Power Lunch - Banks & Beyond, and More Red Flags? 3/17/23

Episode Date: March 17, 2023

Financials were the focus for global markets this week. But 2 other groups were making some interesting moves. We’ll reveal the sectors, and break it all down for you. Plus, The Silicon Valley Bank collapse has revealed some major flaws in banking…and corporate America, too. We’ll take a hard look at some potential problem spots forming. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, banks and beyond financials were the focus for global markets this week, but two other groups making some interesting moves as well. We will break down big tech and oil. Plus, investor eyes are wide open. The SVB collapse revealing some major flaws in banking and corporate America will look for more potential problem spots.

First, let's get a check on the markets off the lows, but still struggling as we end the week. Dow's down 304, NASDAQ down 4 tenths of a percent. Russell, again, the worst performer, down more than 2%. Let's get to Christina Partinevales for a look at that and the week's biggest laggard financials, Christina. Yeah, well, stocks continuing their slide lower, racing yesterday's rally after the 11 biggest banks in the U.S.

swooped in to rescue First Republic. But if we zoom out on the week, the Dow is flat right now. The NASDAQ up a little bit over 4% on the week and has actually outperformed the S&P 500 for 11 straight days. And speaking of the S&P 500, it's still higher than it's the level at Mondays Open, which is 3835 if you're wondering. Actually, yeah, 3835, it's still higher than that at the moment. Financials, though, like Kelly mentioned, the lagger today with many wondering,

who's next? The top searches on Investopedia are what is a bank failure and what is too big to fail. So names like Comerica, U.S. Bank Corp, Keeb, you can see on your screen, all roughly between 6 and a half to 8% lower today. First Republic, though, is suffering from its worst week ever, and there's a lot of heavy trading volume as well today, too, on a Friday. Stock is down almost 24%. Those same credit concerns and demand slowdown concerns hitting alternative energy names. N-phase energy, one of the worst performers on the NASDAQ 100.

That's down 8% at the moment. Solar Edge, down 6%. Lastly, commercial office reits selling offer a second day in a row. There's a triple whammy of concerns Fed rate hikes, strong. work from home trends and the overall employment picture names like Hudson Pacific, SL Green, hitting 52 week lows. Christina, thanks very much. And beyond the bank weakness, which is substantial, as you saw just there in Christina's report.

Technology, however, holding up better than most groups, the XLK Tech ETF up 6% over the past week. And Steve Kovac has more. Hi, Steve. Yeah, Tyler, it's such a big week for big tech. Take a look at the NASAC 100, the Q's versus the S&P. the both up 6% and the S&P only up half a percent

so far a week to date. The NASDAQ 100 by the way has outperformed the S&P 500 for 11 straight days. Now let's go over some individual big tech names this week. Microsoft up 12% meta up 10% Alphabet 12% Amazon 9%

and then some smaller caps some cloud and software names for you. We got Salesforce up 7.5% on the week and Adobe up a whopping 9%. So let's talk about what's going on and explain what we're seeing here. It was a bad year last year for big tech, since the move towards cost cutting and layoffs and other efficiencies, we've seen some boost to these names. For example, just earlier this week, we saw meta layoff 11,000 people

that stock reacted very well to that. On one hand, these names look safe now amid the volatility after handing investors what they wanted over the last several months. Many of these names, especially Microsoft, were also top picks for the year from many analysts firms. And more recently, there's a better chance now after the banking crisis we saw this week that the Fed will slow down on raising rates. That's similar to what we saw over the last week and a half. By the way, it's a good environment for tech growth when interest rates don't go up. So that's some of the bullishness behind here, Tyler. All right, Steve, thanks very much.

And whether or not tech will continue to hold strong could depend on next week's big Fed decision. And let's get the technical take on the group. With us now is Jessica in Skip. She is a director of product at Options Play. Jessica, welcome. Good to have you with us. What have the chart's been telling you? And I assume you agree with the hypothesis that Steve basically hinted at there.

And that is that a slower pace of rate hikes or no rate hike is good news for tech shares. Certainly. And I think a lot of that really goes into the macro headwinds that we're facing that we have to be cognizant of as well, which is that AI hype, which we can certainly get to, which is feel. that tech rally. But what I'm paying attention to is how the market has react throughout various bear markets. So history has told us that the declining or lagging sector tends to lead the decline, but also leads the rally. And that's also seen true throughout bear market rallies. And that, of course, for this fair market rally has been tech. If you look at a weekly chart of the S&P 500 or utilize the NASDAQ 100 as a proxy for the tech sector, you'll notice that

the tech sector actually peaked back on November 22nd, which was well before the peak of the broader S&P 500 in January. And then the same holds true with the trough. What I've noticed is we've paid a lot of attention to the 200 weekly moving average that is an extremely important support zone. That was breached by the NASDAQ 100 prior to the S&P 500. So peak to trough, the NASDAQ is serving the NASDAF 100 as a leading indicator anyways for that bullish momentum. And that's something I'm really paying attention to. So that NASDAQ 100 troft before the S&P 500 troughed back in October, right? That's, that is correct. Yes. And that suggests, what to you? That suggests that it's leading because they're, and that certainly makes sense.

We're feeling the lag effects of the restrictive Fed policy. And that takes a while to go through some of the economic data. But it certainly has an acute impact on tech first. And think about what we saw initially, lack of IPOs. Then that trickled down into pressure on profit margins because it requires cash to innovate. That was an accelerated increasingly hard-to-barrow rate, some of the fastest in history. So the companies had to protect their profit margins. We saw layoffs that will help with that.

And now we've got the collapse. of Silicon Valley Bank, which is arguing perhaps a pause or a slower rate hike may be necessary. We'll see what happens. I think a lot hangs on that. But the market is reacting from the tech perspective to a less restrictive policy. And that certainly makes sense. So you want the NASDAQ above the 200 day and the S&P above the 200 day to avoid risking new lows, Jessica? Absolutely. And that's a wonderful question, Kelly. And that's what we define as a secular bull market. If you were to pull a really larger chart of the market on a weekly level, you'll notice that the 200, the S&P 500 or any security,

going above that 200 weekly moving average is extremely important. Otherwise, when we risk falling below that, that tends to what leads to the strong capitulation moments. But we would definitely see a new low. What does your spidey sense tell you about where the market and technology shares may go next? Does it all depend on what happens or much depend on what happens? happens next Wednesday with the Fed?

I think it's all related and we put the puzzle together. So Fed Chair Powell says labor market imbalance all too often. And the Fed has a playbook for liquidity issues and their tools are definitely going to tackle demand but not supply side constraints. And so with the labor market imbalance, too many job openings, not enough people. The Fed can't print people. But what can help drive balance, efficiencies, productivity gains, and what does that better than artificial intelligence?

So that's where, yes, I see the risks and it is absolutely overhyped and to be careful in timing the markets and that nature. But this growth play does actually solve a larger macro headwind that contributes to the larger and broader inflationary problems. So my spidey sense says Powell has to do what the market is saying right now, which is 25 basis points. That concerns me. I do think perhaps we should have a pause and wait for the data to come in. These higher interest rates, higher risk of a bank run. But more importantly, what is he going to say? We were in a Fed blackout period. We don't know how he's interpreted all this economic data

activity and the market really hangs on understanding his view. It is going to be a fascinating week and that press conference is going to be one of the not to miss moments. Jessica Inskeep, thank you very much. We appreciate it. Right here on Power Lunch on Wednesday, by the way. Yes, indeed. Should we go to Washington? Anyway, energy is struggling amid this growing economic uncertainty and oils having its worst week since April. Pippa Stevens has the numbers in Pippa.

We looked better yesterday and now back at 66. Yeah, that's right, Kelly. Oil hitting a fresh 15-month low earlier today before recovering some of those losses. Still, both WTI and Brent are down more than 10% on the week. Now, much of this is thanks to macro issues and the continued banking fallout, injecting uncertainty into the market. Option selling is also exacerbating the price swings and not helping matters is the rig count data released just now, showing that producers added oil and gas rigs for the first time in five weeks. Now, two upcoming events that could have an impact on oil

is the Fed meeting next week, of course, as well as OPEX meeting on April 3rd. But in the meantime, there doesn't really seem to be a positive catalyst that could change the price direction. That said, one wildcard is the U.S. refilling the S.S. refilling the S. PR. The administration previously said it was targeting the $67 to $72 per barrel range, which oil is now below. Energy stocks, the worst group this week down more than 7%. Kelly. Pippa, thank you. For more on energy and oil, let's bring in Sam Margolin. He's managing director over at Wolf Research. All right, Sam, it's good to have you here. Happy St. Patrick's Day. You too. What do we need to see here in the energy space? And I just keep thinking about how many

investors must be caught wrong footed here. It's been a pretty ugly start. Yeah, I mean, look, energy is not defensive right now. Okay, if this banking crisis gets worse and turns into something more serious, oil's going lower. And so I think that's something people have to keep in mind. But if you want to look through it and play a recovery, one thing to point out is that there were some signs of oil demand starting to get better right before SVB. Consumer confidence was pretty high. economic growth was getting revised higher and refining margins are actually really strong. And that's one thing that's very different between now and say 2008. In 2008, refinery margins have been gone down for a year and now they're stable.

And so maybe the end market's a little bit healthier than what the price suggests. Is that a structural difference or just a cyclical one versus last time? Well, it's structural. Refining capacity shrank in 2021 and 22 for the first time in 40 years. So nobody's really seen before. It's very unusual for global refining capacity to go down on a net basis. And so supply is definitely a factor there. But again, if it was really a demand issue that was 2008-ish, you would see it in refining margins, too, irrespective of where capacity went.

You say that you think the outcome from all this, and I guess that's just the whole complex of issues that are affecting energy in the economy right now, will be an M&A wave. Explain that. Who will be the buyers and who the sellers? Yeah, well, so when energy companies do M&A, they have to mark to market the assets that they buy at the oil price at that time. And so when oil is 100, you put a lot of assets on your balance sheet and you run the risk of impairments and you have a very high rate of depreciation. When you have a pullback like this, it's a much more accommodative environment to add assets. And if energy companies are constructive on the outlook, this is the window for them to deploy balance sheets. Exxon and Chevron have paid down all of their debt.

over the past two years. So the capacity is there. And who would be the targets? Well, you have to look at relative value. I think one that stands out on a comp sheet is occidental. And again, like, you know, this is, it's very speculative, but it's got a really high free cash flow yield that bolts on very easily. The assets are attractive. And so at the very least, even if it's not a consolidation candidate, at least it's a value play. This is not an administration that particularly likes big oil. Wouldn't they stand in the way of a merger at that scale? Well, one thing you're definitely that's going to raise red flags is if companies combined and then reduced activity or somehow made actions after the fact to constrain supply. But I don't think that would happen in this case.

I think if you have an MNA wave in this market, it would probably just put assets in stronger hands and probably make supply more stable in the long run. And let's not forget they just greenlit that Alaska project as well. I mean, you would have thought this was a much friendlier. Or you could argue, okay, more supply comes on lines. Is that bullish or bearish, Sam? Well, it's not for a while. So if you can predict oil demand in 2027 when the project comes on, you can have my job. But anyway, you know, I do think that it was a sign that supply is top of mind.

And, you know, the administration is focused on protecting consumers with more capacity. All right, very good. Can't even predict it for tomorrow. Couldn't even tell you what it was today. Sam Margolin, thanks for your time. time. We appreciate it. All right, ahead on the program. More on today's market moves. Stocks lower after yesterday's brief comeback.

And moving lower just in the past few minutes, now down 411 points on the Dow. But first, up next, the past week's crisis revealing some red flags in the financial sector. But there are other areas. Are there in corporate America that investors need to watch more carefully than they have been? We'll be right back with more. Welcome back to Power Lunch. The collapse of Silicon Valley Bank and the challenge is facing Credit Suisse, forcing investors to take a critical look at companies' balance sheets, banks in particular, figure out what's going on behind the scenes. The bank turmoil comes as U.S. corporate bankruptcy filings overall just hit a 12-year high in the

first two months of this year. That's S&P Global Data. So how can investors spot these red flags before buying stocks? We've got to ask, Herb Greenberg. He is editor with Empire Financial Research and a CNBC contributor. Herb, welcome. It's good to see you again. It's great seeing you, Kelly.

Is the time like this kind of, you know, kind of get you all amped up to start tearing through balance sheets and all the rest of it? Or do you already feel like you have a pretty good handle on the exposures throughout the corporate world and in the banks? Well, you always have to try to figure out where you may get hoodwinked. That's the way I tend to look at it. And I think in this case, you know, what I'm always looking for is I start out by looking for stocks to avoid. And I think that's the way you have to start doing this. I did a piece the other day, a thousand stocks to avoid. And the reason I put that out there is there's, you know, there are certain things you

could look at that are pretty simple. So there's this chart out there. I don't know if you have the chart up, but it's an interesting chart from Calish concepts, which is a fundamental firm, some folks I know I'm pretty friendly with. And they had something really interesting. And what they talked about was in the Russell 3,000, there are 1,000 companies. Now get this. This is a startling statistic.

1,000 companies that either aren't making money or can't afford to pay their interest on the debt they currently have. Now, if you were to look at those thousand companies and if you strip them away, you didn't own them since 1989, the other 2,000 stocks would have well outperformed those stocks. So you always want to look for the companies that are just generally fundamentally stronger, even though they may not be as sexy. They may not be as exciting to follow, to talk about. But sometimes they're the ones that are actually going to do better over the long term. So I think when you're looking at these things right now, I think the thing everybody's looking at is always the maturity of securities and looking at bonds, what is their bond portfolio. And these companies that basically are cash strapped and maybe they have to continue to borrow, if they have maturity is coming due right now, that's not a good, that's something you have to pay attention to, especially if it's a large chunk.

Tyler, it's a large chunk of what they have to do. So if I take 3,000 and I subtract 1,000, that still leaves me with 2,000 out there that presumably are investable. But then I'm sure, because of what you do, is that you can eliminate another large swath of them and come down to ones that are truly meritorious. How do you do that? And what names bubble up? Well, excuse me, I do it. I actually use a system that helps me weed out. anything where there looks to be earnings manipulation, or I'm looking for the strongest

quality of earnings. I'm looking for the strongest balance sheets. I'm looking for anything where I can avoid getting tripped up. So, you know, there are companies out there. Look, some of them are just so obvious right now, you know, that are good ones, you know, a company like a Costco, right? You look at a company like this and an environment like this. And I know people talk about it all the time. It's one of those companies. But you talk about it, you say, my goodness, these guys are basically telling you. They're telling you, if you listen to their conference calls, that if all else goes wrong, they can pay a special dividend because they generate so much cash. You know, what you're looking for is, I always say real companies that make real

products or have real services that serve real people and have real profits and real cash flow. So Costco has so much going on, they can afford to pay a special dividend. They tell you they may very well do that. They're saying it. They're saying they could raise their membership. fees, they really could. So you're looking for the opportunities in an environment like this, but you're also looking for it. For example, there's a bank I like, a community bank. Who wants to talk about community banks right now, regional bank? Nobody. But I like this one company. It's called Triumph Financial. It's based in Texas, small bank. Here's what you need to do with the bank like that. You take a look at the maturities on its securities. They lay it out in their

financial filings. They have, and you compare it to, say, Silicon Valley Bank. It's night and day. It's, these maturities are spread out across, you know, zero to five years. And you also have a situation where the held to maturity securities are just a tiny bit of their entire portfolio. So you can start, you know, if you're looking at banks, you can always use Silicon Valley Bank as a benchmark. And this bank, by the way, does something different, you know, has more going on than just being a bank. And, Herb, in the broader context, and I've heard Jim put it this way as well, but it's an important thing to back up and remember how we got here. How we got here was that we had too much stimulus. As a result, we had not just stock prices rising, not just inflation rising. We had too much demand and too much demand creates what? Too many companies, which creates too many jobs. Unfortunately, it's kind of fun to be part of that on the upside. But when that starts to unwind, when we have to literally have fewer jobs, fewer companies, fewer all of this, well, yeah, Yeah, you can understand why the banking systems and the crosshairs of that.

I mean, what they do is help create new companies. They help support jobs. If all of that has to be unwound, then of course. I mean, so what's so interesting to watch now is as we're seeing it online, the banks are blowing up and the Fed doesn't know how to stop it. Look, look, these are companies that shouldn't have come public, many of them. We know the SPACs already. Look at the biotech sector. Look how many companies were funded that never should have been funded in the biotech sector.

Not that they shouldn't get, have access to capital. But look, I was a guy who was doing short research at the period when this was the most painful. Right. And I was the guy who I called the top by walking away because I couldn't take it anymore. Right. And that was the moment. That was the moment you knew that the Fed, you would be writing about companies where there were fundamental flaws. Nobody cared.

Nobody cared because the stocks kept going up. People looking at you said, what are you doing? You're wasting your time. And that's, but those are the companies you look at. We had a Banks at Risk section back then in 2020 in our reports. Banks at risk. SBNY, signature bank was on that list for other reasons. But again, you're laughed off the stage then. So now you have things you can look at.

And they're there. There are companies that are higher quality and there are lower quality. And it's all on the fundamentals. And it makes sense that the lower quality names across the entire universe of companies and banks and all the rest of it, that's probably, again, who's the most at risk. Why would you buy them? That's the point. Yeah.

Herb Greenberg, the shorts are working. now, I guess. Great to have you back. We really appreciate it. Sure. Herb will also join Brian Sullivan tonight. On the last call, they'll talk to bank collapse much more. You can send them your questions in the meantime. Maybe he'll answer them 7 p.m. Eastern time. Sounds like a good idea. Still to come, the White House taking aim at TikTok, but more specifically at China, how serious are the national security concerns? And as we had to break, check out the cybersecurity stocks, most bucking the trend this week with CrowdStrike leading the way up 11%. We'll be right back. Welcome back, everybody. We've got about 90 minutes, a little more

than that left in this volatile trading weekend. Not too many people will be sad to see it go. Stocks around session lows right now, down 481. Let's check in with Bob Pisani. Hi, Bob. Tyler, you know, it's hard to believe with all of this craziness, the S&P is up 1.3% this week. but I can't remember when I have seen this kind of dispersion between big cap stocks. So I just want to remind everyone what's going on with the regional banks this week. You've seen a lot of this, but all of the super regional banks are down roughly 25% for the week. And I'm leaving out something smaller like First Republic that's down 60%. But these are a stunning move in just five days.

And then look at the opposite. This is what I mean when head scratching dispersion. The tech stocks have been up five days in a row. essentially. So you've got big names like AMD, Alphabet, Microsoft, Nvidia, meta. Everything's up double digits. Down 25% with big banks, up 10, 11, 12%, with big tech. You just don't see that kind of dispersion. And if you look, go below that, you can see the cyclical sector is really struggling. What's that? Well, it's like material stocks like Mosaic and New Corps. It's big industrial names like Cummins and Dover. They're all down. The reits are getting hit rather seriously.

So we have a major problem here. This is all in the Fed's hands at this point. The Bulls want to believe that on Wednesday next week, the Federal Reserve is going to declare some kind of dovish hike. They're going to imply a pause. They're going to say we are making progress on inflation, and they're going to imply a pause due to some of the problems in the banking sector. And, guys, if they don't do that,

I think we're going to continue to have some serious problems in the market because the odds of a recession go up then. The siren. Are coming outside your place there, Bob. Sorry about that. They heard about the market. They know about the market. Coming to rescue, CPR.

Bob, we appreciate it. Let's get to Rick Santelli now. He's out in Chicago tracking the bond action, Rick. Yes, I'll tell you what. It's been one crazy week. Just look at a one week charted two-year note yields. We're down over 70 basis points on the week. Almost three quarters of 1%.

These Fed Fund futures, they're up almost 100 basis points on the week. And finally, Boone's already closed. And they tighten the ECB, 50 basis points, and they closed down 40 basis points. It's been wild. Let's go grab Jason. Jason, it has been a crazy week. What can you put on the tombstone this Friday of what's occurred Monday through Friday? Yeah, it certainly has been a wild ride.

If we just go back to last week, all but 50, basis points was priced in almost as a certainty at next week's FOMC meeting. And then we had a really large systematic shock to the banking sector with SVB. And now it seems like we don't know what the, you know. Well, everybody's talking. If they don't do 25, it's going to be crazy. People are going to think they know more. I personally think that's crazy if they do anything.

What do you think about the VIC? Can't even get over 30. Yeah, I think people want to know if the Fed put is back. And it very well may be. some point early this week, a 0% rate increase was priced in at like 50%. So, you know. If you had to pick right now, everybody on this trading floor, your thought, the conversation, 25 or 50 is things staying right now? I think it goes 50 still. I think Paul has made inflation his biggest worry, and I think 50 basis points keeps status quo. I'm in a lot with Christine Lagarde's

comments of the ECB. Jason, thank you. Tyler, Kelly, back to you. Rick, have a A stressful weekend, I think it's going to be crazy next week. Yeah, it's going to be a wild, wild week. Rick, and you'll be there for us all week long. We appreciate that. Have a great weekend, sir. Let's go to Contessa Brewer now for a CNBC News update. Contessa.

Tyler, good afternoon to you, NBC News, is exclusively reporting. Law enforcement agencies are preparing for the possibility. Former President Donald Trump could be indicted in New York as early as next week. Five senior officials familiar with the preparations tell NBC that security plans are being discussed for the Manhattan Criminal Court building in case Trump travels to the city to face any potential charges connected with alleged hush money payments to Stormy Daniels. The European Union's top foreign affairs official told reporters today an international court's arrest warrant for Vladimir Putin for war crimes is, in his words, just the start of holding

Russia accountable for its crimes and atrocities in Ukraine. And Theranos founder, Elizabeth Holmes, arrived at a California courthouse today with her husband. to ask a judge to pause her 11-year prison sentence while she asks an appeals court to review her fraud conviction. We'll continue to watch that. Tyler. All right, Contessa, have a great weekend. Contessa Brewer, thanks you. Thank you. And ahead on Power Lunch. More on today's market reversal with the Fed decision in focus next week. I can't imagine a bigger Fed meeting. Could the markets be at the risk of another sell-off? We will talk about that one next. Down 468 right now.

the Dow. Welcome back to Power Lunch, everybody. Stock's back around session lows. The Dow all 450 points are thereabouts. Carnage in banks leading those declines. First Republic now, down 25% following a gain of 10% yesterday after a group of banks pledged 30 billion in deposits. That little relief rally didn't last long. Let's bring in Mark Lushini, Chief Investment Strategy at Janney, Montgomery, Scott. Mark, welcome. Good to have you with us. You know, I can't remember a week where stocks were up where I felt so down. Explain to me why I feel that way. Is it because we're still really in a bare market? Well, I think it's partly that, Tyler. I think it has a lot to do with the schizophrenia market participants seem to have on a day-over-day basis. I mean,

as you said, I mean, if we close the week perhaps a little bit higher than where markets are trading right now, it's kind of flattish on a week-over-week basis, but it feels anything but I think it's not only the fact that we continue to be in the grips of a bare market that obviously started early last year, but as well, the cross currents haven't abated at all, not the least of which, obviously, is the Fed's battle against inflation, but now on top of that, additional anxieties have been introduced by way of the bank failures that have occurred with obviously very legitimate worries that we haven't seen the last of them. So the collection of those items, variables, if you will, I think, are only augmenting the risk premium that's being embedded into stock prices.

And to me, that's feeding into sentiment, which is maybe a little reason why you're feeling unsettled about conditions. Clices are popular because sometimes they're accurate. The Fed has a very tough needle to thread here. How do you think they're going to do it next week? Great call on whatever we're going to see next week is going to be the one that I identifies precisely what the outcome is going to be because I think you can arguably make a case that they should pause. On the other hand, I think we've seen a blueprint laid down by Christine Lagarde at the ECB, which went ahead with a 50 basis point increase in spite of obviously the credit Swiss issues and other broader economic concerns in general.

So I don't think we're necessarily going to see 50 basis points. That seems a little aggressive to me. But at the same time, I think absence further volatility in the stock market, probably most likely catalyzed by the prospects of another sizable bank failure, then I think 25 basis points is a very real possibility. And I think markets would be less than welcoming that potential outcome. The press release and the summary of economic projections that accompany the meeting next week will be exceedingly important. I'm trying to get excited to talk to you about stock picks, Mark, but it feels hard. Kind of like Tyler said, why do we feel bad on an up week? Why don't I feel more excited to talk about Zoetis and Solar Edge?

I don't know, with so much of this uncertainty hanging out there, make the case for me. Well, Kelly, I think if you pull the lens back and think about the fact that these two stocks among many, obviously, are not going to be immune to the volatility in the equity markets on a day-over-day basis with Solar Edge, obviously, tied more so in a high beta stock at that to the energy. space, which hasn't performed well over recently. Zootis in the healthcare space, but obviously somewhat idiosyncratic in terms of his business plan addressing the basically companion care industry. But both have, I think, very strong thematic, secular themes associated with them. One is obviously the buildout of alternative energy sources that are, you know, spot on what solar edge is trying to carve out a place for themselves in and are growing very rapidly in that

in that space, regardless of what's happening to the share price on the day-over-day basis. And Zyotis is also, obviously, playing in an industry that has grown massively, particularly augmented by the pandemic, where, you know, acquisitions of pets as a service dog or a complimentary cat or some other pet has blossomed the population of pets, let alone, obviously, the need for caring for them over their seemingly increasingly extended lives. And so as a consequence, we think that's a strong, once again, a tailwind to not only Zuitus, but also Solar Edge and collectively are things, I think, that can be bought and tucked away, not looking at them necessarily for what they might be priced at Monday afternoon,

but necessarily a Monday three to five years from now. Mark, thank you for being my therapist. You charge a lot less, too. We appreciate it. Mark Lushini. You're welcome, Tyler. Any time. You bet.

Still ahead. Three new buy calls on some. stocks that are 20% or more off their highs. Should that be a green light to invest or a red flag? We'll ask our trader in three-stock lunch. All righty, welcome back to Power Lunch, everybody. It's been a week of turbulence after Silicon Valley banks collapse. It's also been a week of announcements with Google and Microsoft continuing to battle for the future of AI, artificial intelligence. And today, John Ford brings us up close with a Silicon Valley founder with deep perspective on all of it. John? Yeah, quite deep. Marissa Meyer, co-founder of

of Sunshine, an artificial intelligence startup, working first to simplify digital contacts. And you'll remember her as former CEO of Yahoo. Before that, employee number 20 at Google, one of the top executives who engineered that company's growth. I spoke with her yesterday about the lessons from Silicon Valley Bank.

She said she's diversified where Sunshine keeps its cash, though it wasn't with SVB. And we talked about the race for AI leadership, which she says you shouldn't count Google out of. Meeting Microsoft will probably take discipline product management. And Meyer says Google has experience with that. I remember when I hired Sundar Pashai, I had him come in.

And I said, you know, I'm not sure exactly what to assign you to, but why did you take a look over the portfolio of consumer products that, you know, my team is working on? And he came back a week later and he was like, you know, there's this thing called Google Toolbar and it has 200 million users. And there's no one product managing it. And I was like, good point. Like, why didn't you start working on that?

And Google Toolbar then gave rise to Chrome, which then, of course, started merging with the Android operating system, and Sundar was a brilliant hire and did a great job with all of that. But it gives you an idea that we had, like, this giant product of millions, hundreds of millions of users that wasn't being actively product managed.

Promote that guy, Sundar. Since Meyer left Yahoo six years ago, she's gone back to her roots in artificial intelligence, which was the focus of her graduate work at Stanford before she joined Google. With Sunshine, the idea is for AI to sift through email and contacts and piece together information that eliminates duplicate entries, corrects misspellings, adds contact information from emails.

Sunshine, we founded the premise and the principle that we want to take the mundane and make it effortless. And we've worked really hard on our contact solution for us. Contacts are the foundation of relationships. The fact that sometimes you go to call some on your phone and the phone number is not there, even though you emailed them yesterday, right, even though you're like, wait, I know this colleague and I've spelled their last name wrong because I had just quick time. type it into my phone and I didn't know how to spell their last name, so I guessed. Those types of things, we feel like if we can help people clean those up and make contacts

for everyone, their contacts are a mess. You talk to thousands of people now, everyone's contacts are a mess. It's a problem, a big problem hidden here in plain sight. And if we can help clean those things up, then we can go on to build more effective groups, more effective events, more effective sharing among small circles of people. Well, here's some economic sunshine. Even if some people are ringing their hands and talking about Silicon Valley getting downgraded from this banking crisis, I'm seeing a familiar pattern.

Experience executives like Marissa Meyer and another of her former product managers at Google, former Salesforce CEO Brett Taylor, they're going back to the lab to invent the next big things this time on top of AI. They're back to being startup founders. I will stipulate that my contacts are a mess. Same. They exist on several platforms. Same. My cell phone, in my outlook, in my LinkedIn.

Does her product run over top of all of these things to rationalize my contacts? Does she sell the product to me, the consumer, or to LinkedIn, the Microsofts, and so forth? To you. And it's right now the primary thing is it's an app on your phone. It reaches into your contacts app and says, oh, you've got six different contact for this person. Are they all the same person? Where are they now? and it'll also link into Gmail and find email addresses that have phone numbers attached to them and be like,

okay, is this a contact? You want to put these together? So things like that, that you don't, the older the contact is, I find the more messed up it is. Oh, yeah, absolutely. I've got old numbers for friends who worked at a former place. We both work, Time, Inc., which doesn't exist anymore. And so it's still there, but at any rate. So I have to do some work here.

It's not, it's not going to, I have to. You got to do a little work. I got a massage. I does a little work. Yeah, it's a work in progress. Does it give her too much access to personal information between Gmail or contacts, you know, that sort of. Did she address that at all? We didn't talk about the specific ways that it works.

It's a very good question. Are these contacts stored in the cloud anywhere? It appears the way it works is it's rationalizing all of this on the client device as opposed to sucking your contact. Just the fact that she hired Sundar Pichai. Yeah. She hired a lot. She's sort of like a mentor of so many entrepreneurs in the Valley, Dropbox, a lot of those folks she's been bringing together since she was at Google. Golden Touch in that regard for sure. John, thank you. John Ford.

Coming up, we're trading three bold calls of the day in today's three-stock lunch and power lunch is back in two. Dows down 483. Welcome back, everybody. It's time for three-stock lunch, and two of our names are in the green today in a tough tape. All three are moving on some bold analyst calls with Chubb lower despite an upgrade to overweight. at JPMorgan, Warner Brothers Discovery, getting upgraded at Wells Fargo on an improved risk reward, and dating at Bumble surging after city initiated as a buy. Well, it's up two and a half percent. Here to help us trade all three is Scott Nations, founder and president of nation's indexes. Good to see you, Scott, on a day like this. Chubb, I mean, insurance names have been a bright spot.

Why the down move today? And would you be a buyer? I would absolutely be a buyer on the JP Morgan upgrade. They mentioned margins and valuation. And the valuation is just getting even better today. down 15% year today, 11% for the month. So we get to buy it a relative bargain. Much of this is because of disappointing Q4 earnings, but it's a great franchise with an even greater customer mix. And now the forward PE is just barely 10.5. So you get to buy a great company below the industry average PE. Let's go on to Warner Brothers Discovery, which has been a problem child over the past couple of years or the past year. Then a big comeback there. What do you think

is next for this stock? This is also a buy, but it's a much riskier by losing money, expected to lose 47 cents this year. The bullish thesis is they're going to make it up on synergy. They're going to make it up on derisking and they're going to make it up on content. For example, they want to de-risk by paying down debt. They also want to exit the regional sports channel business. That all makes a lot of sense. They want to increase free cash flow, but who doesn't? So there's lots of upside, lots of upside, particularly with their new streaming service, but there are also a number of execution risks. So if you like the thesis, if it makes sense to you, then it's a buy, but it's a risky buy. All right. Bumble. What about this one, Scott? This is a hold for me. It's a dating

service. The fact that they're profitable is impressive. They have a unique hook in that women make the first move. I've been out of the dating pool for a long time, so I'll leave it to others to determine whether or not that point of differentiation is going to carry the day. They're going to have to continue to invest a ton of money in the business. They expect EPS to increase 200% this year, which is great, but again, they're going to have to invest in the business. So that trails off in the future. That slows down. If you like that hook, that point of differentiation, then it's a buy, but for me, it's a hole. If he was in the dating pool,

their systems would crash at Bumble. That's what's going to happen, man. I'll tell my wife, then. All right. Scott Nations, thank you, sir. Have a great weekend. All right. Still ahead.

The White House may be worried about TikTok, but Google warning China has other ways to evade even the best cybersecurity tools. As we head to the break, note the Dow is around session lows, briefly dipping below 500 points negative earlier today. we will be right back. It's going to be 60 minutes. You're not going to want to miss. Already one more thing before we go. The White House taking aim at TikTok, who hasn't been lately,

threatening a U.S. ban because of security concerns from China. But Google warns the cyber threat runs much deeper than that. The tech giant claiming Beijing has stealthy ways to evade even the best government and corporate cybersecurity. Amin Javers joins us from Washington to discuss that. What are they pointing to? here, Aiman. Hey, Tyler, what they're saying, this is the Mandate Unit inside Google. They're well known as a standalone company, well known now inside Google, led by Charles Carmichael on this project. And they're very good.

And what they're saying here is that they've spotted a series of apparent Chinese cyber attacks that are going after things on the edges of typical networks like Cisco systems and the like, even the firewalls on the edge of networks. And it sort of combines a couple of things that we've known about in cybersecurity for a long time. One is this idea of a supply chain attack, right? So if your target is here, you find the contractors and subcontractors and sub-subcontractors to find a vulnerability and hit there to get up to your initial target. And also this idea of sort of lying in weight attacks, where you put malware in place

and then leave it there until you need it at some future point in time, TBD. So this seems to have elements of both of that time. Are the Chinese then using tools that our best cyber defenses aren't able to defend against? Well, they're not able to stop at least some of this from happening, but they're also not able to stop Google's team here from discovering it, right? So it's this endless, you know, cat and mouse game of, you know, malware goes in, defenders find it, attackers find a new way to put malware in, and it's sort of never-ending cycle. There's no sort of defeating this entirely.

And what then would be steps to try to ring fence it, Eamon, as we get more serious about these vulnerabilities? Yeah, that's a really good question, Kelly. I mean, the one thing you might want to do is just make sure you have redundancy plans. So if you do lose some systems, if there are attacks that are successful, that you have the ability to recover. A lot of this is sort of, you know, in military terms, left of boom is stuff you do to prevent the attack and plan before the attack. And then there's right of boom, which is stuff you do to recover. And so a lot of what companies need to be thinking about is also the recovery phase here. If there is something that goes wrong in your systems, how do you recover, reboot, redeploy your systems?

that kind of thinking is definitely going on inside boardrooms around the country. TikTok's CEO is going to testify on Capitol Hill next week. Is it mostly going to be performance or will anything really come out of it? Well, I mean, it's going to be a performance with huge stakes, right? I mean, the question is whether or not the administration is going to come down in some way and ban TikTok and figure out a way, either legislatively on Capitol Hill or through executive rulemaking to ban TikTok across the country. There's enormous financial stakes. There's enormous national security stakes.

And there are enormous political stakes in this because there are millions and millions of users of that service in the United States who will be upset if it's banned. And so that's a political backlash that maybe the administration doesn't want to face. Their own small businesses, in fact. Amen, thanks.

Amen, Javours. Don't miss, Amon, by the way, he's got a long day, long afternoon ahead. Anchoring our taking stock special tonight at 6 p.m. Eastern Time. Don't miss it. All righty. What a week it has been.

What a week ahead. Get some rest. You're going to need it in the weeks and months to come, I think. Absolutely. Thanks for watching. Power lunch, everybody. Have a good weekend.