Power Lunch - Power Lunch 12/28/23

Episode Date: December 28, 2023

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Coming up, AI, has been one of the big stories of 2023, maybe even the biggest, and it's not going away next year. Far from it. From questions about how to use it, how to regulate it, how to make money off it. Our panel will answer those questions and offer some investing advice. And whiskey business, the CEO of Mixtors will join us. We'll ask about the impact of tariffs and what he sees on the inflation front and trends in the alcohol industry. People choosing marijuana over booze. Let's get a check on markets, though, with stocks are once again melting higher. The Dow crossing above 37,700 for the first time. Another new record. The S&P, the NASDAQ composite short of their highs. The S&P only by about 10 points, though. The NASDAQ 100 weighted to the bigger names is at near record levels itself and up more than 50% this year.

So the question is not just when will this rally end, but how and how badly to explore that and more? Let's bring in Mike Santoli. Now, Mike, I'm not sure I like. the phrasing of that question because it presumes that the rally must end and eventually all rallies do. Yeah. But it suggests that it's going to end soon and that is by no means assured. Yeah, I'm with you, Tyler. I mean, you don't necessarily should treat record highs, assuming we get there within a few points relatively soon in the S&P 500,

as an occasion to say, when is this going to be over? Obviously, difficult to project either way. but two-year round trip. It's amazingly symmetrical how this market from almost exactly two years ago, right down 25% in 10 months. It's up 33% in the S&P 500 over 14 months. And it's remarkable that two months ago,

it was plausible to say, you know, I'm not really sure this really is a bull market. I'm not really sure we got a significant low in October of 2022 just because it was such a narrow market and it wasn't operating the way it should. And bank stocks were down from that point and never happened before.

So there has been a bit of a real. rescue of this idea that it is a bull market of some description. Now, even if it ended very soon, you'd still call it a brief bull market. But I think the thing to keep in mind is the stuff that would knock it off course, which is excessively bullish sentiment and positioning, they're not good timing tools. Valuations are certainly not all that attractive, but they're also below where we were two years ago when we fell off these levels. And of course, you know, the macro backdrop for now seems friendly and the burden of proof for the moment seems to be on those who say the economy's going to turn hostile very soon. Yeah. All right, Mike, stay with us as we bring in a new guest

for more on this strong year-end rally and how to position for 2024. Let's welcome Jeremy Brian, portfolio manager at gradient investments. Jeremy, I'd like welcome, number one. I'd like to get your reaction to what Michael just said there, but you say it would be difficult to say that we see this type of performance continuing at the magnitude we are experiencing now. And at the same time you point out that now with regard to market performance a year after a big year, higher than 20% gain in the S&P 500, stocks are still up the following year, 65% of the time, and the average return in those years, including the down years, is about 9%. So that suggests that 2024, while we may have a correction, may not be a bad year at all.

Yeah, I mean, that's absolutely right. You nailed it. That's, you know, our opinion is just because you have a good year doesn't mean the next year is bad, right? We've been on a little bit of a seesaw, as Mike said before. You know, we had a massive down year and then a really good year this year. It does not mean we have to continue on that trajectory. In fact, I think, I hope at least, that we kind of normalized to a certain extent. And a 9% market is a normal market. Now, do we get that very often? Actually, not. Usually you end up getting very highs and very low. You usually don't get 9 to 10% all that often. But those numbers that you said show is that better than 50% of the time we're positive again the next year, even after a big year. So from our perspective, we're saying,

hey, have a safety net and be cautious and understand that certain things are pretty expensive. Certain things are still a relative bargain. There's still opportunities out there, and it does not mean doom and gloom for 2024. Mike, what would you add? I'm hearing a lot about this, this idea. I mean, I thought Bryn put it well earlier, this question of, are we about to make a double top or should we expect that once we see the kind of momentum we've been experiencing that stocks typically keep going? Yes, usually, you know, strong returns for a while beget further strong returns. Now, all that being said, I'm not sure the market on a longer term basis really owes investors a tremendous amount. The three-year

trailing annualized return of the S&Ps right at 10 percent. So it's not as if you're digging out of some deep hole if you've been a buy and hold investor. You go back, you know, five years. I think you're up 16% annualized. So in other words, it's not as if this market has been down in the dumps and it's something that it's a recovery effort. But I do think you have to keep in mind. Just any year, calendar years, they're up 70% of the time. Usually you tend to have some kind of follow through.

I don't think you necessarily want to, you know, pencil in the most bullish gains. I think the biggest question, Kelly, from this moment is, are we still in a late cycle? How long can we stay late? Have we somehow gotten the fountain of youth based on the Fed pivot that we're back in mid-cycle? Because that's going to define, I think, how we absorb whatever comes at us in the way of the growth and inflation numbers. So, Jeremy, I wonder to pick up on what Mike just said there about interest rates and so forth, there's an awful lot of expectation about lower interest rates seemingly baked into where we are right now, 150 to 175 basis points of cuts, maybe six interest rate cuts.

That means every meeting they're going to cut, basically, if they do a quarter point at a time. That feels a little fantasy land to me. Yeah, I think people need to calm down on a little bit because they were going the other way four months ago, right? In the effect of they were assuming rate increases and now we're assuming that amount of rate decreases. I don't see that. And here's what we've been saying is that. So what if the Fed doesn't cooperate? What if what if that, what would the market reaction be if the Fed doesn't cooperate, as you seem to suggest, it may not?

Yeah, I think normalization could absolutely happen. Could we get a short-term correction as a result of that? Absolutely. But from our perspective, that's the buying opportunity, right? Is if we're looking at that and saying, oh, the Fed isn't cutting, well, they're not cutting because economic trends are still okay. We still have a good amount of jobs. And maybe they're not cutting as aggressively as we had anticipated. but if corporate earnings are still coming in and market sentiment is generally driving us towards

positivity, I don't think that that is the in and of itself the catalyst for a big decline going forward and saying, well, the Fed isn't cutting as aggressively. In fact, in our opinion, if the Fed's cutting more aggressively than anticipated, that's probably bad because probably your economic trends are falling apart a little bit. Michael, let's talk about the broadening of the market and how you see that and interpret that. Since the, the mid-fall, the Russell 2000 and other small-cap measures have done very nicely. The equal-weighted S&P has been outperforming. So that's a pretty good sign, isn't it?

Yes, absolutely. And, you know, is probably the chief complaint of observers of the market going into that period is the average stock had really sat out this rally. Now, you're up about 16 percent, again, total return-wise in the equal-weight S&P year-to-date, and that's almost all been since November 1st. So clearly a major catch-up move, I think they're a big question for me. I'm not sure we have to continue to think about this market as either or. It's either a magnificent seven market or it's in everything else market.

You know, I mean, as we've seen since the bottom in the fall, the large growth stocks have also participated, and they're not acting in unison either. So I do think there's a way to basically have almost nobody be right if you're picking one or the other. So, Jeremy, a couple of your stock choices based on your forecasts include companies in medical care and health insurance. I believe Cigna is one of them, United Healthcare, another. Why do you think those are likely to outperform next year? Yeah, the real thing is they, just to my point, we haven't really seen their level of participation. And these are companies that are still growing in the 8 to 12 and even higher than that range. So that's what we're really looking at now is if we do get a broadening out, as Mike said before,

what are the companies that we want to be involved in that are going to participate to a greater extent in that broadening out? And we think companies that haven't participated quite as well up to this point and still have good, solid earnings growth characteristics is where you want to be. So health because of the GLP-1s being the only thing that have really worked this year in health care. We just think that's an area where that's all of the other stocks have kind of been left alone and have not participated. Meanwhile, their growth profiles still look pretty good going forward. All right. Thank you both. We appreciate your time. Jeremy Bryan and Michael Santoli. Bond yields have been tumbling for months, but taking a pause today, the 10-year yield back above

3.8 percent. Rick Santelli in Chicago with more. And I haven't gotten to ask you about the dollar yet, either, Rick, but it's been quite weak. Yes, it's been quite weak. It's down on the year. And that shouldn't be surprised to anyone because, of course, interest rates and the robust tightening cycle of the Fed certainly did put a tailwind on the dollar that now has dissipated. And that seven-year note auction, well, look at an intraday of sevens. It jumps out at you at 1 o'clock Eastern, everything changed. And the entire curve reversed because the auction did not go well. It's the last of the auctions.

And many times you do get a bit of an outsized response. And let's not forget, interest rates have been. awfully well behaved. If you look at that same seven year, the aforementioned, yesterday's close was the lowest yield close going back to the first part of June. So we'll call it six and a half months. And finally, if you look at what's going on with tens, I find this so interesting. We've had a wild year. Look at the ranges. What the top, we basically touch 5%. On the bottom, we hit 3.30. And we settled last year, the last trading day, the 30th of December, at 3.88%. We are darned.

aren't close to unchanged on the year. And if you look at the yield curve, twos to tens, as many of us do, it closed at minus 55 for 2022. It's right now hovering at minus 43, less inverted. And that's because the leadership role of interest rates moving down has been taken up by the two year and short maturity's most closely aligned with the Fed, which means for 2024, you should be very observant of a potential steepening the yield. curve because long rates may definitely side on the debt side of the equation, meaning servicing

the debt could keep them much more lofty than many are anticipating because they assume the Fed's done and all interest rates are going to do what the Fed's doing going down. Not necessarily the case. Kelly, Tyler, back to you. All right, happy New Year, Rick. See you next year. Coming up, Apple has always been a tech darling. But this year it got lapped in the AI race as that. The hype and the money was on direct AI plays like Nvidia and others. Up next, what the company can do to fix it. Plus, which chip names could be challengers to Nvidia in the AI chip race?

All of that and more when Power Lunge dives a little bit deeper into AI. Welcome back to Power Lunge. One of the big stories for the market this year, of course, was the rise of the magnificent seven. The seven big tech names driving the markets for better or for worse. CNBC's index tracking those names is up more than 100. 100% this year. Those gains are led by Nvidia and meta, both of which have tripled. Microsoft and Apple

are the laggards in this group, though 50% gains are still good. But that's old news. What about 2024? Our delivering alpha investor survey asked investors, strategists, and our own contributors for the MagS7 names they think will lead the way in 2024. Microsoft got nearly half the votes.

Apple was tied for last. For a look at why the market seemed to have soured on Apple, let's bring in Steve Kovac from the NASDAQ. And Steve, Steve, what they might be able to do to fix it. Yeah, and like you said, 48% nothing to shake a stick out there. So I think any of those names will love to that. But anyway, look, biggest question for Apple in 2024, can it return to growth?

That's because we just got over four straight quarters of declining sales. And on top of that, this current December quarter in, Apple said to expect sales to be flat. Now, despite that, shares are up about 40% on the year. And going into 2024, we have some good news that could help Apple and some bad news. news that can make it harder to return to growth. Let's start with that bad news, first of all. Headwinds in China, that's really the big one here. Huawei returning online, starting to sell phones again and showing some indications that people are switching back from iPhone to those Huawei Android phones. Also, the online

gaming crackdown from the government that can impact the app store, and just overall what we saw throughout the year, a slower economic recovery among the Chinese consumer. Now let's move over to the US. The Apple Watch band still being worked out, despite that reprieve yesterday and going on sale again today. And I'll just smuggle in one more here, the European Union Digital Markets Act that's going to go into full force next year. That's going to force a lot of changes in Apple's App Store, hurting its massive profit margins there. Now the good, speaking of services, that growth has been re-accelerating again. It's a high-margent business. It was up 16% in the September quarter. That is really good news for Apple and

getting back to growth. And on the hard, Wordware side, signals the PC and phone demand may have bottomed out after all that pandemic buying puts a damper on things over the last couple years. Now, guys, look, here's what's not going to move the needle. That new Vision Pro headset we've been talking about for so long, it's going to be a small launch coming out in the U.S. probably as soon as February at first, but it's not going to be a mass market device. Estimates about 500,000 units for 2024.

Still a vision of the future and maybe something to pay attention to, guys. And I wonder if they'll do anything else, Steve, to even kind of AI wash, if I could put it that way. And maybe highlight those aspects of their ecosystem that would most benefit from the continued adoption of the technology. That is the other big question. And I'm glad you asked that Tyler brought that up in the tease before the commercial. And, you know, the big question is, what is Apple going to do with this generative AI boom? We've been saying you've gotten some hints of it. There was like that report in the New York Times last week saying they're trying to train their large.

language models similar to what chat GPT has on media organizations and in fact paying to license that content. We already know about that whole rigmarole that's going through with Microsoft and Open AI in the New York Times. But look, who knows? I mean, does that mean like some kind of supercharged Siri that they can charge for? Does that mean creating new tools for developers to make it easier for an iPhone developer to kind of tap into that AI large language model that Apple made, we really don't know. But I expect, Kelly, if they are going to do something, June, their annual developers conference, that's going to be a good time for the announcement. So really pay attention to that one. I don't like to criticize Apple because I usually end up eating my

words on it. But I have to say, if they intend to charge for Siri, they've got to get serious about Siri because it's not competitive right now. No, it's nowhere close to the capabilities of what ChatchipT can do and so forth. But here's the thing about Siri, Tyler, is. is Apple was very cognizant about getting the answers right. They're so protective of their image. I mean, early on in the early days of Siri, you know, it would get things wrong and they'd have to run in and correct it manually. So they want to get it right. That's my suspect.

That's what I suspect, at least, and why we haven't seen that kind of product. But we do hear from Tim Cook over and over again. They are playing around with this technology. They have some ideas. Maybe in 2024 we see it. Better to be right than fast. Hey, Siri, did you hear what Tyler just said about you? I don't think she's going to be very happy.

Did she respond? No, because she can't. She can't. She can't process it. Large language model, my Bippy. All right, Steve, see you, man. Thanks. Our further ahead, will you get your whiskey neat or messy? That space facing some troubles,

even with the potential EU tariffs on American exported whiskeys being delayed. Between higher prices, shrinking alcohol consumption, what can those businesses expect in the new year? Plus, lit taking a hit during the EV craze. Lithium was the hot trade. But this year it took a free fall, with prices down around 80%.

What does this say about the future of EVs? We'll break down that one next. Lithium was supposed to be the centerpiece of the EV future, but as demand for EVs has cooled just a bit, so has the price for lithium stocks. The lit ETF. You got to love that one, is down 10% so far this year. Let's bring in PIPA Stevens.

for a look at lithium in 2024. Well, Evie's had a wild ride this year, and so too did lithium. At the beginning of the year, spot prices topped $70,000 per ton, according to benchmark. Today, they're trading under $16,000. That's a decline of nearly 80%. Prices started rising at the beginning of 2021. As forecasters said, there would be shortages, which pushed prices up nearly 800% in the span of just three years. But now there's too much inventory, slow in the time.

EV demand and surprising supply growth. When prices were rising, battery companies stockpiled lithium, which they're still working through, just as that demand slows. Plus, supply came online faster than expected, in part because sky high prices made projects that would otherwise be too expensive, economically viable. As Citibank put it, it's a perfect storm of headwinds. And there could be even more declines ahead, given that we're entering a seasonly week period before China's Lunar New Year in February. Now, key players like Alamar, Liven and SQM, catching a bid this month, but still in the red for 2023.

We've seen this with commodity cycles before, that when prices go up, everyone gets in, then prices drop, then there's no investment, they go back up and yaddy, yadi. Yeah, I guess what's interesting here is those companies that invested in big projects, assuming the price was going to stay high, they're now in a bad place, right? So they've always been very careful and watched their words in terms of lithium projections, and I think that's because there was so much volatility. And nobody in the industry thought an 800% increase was good. You know, over three years, that's just far too much.

And that nothing kills high prices like high prices. So it's not good for them either. But they were certainly banking on continued upside because they changed their contract structures from long-term contracts to contracts that match a global-weighted average of lithium. So they made that move kind of almost really at the top just as then prices started to decline. I mean, I do think we'll or analysts say that, you know,

we'll see a bottom at some point because there's no question that lithium is, you know, vital for the energy transition, but certainly not above $80,000 per ton. That was too high. And I think everyone universally said that was not good for EV demand looking forward. Buying at the top, that is the Matheson Law of real estate purchases. Always, I'm always right there within a couple of months of the peak. Pippa, good to see you. Thank you.

Let's get to Christina Parts in Evelist now for a CNBC News update. Christina. Thanks, Kelly. For all the U.S. issued sanctions today targeting funding for the group blamed for the recent shipping vessel attacks in the Red Sea. United States officials say the sanctions focus on a group of money exchange services from Yemen and Turkey

that allegedly transfer millions of dollars to the Iranian-backed Houthi rebels. Those rebels have been attacking ships in the Red Sea in recent weeks. Israeli sources tell NBC news that Secretary of State Anthony Blinken is expected to return to Israel in the new year. It'll be his fifth visit to the country

since the war with Hamas started in October. The visit is expected to come at the beginning of January, although the State Department has not confirmed Lincoln's travel plans. Pierce Brosnan is in hot water for walking into restricted

areas of Yellowstone National Park. The actor is accused of traveling off trail in the park into thermal areas. He's been ordered to appear in court at the Yellowstone Justice Center at the end of January.

Kelly, that means that even celebrities need to follow rules. I have been to some... We did an end-of-year trip to Yellowstone in the minus-four. a couple of years ago. But I wasn't wandering anywhere. I was wandering back to the hotel.

Was you going one of those snowmobile tours? We did, yes. Yes. Oh, cool. Highly recommend. Yellowstone is one of the most eerie, beautiful places I have ever been. And while you're there, you're like, could the volcano blow while I'm here? Yeah, whatever.

Old faithful? Yeah, exactly. I think Pierce Brosnan ought to just get off on handsomeness and loan, you know. And he probably will, to be honest. On handsome. All righty. Ahead on Power Ledge, we're looking back to the future. The biggest story of 2023 was artificial intelligence, and it's likely to be just as big in the new year.

What transformations should we expect? We'll discuss that next. Don't go anywhere. Welcome back, the U.S. and EU striking a deal to avoid 50% tariffs being imposed on whiskey exports to Europe. That's great news for our next guest whose whiskey bottles would have gone from 67 to 88 euros across the pond. Here to discuss taxation, inflation, inflation. and demand for libations is Joseph Malioko. He's president of Mictors Whiskey and Chathamintosh.

It's great to have you back. Welcome. Thank you so much for having me on. Love the show. And it's my understanding that we've had tariffs. They've been removed. They might have gone back. How has that price volatility affected demand in European end markets over the years?

It's been quite a saga when comes to American whiskey exports. And the story still isn't totally clear and totally over yet. 2018, the tariffs on American whiskey came in 25% on exports to the EU. It was a retaliation for us instituting tariffs on aluminum and steel from the EU. And it affected volume a lot. 2018 to 2021, volume dropped on American whiskey exports to the EU by 20%. Wow. The tariffs were suspended for two years as of the beginning

at 2022 and 2022, the business really bounced back strongly. In 2022, American whiskey exports to the EU were up 29%. So that's the good news. The bad news is that it was just a postponement of the EU tariffs and its suspension of it. And the EU tariffs were supposed to get reimposed next week on January 1st of 2024, but not just reimposed, but doubled to 50%, which would have been just a tremendous, you know, tremendous increase all at once. Fortunately, on December 19th, the EU and the American government agreed to stuff that would

suspend the tariffs. But the suspension is only until March 31st, 2025. So the saga continues, and distillers like us will continue to bite our nails. How much has the uptake of cannabis affected demand for your products, for alcohol generally? And if you wouldn't mind, tell us how that uptake in cannabis plays across different age groups. In other words, is it higher among younger people? Therefore, consumption of alcohol among younger people is lower. Is it lower among my generation?

So we're still drinking the way we used to. You know what I'm saying? Look, I know a fair amount about whiskey and a fair amount about spirits and wines. I am by no shape or form an expert on cannabis. and I certainly don't want to portray myself as one. You know, that being said, I think on a high-end item like mixtures, you know, I think that cannabis has very, very little effect. And I really haven't seen, you know, cannabis having an enormous effect in general on the industry anecdotally.

You know, an IWSR report came out very recently saying that of Gen Z legal drinking age people that about one third of them are not drinking alcohol. Now, is part of that cannabis or not, I don't know. The good news for the industry is that two-thirds of them are drinking alcohol. But again, I think it remains to be seen, and I don't know that it's really been quantified how much can. cannabis is directly affected in the industry at this point. Let me switch and ask you a little bit about inflation pressures and where they have been coming from, whether they are abating, and, and get you to address this question, and that is, I understand if corn prices or rive prices or barley prices go up in 2021 or 2022, but a lot of what you are selling today at bars and in

liquor stores was put in the barrels 10 years ago when prices were very different. So how do you how do you price today for inflation influences that you're feeling today when so much of your product was made 10 years ago, nine years ago, when prices were different? It's a great question. Obviously, you know, corn, which is up 22% from pre-pandemic levels and rise up 32% from pre-pandemic levels and malted barley is up a 32, sorry, rise up 50% from

pre-pandemic levels. So, but you're right. I mean, we have so much risky that we're selling now that was laid down previously, but the thing you had to realize is that we're laying out money now to buy this stuff. And for example, you know, I'm aware of barrel price

increases in barrels. The barrels are more expensive than a distill that you put into the barrel. Barrel prices, for many people, are going up 30%. effective January 1st, 24. And so we're laying out a lot more money now. Now, also remember, you know, if you compare SOFER, you know, standard overnight fund rate, you know, it was 0.05% in in December 21. It's now 5.3,4%. So it's a 10,000% increase. So it costs us a lot more to lay out the money now. And, you know, remember, you know, it's something like Mixtor's our US1 line,

which is our entry level line, you know, typically, you know, we're averaging around six years holding this stuff before we bottle it and get our money out of it. So there's a lot of money that's being laid out by the industry right now. That's a very interesting answer there. In other words, you're having to invest now for the product that you sell in nine years. And so today's prices have to reflect that investment into tomorrow's product. Yes. You know, and, and, and But it's not just, you know, it's not just, it's what we're laying down and increasing inventory right now. But it's also, it's also, you know, we're rightfully so. We're paying our people more.

Yeah. You know, labor costs more and, you know, energy costs more. And, you know, so there's a lot of different factors, you know, that go into it. And, you know, and really, inflation really has also, I think, affected the whole industry somewhat. Yeah. You know, people are, you know, people, you know, people, you know, one thing that we find, which is anecdotally interesting, is that, you know, now that maybe, you know, interest rates, look, interest rates are starting to come down, but a 30-year mortgage is still, you know, 6.6 percent as of today. You know, the people are experimenting less. They're just sort of buying more tried and true brands that they know rather than buying some expensive discovery products.

So we, we do see inflation affecting things. interest rates also too have led to a lot of de-stocking at our industry retailers have been cutting their inventories in 2023 substantially and that's one of the reasons why people are looking at our agency are looking forward to 2024 because now now think sort of moderate we have to leave it there joe but but i would suggest that anybody who has a 7% mortgage the best thing to do is to open a bottle of mictors and just have have a little that'll make you feel a lot better about that mortgage i love that idea joe malyoko thank you very much happy new year my friend of mixed mictors whiskey and distillery. All right, speaking of booze, why not? Coming up, we're popping the cork a little early on our three-stock lunch. Our trader, oh, Michael Lemon Cake Far, is going to lay out his top picks for 2024. We'll be right back. All right, folks, time for today's three-stock lunch. We take a look at some of our next guest's top picks for 2024 here with the trades for the investment recommendations. Michael Farr, President's CEO of Far Miller in Washington. Hi, Michael.

First up on your list, Goldman Sachs, shares are higher by 12% year to date. A lot of people would turn their nose up at that, but that's not a bad return at all. Your take on Goldman for next year, sir. Not a bad return at all. I've done this top 10 list, Tyler, for 16 years. Goldman at 1.2 times book with about a 3% stock dividend, 2.9% dividend. growing at 8% a year. I mean, you know, I joke about Goldman Sachs, you know,

and saying sometimes the customers or investment banking clients may or may not make money, but Goldman Sachs always makes money. You know, over a lot of years, you don't bet against Goldman Sachs. And I think you see an investment banking comeback in the year ahead as the economy may be slows but then starts to recover. All right. And by the way, everyone says thank you for the lemon cakes, a huge hit. Let's talk about PepsiCo.

The stock is actually down about 6% this year. What are your thoughts? I didn't see that one being sent out for Christmas. No, and I wish that PepsiCo made those lemon cakes because God knows I buy a lot of those things, you know? I really do. PepsiCo is not cheap at 20 times, at 20 times earnings, 3% dividend. Solid balance. But the new CEO, Raymond Liguerta, has Ramon Liguerta.

has, Ramon Liguerta has been improving and gone in with this faster, stronger, better at PepsiCo. Snack food business, lots of efficiencies. They filled gaps in their lines. I think they continue. This is not an exciting company. This will not be the best performer on my top 10 list. But I think it's going to be a very solid performer, and you should have a core anchor in every portfolio. I've got this one in Johnson and Johnson.

And the list comes on CNBC.com after we get off here. So it's been, none get released until after your show. We're going to give them the appetizer portion, then they can go get the whole feast when we finish here. Finally, Valmont Industries, not Voldemort. Valmont shares down almost 30% year-to-date. What about Valmont? A loser turned winner next year?

You know, Tyler, it was a great winner over the past few years. It did have a bad year. And if you're catching a theme here of solid balance sheets, good, strong, cash flow, conservative companies with a bit of a dividend, you're right. Also, I'm not chasing the things that have gone through the roof. I'm trying to hit them where they're not. I like to buy low. Some of these aren't cheap, cheap, cheap, but the fundamentals are strong.

Valmont makes industrial poles, utility poles. They make infrastructure products. They do stuff for agriculture and irrigation, highway safety. This is a core company that's going to benefit from the still ongoing deployment of 5G. also agriculture and infrastructure spending 15 times earnings, 9% earnings growth. So superior to the S&P, at a discount to the S&P. I like Valmont. I've owned it for a while, and I like management at Valmont.

So here are three. I also add some health care companies to balance out the portfolio. They're going to be on CNBC.com. And happy New Year to you guys. Thank you so much for having me. Happy New Year to you, Michael. Always great to see you and best of your family. Thank you. And for all 10 of Michael's picks for 2024, you can, as he suggested, go to

CNBC.com. Those picks will be up in about four minutes time when we leave the air. And still ahead, a huge change is coming to 529 plans. That's in closing time next. All right here. We're going to wrap it up. Huge change coming for college 529 savings plans. Up until now, funds had to be used for qualified education expenses. But starting on January 1, the savings can be put toward retirement. if not needed for school. That is a big game changer. I have a son who's going to college next year. So I'm going to be using my 529s for the historic purpose of college expenses.

Probably worth it in the long run, but I'm glad to tell people about this. I didn't realize this. I always knew there was a way to do this, but this makes it much more accessible. Thanks for watching, Power Lunch. I am off tomorrow. Happy New Year, everyone. Thanks for joining us. See you next year.

The next year. Closing bell starts right now.