Closing Bell - Closing Bell Overtime: Stocks Keep Rallying, Biotech Buyout Boom & Under the Radar Housing Play 12/26/23

Episode Date: December 26, 2023

Stocks surging again as the major averages try to extend an 8-week win streak.  Long-time bull Tom Lee says the market can keep rallying in the new year – and reveals which group he thinks can soar 50%. Another day, another buyout in the biotech industry. This time it's two deals. Astrazeneca acquiring Gracell Biotechnoligies for $1.2B and Bristol Myers buying Rayzebio for $4.1b and comes just days after Bristol announced a $14b deal for Karuna Therapeutics. Wedbush Biotech analyst Laura Chico says the M&A action should continue next year and names her top picks in the space. The Mastercard spending pulse report shows holiday retail sales increased 3% from a year ago despite retailers warning about spending concerns. Neuberger Berman's John San Marco and Bernstein's Nikhil Devnani name their top retail and e-commerce picks. And Frontdoor CEO Bill Cobb discusses his red hot stock, which has been soaring along with the housing market. He discusses whether consumers are still spending on home warranties and repairs and if he is able to increase prices. 

Santa Claus rally continues with another up day for stocks in this final trading week of 2024. That is the scorecard on Wall Street. The action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Hort is off today. Stocks rallying to kick off the final week of the year as the major averages try to extend an eight-week winning streak. Turn that into nine. Coming up, Funstrat's Tom Lee tells us why he sees no sign of the Bulls slowing down and reveals the group he thinks could rally 50% 5-0 next year. Plus, the biotech buyout boom rolls on. We will discuss whether more pharma M&A deals are in the cards for 2024.

But first, the major averages are higher. Again, the S&P trying for its longest weekly win streak in nearly 20 years. But check out the Russell 2000 adding more gains, up more than 1% on the day, almost 1.5% as things settle here. But let's bring in Unlimited CEO Bob Elliott to kick things off. Bob, it's great to have you here. I mean, S&P 500, it looks like up 0.4 percent today, 47 at 74. I mean, when we started the year, did you think that we would

end here up 24 percent on the broader market? I think few people thought that we were going to get to that point over the course of the year. Even I, who was pretty bullish on economic conditions, thinking that we were unlikely to get a recession, was surprised that there was the magnitude of easing that we then saw in the last quarter of the year that's really driven this last leg higher. But when you see what's happening with the Treasury and the Fed taking steps to ease the tight monetary policy that had existed before, you've got to go with it. That's a great situation for stocks. The economy is still strong.

Monetary policy and long end is easing. Those things add up to being bullish stocks, particularly relative to the bond market. So for 2024, is it a don't fight the Fed mantra again? Well, it's the Fed and the Treasury who have both taken the steps to really rein in any concerns about an era for higher for longer. And it's true. It's an environment where you don't want to get in the way of that liquidity production that the Fed and the Treasury are providing and somewhat committed to provide. The real question is whether you wanna be thinking

about bonds in that context. I think stocks, it's relatively clear, but bonds are a little more concerning, particularly when you see all those cuts that are expected to come in 2024. So in light of that, does 60-40 make sense in 2024? Are you thinking about it differently? Well, I think 60-40 in general, you continue to be very concentrated in stocks. And just because it looks like there's strong momentum in the stock market and weak momentum in the bond market

heading into 2024 doesn't necessarily mean you want to give up on that diversification. You might look for other opportunities to find that diversification. You know, we've talked about gold plenty over the last year and it's held up well relative to bonds. And so you may see that gold looks a little bit better as a diversifier relative to stocks as we go into 2024. I love that you brought up gold because that's exactly what my next question was for you. And that's the fact that it has been a good year for gold, whether it's inflation starting to come off or yields finally coming back off a little bit. The geopolitical aspect of all of this and the uncertainty. That means the fact that central banks have been buying more heavily in gold, too.

Are these fundamental drivers that continue into 2024? Yeah, I mean, you make the case well for all the different things that are supporting gold. We've had a real stepwise move in terms of the gold price relative to interest rates over the last couple of years as those geopolitical concerns have crept in and central banks that have been concerned about holding U.S. dollar or European denominated bonds look for other assets to hold in order to protect themselves and their reserve assets. That's shifted the level up. The second question is then what happens with interest rates and inflation in that context. And their gold has continued to benefit

from the fact that we've had a bit, you know, we've had this weakness in interest rates and probably the combination of the two things. Certainly, if you think that bonds would be a good diversifier in 2024, you should really be thinking about gold, given the complex that it brings, particularly on that geopolitical tension in the event that it increases. OK, let's bring in Fundstrat Global Advisors Head of Research Tom Lee to this conversation. Tom, it's great to have you back on Overtime as well.

I mean, we've talked about your year-end price targets. The fact that you basically nailed it this year with $47.50 for the S&P and, of course, us sitting here at $47.74 as we talk about this today. Next year, you expect $5,200, so about 9% upside. But there's another group that you like even better. It's small caps. Why? Well, I think there's room for a lot of positive surprise next year. You know, easing financial conditions and falling inflation and falling rates means we could unlock a lot of pent up demand, both for consumers as mortgage rates fall, but also for a lot of capital spending. That sort of economic momentum really favors small cap

stocks, which in our point for outlook, we highlighted there at 1999 lows relative to the S&P. That was the launch point for 12 years of relative outperformance. And when you think about their small cap exposure to regional banks where asset quality can improve, I think this group could easily add 50% next year. Not that different than the fact that we thought FANG could be up 60% in 2023 because of the valuations being so attractive at the start of this year. So, yeah, I think small caps could really be the leading group next year. You know, Ben Emmons at New Edge Wealth put out a note over the weekend, Tom, showing that core PCE deflator six month annualized rate. It's fallen below that two percent target of the Fed and that since July.

So when the so when the funds rate reached five point five percent, Treasury yields and mortgages hit 15 year highs. That's when you saw essentially that six month annualized PCE cut in half. I mean, the chart is pretty startling. Does this disinflation narrative continue? Is it time to start talking about, dare I say, a deflation? Well, if disinflation is taking root, which, look, when you think about cars, which is 11% of, you know, CPI, core CPI, and I mean, car price, used cars price probably going to fall 30%. I do think you could actually have an undershoot on inflation. It's much easier, though, for the Fed to offset this with cuts and then communication. And, you know, the incentive would be for the S&P to actually the Fed would like to see the S&P rally,

because that's one way to offset disinflation. So if you're concerned about an undershoot on inflation, you know, it's actually more upside for equities. Bob, do you see it the same way? And I ask because it's this last, quote unquote, mile of inflation as we do move back towards this stated target by the Fed. We know historically can be very sticky. And even just today, the Case-Shiller Home Price Index showing another increase in housing prices. And I realize that's a lagging indicator, but your outlook on this and how key for the market to continue rallying in 2024 is it that we continue to see these prices come down? Well, the Fed has benefited from a bunch of big disinflationary impulses in the economy.

Tom mentions used cars, which have fallen pretty rapidly over the course of the year. And in order for them to continue to add that disinflationary pressure, they'll have to continue to fall at the same pace. Similarly, we've had a buck decline in oil prices or gas prices over the course of the last eight or 10 weeks. Those are things that are all adding up to bring that disinflationary pressure into the economy, but they won't necessarily last forever. And so I think that's where the Fed is likely to be a bit more cautious than folks are necessarily expecting, particularly priced into the short rate market. When they look at that services X housing segment of inflation, there's still some room

for concern with, you know, that pace running around 6 percent and not really coming down the way we've seen in a variety of different goods prices. And so probably it'll be a pretty good picture. It'll look pretty good for maybe three or six months. And then once those disinflationary pressures ebb a little bit, the real question is whether the rest of the economy and particularly wages start to come down. And that's where I think it's going to be a little more ambiguous. And that's why the Fed's probably going to be a little more cautious than what people expect. But look, there's been a big easing in the economy over the last 10 weeks.

It doesn't mean that stocks can't continue to rally. It's just it's going to cause the Fed to be a little more hesitant than what folks are thinking in the bond market. As we have this conversation, Tom, and as we have seen economic data soften a little bit, we do have Fed rate cuts pricing in for next year. Financials, it's your favorite large cap sector. Why? Well, I mean, financials got a gut punch in 2022 and in 2023. They really haven't gotten a break really since 2009. We had a 100-year chart showing that financials price ratio to the S&P hasn't been this low since ever.

In fact, we're just touching a support level that would have been where financials rallied in like 1950. So to me, this sort of constellation of factors that are pointing to pent-up demand and falling rates would be very good for financial stocks whose PEs at 12 times. And I think there is a consensus anchoring that services inflation is high. But when you deconstruct services inflation, some of the biggest contributors are auto vehicle repair, auto insurance, vehicle leasing.

These are related to car prices and are really just lagging the step up in car prices over the last few years. So to us, I think there is an anchoring bias to think inflation's quite sticky when actually the trajectory has been kind of falling like a rock. Tom Lee, Bob Elliott, thank you for kicking off the hour with me. Have a happy new year. Apple is appealing a decision to ban imports of some of its watches after the White House said it would uphold the ban. Steve Kovac is here with more details. Steve, we've been following the story pretty closely and very telling to hear that the president is going to basically stick with this decision by the ITC to uphold Massimo,

who's been on this show, with their patents. Yeah. I don't know if you got what you wanted for Christmas. Apple definitely didn't. They were hoping for this 11th hour veto by the president or the U.S. Trade Representative, more specifically, to veto this International Trade Commission decision to ban Apple watch sales by the deadline yesterday. Well, didn't happen.

And the ban went into full effect today. This, of course, like you said, stems from that patent dispute specifically on the blood oxygen sensor on the Apple Watches by that health tech company, Mossimo. Now, Apple says it's working to make changes to the Apple Watch so it doesn't violate those patents and hopes to start selling the watches again soon. Also filed an appeal today asking for yet another stay on this ban until customs and border control determines if patents were violated. That decision coming by January 12th. But in the meantime, right now, banned from selling the two latest models of the Apple Watch. That's, of course, the Series 9 and Ultra 2. And this only applies to the United

States. Now, there's another version, the Apple Watch SE, that doesn't have that oxygen sensor. That's still in sale. You can buy it like normal. And third-party stores, Best Buy, Amazon, Target, you name it, they can still sell their remaining inventory, but Apple can't sell it from its own retail stores. Now, let's talk about the revenue impact here. Of course, it's not the most popular product at Apple. That would be the iPhone. But Morgan Stanley analysts last week estimated less than 2% of Apple revenue would be affected by the ban. And Apple could be missing about $135 million in sales for each week the ban continues. Now, I know that sounds like, you know, peanuts on Apple scale, but everything counts, even the little bits from the Apple Watch, because Apple is still struggling to return to that top line sales growth after four straight quarters of declining sales. I'm going to throw two questions

at you at once. And the first is in reaction to this. Why aren't they just working with Massimo, maybe like paying for the right to use their technology? A and B, the fact that the White House said we're not getting involved, we're not vetoing. That tells you everything. Yes. And it sort of speaks to an environment in which the biggest of the big tech names are under antitrust scrutiny and are being considered, you know, potentially too big for their britches. And there needs to be more, at least from a political standpoint, there needs to be more room for competition. Case in point, not just here in the U.S., but even just today, Japan saying it's cracking down on Apple and Google App Store monopolies. Yeah. So for a little bit here, it says a lot that the U.S. trade representative,

who appointed by President Biden, just let this happen. No veto, looked at the facts, studied everything. And Apple, loved company, people love their Apple Watches. It's not like they're going to run out and buy a Mossimo watch all of a sudden. But what could happen here? Why don't they just play nicely with Mossimo is your question. They've done this before. We've seen this play out with Qualcomm over the modems and the phones. In fact, Apple literally stopped paying Qualcomm for those licensing agreements that they had because they didn't believe that they should. Eventually,

they ended up having to. And in fact, they had to renew their deal with Qualcomm because they couldn't make their own modem. We're seeing not the exact same thing play out here, but a very similar thing. A lot of people think the end game could be something similar where there's some kind of licensing deal between Mossimo and Apple. I know the Mossimo CEO is on this program saying, call us, Apple. We're ready to deal with you. Not happening yet. Yeah. And I guess in some ways it sort of gets right back at the idea that they are big. They're sitting on a huge cash pile, and they have all the leverage in the world. All the lawyers, they can fight this tooth and nail. And to your point about Japan, I mean, look, this is happening country by country,

these regulations. What Japan is proposing today about the App Store model, allowing more App Stores, allowing different payment systems, not a new idea. We see it in Europe. We're seeing it talked about here. And we'll see more of it in 2024. Exactly. All right, Steve Kovach, thank you.

Well, there's an urge to merge in the pharma industry with two more deals being announced today. Up next, a top biotech analyst on whether M&A Mania will pick up even more next year. These companies are paying top dollar too, by the way. And later, the CEO of an under-the-radar housing play whose stock is up more than 70% this year. He's going to tell us whether he sees any signs of slowing demand. Overtime's back in two. Welcome back to Overtime.

It's a busy week already on the biotech front. Two deals announced just this morning. First up, AstraZeneca to acquire Graycell Biotechnologies in a $1.2 billion deal. Shares of Graycell jumping on the news. Look at that, 60% today. The deal will further AstraZeneca's push into cell therapies for cancer and autoimmune diseases. Graycell is headquartered in China and has operations in both the U.S. and China. Plus, Bristol-Myers will acquire radiopharmaceutical therapeutics company RaiseBio for $4.1 billion, RaiseBio up 100% on the news today. This deal comes after Bristol announced just Friday that it will acquire Karuna Therapeutics for $14 billion. Karuna

has an experimental schizophrenia drug up for U.S. government approval. So joining us now to talk about biotech M&A and whether to expect in 2024 more of it, Web Bush Securities' Laura Chico. Laura, I'm going to start right there because what's so incredible about both of these deals today is the premiums attached to them with these price tags. Is this going to continue into 2024 as some of these big biotech companies and pharma companies that are sitting on a lot of cash look to find growth? Yeah, thanks, Morgan. And I think you hit the nail on the head. You know, it's from the buyer's side. We have a lot of cash to deploy and we have pipeline gaps to fill. And from the target

side, we have a number of assets getting more mature, but valuations are still attractive. You mentioned the premiums, but the large and mid-cap biotech space is still only trading at about a six to seven times multiple to revenue. So I think that both sides of this story can work in 24. We have seen about five deals,

as you mentioned, in December already. That's definitely higher than the average. We typically see about two to three deals in the December, January timeframe. But I do think this continues in 24. I mean, we've been having a conversation about the fact that we're starting to see across industries and across sectors a pickup finally in M&A activity after a dearth of it, at least earlier in the year. Has that been the case in this sector, too, or has it been more robust? No, absolutely. It's picked up here in the second half for biotech, and we've done about $118 billion in total deals. So far, we've tracked

about 21 M&A announcements this year, and that's considerably higher than even just last year when we did about 14 deals and about $60 billion worth of transactions. So the pace is definitely accelerating here. What are names in your coverage universe that could be takeover targets? Yeah, you know, I think we're looking at companies that have more de-risked assets that have gotten through a number of clinical trials or things that are starting to mature. And I think within that wheelhouse, we're talking about names like Viridian Therapeutics, VRDN. It's a billion-dollar company focused on thyroid eye disease. Edgewise Therapeutics, another one, EWTX, is a smaller cap name and a little earlier stage, but a focus in both muscular dystrophy and cardiac disorders. I'm looking at your notes here, and you talk about the fact that there have already been 52

FDA approvals. How does that compare to years past, and how crucial is that approval pipeline to all of this dealmaking continuing? It's definitely an important driver. And I think the number has actually moved up to 55 now for the year. And I think that's second only to a couple of years ago when we had 59. So FTA remains incredibly productive. And I think that still bodes well for the future here. We have a PDUFA calendar, regulatory decisions that are already pretty filling up for 2024 as well.

We're also going into an election year. How much is that going to factor into investor sentiment? You can say dealmaking activity, but even more broadly than that, investor sentiment in this sector, given the fact that we know, politically speaking, drug prices and other dynamics within health care tend to come under the microscope? Yeah, that's a tricky one to answer here. And I think we've seen a little bit of the kind of political blowback this year as the Inflation Reduction Act has started to kind of impact things. And we've gotten our first slate of drugs that are ready for negotiations. But, you know, I think heading into the election year,

still optimistic here because we do have a number of factors, like you mentioned, the FDA remains productive here. We have attractive valuations and a number of companies move along. And I think we have a good catalyst lineup. So a number of data points that should be reading out. So net net, I still think it's a positive year for biotech. OK, a healthy year for biotech ahead, potentially. Laura Chico of WebBush, thanks for joining me. Thanks, Morgan. It's been a December to remember for retail stocks, which have been significantly outperforming the S&P 500 this month. Our next guests will give us their top retail and e-commerce picks for 2024. We'll be right back. Welcome back to Overtime. Holiday retail sales rose 3% from a year ago thanks to slowing inflation and healthy job creation. That's according to MasterCard's Spending Pulse report. Spending increased for restaurants and apparel, but sales declined for electronics and jewelry. For more on where to find opportunities in retail and e-commerce, let's bring in John San Marco from Neuberger Berman and Nikhil Devnani

from Bernstein. Good afternoon to you both. John, I'll start with you because the MasterCard numbers to me are very indicative of the fact that you have a consumer that's still going out there, that's still spending, but not at the huge and fervent rate that we saw over the last couple of years as we were coming out of the pandemic. Is this a last gasp in spending or before things slowed down more materially, or is this a return to something more normal finally coming out of the pandemic? Thanks for having me on. And, you know, I think the latter. I think this is, you know, boring in the best possible way, or certainly in a good way. This is, we've achieved kind of the new normal wallet share shifts from services to goods. That's

kind of stabilizing a bit. As you mentioned, some of the disinflationary impacts from gasoline and food prices, and that should help the discretionary budget as well. So, you know, we think that the environment's lukewarm, and our outlook for 2024 is for the consumer spending to remain lukewarm in this 3% to 4% range. Okay. Nikhil, do you see it the same way, especially given the fact that, and I'm just coming out of the most recent retail earnings season, I mean, if consumers continue to get more selective, they're much more focused on spending on their needs rather than their wants, much more deliberate with purchases. But on the flip side of that, we've seen so much inventory destocking that at

least some companies have said they haven't had to mark down or discount as aggressively as maybe they had earlier in the year. Yeah, look, I focus on the e-commerce vertical. I think boring is good is probably the best way to put it. You know, what we've seen this year is that growth has been pretty stable. But what's working right now is aggressive promotion. So what we're seeing, at least in the online space, is a very promotion-heavy environment. Consumers are being selective. They know that there are deals to be had and gone after.

And they're waiting around for those deals to come through. And so they're engaging when there are sales and discounts on there, but not so much when there aren't. And so I think that sets up again for an environment that's okay, but not necessarily super robust. Keep in mind, e-commerce used to grow 12, 13, 14% pre-COVID. Right now it's doing about eight. So it's somewhere in between, you know, the lulls of coming out of that COVID hangover and still getting back to what we would consider normal as we look ahead. OK, John, I want to get your thoughts on what represents an opportunity, an investing opportunity as we look to 2024 in retail. Sure. Dollar Tree is our largest position in the Next Generation Connected Consumer Fund. And we

think investors have really got hung up there on their family dollar banner that they own. It's less than 10% of EBIT, and it's admittedly sort of been a choppy turnaround. We frankly believe that things get better in the new year. There'll be some stabilization in SNAP government assistance funds. But the real story here that kind of gets lost in the controversy around the family dollar banner is this Dollar Tree banner, which is a fall of profit and has just been a really great story that, you know, mid-single-digit consumer traffic growth. They've been rolling out multiple price points with a lot of success. And in so doing, they're attracting a more affluent consumer who, over the long run, just going to be able to open up their purse strings quite a bit more and shop the whole

store and be a more profitable customer. So we think some of that goodness is getting lost in the controversy at Family Dollar. And you're getting a very reasonable valuation on what is mostly a business performing very well and positioned quite well for the environment. Okay. Nikhil, going back to the e-commerce piece of this, the fact that maybe we're not seeing the torrid growth of the last couple of years, but still robust growth, I'll call it, for e-commerce versus broader retail. What are your top picks when you look to 2024, especially in an environment where you have Etsy filing or restructuring inciting macroeconomic uncertainty? Yeah, actually, funnily enough, we don't have any top picks on the e-commerce side.

We're actually starting the year relatively cautious on this basket. And keep in mind, I cover discretionary names like an Etsy. And those are the buckets of e-com and retail that are being hit a little bit harder right now. You know, a company like Amazon is doing a lot better because it sells essentials. But companies that sell home goods, for example, like Etsy and Wayfair, which I cover, are a little bit finding a little bit harder to grow right now. And so as we look into next year, we've had significant amounts of multiple expansion in the last two months alone, given the interest rate outlook has changed so much. And so you've had these stocks run up a ton. It doesn't feel like the fundamentals have moved with it. And so we're starting the year

with a bit more of a cautious stance as we look into 24. Now the fundamentals have to keep up with where the expectations are going. And that might be a tougher thing as you as you roll forward through kind of the upcoming quarters here. OK, that sounds like consumers are being more discerning and investors need to be as well. John San Marco and Nikhil Devnani, thanks for joining me. We have a news alert on Amazon. Speaking of e-commerce julia borson has the details julia yes amazon prime video will start incorporating ads as of january 29th as according to a report from the verge and this follows and is very much in line with what amazon said earlier this year which that it plans to start incorporating ads into movies and tv shows streamed from amazon

prime video early in 2024 So the date is now January 29th. They have said they'll have meaningfully fewer ads than linear TV and other streaming providers. And then customers have the option of paying an extra three dollars per month to avoid ads. Back over to you. All right, Julia Borson, thank you. Kind of keeps going back at that narrative of cable bundle 2.0, doesn't it? Time for a CNBC News update with Pippa Stevens. Pippa. Hey, Morgan. A senior Iraqi official says 20 people were injured by U.S. strikes on a militant base today.

The strikes targeted the headquarters of Iraq's Popular Mobilization Forces, an Iran-backed militia. The U.S. launched the attack after three service members were injured by a drone attack on a U.S. base on Christmas Day. Police say they are investigating incidents directed at Colorado Supreme Court justices following the court's decision to remove former President Trump from the state's presidential primary ballot. Officers said they are providing extra patrols around the justices' homes and looking into any reports of threats or harassment. The efforts are being coordinated across local, state and federal law enforcement agencies. And 7 million people are under winter weather alerts today as blizzard conditions roll through

the plains and parts of the Midwest. Snow is falling at a rate of an inch an hour in parts of the region. Denver International Airport reported 200 delayed flights and 18 cancellations this afternoon. The National Weather Service expects the blizzard weather conditions to continue through Wednesday. Morgan, back to you. Winter is coming. Ms. Stevens, thank you.

There is no place like home. Up next, we will discuss whether the sky is the limit for surging home prices now that mortgage rates are falling. And do not forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Home prices posting the largest gain of the year in October. And that was in spite of rising mortgage rates. Diana Olick has the details. Hi, Diana.

Hi, Morgan. Yeah, you would have thought home prices couldn't hold up with an 8% mortgage rate, right? But they did. Home prices nationally rose 4.8% in October year over year, according to the S&P Case-Shiller Index out today. That's a jump from the 4% annual increase in September and marks the strongest annual gain of this year. This, as the average rate on the 30-year fixed, crossed 8% on October 19th, according to Mortgage News Daily. That was the highest level in more than two decades. Rates, however, dropped steadily through November and more sharply in December, with the 30-year fixed rate now around 6.7%. So going local, among the top 20 cities, Detroit reported the largest year-over-year gain in prices,

followed by San Diego and New York. Portland, Oregon was the only city in the index showing lower prices in October versus a year ago. So with rates now much lower, home prices will likely continue to gain even more, all because of the very low inventory. Prices are now 1% higher than the peak in 2022, and they have recovered all the losses recorded in the second half of last year. Morgan? This is absolutely incredible to me. It is so different than what we've seen in past cycles with higher rates. Correct me if I'm wrong. Is this really just because we have such a dearth of inventory or is there more to this story? Like, for example, the mix of buyers?

No, I hate to be simple with you, Morgan, but that is simply it. We have never had this few homes for sale given the type of demand. Millennial home buyers coming in and Gen Z now coming into the market. And we have this incredible lack because when we came out of the Great Recession, the builders didn't build. And then we had the pandemic just surge in demand, which bought up all kinds of houses all over the country. So that just made for record low inventory. So with high demand, low inventory, it didn't seem to matter where mortgage rates went. Prices just continued to go up.

The question now is with a six percent ish rate this spring, will sellers finally get off the fence and say, OK, I'm willing to trade to that 6% rate, even though I have a record low mortgage rate back from the pandemic? Or will they still sit tight and then we still have a problem? And we know you will be the first one to report if we do actually see that happening. Diana Olick, thank you so much. Sure. Well, check out this under- radar housing winner. Shares of Front Door up more than 70 percent this year. Up next, the CEO of the Home Services and Warranty Company on the strength of the consumer and

whether he plans to raise prices. Stay with us. Welcome back. Home building stocks have been a red hot this year, but check out shares of Front Door. A more than 70 percent year to date. The company offers home maintenance and repair as well as home warranties. It has been a stealth play on housing. Joining us now is Front Door CEO Bill Cobb. Bill, it's great to have you on the show. Welcome. Thanks, Morgan. Happy holidays. Happy holidays to you. And, you know, we just teased it as a stealth play on housing. What are you seeing at a time where, as we were just talking to Diana Olick about it, home prices continue to tick higher, inventory continues to be too low, and people are staying put in their homes more often. Yeah, I think Diana said it well. And like she said, you hate to be simplistic. But with the lack of inventory on the market,

it's only 20 days or so. The latest numbers from the National Association of Realtors, it is continuing to drive prices up. But I do think the mortgage decline, the rate coming down about 6.67 and the prospect for lower interest rates, we believe and we agree with the National Association of Realtors. We think there will be more than a double digit increase in housing, you know, in terms of real estate transactions in 2024. In 2022, we did 6 million. I mean, 2021, 6 million homes were sold. 2022, 5 million. This year, it's going to be about 4. So there is pent-up demand. And we do think there will be an increase, especially as rates continue to come down. So what's better for front door? When people stay in their homes for longer, and then they have to do maintenance and repair and they and they turn to you for the guidance and the help to do

that or to get a home warranty, for example, which helps, I would imagine, hedge against inflation? Or is it better when you see this uptick in housing activity and more movement in general? So the great thing for our business is we get the benefit of both. So if real estate was to come back and more homes are sold, we are there with first time buyers. That's part of the mortgage, the situation when you buy a home, you get a home warranty and we attach to about 16 percent of all real estate transactions. But on the other hand, if you're in your home, we have the ability to deal with you directly because systems continue to deteriorate over time. We repair and maintain over 23 systems in the home. And so what happens is people have a tendency to look to us to stay in their home knowing that

something's going to break inevitably. And it's borne out by our retention rate is the highest it's ever been at over 76 percent this year. Which which business is growing more quickly? Well, because of the decline in real estate, that has been that has been down the most. Our direct to consumer and our renewal business, our renewal business is really the backbone of the company. And that's been the one that's been the strongest area. What is it taking to acquire customers and then to retain them in this environment? Yeah, it's taking a lot. Marketing costs are going up. So it is taking a lot. Incentives are there because of the inflationary pressures. So it's a much more complicated marketing approach. But we have a really good marketing team and they're doing a really nice job on that. So getting new customers. But I'm really proud of the work we've done with our current customers. We are sending more and more of what we call our

preferred contractors. Those are our best contractors. They do about 84% of our jobs. We also have done a much better job working through what we call the customer journey, which is making sure we onboard them correctly. We work with them during their time. We actually want people to use our service. That's the best renewal we have to see how well our service performs. And it's borne out by we are running right now our highest five stars we've ever had in terms of reviews and our lowest one stars. Okay. So what do you see as your biggest competition in this marketplace? Is it the more traditional players, you know, housing, home improvement players like Home Depot and Lowe's?

Is it Angie's or some of the other online sites that are focused on housing? Or is it social media or something else? I don't think it's, well, social media is a part of everything today. But I think what we see is there are other home warranty companies there, certainly competitors of ours. We're the largest. But other people, like you say, Home Depot and Lowe's, want to get into the repair and maintenance business. So just like with a number of businesses, it's not just easy to just pinpoint your competitor. What you need to do, I believe, is have the right value proposition, service the customer well, and continue to do a great job with your existing customers and attract new customers. Yeah, we've been talking about technological disruption in real estate and housing for so

long, and it does seem like it's taking root, finally, in a more meaningful way. Bill Kahl, the front door, thanks for joining me today. Thanks, Morgan. Well, crude oil staging a big comeback today on new concerns about attacks on ships in the front door. Thanks for joining me today. Thanks, Morgan. Well, crude oil staging a big comeback today on new concerns about attacks on ships in the Red Sea. We've got those details straight ahead. And check out shares of Manchester United popping after British billionaire Jim Ratcliffe bought a 25 percent stake in the soccer club, values the team at roughly six point three billion dollars. It also ends a sales process that lasted more than a year. Those shares finished the day up 3.5%.

Sports, the value continues. Stay with us. Welcome back to Overtime. We have an update on a story we have been following for weeks here at Overtime. Maersk says it plans to resume container shipping through the Red Sea and Gulf of Aden as soon as operationally possible, quote-unquote, amid the deployment of the U.S.-led military program Operation Prosperity Guardian, which is now in effect.

A number of companies have had rerouted their vessels from the area in the wake of those attacks on commercial ships by the Houthi militants in Yemen. It's a dynamic that has made the critical Suez Canal unusable or too risky for many carriers. The Iran-backed Houthis started attacking merchant ships in response to the Israel-Hamas war. MERSC did note that if the security situation worsens again, it would divert traffic again from the region. Another container shipping peer, Hapag-Lloyd, reportedly saying it too will decide on Wednesday how it will proceed with its Red Sea routes after suspending shipments as well. Last week, we spoke with the CEO of Nordic American

Tankers, which transports oil across the globe. It had one tanker in the Red Sea at the time, the company telling us today that vessel has now passed through and is in the Indian Ocean on its way to Singapore. Keep in mind, though, the threat is still very much active. Just today, the Houthis claiming a missile strike on a MSC Mediterranean shipping container ship. All crew reported safe, no injuries. And last Saturday, a U.S. Navy's destroyer intercepting more drones and ballistic missiles. Oil moving higher as traders point to tensions in the Red Sea. Plus, we had three strikes in Iraq by the U.S. military.

Pippa Stevens joins us here with more. I do want to start with oil because obviously geopolitical risk playing a role here. But also, I think it's kind of flying below the radar. You have an SPR purchase of three million barrels today as well. Yes. So that is part of the ongrowing program to refill the SPR after we had that 180 million barrel sale in the wake of Russia's invasion of Ukraine. And that's been long pointed to kind of providing a floor underneath oil prices, because as they come down, the government is buying, is replenishing the SPR. There's been a lot of focus about that drawdown because it did get to the lowest level since the 1980s.

It was in nowhere near, you know, dire conditions or anything like that. But it was notable that it had been drawn down. So they are refilling over time. But the market is very much on edge right now because while no oil supply has actually been affected, this region is so important. About 12 percent of global seaborne crude passes through the Red Sea with the Suez Canal at the north and the Bab el-Mandab straight at the south. And so, you know, traders are very much on edge watching the latest headlines. And if there is a disruption, you know, also this region has taken on greater importance,

given that Europe is now importing more oil from the Middle East, while Russia is now sending more through the Suez Canal, through the Red Sea, to China and India. So kind of trade flows have really shifted in a way that if there were any closures or if we did see companies decide to reroute their tankers, there could be more of a lasting impact. And of course, when you see these types of actions by Iran back to militants in other parts of the region, for example, in Iraq, where the U.S. military launched three strikes today. That doesn't help the situation either, because I think that raises concerns that this conflict could broaden as well. An area that we haven't talked about a lot this year, but has been rip-roaring, has been uranium,

as given some of the conflicts we're seeing, Ukraine, Russia really sort of cast a light on this last year, nuclear power and the fact that we're starting to see more demand for more projects along those lines. Yes. So spot uranium prices are up more than 80 percent this year, according to UXC. And Jonathan Hinsey said they're now at about, you know, above 80 bucks as well. And he said that they could go over $100, given that there is this kind of newfound almost renaissance for nuclear power. And you bring up Russia and Ukraine. And notably, through all these many rounds of sanctions against Russia, the country's nuclear

fuel supply has yet to be targeted, simply because there is no alternative. They control about 38 percent of uranium conversion and 46 percent of global uranium enrichment. So while they're not a key miner, they are key in that supply chain. And so now there are growing calls in Washington and Europe as well to ban imports of Russian fuel, which so far, once again, we haven't done because we can't. And that coincides with countries now saying they're going to build more nuclear reactors and also extend the lifespan of existing ones. And so all of this means we need more uranium even just to keep our current operations going. And there has not been a lot of investment in the upstream mining because we saw a price collapse after Fukushima. You know, prices were below $20.

And so it did not make sense to invest in new production. And so there's all this interest on uranium. And so the URA and the URNM have really, you know, taken off and traders are looking at a way to play this, given that there are not that many ways to get exposure, you know, to the nuclear fuel industry. All right. Pippa Stevens covered a lot there. Thanks for joining me here on set. Thank you. Well, Aquaman and the Lost Kingdom is the latest superhero movie to disappoint at the box office. Up next, we will look at whether this genre is now, I'm going to say it, kryptonite to Hollywood. Stay with us. Welcome back to Overtime. Aquaman and the Lost Kingdom floundering during its box office debut,

becoming the latest superhero film to fall short of expectations. Julia Borson looks at what this could mean for Hollywood. Julia. Well, Morgan, superheroes, they're no longer a sure thing. Warner Brothers Discovery's Aquaman and the Lost Kingdom grossed $40 million in North America through Christmas. That made its weekend debut the fourth lowest opening for any film in the studio's DC Extended Universe, and that was less than half the opening of the

first Aquaman film back in 2018. While this film has brought in $120 million globally and the first Aquaman did perform much better overseas with an estimated $205 million budget and even more for marketing, this opening is a disappointment ahead of a planned DC Universe reboot in the works. Now, it's not just Warner Brothers. This comes after Disney's The Marvels marked its lowest box office of any movie in Disney's Marvel Universe, with an opening box office less than a third of Captain Marvel. Now, with the box office finishing the year up about 21 percent from last year, but still down more than 21 percent from pre-pandemic levels back in 2019, theater chains and studios alike are hoping that superheroes will appeal again next year

when Marvel has a number of superhero films lined up, including a sequel to Deadpool. Morgan? So all of this raises the question, franchise fatigue, A, and B, in a world where streaming is becoming more and more important, does it really matter how well a film does at the box office? It really does, because the studios really want to have these big franchise films to continue their movie industry, right? They want to make sure to have a movie business in addition to a streaming business. This is all part of the diversification of their media companies. But I think what's really key here, Morgan, is that it's not just franchise fatigue, but also this question of maybe these films just weren't that great.

Maybe these films suffered from things like the pandemic making it harder to shoot. Maybe the screenplays weren't as good because they didn't have people on set really engaged in sort of the real time making of these movies. So there's a question of whether there was a pandemic impact and also whether there was some residual impact from the lack of actors promoting these films. Though obviously the actors are back at it. But during the strike, whether there's an impact there. So a lot of different factors at play. But we definitely saw this year that people like original ideas like Barbie. OK, we'll have to see if it starts to normalize a little bit next year.

Julia Borsten, thank you for joining me. Just taking a quick look at the markets here. All the major averages finishing the day higher as the Santa Claus rally continues. That's going to do it for us here at Overtime. Fast Money begins right now.