here is we've had such a quick, hard run. I think some kind of stutter step in here would be normal. But I think what we're seeing this last month or so, you know, tech is not as aggressive. The Navidias of the world, they're rolling over a little bit, which would be normal, you know, profit-taking there. And I think you're seeing a nice broadening out in the market, whether it's in energies, financials, materials, some commodities. So I think you're going to continue to see opportunities in the market, I still think, and I've thought, you know, for a few months here, it is a stock picker's market. And you can make, hey, and you just buy on pullbacks. I think this churning is going to be normal. Everybody seems

to be, you know, expecting a soft landing. The Fed made it clear last week. They think they're close to making a decision. And they still talked about three rates. And of course, what got this started was in the fall, the Fed indicated they had reached peak rates. And the question now is how many? But even that doesn't seem to matter because in the beginning of the year, people expected six. The market seemed to discount that. And now we're expecting three, maybe two. And the market's still going higher. And I think that's simply because the outlook for corporate earnings is very strong. Victoria, do you see it the same way, especially since I know you've been, I think, as you've put it in your own words, constructively bullish for a while now?

It's a bull market now. Everybody just needs to accept that. And actually, we're running behind where the bull markets of 2009 and 2020 were. So this is just a very normal bull. We actually just released our second quarter outlook. And what we said is this is just a normal bull market. Everybody stop freaking out. This is what happens in bull markets. Nobody believes it the first few months. Everybody doubts it the next few months. Eventually, people catch up. We still have tons of cash on the sidelines. But as we mentioned, fundamentals are there. Earnings are growing. I think we're going to see increases in productivity that can continue to drive earnings growth. And that broadening out is just fantastic. Energy and value leading a little bit. For me, that says this baton can pass a little bit between

just the mega caps. I'm still a buyer, though, of most of the mega caps that they dip, I think that's still a good place to pick things up. But I think any dip is going to be so short lived because there are many investors waiting for their chance to get in. And I think if you continue to wait, you might get burned. We saw this in multiple bull markets of the past. If you keep waiting for that other shoe to drop, you may be sitting out a very long time. Yeah. I mean, after 2023, it's like a bull riding a bull, though. That's unusual to see. A lot of people didn't expect it. Barb, you mentioned the necessity in some cases to trim from some big gainers here. But in a market like this, where do you put it when you trim? You don't want to stay in cash, I imagine, for too long, even though that might be tempting. It is tempting, tempting. But that is that is a quandary because,

you know, for instance, a lot of people are talking about small cap. Their time is coming with interest rates being cut. I still think it's a bit early for that trade because it really is dependent on interest rates being cut. Given that credit is tight for small businesses, they're the ones who have more leverage and so on and so on. And the Fed probably, you know, if they do three cuts this year, it'll be in the latter half and it's going to be incremental so that the cuts will show up over time and not immediately. So, and I think, you know, industrials have, there's been good names, whether it's Eaton or the materials, Martin Marietta, things like this are in defense where people are trying to

find, you know, bargains there. But I think you can just wait for pullbacks. You know, as you know, a week or so ago, I mentioned a video as my top pick. Well, since then, it's pulled back a lot. So that is a name you are still going to make a ton of money. So you can wait for those kind of pullbacks, you know, and add back in. But I think you have your shopping list ready and you wait. So I think right now it's tough for investors to wait because, you know, it's a bull market. Where should I be? But some of the names that you've been in are the place to stay because they will continue to grow and make money. So you just have to be patient. Well, speaking of shopping and waiting, we are awaiting results from Restoration Hardware.

Really, it's called RH now. Victoria, I wonder how the overall, this weird housing environment where, yes, new homes are selling, but largely because existing homes aren't. How does that affect names in the category of RH that have some dependence on turnover in housing? I don't know if you're buying a big expensive dining room table or a big sectional couch if you're not moving into a brand new house, and a lot of people aren't. Well, they say they cover everything from couches to caviar, so I think you can find something at RH these days. But no, it has affected them, and that's the big thing.

Everybody's waiting on this turn on their margins, and they had an ugly quarter last quarter, and this quarter is expected to be a little bit nasty as well. But what we need to see is margin improvement, and if they follow their peer, William Sonoma, if they show margin improvement, that they're done with the discounting, they're able to sell more things for full price, then we could actually see the market positively be receptive of earnings, even if they're a little

bit light. But a lot of it's on the outlook. A lot of it's going to be on their margins. And yes, they need the housing market to kind of loosen up a little bit. And that has weighed on them. But we have seen their peers be able to show there might be a light around the corner for this home furnishing markets, which has probably been one of the weakest parts of the retail market. But they are they're expanding. You know, there's a lot to like if you're willing to take a little bit of a gamble that, yes, we do think it's going to be ugly, but it might get better down the road. It's like if you're hiking with that horrible friend that just promises you like, oh, it's just another mile to go. Like, it'll be fine. Yeah.

And speaking of RH results are out, we're going through those numbers right now. We're going to bring them to you in just a moment here. But shares of RH are tanking on this, down 9% right now. Barbara, it raises the question, investing in goods versus investing in services right now, are there opportunities there? Or given the fact that consumers really do continue, and we even saw it earlier today, carnival results, good example, and consumers do seem to be putting their dollars to work, continuing to put their dollars to work in experiences. Yeah, no, I think it's true. We did see a pickup in durable goods orders,

and you're seeing a pickup in manufacturing. But when you look at, you know, I think you're still seeing services, the hotels of the world, casinos, it is still all about that. And RH, I think, is a little bit a special case because they are so tied to the housing cycle. And even Williams-Sonoma, which has been killing it. Williams-Sonoma is up 55% this year compared to RH up 2%. And RH, I'm suspecting they still, they talked about inventory clearance. They have a stock. Who knows what they're talking about guidance.

I don't think they have their call till 5 p.m. But it's really, is the trough there? Are they going to, they have 80% new products in their stores. They need to talk about their international. So the stock, you know, it's down a lot. So obviously it looks like they've missed numbers like they did last time, which were they missed on earnings, sales and margins. But we have to really see what they see going forward.

And there may be signs of like, and certainly some of their peers besides William Snow reported and they reported better guidance. So I think that's going to be key for this stock. All right. Barbara, Victoria, thank you both. Let's get more on our age right now. Bertha Coombs has the numbers that bounces around between down 7 and 8 percent. Yeah, John, a big miss on both the top and the bottom line. The company reporting 72 cents per share. The street was looking for $1.67. On the top line, $738 million. The street was looking for more than $777. The company blaming January weather delays and shipment delays for the issues during the quarter. Gross margins. So this is one of the areas that folks have been looking at because they've had a problem with discounting and their margins have been coming down.

Came in at 8.7 percent. The street was looking at gross margins above 12 percent for them. The company says in their release that we have spent the past 18 months destroying the former version of ourself and are in the process of unleashing of what we believe is an exponentially more inspiring and disruptive RH brand. They're referring there to the Pablo Picasso quote that every act of creation is first an act of destruction. But right now, shares are down. They're fairly volatile. We'll see what more they have to say on the call this afternoon. Yeah, as you were talking, they bounced off the lows pretty strongly, now down just about 1 to 2 percent.

Bertha Coombs, thank you. As we continue to watch that and wait for the call, let's bring senior markets commentator mike santoli for his dashboard mike yeah john a lot of celebration for the broadening out of this bull market over the last few months with some value sectors participating you take a look at how value is performed relative to growth measured by the russell 1000 uh indexes and you see it's been tentative there's definitely was a low back a few months ago in in november on a relative basis it's trying tentative. There definitely was a low back a few months ago in November. On a relative basis, it's trying. We, of course, have had a few false starts in this direction, mainly because the growth part of the market just continues to outperform.

So it isn't necessarily that value is outright weak. And in fact, the next chart shows you that. This is the same Russell 1000 growth and value indexes just separated out. You can see on their own that they both are in pretty healthy trends. Clearly, magnitudes don't compare. But, you know, this is a pretty nice uptrend line. You're at new highs. It looks like things are pretty much coming together. The question is whether you want to make a big bet one way or the other.

And, you know, argument is probably only if you believe in very long-term reversion to the mean would you say let's go heavily into value right here. Of course, you are picking up a lot of potentially kind of broken value trappy type sectors if you do that, John. It's weird, Mike, because in this market it seems like every time people get scared, value and the Russell 2000 overall get hit harder. And when people get excited, the big large cap tech stocks get a bit higher. What would it take in this environment for the Russell 1000 value, you know, historically speaking, to get more of a chance? I mean, arguably, if we're getting Fed rate cuts into a still strong economy and the broadening out of earnings growth really takes hold, as the current consensus argues it probably should, that might be enough for a little while. I just don't know that it's going to happen

to the exclusion of growth. You know, the best periods of value versus growth and small cap versus large after the peak in the year 2000 for the overall market. Yeah, they did really well relatively, but a lot of that was because mega cap growth got destroyed. So it wasn't necessarily a happy time. It was just a less miserable one for value in small investors, Morgan. All right. Mike, we'll see you later in the show. We have a news alert on Discover Financial. Pippa Stevens has the details. Pippa. Hey, Morgan. Well, the Discover Financials CEO has quit.

The board of directors accepted the resignation from Michael Rhodes. And in a filing, the company said that he was not expected to have a long-term role at the combined company after the completion of the merger with Capital One Financial. Mr. Rhodes will remain as CEO through April 1st and will also act as an advisor to the interim CEO through April 12th. The stock is flat here. Back to you. All right, Pippa, thank you. Up next, a top retail analyst reacts to RH's earnings and what he wants to hear from executives on the call at the top of the hour. As you can see, those shares have now turned higher. They're up almost 3 percent, moving around a lot here in overtime. And later, Gamco's chief investment officer of growth

equities and where he sees the biggest opportunities in tech right now and why he recently trimmed his funds position in Apple. Overtime's back in two. Let's get another check on RH. Those shares getting restored a little bit in overtime. They're up about 3% now after being down about 9% after missing on earnings in the top and bottom lines. Joining us for a deeper dive on that report is Anthony Ciccumbo from Loop Capital by phone. Anthony, the most interesting part of this report to me that I see so far is in the outlook, where they say they expect business conditions to remain challenging until interest rates ease throughout this year, and they expect revenue to lag demand during the year, so increased backlog of $110 to $130 million.

What in that, if anything, would traders after hours be finding encouraging? So I think what they're finding encouraging is the fact that they are talking about the fact that they expect results to improve sequentially as the year goes on. There's a lot of talk in the letter about the newness that they have coming. So there was a new RH outdoor sourcebook. They're coming up with a new RH modern sourcebook, a new RH interiors sourcebook, a new RH contemporary sourcebook. And so I think it's optimism around the newness and this forecasted sequential acceleration.

But, I mean, these fourth quarter results were not good. I mean, to miss the top line by, you know, call it $50 million and then EPS by $0.97, that's not great. This reminds me of the fixed income market, Anthony, in a way, because it's the prospect of things not getting a lot worse because rates have probably peaked. That idea that that's good news. Yeah, I think so. I mean, the other thing to think about from a just kind of macroeconomic, you know, sort of 10,000-foot level is the fact that existing home sales have gotten significantly better early in 2024, right? I mean, particularly the number that we saw in

February up 9.5% sequentially, the best existing home sales since February of 2022. And clearly, this is a business that's very levered to existing home sales. So I think that there is some hope that if the macroeconomic conditions get better, that will certainly benefit RH. And then if you sort of marry that with the newness, it could set up well, particularly as you get into the back half of 2024. I mean, along those lines, you have a CEO at RH who has not been known to, or has been known, not been known to mince words and has come out very strong with some of his commentary in the past about the macro. When you look at RH specifically, how much of this is macro versus company specific,

especially as they do stand up a new line with RH Modern? And given the fact that some of its most direct publicly traded peers like Williams-Sonoma have been doing so much better. I think that so here's the difference between RH and Williams-Sonoma. You know, Williams-Sonoma is definitely levered to the overall housing market. RH is more levered to the high-end housing market, right? And so, you know, that's a difference. The other thing is that, to some extent, Williams-Sonoma is doing a lot of things that RH already did that were very successful for them. So the most notable one of those being the fact that they have pulled back on site-wide promotions, right? And so they're selling more at full price.

If you remember, RH did that years ago when they went with the RH members program and essentially, you know, eliminated discounting at that time. Okay. So the key question here, with the stock moving around in overtime and now up almost 4 percent, despite a top line and bottom line miss, is do you buy the stock here on the belief that it's troughed and things get better now, or do you sit on your hands and wait a little longer? So we have a hold rating on RH at Loop Capital Markets, basically downgraded the stock in June of 2023, right around these levels, right around call like 310 or so. You know, when you look at the valuation here, it's not particularly cheap. And, you know, it is kind of a show me stock,

right? I mean, like I said, they just reported a pretty bad quarter. And while Gary thinks that things are going to get better, you know, it seems like he kind of thought things would have been better by now just off of the newness. So, you know, yeah, I just don't see a compelling reason to get involved at RH at these levels. Now, if it was to pull back significantly, that would be a different story. All right. Anthony Chukumba, thank you. From Loop Capital. Up next, Mercer's U.S. Chief Investment Officer, Alalu Aganga, on why you might put money to work in China as that country's leader meets with American CEOs in Beijing. And check out shares of Merck closing at a new high after the FDA approved its treatment for a rare, potentially fatal lung condition.

Analysts estimate the drug could reach annual sales of up to $7.5 billion. Shares finished today up 5%. We'll be right back. Welcome back to Overtime. Take a look at shares of Miller Knoll sinking in overtime. The furnishings office and home furn Furnishings Company, just reporting earnings which declined year over year. The company's saying, quote, overall demand patterns across much of our business have continued to be sluggish, driven by elevated interest rates

in major markets around the world, ongoing geopolitical concerns, and a lagging housing market in the U.S. Sounds a lot like restoration hardware, RH, but a very different overtime reaction. That's right. It's RH plus office furniture. Chinese President Xi Jinping met with American CEOs in Beijing today in an attempt to boost foreign investment in China. Our next guest is someone who recommends a nuanced approach when investing in China. Joining us now is Olalu Oganga, Mercer's U.S. Chief Investment Officer. It's great to have you back on the show. And that's where I'm going to start, because we've talked about emerging markets and investing there,

but it's tended to have an asterisk attached to it, which is excluding China. So walk me through how you're approaching it, how you think about it, what that means both in terms of investing in China and avoiding it. Yes, it is a nuanced approach, right? Because if you start thinking about the emerging market complex and we group them together, but we really shouldn't. We have countries like Brazil, India, Taiwan. Those countries have demonstrated clear resilience, growth potential, and really underscores the importance of geographical diversification, right? So you need specialized knowledge in order to be able to do that.

Now, for institutional investors, adopting a long-term view and a diversified investment approach is key to weathering a lot of the volatility. So if you think of China, U.S.-China relationship has significant implications on global investment strategy, policy shifts, you name it. China is over a quarter of the emerging market index. It is cheap from a valuation perspective. Some could think it could be a valuation track, but you require expertise on the ground that knows the names, able to navigate them. And as you sift through, you do find pockets of value. OK, so we expand this out. We're coming up on the end of the

quarter. S&P poised for a 10 percent gain since the start of the year, more than 30 percent over the past 12 months. When it comes to institutional investor flows, we do talk about these rebalancing. What does this mean when you think about stuff like pensions, for example, which tend to be well-funded right now, and how that money is shifting and the role that, say, fixed income is playing when equities have had such a strong rally? Yeah. I mean, firstly, if you're lucky enough to have a pension, that's a great thing. Pensions are well-funded. As of the end of February, we do a pension barometer. We've looked at the state of retirement for quite some time. Pensions, S&P 1500, rose about 1% in February.

So it's another strong month. Big contributor is equities. There are moderate rate increases that have contributed as well. But equity markets really have contributed to the improved funded status as they continue to have a bull run. And it's consistent with what we've been seeing through the end of 2023. And we monitor the funded status of pensions through time and comment on that and really research that broadly speaking. But if you are fortunate enough to have a pension, this is a great environment for you.

Alalu, tell me about what is happening in fixed income overall that you see because of what's been happening with rates or what the expectations are for rates. We're just talking about RH and the numbers are in good, top line or bottom line. But the stock is higher in overtime in part because there's the expectation that rates have peaked and better times are ahead. So as you look what people are doing in fixed income, shifting duration, does that reflect this expectation as well? Yeah, I mean, right now we're at a stage, and we've talked about this before, we have rates where they are, it's poised to go lower, but we're seeing adjustments to fixed income duration, particularly for a lot of the large asset owners. Like three quarters of them

believe that their fixed income portfolios are resilient now, like we've seen inflation where they are. They've adjusted their duration. Initially, it was a lot more shorter duration type of assets. They've extended duration to the five, six year bucket to be able to take advantage of the higher rates. But as rates go lower over time, you will continue to see an extension in the duration position. And we're already seeing that over the last few months. And we're actually recommending that clients continue to adjust their duration positions. So in a way, is that a return

or at least an expected return to a kind of normalcy? I mean, if rates were this high in an ordinary market, you would expect investors with balanced portfolio desires to be locking in some of those higher rates for a longer period of time. But while we got, you know, AI stocks running and big tech continuing to power higher, a lot of investors might have hesitated to do that. Right. Correct. Now that if you are and we also have talked about this, if you're day trading your portfolio, if you have shorter time horizons, if you're moving your portfolio between equities and fixed income frequently, then yes, equities are attractive right now. They're at record highs. They continue to be at record highs. But that could quickly change. The clients that we're talking to is making sure that you are not making knee-jerk reaction and you continue to be balanced. Now, if you're continuing to be balanced, it means that for diversification, you should continue to have equities, fixed income,

other asset classes that are in there for diversifiers if and when we see the markets change. And those drawdowns happen. They're quick. They're really quick. And we make sure that clients have their portfolios protected in that event. But with regards to fixed income, yes, you do have bonds. They're a constant staple in your portfolio. And then you look for other tools for diversification. All right. Maybe we can learn something from the big money there. Alalu Aganga, thank you. Mercer's U.S. chief investment officer. Time now for a CNBC News update with Contessa Brewer. Contessa. John, local officials in Virginia have ended negotiations to bring the Washington Wizards and the Capitals to Alexandria. The city said in a statement today it ended the talks after the Ted Leonsis-backed deal did not align with

the city's financial interests and community values. The House Education Committee has added Rutgers University to the list of schools under investigation for anti-Semitism. The committee sent a letter to the university requesting information on anti-Semitic incidents. It said the institution did not adequately address, as far back as 2021, Rutgers is the fifth college to be investigated, joining Harvard, Columbia and MIT. And North Carolina's entrance into legalized mobile sports betting is off to a strong start. State lottery officials said today nearly 200 million dollars has been wagered in the first week alone but you know John it is March Madness and by volume we expect to see a bigger sporting event in terms of betting than even Super Bowl so there's that. Yeah for sure there's so many

different things to bet on, if you bet. I'm not a bettor, but there you go. Contessa, thank you. I love that Contessa brought us that story, too, since she's an expert. She's a resident expert on it. Yeah, I got back from Vegas just overnight, but part of Contessa's mind lives there for sure. All right, there is a growing trend in companies trying to design their own AI chips. Would that eventually be a threat to NVIDIA?

Well, Christina Parks-Nevelis is in Austin, Texas with more. Christina. Eventually, maybe. I keep touching everything, John. But what's happening is you have mega cap tech companies that are spending billions of dollars building and designing, I should say, chips in-house like this microscope used to look at the finer features and voltage of inside a chip. Coming up after the break, we look at how maybe these products could steal market share away from the likes of NVIDIA and other chip native companies. That's next. Welcome back to Overtime. The growing need for cost-effective AI semiconductors is leading some of the biggest names in tech to craft chips designed for their AI workloads,

hoping to avoid having their margins devoured by premium silicon from NVIDIA and others. Christina Partsenevelis is at Amazon's Austin Chip Design and Testing Lab in Austin, Texas. With the details, Christina. John, it's also not only about high cost, it's also about the short supply. We've seen that with certain companies and trying to get a hold of their chips. That's why so many mega cap tech companies have announced that they're going to be, you know, creating further iterations of their in-house chips or like OpenAI creating possible in-house chips in the future, should they be able to do so. All in an attempt to build it in-house. So they're spending billions of dollars and then reducing their reliance on third-party chip companies like AWS.

That's where I am right now, surrounded by all these really smart people, PhD, way smarter thanapurna labs focusing on in-house chips they've been working on their chips for about 11 years and yet they still have to maintain a partnership with Nvidia very similar to Google Google as well has a similar case they have their tensor processing units TPUs and they are gaining in popularity listen in they're seeing tremendous interest and demand from our customers. We're also using them significantly internally for in-house machine learning workloads. So for example, the Gemini models that we've recently announced were all trained and are being served on TPUs.

So Google's using their TPUs, and it's very competitive. It's very difficult to create chips in-house. You're validating a chip right now, right? This is what this oscillation machine does. I'm not going to pretend that I know what it's doing. But what we do know is that not everyone gets it right. Researchers have recently found security flaws in Apple's new chips, or chips, I should say, the M1s, the M2s, and the M3s.

You also have Microsoft that's been working for years on their custom AI chips and only recently announced them to the public. We're not sure exactly when they will be launched for sale, but it just shows how long it's taking. But overall, John, what we're seeing is companies like this, mega cap tech companies spending billions of dollars to build and design in-house so that eventually they can steer their own destiny and not be so reliant on third-party chip companies. Yeah, Christine, it's interesting. In a way, this is a playbook, as you mentioned, that's been going on for more than a decade. There were cloud providers, the hyperscalers,

taking ARM chips and applying them to things like email, the very basic functions in the data center, trying to drive down costs so they could grab share, remain competitive. It looks like that's playing out in AI as well, maybe not competing with the very highest end functions of NVIDIA and others, but those basic AI tasks, if they can handle those with their custom silicon, at least to start, then they have a profit advantage, right? Yes, exactly. And it's a matter of being a little bit more specific than general purpose GPUs that can do a lot of tasks. Instead, they can create chips that are very, very specific, and that's

how you can lower the price. That's how you can say it's more cost efficient. And so that's part of one of the angles for AWS themselves is they're offering more power efficient, cost efficient. And so that's part of one of the angles for AWS themselves is they're offering more power efficient, cost efficient. Google said the same. I'm sure Meta, when they launch theirs, is going to say the same. It's all about bringing the best quality to customers. The problem is how many customers are going to want to switch to the in-house options when they're already stuck in that NVIDIA ecosystem that Jensen Wong loves to talk so much about, or they're using that NVIDIA developer or software named CUDA. So it's a matter of getting the customer to switch over

and then take advantage of maybe sometimes the cheaper, yet more efficient options. Yeah. Great deep dive, Christina. Thanks for bringing it to us. It's pretty amazing. We were just talking about it relatively recently, but to her point, years in the making for a lot of this. All right, Christina Parts Neville as well. Talk about a buzzkill up next. Mike Santoli takes a closer look at why the coffee business is having a latte problems. And Reddit shares finally taking a breather after a huge rally following its IPO last Thursday.

Despite today's pullback, the stock is still up roughly 70% since that debut. Stay with us. Welcome back to Overtime. The Gabelli Growth Fund has more than a billion dollars in assets. Top holdings include AI winners like Microsoft, NVIDIA, and Alphabet. The fund recently trimmed its positions in ServiceNow, Apple, CrowdStrike, and Adobe. And Howard Ward, Gabelli Fund's CIO of Growth, joins us here on set. Great to have you here, Howard. Talk to me about the trimming. I mean, when you got a growth fund

and you got multiple trillion plus market caps, what makes you decide enough is enough? Well, you've all heard the old saying about pigs get fat and hogs get slaughtered. I'd rather be a pig than a hog. And in 2023, these stocks were amazing, you know, returns of 100 percent, in some cases more than 200 percent. And then they began this year with at another torrid pace. And we were concerned, still are concerned about the prospects for a recession this year. We're not out of the woods on that yet. And in a recession, these stocks are all going to hiccup big time. And so we decided we would take some of our profits out of these names, rotate that money, bring down the tech weighting, bring it down a little bit.

I mean, John, the tech weighting was up near 60%. That's a lot of tech. So we brought that down. And specifically in the case of Apple, I mean, we built our Apple position 10, 12 years ago at very low prices. Apple's growth has clearly been slowing, almost no growth last couple of years, it probably will accelerate now, but we have to acknowledge that. We had a 12% stake in Apple, we've been we've cut that now I think three times over the last two years, getting it down around 5%. To acknowledge the fact that the easy money with Apple, you know, it's gone from being a 20% grower to a teen grower to a single digit grower, plus a share buyback to get

it to double. You know, you want to pay too high multiple if you're getting 4% of your growth from share buybacks. So we still like the company, great products. We hope the growth reaccelerates, but that's been in a trip mode. But CrowdStrike, the ServiceNow, the Adobe, again, huge 2023s, long-term prospects, very good. The positions had become large. And again, let's just not be too greedy. If we have a turnaround in the market, let's not give away everything that we've gained. So that's all it was. Okay. So you're trimming tech because tech was such a big part of the fund. Where do you find growth outside of tech right now? I hate that question.

So it's hard. But the other big story, really, and it was a great story, it still is a great story, is the GLP-1 drugs. Yeah. In the case of Eli Lilly, which is our biggest holding in this area, you've got ZipBound and Moonjaro. And you've probably seen the press, they can't produce these things

in enough supply to meet demand. The demand expectations are very high. I think they will still go higher. You know why? Nobody wants to be overweight. They don't. Unless they want to be overweight tech stocks. Unless they want to be overweight tech stocks. And as people become more comfortable with the safety profile of these drugs, the demand is going to go even higher. And yes, there will be some additional competition from other drug companies over time. But right now, it's Lilly

and Novo Nordisk that really own this market. And Lilly, we think, has the better product. Let me take you back to tech real quick, because a lot of people say, I notice you're not trimming NVIDIA. I don't think you said that. No, actually, we added to NVIDIA in the first quarter. So why you trim ServiceNow? People argue, OK, well, NVIDIA always grows into its valuation. Some of these software names are growing nicely. Yes. So why do you trim them? Well, okay.

Software weight in the portfolio versus the hardware weight in the portfolio. The software weight in the portfolio was substantially overweight. The hardware was underweight. So it was a little bit of more hardware, but also just NVIDIA-specific. What's happening there is a once-in-a-generation kind of thing. And artificial intelligence is this tremendous new technology that will surely bring innovation and productivity perhaps at rates we've never seen before, impacting a whole host of industries.

So it's really rare to get a shot to buy a company that is in the catbird seat that essentially has a monopoly position on the tools that are required to generate this technology. Uh-oh, the DOJ might have heard you. And don't get me started on that. So NVIDIA is really a special situation within tech. And on the hardware side, we're more comfortable owning more NVIDIA and less of some of the other chip names. And software, it was just too big a part of the portfolio. So we love these names, but people need to understand if you buy tech stocks today, don't think that they go up all the time. They don't.

And if we do get this recession that is still a risk, they will all get hammered. So buyer beware. Howard Ward, thanks for joining us. Thank you for having me. Well, up next, top energy strategist on why he thinks oil's rally this year still has room to run, at least in the near term. Stay with us. Welcome back to Overtime. We have some results from our Delivering Alpha Investor Survey for you.

This poll surveys institutional investors, top strategists, our own CNBC contributors. We ask them where they're forecasting the best returns for the remainder of 2024. Tied for third place, oil. And so far this year, crude is up 14 percent. Joining us now is Macquarie global energy strategist Vikas Dwivedi. Vikas, it's good to have you on. I'm just looking at your recent note here where you say oil is likely to grind higher until 90 bucks a barrel, at least in the case of Brent. And you point to geopolitical tensions. Walk me through it. Yeah, absolutely. The rally we've been in, we think has been one of the healthier rallies because it's not been so one sided where everybody knows it's bullish, thinks it's bullish. And everybody's going to make a ton of money on the long side.

There's debate. There's actually tension on the rally. You know, the questions are, do the geopolitics matter? They do. They haven't mattered as much as in the past, and nor should they, because these geopolitical events haven't turned into actual supply hits in a long time. But there is frictional costs, right? Rerouting vessels into much longer voyages, higher insurance, those type of things. And then a little bit more uncertainty, right? Like I'm getting my oil, but it's not quite as reliable because of the risks. Also, we've had an undue number of supply outages. Those are mostly

done, but there's still some residual impact. You know, those outages have tightened the market. And, you know, I think when we put that together, we think the oil market is still on the tighter side. And as you know, we've been bears for a long time in oil. You know, we're generally bearish because we've always viewed supply as easy to grow. So Vikas, how much does your $90 oil call hinge on China macro data? Not much. You know, we're not expecting a lot from China. There's a lot of China enthusiasm. Look, it's not trivial for us. You know, we have 1.3 million a day of demand growth

in our model and 600,000 a day of that is China. Last year, China grew by, you know, almost 1.6 million. So it's quite a bit less than last year, but it's a little bit more normal. But we don't think that even if the Chinese economy picks up rapidly, their petroleum economy, i.e. their demand, probably won't follow. A lot of their demand is already pretty decent in terms of the growth. All right, Vikas, thank you so much for joining us. All right, thank you. The energy piece of this is going to be one to watch, right? Because we know it funnels into other aspects of the economy. And at a time where inflation has been pretty sticky. And of course, we'll be watching for PC, even though even though the markets closed on Friday as well.

And GDP tomorrow, that could matter. It could. And then at the same time, we're about where we closed today. I don't know. About what? Right where we were a week ago in one of the indices I was looking at. I'm blanking on it right now. But there's been this bouncing around that's continued to happen in certainly so much of tech. And you wonder how long these record highs and the S&P can keep getting made. Yeah, especially as yields have been, yes, largely range bound,

but certainly pushing the higher end of that range. And again, some of that's going to matter on some of this macro data we get. And of course, thin trading. Tomorrow's the end of the quarter. It's kind of amazing. S&P 500, record high today, snapping that three-day losing streak we saw. And the Dow close to 40,000 now. Kind of amazing. That does it for us here at Overtime. Fast money starts now.