Power Lunch - Baltimore Bridge Collapse, Direct Deals 3/26/24

Episode Date: March 26, 2024

A cargo ship crashed into the Francis Scott Key bridge in Baltimore, destroying it in seconds. We’ll get a live report from the scene, and look into the economic disruption as well.Plus, private equity deals have climbed from $6 billion in 2019 to $31 billion last year. We’ll dive into that under-explored section of the economy with an industry insider. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon and welcome everybody to Power Lunch alongside Julia Borson. I'm Tyler Mathes. I'm Tyler Mathis and glad you could join us. And this is the big story everyone is talking about today. A ship crashing into the Francis Scott Key Bridge in Baltimore on the Baltimore Beltway destroying it literally in seconds. We will get a live report from the scene and look into the economic disruption as well. But first, let's check the market. Stock slightly higher, shares of Tesla are higher. Despite noted Tesla bared, Tony Saginaaki, saying the stock is still overvalued. Cutting his price target even further down to $120 a share. And it comes as Elon Musk wants to provide drivers with a free month of the company's latest driver assist system.

All right. We begin, however, with that Baltimore bridge collapse. And let's get right to Amon Javers, who is there at the scene. Hi, Amon. Tyler, still six people unaccounted for here in Baltimore, Maryland. And we've seen the Coast Guard helicopters circling the scene here all day through the morning and now into the afternoon, looking for any potential survivors, any victims of what happened here this morning. Take a look at the ship behind me, and you can see the scale of what happened here. This container ship still wedged under the bridge, some of the wreckage of the bridge,

actually on the bow of the boat, and you can see those containers there. They're still piled six, seven containers high. This was a massive amount of mass that impacted that bridge. And you can see the bridge structure itself there collapsed onto the bow of the ship and the highway now highway to nowhere jutting up into the air. That's where the bridge would have been and was until 1.30 a.m. last night. We did hear from President Joe Biden a short time ago at the White House suggesting that the federal government is going to pick up the tab for rebuilding this bridge here.

No estimate yet in terms of the timing of how long all this will take. First of all, the search and recovery efforts. Secondly, getting that bridge wreckage out of the water and getting that area clear, it's about 50 feet deep in the water right there. So getting that all of that wreckage out is going to take some time and then reopening the port. But you did hear the President of the United States saying that he is going to make sure that the federal government pays for all of this. Here's what the president had to say earlier today. Around 850,000 vehicles go through that port every single year, and we're going to get it up and run it again as soon as possible. 15,000 jobs depend on that port.

And we're going to do everything we can to protect those jobs and help those workers. So the president there talking about the economic impact of what we've seen here. Obviously, a human tragedy has occurred here today, but also a massive economic disruption here up and down the eastern seaboard. I asked Maryland Governor Wes Moore earlier today his estimate of timing to get this port reopened. He said they are just focused on search and rest. at this time, but that port is now a bottleneck and nothing is coming in or out of it anytime soon, guys. Back over to you. Getting the port up and running is one thing and obviously critical for the regional economy, but also getting that road, which is basically the Baltimore Beltway,

around the south and eastern side of the city, back up and running. That could take a very long time. Absolutely. I mean, you're looking at years here, Tyler, and potentially billions of dollars before this is all said and done. The impact from the traffic perspective, you heard the President talk about the vehicles that come in here in terms of sales into this port. It's about 30,000 commuters every day going over that bridge in recent years. So you're talking about a lot of extra traffic now diverted onto I-95, which is the main north-south corridor here on the eastern seaboard. All of that going through the Baltimore tunnels, that is going to potentially impact traffic

in the Baltimore area and transit between Washington and New York, all of the trucking that happens up and down 95, all of that subject to the. those delays as well, Tyler. So just a massive, massive disruption here in Baltimore. It's amazing that more, I can't really tell from that video that we're showing right now, how many of the containers fell off that ship. But it's amazing that more didn't. I mean, when you consider the impact that took out. Go ahead. Amen. Yeah, we can't tell from our vantage point. There's a helicopter, a Coast Guard helicopter here coming over just as I'm talking. We can't tell from our vantage point how many of the

containers may have fallen off the front end of that ship. At the back end of that ship, is piled high as you look at the Coast Guard still circling the area here, looking for any survivors, getting an assessment of the wreckage, trying to figure out what the best plan of action here is to remove all of that wreckage. But you can see the containers piled on the back of that ship, Tyler, six, seven containers high. This was a heavily, heavily laden vessel, and that just gives you a sense of the weight and the mass of that vehicle as it, as it impacted the bridge and why that bridge just couldn't take that impact.

All right, Amon Javers, thank you very much. amazing story here. Let's turn to the financial impact and the disruption. This will have on shipping and logistics. Lorraine Luracco, CNBC's Global Supply Chain Reporter joins us now in Lorraine. Welcome. Good to have you here. Let's set a little level here. How big is that port? And what are the major items that come into and go out of it? Sure. So the port of Baltimore is the 11th largest port in the United States. But it's critical to our imports and our exports, and here's why. It is the largest importer and exports of all automobiles and light trucks. Larger than the port of L.A. Yes, it is. In terms of imports and exports, it's the largest

they call it Roros, roll on and roll-offs. It is also the second largest port for coal exports. So that is very big for our GDP. And so this combined between the commodities as well as the containers. You've got Home Depot. You have IKEA. You have agriculture. cultural products. You have Bob's furniture. All of these retailers are bringing their product in into this port. And then they disseminated out to, you know, the rest of the United States. So when you look at what can happen now, where do all these shipments go in and out of now as everything tries to rebuild there? Sure. So I've spoken with ocean carriers like Maersk, which, of course, is the one that's chartering the vessel here. They're already diverting the vessels

to the ports of New York, New Jersey. They're Virginia, as well as severe. And all of the ports have told me they definitely have the capacity of receiving the products, particularly when you're looking at the automobiles, when you're looking at Savannah and the other port down there. The problem is, is the rails. The rails have to now reconfigure the equipment, the chassis, right, to get to these ports to receive the extra containers. So while the ports can receive it, they have to then push them out of the port. Maybe you don't know this or maybe you do. I can imagine that there may be vessels that.

are actually in the port of Baltimore. And it's also a cruise port. Yes. Vessels in the port of Baltimore that can't get out. Most definitely. You have, I'm going by memory here. You have about five vessels that are currently stuck in the port where, you know, nowhere to go. And then you've got Royal Caribbean and you have carnival.

And so it really is amazing to see how one port, even though people say, oh, it's just the 11th largest port. It's extremely significant to the economy. You were mentioning earlier off-camera ethanol, which comes in and out of there, is then taken, I guess, to refineries in the region and then blended into the gasoline that people on the Eastern Seaboard use. Yes. So when it comes to the local area, so it's not going to be a nationwide type of problem, but in the local area for Baltimore, their ethanol is brought in by bulk, by a bulker vessel. And so now you're going to have to have ethanol diverted from Philadelphia to drive around the long way to get in there so the ethanol can be blotted into the gasoline. Now, obviously, this all just happened. But if you had to look ahead and say what the impact would be on corporations, both those that actually have sort of an investment in that area and also on consumers, what should we expect?

Are we talking about delays? What else? It's definitely going to be delays. and now you're going to have the logistics managers that compounding effect of that just in time, particularly with the automobiles. They are just in time. And so now these vessels that are stuck on, you know,

that were bound for Baltimore have to go now to another port and then have to wait to get onto a railroad chassis. So it's going to be hurry up and wait, and then there's extra costs added for the diversion and for the diversion from the vessel as well as to truck or rail. All right, Lorian, we know what you'll be covering. for the next few weeks. Lori Ann Larancoe, thank you.

Well, let's shift over to a major stock mover. Check out shares meantime of Krispy Cream. Higher by more than 20% after a brief testing period. McDonald's going to expand its partnership with Krispy to all of the burger chains, U.S. locations, by the end of 2026. Kate Rogers has more. Kate.

Hey, Tyler and Julia. So Krispy Cream is going to be doubling its distribution to make this happen, and McDonald's will be its exclusive fast food partner. The donuts, glazed chocolate sprinkle and chocolate iced cream are going to be delivered fresh to McDonald's restaurants every day. The test between the two brands began in 2022. It was initially at 160 stores in Lexington and Louisville, Kentucky. Consumer excitement and demand exceeded expectations, the two companies said in a release today. Now, the initial pilot restaurants will continue to serve the donuts as the rollout is phased in. McDonald's has been leaning into coffee and some specialty drinks at its new Cosmix location in Illinois.

It's also slimmed down, remember, its own cafe menu in recent years. Now, in a research note this morning on the deal, Kalinowski Equity Research said, as best it could tell, the test restaurants were selling an average of about 800 to 900 donuts weekly, adding, quote, one of our industry contacts calls this, quote, better than any baked goods that McDonald's has sold before. Now, what's more, the firm says if the donuts are sold at 10,000 to 13,000 McDonald's U.S. restaurants, then this may suggest an incremental annualized addition to McDonald's U.S. system-wide sales of between $550 and $750 million. It also notes that these sales were incremental, which is good news for McDonald's. Importantly, the donuts will be sold all day at these stores, of course, while supplies last.

Guys, back over to you. So, Kate, I understand why this makes sense for McDonald's with the amount of coffee they sell. Obviously, this is great for Krispy's cream. We've seen that stock move higher on this news. But what does this say about McDonald's and what it's done around healthier food? We've heard about parfaits and salads. Does that mean that those days of healthier fast food are behind us? I don't think they're necessarily behind us, Julia.

But remember, Krispy Cream has struggled a little bit, too, as we've talked about some of these weight loss drugs and what that means for companies like this. I think my takeaway in covering the sector here is that McDonald's is looking for simple additions that will drive incremental sales. And I know that's something that franchisees, rather, have been looking for as well.

You know, things that are easy to make, boost sales additionally, and who doesn't really? like to grab a quick donut on the way out with their coffee. We know people are snacking more and also leaning more into beverages post-pandemic. And this could be, you know, a good move for both companies here. Kate, thanks so much for joining us with that story. Thank you. And coming up, the growing value of tech infrastructure, CFRA out with a new note detailing some of the possible long-term winners of the AI boom. Plus direct deals on the rise, private equity moves climbing from $6 billion in 2019 to $31 billion in 2023. We'll talk more about that under-explore.

section of the economy when we return. Welcome back to Power Lunch. Mega Cap tech stocks have dramatically boosted investments in recent years and are showing no signs of slowing down, according to a new note from CFRA research. Amazon, Alphabet, Meta, and Microsoft are expected to spend more than $175 billion combined this year with even more expected in 2025. Joining us now is the author of that research note, Angelo Zeno. He's the vice president and senior industry analyst at CFRA Research, covering tech hardware,

software and semiconductors. So, Angelo, tell us what is driving the spending this year. Is it all about AI? Well, I mean, that definitely is a big part of it, right? So when we kind of look at the CAPEX environment here in 2024, we're looking for growth of about 25 percent or so. That actually follows a year in 2023 where it was roughly flat or so. The last time we actually saw a flat kind of CAP-X environment was about 2018, 2019, and we all know what kind of led, what drove kind of CAP-X thereafter, and that was, you know, a very strong pandemic. And you kind of look over here into 2025, our view is low double-digit growth. Of course, the AI spend is going to be a big driver of that. But just an overall recovery and kind of server spending will also help that when you kind

of think last year. We actually saw a sharp decline in terms of server spending overall. And a big reason for that was just because of the digestion that we needed to see in terms of some overcapacity on that side of things. But kind of looking ahead, it's going to be AI driven. It's going to be kind of just your natural data growth that we've seen kind of over the last two plus decades out there, growing north of 20% at an annualized pace. And then ultimately, it's just improving free cash flow growth from each one of these companies. I mean, when you kind of look at the fundamentals for each of these companies, extremely strong in nature, and that's going to drive higher spend, we think has historically been the case.

But this also comes after Medahad's year of efficiency and then just said, going forward, we want to operate as leanly as possible. And we heard similar messages from other tech giants. They're trying to be lean and they're also trying to chase AI growth. I guess the question is after this big sort of bounce back in growth you expect this year, are we really going to be able to see such sustained growth rates as these companies try to be more efficient with that capacity and rain in costs? Well, so I actually think the efficiencies are actually supporting kind of the CAPEX spend out there, right?

When you kind of think about what happens to 22 into 2023, to your point, each one of these companies really focused on those cost efficiencies, actually improve the profitability metrics of their individual companies. That has actually improved the free cash flow potential going into 24 and into 2025. So again, our view is we're looking for, is this cap expense sustainable? we think so. The magnitude of the spend isn't sustainable in terms of 25% plus growth, but we do think 10 to 13% growth is sustainable going into 2025. A big reason for that, again, is that free cash flow improvement? And a big reason from that also has to do with those efficiencies that they focus on into 2023 and into 24. And again, we do think those efficiencies are going to continue to be focused on going forward with an emphasis and an ongoing shift towards

the CAP-Expend environment. Where are these centers located that are being built geographically around the country and the world? And is the power infrastructure adequate to service them? Yeah, I mean, that's a question we get a lot of in terms of the power infrastructure. And I think that, you know, that'd be a great question for our utilities analysts out there. But as far as what we can see out there, I mean, there are clearly some concerns out there. Our view is it's probably going to be adequate over time. these companies are all looking for different ways to kind of meet some of those power needs.

I mean, when you think about a company like Meta, I think they've kind of looked at things like nuclear out there. Each of these companies are going to continue to figure it out at some point in time. But from a technology perspective, you know, if you look at the likes of Nvidia, the arms of the world, in our view, just throwing more arm-based kind of servers out there will definitely kind to help a lot in terms of those initiatives and then kind of where these data centers are located. I mean, they're located all over the U.S. I mean, obviously areas like North Carolina, what have you, big areas in terms of the data center structure. But, you know, if you kind of listen to Jensen Wong out

there, it's going to be kind of this whole sovereign AI theme out there is going to be bigger in nature where we're going to see kind of these data centers built all across the globe in every single region of the world. Angela, you had a list of companies that are going to benefit from this Microsoft. Amazon, NVIDIA, and a couple of others. Can you tell us which one or two are going to benefit the most from this trend that you see? Yeah, I mean, the three themes we continue to look at is compute networking and memory, which has kind of been the three areas, the three winning strategies here over the last 15 months or so.

We think that continues going forward. We do like Micron a little bit more than all the other names right now in the sense that we do think there is a re-rating taking place. And we don't think kind of the story has been told as well in terms of the memory theme out there. But also kind of the Marvell is another name that we like a lot that we think is a bit underappreciated. They've been hit big time here over the last couple of weeks because of some of the struggles in kind of their non-AI businesses. We think the entry point is really interesting at this point in time. Yeah, Marvell technology is up over 3% today. Thanks so much for joining us, Angelo Zeno.

All right, thanks, family. All righty. The workforce has drastically changed over the past four years, whether due to COVID, hybrid work models or AI. but amid all of this, women-owned businesses have climbed 14% since 2019. Details on that story further ahead. We'll be right back. Welcome back to Power Lunch. Let's get a check on the bond market now as yields are slightly higher,

following some stronger than expected economic data. Rick Santelli is live in Chicago for us. Rick? Yes, and maybe the biggest issue today that moved markets yields to the downside, that is, was a five-year note auction at a record size, $67 billion. The investors showed up, and it was an above-average demand at one Eastern. Look at an intraday of fives, and you could clearly see at one Eastern, yields drop. Now, when you pair today with yesterday, what's fascinating is that all maturity treasuries at one point today, earlier in the session,

traded above yesterday's highs. That's important for momentum, meaning higher highs, and, of course, the price was a bit lower. But after that auction, things eased back a bit. As a matter of fact, right now, you have the maturity. right around 2s, 3s, 5s, lower yields on the day, while the longer maturities have slightly higher yields on the day. But maybe the thing to pay attention to most is trying to handicap which central bank is going to follow Switzerland.

Is the EU going to lower rates before the Fed? Is the Bank of England going to lower rates before the Fed? Well, markets are starting to weigh in on that to some extent. If you look at the difference between the U.S. tenure and the European tenure known as the Boone to German credit, credit, you'll find that the difference right now is the widest it's been in five weeks, so over a month, and that difference is approaching 2%. We definitely want to pay attention to this. Their yields around 2.5 and a quarter. Ours is around 4.5 for them, 4 and a quarter for us.

Difference at the moment around 190 basis points. Tyler, back to you. All right, Rick. Thank you very much, Rick Santelli. Well, traders are going Cuckoo for Coco. with the, I guess I did read that, commodity hitting another record high in what's shaping up to be the hottest trade of the year. Pippa Stevens is here with more. Tell us about it. So everyone is always blaming the weather for all of their problems, but this time it really is about the weather, specifically climate change.

Coco production is very concentrated in West Africa with three quarters of world output. Now, changing weather patterns are causing diseases and impacting the soil, leading to another poor harvest. The International Coco Organization forecasts an 11% year-over-year drop in production for a third straight year of shortfalls. The result is Coco's surging above $10,000 per metric ton for the first time ever. Earlier today, more than doubling this year and tripling over the last year as the supply issues way. Now, this is a very small market and is not widely traded, meaning it is vulnerable to price swings driven by financial players and speculators. And some of the largest chocolate companies like Hershey and Mondalys typically have hedging strategies in place to manage these swings, but higher costs will likely be passed along to consumers.

And in terms of where prices could go next, TD asset management's Humeza Hussein said it is anybody's guess, noting the market has basically become unhinged. Has it already started to show up in the price of chocolates? When you think about shrinkflation, you know, you're getting the same price of chocolate, but it's smaller. And so companies are trying to manage those costs, and they are hedged so they're not exposed to all of these price swings. But at a certain point, those costs do get passed along to the consumers, and so higher Easter candy. So as a consumer of chocolate, I'm invested in this one, I'm particularly invested in this one. But my question is, you mentioned global warming. Does this just mean with global warming, there's going to be more volatility and prices are bound to continue to increase? So I think the thing about this crop specifically is that it is so concentrated in West Africa and cacao trees can really only grow 20 degrees north or south of the economy.

equator. And so they're a highly specific crop. And so what Humza Hussein was telling me was that he thinks the soil has now been permanently changed. It wasn't that it was too dry last year. They actually got too much rain in short concentrations. And so it's not ideal for these crops. But I think beyond just cocoa, we see this in special commodity, very small markets like uranium, like lithium, if they are concentrated in one area, if there's any impact in that region, it does lead to these crazy kind of out-of-wack price swings. Yeah, so much risk tied to that global warming. Thanks so much, Pippa. Really appreciate it. And as we head to break, a quick power check on the positive side, Ziegate technology, Morgan Stanley upgrading it to overweight, citing AI's

potential to boost earnings. On the negative side, UPS having its worst day since its earnings in January. Despite decent results, shares are moving lower after announcing a new one plus two plan. This is the goals of growing volume by dollar, then growing volume with a focus on margin. That's your power check. We'll be right back. Welcome back to Power Lunch. I'm Contessa Brewer with your CNBC News update this hour. The Wisconsin Supreme Court today handed a victory to Amazon flex workers, letting stand a lower court ruling that some of Amazon's delivery drivers should be treated as employees, not independent contractors, as Amazon had argued.

The ruling says drivers in the Flex program are entitled to unemployment pay if they're laid off. The case closely watched for the broader effect the ruling could have on the gig economy. luxury apparel company Canada Goose announced today it's cutting 17% of its corporate workforce. That move follows a string of layoffs from other retailers this year as people pull back on discretionary spending. And Buckingham Palace announced today that King Charles and Queen Camilla will attend an Easter service this Sunday. It would be the first major public appearance from the King since he was diagnosed with cancer last month. Prince William and Kate the Princess of Wales, who's also undergoing cancer treatment, are not expected to. attend. Julia, send it back to you. Thanks so much, Contessa. Now, take a look at shares of medical

device maker Shockwave Medical. Shares are surging on a Wall Street Journal report that Johnson and Johnson is in talks to acquire. Take a look there. They're up about 10%. Shockwave was briefly halted for volatility earlier this hour. Now the deal could be finalized in the coming weeks according to the report. Now, Shockwave telling CNBC they do not comment on rumors or speculation. We've reached out to Johnson and Johnson as well. At the meantime, the high interest rate environment is having a big impact on private equity. The number of private equity-backed deals globally dropped to under 6,000 last year from a peak of more than 10,000 in 2021. But one so-called niche area that is growing is the number of so-called direct P.E. deals.

Essentially, that means a capital raise for a single company outside of a traditional fund structure. More than 700 companies were acquired by private equity in this type of deal last year compared with over 200. just five years ago. And the annual value of these deals directs has also soared from $6 billion in 2019 to more than $30 billion last year here on set to talk about what this means for investors is Matt Swain, CEO of the direct P.E. firm Triago. It's being acquired by the California Investment Bank, Hulahan, Loki, in a deal that officially will close next month. Matt, welcome. Good to have you with us. Thank you for having. Let me make sure I'm understanding what a direct deal does.

In a traditional private equity format, the private equity company, whether it's Blackstone or Carlisle or any of the names we know, assembles a fund of money drawn from institutions, private sources, family offices. And then they go out and they find companies to put that money to work in. Under your model, it is inverted. You find the company first that you want to target and you then go and get solicit capital from private investment. from private investors, institutions, and so forth. Am I right on that? That's exactly right.

Again, a direct is raising capital around a single company outside of a fund structure. Most structures today for private equity funds are what is known as blind pool. Blind pool means that you raise money around a sector in industry. You know the thesis behind what you're investing behind, but you don't know the actual companies that you're going to be getting exposure to. Direx turns this on its head. you are buying into a very specific company that you know will fit within your portfolio. And the money then gets to work, I assume, quicker, because often in those private equity funds,

the money can sit for a while, collecting a fee for the blackstones of the world, but not really being productively put to work. Am I right on that? Absolutely. Do you know how much blind pool capital is currently sitting on the sidelines? No idea. $3.7 trillion, more than the GDP of France. I mean, in this type of environment, you can't have that much money sitting on the sidelines, paying a fee to private equity firms. You have to be able to invest it quickly, and your money has to grow, especially with four or five percent type interest rates. So walk us through some of the advantages, though, not just for investors, but also for the target companies, of going this route.

Yeah, these deals are categorized more by an operational value ad. You know, not all private equity funds are getting it wrong. The ones that are trying to generate... returns through financial leverage, they are getting it wrong. But what I would tell you is true of these private equity deals or direct deals is that almost all of them are focused on adding value to the company on a day-to-day basis. You have these managers actually moving on-site, taking interim roles at the company, trying to find customers for these assets. And that's really what characterizes these types of things. So when you target a company that you're going to put capital

into? Are you targeting companies that are, quote, distress situations or are these successful companies that are growing and you think can grow even faster with your infusion of capital? That's question one. Question two is, are those target companies welcoming to the outside capital that you're bringing? It's a good question. I would tell you, these tend to be lower middle market, middle market buyout companies that are profitable. They have to have some type of runway of growth. If they don't have a runway of growth, quite frankly, investors aren't interested. Managers tend not to be interested, this is not the best structure for them. So as it relates to number one, it's a profitable company that has a long runway where you can invest behind, usually with some

type of macro tailwind. And then in terms of what this means for the incumbent firms, the Blackstone, the Apollos, are they doing this as well, or do they see you as a threat in the fact that you're doing this? Okay, I won't comment specifically on any large-gap buyout firm, but what I will tell you is they're cognizant of the space. A lot of these firms are actually looking into the space. You may have seen recently, Tyler, you just mentioned it. We just sold to Houahann Loki. Some of the competitors during the actual sale process of Triago were buyout firms. Were these large private equity firms that want to know how to best access these type of deals?

Because although the results are early... They want to continue those kind of deals. They don't want to squash you. They do not want to squash you. Because you're the goose that's killing the golden egg. We're still a small part of the private equity fund market. We're about $31 billion of deals, whereas the private. equity fund market is $800 billion of deals. But what I would tell you is there's just a lot of

alpha in these deals. And if they can unlock that alpha, they want to play in that space. Let me come back to a question. I think I cut you off before you got to answer it. Do the companies that you're targeting, those middle market firms that are profitable that you think can benefit from the infusion, are they welcoming to your involvement or that of investors, A, B, C, D, E, and F? Yes. These deals tend to have great alignment with the existing management teams of these companies. You're not blowing out the existing. No, almost never.

We're working alongside them. And what I would tell you is characteristic of these direct deals is helping the customer base grow or helping these type of companies overcome the biggest problems that they're facing literally on that day-to-day basis. So it's actually the opposite. Usually they're waving us in with open arms. I can't help but notice that you are hardly a gray beard. How old are you?

Around 30. How about that? Around 30. How did you get into this? You know what? A lot of great people in my life, a little bit of luck to tell the truth. But in all honesty, this isn't rocket science. I mean, we noticed a macro economic trend of investors wanted less of a filter between them

and the companies that they were investing. And finally, how do you make money? We generate the ecosystem. So in short, we're banking these transactions. We are matching the buyers, which are investors, up with the sellers, which are the actual managers, taking a transaction fee and usually rolling a portion of that transaction fee. into the companies going forward. And so you invest in those companies.

Very often personally as well. All right, Matt Swain. Thank you. Thank you. Continue to good luck. And coming up, call it a comeback. A new report from Wells Fargo highlighting the tremendous impact

that women-owned businesses have had on America's post-pandemic recovery. We'll bring you the key findings with power lent returns. Welcome back. The pandemic upended operations for small businesses across the country, but from those challenges,

entrepreneurs did what they do best. Look for options. opportunity. And a new report finds that women are leading the charge. CNBC's Kate Rogers is here with more. Kate. Hi again, Julia. The data show that women sees the opportunity to launch new ventures during the pandemic at nearly double the rate of men. Data from Wells Fargo show new business starts from 2019 through 2023, we're up nearly 14 percent for women. That's about double what we saw for men. What's more, growth rates for revenue and employment are even higher for businesses that are owned by black and African-American women with their business growth rates outpacing the markets.

Now, this is key as businesses owned by women and minorities, remember, were disproportionately impacted early on in the pandemic and were less likely to receive initial rounds of paycheck protection program funding. Ruby Taylor, who is a former school social worker, runs the Financial Joy School, which aims to close the financial wealth gap and create a new generation of black investors. Taylor has overcome not only funding challenges to launch her business, but also a traumatic brain injury in 2012 that drastically altered her life. She learned about long-term investing,

she says, from the parents of a former student and got the idea to launch her business from there. When my financial situation changed, I began to invest. And then I saw my money grow. I'm like, this is so dope. So I am on a mission to create a financially equitable world where everybody can build generational wealth, no matter your income.

Now, Ruby graduated from Milestone Circles, which is a program presented by the NASDAQ Entrepreneurial Center. It's also sponsored by Wells Fargo. It helps owners find new pathways to funding. That is very key, Julia, in overcoming some of these barriers for owners, of course, as they look to grow their businesses. Back over to you. Kate, I love this optimistic, positive news.

But I wonder how it interacts with all the data we saw about women leaving the workforce during the COVID pandemic. Does this mean that women, after they left the workforce, re-entered as entrepreneurs? And how much are those two things related? I think that they're certainly related. So the labor force participation rate for prime aged women is still lower by about 10 percent than it is for men. It's nearly 90 percent for men right now, just under 80 percent for women. But we know about one million additional women, aged 25 to 54, re-entered the workforce since December of 2019. And if you look at those new business starts at early 14% for women, just about 7% for

mensually, you have to put two and two together and notice here that they are launching more. Do women still struggle to raise capital for their businesses? Oh, certainly. I mean, there are definitely big gaps there in terms of women's ability to raise in comparison to men. And also I mentioned some of the gaps that we saw with the PPP program that we covered so closely here on CNBC for women and minority-owned businesses, not accessing that capital at the same rates that male-owned businesses were. But if you look at the numbers,

they're really roaring back here, which is great news. Great news indeed. Thanks so much, Kate. And we will be celebrating CNBC's inaugural Changemakers, Women Transforming Business List. That's coming up on an new event in New York City. It's on April 18th. To learn more, go to CNBC.com slash changemakers or scan this QR code. And as we mark Women's Heritage Month, we are sharing the stories of some of our newly named changemakers. Here is Priscilla Sims Brown, amalgamated bank president. I think for everyone there's that secret sauce, and I think everyone has their own superpower. You are enough.

You don't have to be perfect, and you don't have to fulfill a certain mold. I have to say today, I really think a lot about the younger people, like my daughter, Faith and so many of her friends who are taking on the world in a brand new way. I find them incredibly inspiring. All right, welcome back to Power Lunch, everybody. Time for today's three-stock lunch. And here with our trades is Malcolm Etheridge, CIC wealth management executive vice president and a CNBC contributor. First up, Malcolm, welcome. And first up, Visa. Visa and MasterCard settling now a long-running lawsuit agreeing to a $30 billion settlement that is going to lower those so-called swipe fees. Shares of Visa are higher today, presumably in part because of buy a little bit. What's your trade on Visa, Malcolm? Yeah, Tyler, I actually think this one is a buy. Despite what you just mentioned with some of those swipe fees potentially coming down, I think Visa will figure out a way to make up the difference. There's concerns about cybersecurity. They'll always be able to offer extra protections there. So to me, VISA is the definition of a defensive stock, right? Good economy, bad economy, recession. It doesn't really matter because they sit in the middle of each one of those transactions that you and I make and collect their fees. So I think this is a great one to hold. long term. And I also think it's one of the better fintechs to own, probably even safer than one of the big banks because it doesn't have that interest rate sensitivity that a lot of the

financials do. And next up, Malcolm McCormick, the spice maker benefiting as more consumers eat at home. McCormick reporting net income climbed 19% year every year, shares up nearly 10% today. Malcolm, what's your take on this one? Yeah, so actually like McCormick, this one has basically been beat up for about two years, right? They hit their all. time high in March of 2022, and they got cut in half pretty much since then. But I think McCormick is one that we should at least consider because as the market start to get a little wobbly, we've got an election coming up. We know volatility happens in election years and investors go seeking security. The staples will be the name, the sector, excuse me, that investors

look for. And McCormick is a great one in that space that doesn't have too much trouble competing with the names like Walmart and Target that have offered their private label since the COVID pandemic caused people to go down market a little bit. And finally, we're going to look at CVS. Amazon announcing same-day delivery of medications in New York City and Los Angeles, plans to expand the option to other cities by year end. It could be a threat to traditional pharmacies, including CVS, your trade on CVS. Yes, so for me, CVS is a sell, partly for the reasons you just mentioned,

right? But also I've heard investors make the argument that some of the acquisition CVS has made most recently, specifically, Aetna, I think is the biggest, more marquee one, should put in the bottom here in the mid-70s somewhere for CVS. But I just feel like the market for PBMs, those margins are shrinking and shrinking. And so the online pharmacies that compete against CVS have just been cutting into those margins. And then you also have to couple the fact that CVS, CVS has a shrink problem, right? They still have stores being closed due to theft. And I just don't see this turning around anytime soon. It's going to be a long, hard slog for those shares. All right, Malcolm. Thank you very much. Appreciate it.

Malcolm Etheridge. And still ahead, Peacock getting exclusive rights to stream the NFL's first opening weekend Friday game in over 50 years. We'll break down what it means for the entire media landscape when Power Life returns. We only have four minutes left in the show and several more stories you need to know. Let's get right to it. Our theme of the day is prices, starting with the price of Reddit shares on a tear following last week's IPO. It's at more than 12% today after posting a 30% gain in yesterday's trading.

So what's so interesting to me, Tyler, about this, is that we just saw Estera also went public on Wednesday, Reddit went public on Thursday. These are stocks that had strong IPOs and have held onto their gains. Maybe this means the IPO market is that. Yeah, and Reddit, they're almost a double. And we should point out that former president Trump's. SPAC-related IPO started trading today. And if we have that one, there it is, Trump Media and Technology, up 43 percent so far, moving very higher.

So the price there is moving up. We'll see how, well, that one hangs on. Now to home prices hitting a new all-time high in January. This is according to the latest K. Schiller Index report. Home prices in America's top 20 metro areas, up 6.6% year over year. You want to guess the richest one with the highest gains, Julia? San Diego. San Diego.

Up 11%. Stay classy, San Diego. 11% there. LA up 8%. Yeah. So pretty good. Pretty good. Meanwhile, Dollar Tree says it's raising its price cap for items to $7,

citing an influx of customers earning six-figure incomes. That's thanks to sky high inflation. Dollar Tree had previously raised its price cap to $5 back in June. And I think it's interesting also they're raising the lower prices as well. Now things don't cost anything less than $1.50. I didn't know that they had a top price in. In dollar tree. Yeah, you need to be able to walk in and know that everything is going to be cheap. Family, yeah, dollar tree. Anyhow. All right, and finally, prices. Inflation has been bananas recently.

And that's even true at Trader Joe's. The grocery chain noted for its deals is raising its price for bananas for the first time in 20 years, up to 23 cents from the previous price of 19 cents. That's more than a 20% of it. I don't know they sold bananas by the bent, by the piece. Individually. They sell them individually. Individual bananas. You have to wonder if if they were treating bananas. as loss leaders. If they were using them to bring people into the store, and they must have different margins and must know that people love the idea they could just go in there and grab a banana for 19- So while we have you here, and we've got another couple of minutes to chat, what are the big deals that you've got on your radar screen in the media world? Is it Paramount? Well, everyone's watching to see what's going to happen with Paramount Global and also to see what David Zasloff says with Warner Brothers Discovery. But I also have to say the big deal that is going

influence a lot of these companies is the NBA, because those NBA rights are up for grabs. And this ties into our final story, which is this, some NFL news. The opening weekend game will be played in Brazil. It'll be streamed exclusively on Peacock on Friday night, September 6th. Now, Peacock was the first to exclusively stream an NFL playoff game last season. So this season, Amazon will get an exclusively streaming game, a playoff game. And there are two big takeaways here about the Amazon and Peacock News. Now, streaming is a huge. huge part of the NFL's future. And Peacock certainly seems to feel like the big money it spent for rights to that wild card playoff game was well worth it in terms of subscriber additions.

And of course, we have to note that Peacock is part of our NBC Universal family, the parent company of CNBC. But all this says to me is look for some streamers to be involved in that NBA rights deal as well. I could not agree more. There's going to be a lot of streamers involved there. Why don't we take a look at where the market is right now, as you see the Dow at 39. 399 down at the bottom of the screen up just a little bit 80 points or so the S&P 500 up a fifth of a percent and the NASDAQ is higher by about 51 points at 16 435 all right we will see you when we reconvene here same time same place you'll be here I'll be here thanks for watching Power Lunch closing bell starts right now