Power Lunch - Power Lunch 5/14/25

Episode Date: May 14, 2025

CNBC’s Brian Sullivanand 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.

The market rally mostly rolls on as most stocks are higher once again. Welcome to Power Lunch, everybody, alongside Kelly, you just saw. I am Brian. The NASDAQ hoping to make it six gains in a row. That would be the longest winning streak in nine months. And markets have soared off the April 7th lows. The S&P 500 popping a staggering 21% since the intraday low that day with some specific stock surging Kelly in a month, NRG, Palantir, Microchip, and many more. Rocketing. Look at that energy up 60%. It's crazy. So where might be the next big opportunity?

We're live at the Sone conference where some big money managers are presenting their best ideas all afternoon long. And stock trading platform, E. Toro is a new stock itself. And it is soaring about 28% off the IPO price, Brian, not bad. And much better than it would have gone at the original IPO date. I imagine they pushed it back amid the tariff drop. Yes, I don't want to be clear. This is not an electric lawnmower. This is not an E. Toro. I have one of those, you know you do. This is E. You're such a nerd. It actually works.

It's self-propelled. It works very well, but I tried it for a little while. And by the way, the nerd reference is a shout out to a friend who's watching the show. We're nerds and we're proud of. All right. So we just hit how well our markets have done lately, but here's kind of an RBI for all you market nerds out there. Many other countries have made you more money than the United States this year. Our markets just slightly positive for 20.

2025. Not bad, anyway, given what we had a month ago. But break out your investing globe and take a gander at this. The ETF that tracks the German market, it's up 28% this year. My God. Mexico's ETF up 26% and Brazil, which, by the way, I wrote about over a year ago as a prediction, but it's been a complete dog, is finally showing some life up 26% so far this year. And some smaller markets, more obscure markets, are up even more. Your first guest today has probably been to every single one of those markets and those countries. He has logged millions of billions of miles on airplanes. He is a trailblazer in investing in emerging markets.

We're talking, of course, about Mark Mobius, the Mobius Emerging Opportunities Fund, joining us now. Mark, it's great to have you on. You could be in Nepal or in San Francisco. I have no idea. Welcome. It's good to see you. Why do you think we're seeing this huge push into global markets? We only highlighted a couple, but pretty much every major and emerging market is actually outperforming the United States.

Well, I think the main reason is because Trump has opened up the whole world in the sense that people are now realizing that anything is possible with Trump. And as a result of his trade negotiations with China, now China is not the only game in town. We're now seeing all these other countries entering the export market and being able to compete. So it's really very exciting to see what's happening around the world and probably the most exciting place now is India because India is going to be taking the place of China in many, many areas. And we've already seen companies like Apple and others come to India to manufacture and export. So India, Vietnam, Thailand, Turkey, those are the ones that are looking very interesting for us at this stage. But as you pointed out, there are many other markets. around the world are doing better than the U.S.

So, I mean, although the U.S. has come back, so maybe it's taken a little bit of the wind out of the sales of this Sell America idea, Mark. What did you think about that at the time? And what do you think about that as a risk going forward? Well, you know, one of the things we've discovered, and one of the reasons why our new fund encompasses not only emerging markets, but the U.S. market, because many of the U.S. companies are actually emerging market companies. Let's take Apple, for example.

Where do they manufacture all their products? Where do they sell all their products? Emerging markets are a big part of this company. So that's the kind of thing we're looking at. We're not only looking at the emerging markets, but at companies in America that are benefiting from the growth in emerging markets. Would there be any other examples of that? Another good example would be Microsoft.

Microsoft is exporting software around the globe, and that would be another good example. example of a company that is really a global company, not a U.S. company. The richest man in India is going to be meeting with Donald Trump and I think Doha, Qatar in a few days. There's a lot going on there. I used to trade commodities in a life a long time ago. And the one thing I liked about India was that it was rule of law. They used British law and you could actually enforce a contract. In China, it was tough. People would just vanish. You'd sue them and they would just disappear. But India has a lot of problems, Mark.

I mean, they don't have a lot of electricity, the infrastructure for supply chains. We want to believe it's there, but it's not. It is now the most populous nation in the world. How risky, though, is India as an event? A lot of opportunity, but I would imagine a lot of risk, too. Well, the big problem with India's bureaucracy. As you know, they inherited this incredible bureaucracy from the British, and the party that took over, the Congress party took over, perpetuated that bureaucracy.

but Modi, the new prime minister, has done a tremendous job in cutting through a lot of the bureaucracy, but still there's a lot to be done. And he's digitizing the entire economy, first of all, by getting digitized identity cards for everybody so money can be transferred directly to bank accounts, even to the poorest people in the country. But this takes time.

I call it the United States of India, because you have all these states, many of them with different languages, both written and spoken languages. So the unify this country is quite a job, but still, the opportunities are there because you have a lot of very smart people. And as you say, it's the most populous country in the world now. We figure about 1.2 billion people compared to, I would say, now India's bigger than China, and China maybe 800 to 900 million. Wow. That's a huge difference and potentially very bullish development in many ways. Where are you less enthusiastic, Mark?

As a lot of investors are doing their homework on international stocks as they see some of this outperformance, where would you kind of, you know, steer them clear of? Probably Latin America with the exception of Brazil and Mexico, maybe, but Latin America has got a long way to go to reform, to change. Of course, the prime example of reform is Argentina. That's done very, very well as a result of reforms, but the market is outpaced all these reforms and it's maybe a little bit too late to get in there at this stage, but it's worth looking at. Yeah, I mean, what's the sort of the kind of the twisted joke? And I was bullish on, not that it matters what I think, bullish on Brazil. They say that Brazil's the country of the future, always has been, always will be, because, you know, they have their issues.

They can't get out of their own way, but they do have a lot of power. Right? Petrobras. Does that change how you view Brazil, the fact that they've now discovered all these energy riches? Petrobras is sitting on some of the biggest and wealthiest oil reserves in the world. If they could kind of just get out of their own way, then might be able to monetize that. Well, as you know, Petrobras is an incredible company, but you also must know that there was a big, big scandal surrounding Petrobras. and the reason why there was a change in government as a result of the corruption in Petrobras. Now, hopefully, that's over, but that's absolutely right. Brazil has all these oil reserves.

But more importantly, Brazil has agricultural resources, which is tremendous. And, of course, you know, Brazil has digitized a lot of the economy. We've been looking at central bank digital currencies, and Brazil is way ahead in that regard. So there's a lot of interesting things. But I must emphasize that we can't take this country as a whole. In other words, we've got to look at individual companies. And we are finding some good bargains in Brazil on an individual company basis. Just a parting question, Mark.

Do you have a position on gold on any of the kind of cryptos, on any of these almost kind of global currencies amid all of these currency cross currents that could be quite significant this year? Well, gold is a favorite of mine. I believe everybody should have some gold, maybe 10% of the portfolio, regardless of where the price is at any point in time, it's good at the dollar cost average into gold. As regards to crypto, it looks like the U.S. is bound to become a leader in crypto, and that is going to be very important going forward. I personally am not a big fan of crypto, but there is a very important.

members of my team are convincing me that we've got to do more in crypto. So we're looking at more carefully. I'm particularly interested in the crypto exchanges rather than the coin itself. Quickly, do you still love Mercado Libre, one of the top holdings in your fund, MELI on the NASDAQ? Yes, it's an incredible company, very well done. There's a good example of a Brazilian company that's doing quite well. Of course, it's decided in Argentina, but now it's big in Brazil. All right. Mark, great to check in with you today. for joining us. Thank you. Mark Mobius with Mobius Emerging Opportunities Fund. Staying international, Morgan Stanley today doing a deep dive on the Chinese AI market,

and the researchers say it's much more developed than you might think. For one, they're producing cutting-edge AI technology with significantly less hardware than the U.S. They have 47 percent of the top AI researchers, and they plan to achieve full AI sovereignty as early as 2030. Morgan Stanley also laying out some of the names that benefit from or are involved. in that ecosystem. Some you might guess, Tencent, Alibaba, Baidu. Others are more interesting. Lee Otto, for instance, Yum, China and others. Tencent actually reporting today, topped revenue as its AI investments are starting to pay off. Those shares are up 4%. Alibaba, also of 1% today is set to report tomorrow. Yeah, some big names, some positive names as well. And all AI, you're the AI

Maven. Because I use it for recipes. I don't think that makes me much of you. for everything, don't you? It's true. I do. Yeah, it's more straightforward than Google. And you guys, which, which, do you have a preference? There's so many now. Is there one that you and your lovely husband, Eric, former colleague and friend of mine, current friend, former colleague, MIT grad, is there one that you guys love? You know, he studied AI at MIT 20 years ago. Did he really?

His life is coming full circle. But now, and he's lost like 10 pounds. And he's lost, he didn't have 10 to lose. No, I'm telling you. It's like an international man of mystery. 20 bucks a month we pay for chat GPT. and happily use it constantly. GROC 3, also phenomenal. It just has a little bit less of the user-friendly folders and chats and things that you can organize.

But yeah, they're both excellent. There's a lot of problems out there. Perplexity family yet? It's, I think, a little bit of... Anthropic. It's more for doing research. Its valuation is much smaller. I think it reflects that.

But in terms of the supply chain, you think, okay, we're all so obsessed about NVIDIA chips. And what this report tells you is that NVIDIA leading-edge chips or not, China is building out this massive AI ecosystem. system. Yes. So while it's- Which the answers will be harmonized with exactly what the government wants you to know.

Well, that's my point. So yes, it's great that right now we can use these tools, all of these apps to mention and without problem. But we have to be cognizant of maintaining that lead, you know, and not necessarily seeding ground as they get more and more sophisticated. Well, the question goes around Deepseek. What was it, January 27th? I think was the Deepseek day where the markets crashed. I know because I was traveling. And so whenever you travel, the markets crashed, because people are still wondering how much of Deep Seek is, quote, real. and if you're on the radio, I'm doing air quotes, and how much is just kind of a lower-end version of a chat GPT?

Right now it's both and. The Deep Seek moment did not stop AI investment in Nvidia chips or in the huge data centers here in the U.S., but it also shows that China can achieve significant gains and improvements in its own ecosystem without needing to rely on the tech that we're relying on as well. And that's one to grow on. Kelly Evans, thank you very much.

All right, there is a lot more to come in the show. Here's what's on the venue, The Pain for United Health. And its stockholders continues. Two firms downgrading the shares. We're going to hear from one next. Plus, a big idea from a big conference and a massive rally in super micro. Not so micro anymore. We're back after this. Welcome back several more blows for United Health today. After yesterday's sharp decline on news, the CEO is stepping down. The stock is the worst performer in the Dow this year. And this is all just the latest setback in a string of events going back to the shocking murder of one of its division CEOs. Also, its first, First earnings miss since 2008 and mounting criticism from the public and investors like Bill Ackman, not to mention Congress and the White House, two analysts downgrading the stock today, one of whom is our next guest. Joining us for more is John Ransom, Director of Healthcare Research at Raymond James.

John, it's great to have you here. There are a lot of people who actually have looked at these events with the stock down 50% and at 11 times PE and said, you know, maybe it's actually time to own some shares. So talk about what's giving you some pause here. Yeah, Kelly, I despise doing this, you know, downgrading a stock after the horses left the barn. So I realize it's of limited utility and I've got my dunce cap in the corner. So no excuses. But, you know, the question is what happens looking forward and three quick points.

So number one, our new 27, excuse me, 2026 earnings number is $25 a share. So if you take the current price over $25 a share, that's about a 12.5 PE. And, you know, I think what's going to happen with United is that it's going to trade closer to an industry multiple, which is a low teens PE versus the old peg of the S&P 500. Maybe 30% discount would have been the old floor. So first of all, the string of events you laid out and others are going to lead to a lower PE. The second thing is, you know, we weren't surprised at the management change, but we were surprised that they withdrew guidance. Remember, they just gave guidance less than a month ago. And so to step back from that with, you know, weeks after you give guidance and say,

never mind, it's gotten worse. That's really the biggest thing. And then the third thing. Well, Clay, John, I'm sorry to jump in on you, man. I know you got three points. I want to highlight point two for a second. We'll go back to point three. Well, you just said is massive.

The company gave guidance a month ago. Now they withdrew their guidance. Okay, I've been doing this a long time. So was Kelly. I don't know if I've ever seen a company of this size, certainly not a Dow component. Do this. Okay. take aside the fact that one of their executives was killed six months ago, lost half the investor

value in a month. The CEO unexpectedly quits. They withdraw their guidance, which means they don't have any idea what they actually earned, I think. Do you feel deceived by this company? Do you feel like there's something weird under the hood here? I would say that if you look at the earnings last year, there were a lot of one-time gains in those numbers. So the earnings foundation was lower. So they pulled some rabbits out of the the hat last year to print a, you know, a PE that wasn't a high-quality PE. Brian, what I'd say about this year is the, they've stopped doing M&A for a couple of years now. And, you know, sometimes M&A can be a real driver of earnings. But, but, yeah, I think everybody,

the messaging and the numbers have been moving around for several quarters now. And, yeah, I think this, this was probably the, you know, the crescendo. And, yeah, just the last thing I'd mentioned, the company has over 70% of his members in four-star plans, and that gets reassessed in October. And you saw what happened to Humana. Humana went from 94% to 25%. It doesn't take much to lose your star ratings. And so, yeah, I hate, you know, we've been wrong about this. The stock had a great rally after the unexpectedly good Medicare rate update a couple months ago. But what I think, in the market, I could say clearly in ourselves, we just didn't count on the fact that the company historically has been the best executor as suddenly, you know, the numbers have suddenly

fallen apart for reasons that aren't very quick. And we're not here necessarily to break you over the coals for that. I mean, we're just all trying to understand what's happened, you know, and the questions that have been raised about, you know, were they over billing or whatever for you? I mean, are there structural issues that between political scrutiny, investor scrutiny, and everything that's now going on, you think could come to light here? I don't necessarily agree with Mr. Ackman. I have a lot of respect for him. But there's part of their business called Optum Health, and it's really a shadow insurance company. And what they do is they take risk for themselves. And they've got over $100 billion of intercompany alumniations, but they also take risk for other insurance companies. And other, this is called value-based care, physician-driven value-based care, and other platforms have not been able to make this work. And so I would say the biggest question mark from a strategic standpoint, Does it make sense to take risk for your competitors? And what they say is, gosh, we take this risk and then we find out all these things after the fact.

Do you feel like, John, I'm going to be more direct than you may just completely avoid this question. I get it because you're in a spot with analysts and 100 million rules. Do you feel like there's fraud at the company? I think that, you know, Helmsley is an accountant, right? And so his fingerprints are on the strategy. He's been on the board. He led the strategy. I think the earnings test this year is going to be very interesting because I think it's going to have to survive a lot of scrutiny from, certainly from insiders, but also from outsiders.

And so, yeah, I think that these are the kind of conditions where, you know, accounting and, you know, earnings. Well, it's a cut. John, I'll speak for you. And I know it's a tight, listen, we're not alleging anything, but we have a company that have pulled their guidance. I mean, they didn't cut their guidance by a nickel a share. withdrew it, which implies the visibility. I've seen this happen. I'm sure Kelly said it happened with like small cap biotech stocks, right? Like, oh, didn't work. We don't know what happened.

Not a company, this is Minnesota's second biggest employer. 400,000 people, right? I don't know why the governor of Minnesota is not up this company's, you know, pale pipe to figure out what the hell's going on here. Well, let me just draw an analogy, Brian. on CVS last year. When you missed trend in Medicare Advantage, which I think they did this year, let's say you thought the cost were going to go at five.

They went up 10. You have razor-thin margins if you're off even a little bit. So I think it's mostly that they missed trend with their Medicare Advantage bid. That's what I think's going on. But yeah, I do think where your strongest point would be is if you just go back and look at the earnings quality last year and look at the gains that were taken, you know, you're starting important earnings this year, probably more like $24 a share. And, you know, that's, that's, now again, what's interesting, Brian, one other thing, all the other Medicare Advantage

companies did just fine, you know, and nobody's pulling guidance. They did just fine. And we thought our theme was, well, the bottom is in on MA. And so, yeah, what you never expected was historically the best company to have all the problems this year that their competitors have been having for going on two years now. So that's really, but my operating assumption is that is nothing more than a big MA trend miss, but you know, you're not certainly not ruling out something a little more, a little more devious than that, for sure. And a final word, John, as we sort of all try to sort out those trends, what is coming down the political pipe that might affect that one way or the other, right? So we hear about, you know, Medicare drug price changes and things like

that. I mean, is that going to put yet more pressure on the business? I don't think we don't, Our DC analyst, Chris Meekins, doesn't think the EO is going to have a lot of sicking or staying power. But, you know, the interesting point here that you raise is, you know, Dr. Oz is fairly new. And we're not quite sure the Trump administration has proven to be quite unpredictable with everything, including health care. And so it's not a given that they, that the number one priority for the Trump administration is the United Health Care margin, shareholder, stock price and, you know, employees. So it's not a slam dunk that this is, it couldn't be as bad as Biden, but there's no guarantee that it's going to be a benign backdrop. I saw Dr. Oz last week. I talked to him.

He's a friend. Would it be helpful to get him on the show? If he came on this show, not today, but tomorrow or whenever he's available, well. I think that's a, you know, let's have both of us talk to him. I think that'd be true. I will reach out to his people right now and we'll hope to get Dr. Oz's been on this network in the show before. Of course, if you look at some of the world. the Wall Street Journal's Dan, Don, Anna Matthews is a great reporter. You know, United has a history of

aggressive coding. Now, that was under the old coding system. And so people think, well, now they're not coding as aggressively, and you've got a bad trend and they underbid. I think that's probably the, you know, never attribute to malice, what can be attributed to more straightforward circumstances. I think that's the hypothesis. Your term aggressive coding is an interesting one, John, and I hear what you're saying. As somebody who is, without getting into it, I would just say that me and my family, we have been heavy users of the medical system in the last 12 months or so. Thankfully, everybody's okay. And almost, it's fine. And not just United Health, but many other things. And a lot of the billing is wrong and you're constantly fighting. But is aggressive coding like

a code term for you for accounting shenanigans? I'm using nice words here, John. No, it's you, what the government did, and it's all good intentions, is what they didn't want the plans doing is cherry picking healthy patients. And so when you get a new Medicare Advantage patient, you go send either they get seen by a doctor or they're seen by a nurse, and their conditions are coded. And those coders trigger extra money out of the Medicare system. And just go look at some of the work the wall.

And this, again, this was under the old system where you could code for things, get paid for it, and never treat for it, which was insane. And so one thing I do want to stress here is that B28, which is the new coding system, it's taking away about 13% over three years of the rate for Medicare Advantage. So the government knew what was going on, and they changed the system. We think for United Healthcare, it was a $15 billion revenue bad guy over three years. And so that is a little bit of last years, you know, the last war, you know, so I don't want to overstress that. But yeah, yeah, and it could

be, and this is where I'm over my skis a little bit, it could be that, you know, the employees inside the company saying, you know, we maybe we're going to assess these patients a little less aggressively ourselves because we know the company's under scrutiny. Right. And that's how you see kind of the snowball trying to roll back up the hill, I guess. Yeah. Again, these are tiny margins. So you go, you know, this is fancy math.

You go from 3% to 2% margin. That's the third year earnings. And so, you know, these MA margins. And their competitors have been running flat to negative margins because of the hostility from the outgoing administration. Wow. So if it's headed in that direction, we can see where that earnings pressure

would certainly come from. John, really appreciate you joining us to break it down today. Thanks so much. Thank you, guys. See you later. John Ransom, Raymond James. All right, let's break in with a market flash

on Boeing. Boeing stock is up, not as much as it was, up about 2% earlier, but it did get a huge order. Boeing and GE Aerospace securing a landmark order from Qatar Airways. It is a deal for as many as many as 210 Boeing jets. It could be worth Kelly as much as $96 billion, billion with a B,

not a million with an M. This could be one of the biggest orders Boeing has ever received. And the shares? I mean, this is coming on the heels of China saying, I'm not sure exactly what the details were, that they were going to kind of reevaluate how many planes they were ordering. That was a big blow, and the shares reacted at the time. So just as perhaps one door is closing, maybe here's another one opening,

and the shares have been on a pretty nice rebound this year. All right on deck. If you hope that mortgage rates were going to go down, you may want to think about it. The bad news for home buyers, that could be good news for savers. Next. Welcome back with a quick look at the markets where the Dow's down 103 points still. But the SMP and the NASDAQ, the SMP is positive. I mean, well, there it goes into the red. The NASDAQ is still positive by a half percent today. The 10-year yield crossing above 4.5 percent, that one's been a little bit more significant to keep an eye on. For more on the bond market, let's head out to Rick Santelli in Chicago.

Good to see you again, Rick. Welcome back. Yes, Kelly, and boy, interest rates are in focus. And every part of the curve has something important to say. Let's start out with the short end. Let's look at a two-year note yield. And do keep in mind, we're on pace for a couple important things. For the third close above 4%, 4%, 4% is a key psychological level.

And we're on pace for a two-month high-yield close, as you see on that chart. Now, as we move down the curve, tens are flirting, as you said, with four and a half, 30s are getting close to 5%. Let's look at that 10-year, okay? And remember that if you look at fours are wild on 4-4, April 4th, we touched and basically moved and held above 4%. I can't tell you how important that is. The day it happened, I pointed it out. It's the perfect psychological launch pad. Technicians were all over it.

Now, open the chart up, and you can clearly. see that we're on pace for a three-month high yield close, going back to February. But what's important here is that we're moving from higher to lower yields on our comp on the left side, even though we're moving above 4.5% today. When was the last time we moved above 4.5% from lower yields to higher yields? You have to go all the way back to Ds of last year. I find that significant. Right now, the big talk, no matter where you look, is obviously on tax policy and current

legislation that continually fuels talks about debt and deficits. I've been saying all along that the politics of the day in this administration is warranting much looking at inflation and debt and deficits. On one hand, you have the outlook for inflation that seems to be on the hard data actually cooling and moving sideways, but it doesn't matter. Right now, the focus is going to remain in issues that are going to keep long end rates, in my opinion, holding to the high site or moving higher. If I had to pick the next spot of big resistance, I'd be picking $470.

Brian, back to you. So if the Fed cut rates, would interest rates go down? Brick, it doesn't sound like it. No, I think the curve would steep it and log rates would still pay most attention to the important facts of debt and deficits. Remember, the Fed continually manipulates rates. They can't control the long end without doing QE. and they haven't quite gotten there yet, but they're certainly not doing much QT anymore. What did political pundit James Carville say like 30 years ago?

When I die, I want to come back as the bond market. Then you can intimidate anyone. That was my best Cajun accent. Rick, thank you very much. That's very good. Thank you. Coming up, one of America's top investors going to give you one big stock to invest in right now, and the name might be a new one.

All right, welcome back. Yesterday we highlighted a company called Charles River Labs because the lab testing company's stock has been an absolute rocket ship over the past month. Well, investor Lauren Taylor Wolf just sold Charles River Labs and probably made a fortune. So where is she putting all that new money to work? Well, she's buying a stock called. Let's find out. Leslie Picker is at the Sone Conference with Lauren Taylor Wolf. How was that for a tease, Leslie?

That was a great tease, Brian. Thank you so much and thank you to Lauren of Impact of Capital for being here. Tell us about the name that you presented today. This is not a new position for you, but from an engagement standpoint, from an activist standpoint, it is relatively new. So what are you looking to achieve with this name? That's right. Thank you, Leslie.

Thank you, Brian. So we presented Wex today. Wex is a $4 billion B-to-B payments business that operates across a benefit segment, a fleet segment, and a corporate payment segment. And these are high-quality assets. They have recurring revenues. They have network effects, capital-ite model. However, the business is stuck trading at about an eight-times forward earnings multiple.

Why? Well, trading with a conglomerate discount. These are three separate segments that don't belong under the same umbrella. And so we are engaged with them. We think the answer is simplify OX and improve shareholder alignment. It seems like simplification is a broader theme in the corporate world right now. Now, you're currently running a vote no campaign on three directors. You said in your presentation, this company doesn't need to be reinvented.

It just needs to be realigned. So how does getting rid of these three directors achieve that goal? Well, you know, listen, these are good people. The board is comprised of good people. However, the challenge is when you look at the past 10 years, these folks have presided over a 2% total annualized return. And that's simply not acceptable given the quality of assets they are. And so what's on the vote today is really a referendum against this lack of shareholder alignment,

just as a comparable. Wex is closest peer Corpay. In 2011, these companies had extremely similar assets. They both traded $2 to $2.5 billion of enterprise value. And yet over the past 10 years, Corpay has doubled while Wex is roughly flat. Why is this? Well, when you look at the ownership percentage, Wex insiders, the management team and board, they own about 1% of the company, and Corpays

insiders own 5%. That 5% equates to a billion dollars of value. That creates incredible incentive structure and also shareholder alignment. Wex doesn't have that alignment. And as a result, we've seen Corpays margins that are 20 points higher than Wex's. Their returns on incremental invested capital are three times better. We think there's tremendous upside in Wex. It just needs to be restructured, eliminate the conglomerate, and also have improved shareholder alignment by putting an owner, a current shareholder on the board. But that is not what they're doing with this current meeting. And a sizable shareholder, you own about 7% here. And I just want to read a statement because we reached out to Wex for comment after your presentation.

And they said, quote, we respect impactive and look forward to continue to engagement. So certainly one to watch there. I wanted to ask you about just the broad state of activism right now because the world is changing so rapidly. I know there's a lot of lot of engagement behind the scenes in the industry. How is it being kind of an engaged investor in the current environment with the macro picture changing so quickly? And do you expect to see more public engagements, you know, maybe later this year? Yeah, I think the environment is particularly suitable for activist investors.

Why there's been a lot of volatility. Everyone sees the news. But the volatility creates incredible pricing, and these prices are at most times, disconnected from value. And that's where someone who is a long-term, actively engaged shareholder, like Impactive, can pounce and really take advantage of the mispricings, whether it be trimming positions that have done extremely well

and adding to positions like Wex that haven't done as well, or investing in new potential opportunities. So I think there will be the pricing opportunity in the markets create a huge opportunity for actively engaged shareholders. And then you mentioned, like the conglomerates, you know, there's a movement to simplify business I think you're going to see a lot of actively engaged shareholders, not just the quote-unquote traditional activists, but others, speaking out, right?

Demanding returns, demanding a voice in the boardroom. Yeah, that's a good tip. Yeah, M&A so far has been pretty stagnant to declining. Activism has really been on fire. I want to lastly ask you about ESG skepticism because impactive, kind of the ethos of your firm has been around ESG campaigns, ways to get more diversity into the board, ways to be more environmentally friendly as a business. And that was the impetus of the fund. And I'm curious, how do those conversations look those days, just given that the ESG term has been essentially weaponized

in certain circles? It's become extremely politicized, but at impact if we're doing the same exact thing that we've done since day one. We are linking an ESG initiative to shareholder value. So we connect every initiative that we do around the environment, or around social initiative or a governance initiative, to profitability and overall value creation. in the market. And that's really indisputable, right? Ideally, we'd get ESG drivers linked to

executive pay because economic incentives drive behavior. But if an environmental or social or governance change is good for business, it's going to drive profitability. That's how management teams and boards are paid. It's good for sustainable cash flows over the long run. So at impact, it's definitely been politicized. It's almost like a four-letter word. But at impact, that we're doing exactly what we've done since day one is make sure that these policies, policies or these changes have an economic justification. Yeah, in some ways, activists by and large are ESG investors because of that G, the G in governance, which is oftentimes what they push for. So Lauren Taylor, well, thank you so much for joining us from Sone. Really appreciate it.

I'll send it back to you guys in the studio. Leslie, thank you very much. Leslie Picker. And let's get over to Julia Borson for the CNBC News Update. Julia. The top federal aviation administration officials said today a hotline connecting Reagan, International Airport, the Pentagon, has been down since March 2022. Deputy Chief Operating Officer Franklin McIntosh testified on Capitol Hill today that the agency became aware of the issue following the mid-air collision between an Army helicopter and regional jet that killed 67 people in January. The line is intended to coordinate air traffic. McIntosh said communications recently

have taken place over landlines. California Governor Gavin Newsom announced a $12 billion budget deficit today as he laid out his nearly $322 billion spending plan for the state. He says the deficit is partly due to economic uncertainty and a swelling Medicaid budget. And the National Zoo already has giant pandas from China. Now it's about to get Arabian leopards from Saudi Arabia. The zoo announced today it will welcome the critically endangered species to help establish a backup population, advance research, and raise awareness to the threats facing the leopards. What beautiful creatures back over to you.

So wait, Arabian leopards are the new pandas? Is that the idea? I guess they'll be the new pandas. Who would win an Arabian leopard diplomacy? What if a leopard and a panda got into a fight? Who would win? I don't want to place bets on that one. Let's hope they don't get into a fight.

Julia, thank you. Speaking of Washington, we have some news on the negotiations over the big budget bill. Emily Wilkins, what can you tell us? Hey, Kelly. So we were just out here. here talking with a number of lawmakers. And we're beginning to hear, particularly from those fiscal hawks,

that the bill as it stands will not be able to pass next week unless there are changes made to the package. And a number of these fiscal hawks that we spoke to, they said, look, we have a number of concerns. There are a number of things like work requirements going into place for Medicaid that aren't set to start for another four years. And they're worried that cuts don't go far enough.

We spoke with both Chip Roy and Ralph Norman. Listen to what they just told us. Again, the work requirement thing that doesn't actually take place for four years until after the Trump presidency. That is facially absurd. Like it's one of the stupidest things I've ever heard of, actually. Bottom line, I don't like smoking mirrors. A lot of this does not get us where we need to be. And it's not where we promise American people.

We also just spoke with Mike Lawler. He is one of the Republicans who has concerns about the current salt cap. And he said those concerns remain at this point. Republicans are supposed to meet tomorrow to go over the bill as it stands and try to figure out a path forward. Remember, Speaker Mike Johnson wants to see this past before Memorial Day, which means next week they're going to have to figure out a way to get to yes or begin to delay this process further than they want. Kelly? All right. Emily, thank you very much. Let's jump in on one quick thing here that I don't know where it is in the process, but there's a part of the tax bill which is going to give $1,000. Yes, MAGA accounts.

To every kid. Brad Gersner, who's a frequent guest on halftime with Scott, Silicon Valley. He's one of the guys behind this. Well, where you basically give everybody a thousand dollars. I mean, you think about the stock market impact if everybody's given a grand at birth. And it's not that expensive in terms of, they're talking about a multi- trillion dollar bill. You can't sell it, by the way, because I asked, well, until you're 18. I think you can't touch it until you're 18 and then there's some phased out thing until you're 31. Brad, if you're out there, let us know. But it's like that and you can't sell it, like, you know, I need to cash now, like, JJ Wentworth, whatever it is. Right, right. No. But it's an interesting aspect of the tax bill. This is an idea we've heard from the left, from the right, from like, also.

sorts of different groups probably for 20 years now. And this might actually get across. Get everybody engaged in the equity market. Yep, exactly. As we had to break, check out this high flying mystery stock. Here's your mystery chart. It's up 50% from its post-liberation day lows. We'll reveal the name and what's driving the gains next. CryptoWatch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. If you own Super Micro Computer, SMCI, congratulations. The stock is absolutely soaring.

They said Tuesday yesterday. They shipped a bunch of services as part of a deal with Saudi Arabia. You might remember earlier in the week, Raymond James gave him a $41 target. Stock's above that already. It's up $6.5.41. I know it's not at its high. Don't at me. But it's been a big mover. Nonetheless, in Vida, by the way, similar. Super Micro's up 41% this week, Kelly. And Nvidia is now positive on the year. Incredible. As we had to break another mystery chart for you, the stock riding a three-week winning streak and pacing its first four-week win streak since October. We'll reveal the name and trade it in free stock lunch. All right.

I got a news alert right now happening on Netflix. Julia Borsden has that. Julie, what's going on? Netflix announcing it is upfront ad presentation that is ad-supported tier now has 94 million monthly active users as an increase of more than 20 million users since. at last release these numbers back in November. The company also saying that its ad-supported tier, which is its lowest cost here at $8 a month, reaches more 18 to 34-year-olds than any U.S. broadcast or cable network. Stock is up just about half a percent. Back over to you. Thank you, Julia. Really appreciate that. And now it's time for today's three-stock lunch,

hitting three of the biggest movers and asking our trader, whether investors should be buying or selling the stocks. And I think Scott Nations is in a buying mood today. He's the president at Nations Indexes. Scott, welcome. We'll start with. with our mystery chart, which was AMD. Congrats to those who guessed it. Shares of 4% today after the board approved a $6 billion buyback. What do you do here? Yeah, this is a buy.

That wasn't the only good news. The Trump administration is also going to roll back curbs on exporting AI chips. That's going to be good for the whole space. And while everybody talks about Nvidia, AMD is the second best play in the space. So they're also going to get the ship more chips overseas, particularly to Saudi Arabia. They just inked a deal with Saudi Arabia's AI project that may generate as much as $10 billion in revenue for AMD. You mentioned the $6 billion share of buyback. It's all good news.

And here's the thing. If you want to be in the AI space, you get to buy this name at a 35% discount to its 52-week. It just, you know, it's kind of always the bridesmaid, never the bride. But maybe this time will be different. Abbey is the next one, which shares are dropping more than 4% on this downgrade to neutral at city. They're citing some caution around pharma tariffs. And this is a well-like thing. We constantly hear people coming on and saying they want to own it here.

So, you know, pouring a bit of cold water on that from the analyst today. You agree? No, this is a buy. And this, I think, is a really goofy downgrade. They're saying that Abbivie v. Does too well when it comes to earning surprises. The people are focused on that. Investors are focused on that.

And they're ignoring issues like the pipeline. Now, the pipeline is critical for any pharma company, but this company beats on earnings expectations consistently. It raises dividends, has a nice dividend yield 3.5%. It's in a good space. I don't quite understand why city downgraded it unless they're letting the perfect be the enemy of the really good. All right. So then that is also a buy for you in a disagreement on the call, which brings us Tesla, which is 3% higher. They're planning to resume shipping components from China for the cyber cab and semi-manufacturing here in the U.S.

The board is also forming a special committee to rethink Elon Musk's pay package amid this ongoing legal battle. What do you think about Tesla? I think Tesla right now is a hold. Investors were desperate for Elon to get out of the political spotlight. Seems like he's finally done that. It's good that they're going to resume importing parts from China. But remember, there's still a pretty big, half-y-y-y-ymparty. deep tariff in place for Chinese imports. The potential exists that in about 85 days, that tariff is

going to increase, maybe as much as triple. So while it's nice that Elon is out of the political spotlight because that was causing so many problems for the company at large, you wonder if the people who three or four years ago didn't love Tesla because of its environmental impact are now turned off because of Elon. And one other thing. This compensation, thing is a horrible distraction. I understand that they want to, well, compensate the founder of the company, but it's just a horrible distraction. It's terrible optics. He's already got enough money. Just how about a package that's in line with other CEOs? While you're in the mood, got any such thoughts about the broader market here, Scott?

Yeah, and one other thing about Tesla, this is a little geeky. It is the option market is incredibly bullish in Tesla. It's more bullish than in any of the other big names. As far as the broad market talked about option prices, implied volatility is coming in, people are much less scared than they used to be. It's trite that investors hate uncertainty, and they think they have less uncertainty, at least on the tariff front. I don't quite see it that way. I think we're still in the middle of it. I think China may still try and teach us a lesson, if you will. And so while it's nice to see the S&P bounce back from below 5,000. Let's not get ahead of ourselves. All right. So you're a buy-on, ABV, B, and AMD, but not so much enthusiastic about the rest

of the market. Scott, thanks for joining us. It's certainly not Tesla. Scott Nations with and for every three-stock lunch, if you want to just go back and look at the archives, get all the ideas, just scan that QR code or head to CNBC.com for more. Especially if people are having lunch and say Phoenix. Before we go, some key earnings on deck tonight. You've got Cisco Systems tonight. They're under pressure. today, but up 6% in May. They're going to snap a five-day wind streak. Oh, and by the way, Walmart, you might have heard of them. They're a pretty big store. Walmart, fifth negative week in the last 10, so it's half, but their earnings are tomorrow morning, Kelly. That's going to be a big consumer

one. Yeah, Walmart's been a much better performer than Cisco over a five-year period. But, you know, now that the market is a little bit, as you said, as Scott said, a little more iffy. People are looking for those more reliable stocks. And Walmart is having a hard time proving it can be that in the recent stretch. I guess we'll have to tune in tomorrow to see how the earnings come in. Yeah, looking forward to. reads on the consumers as timely as possible. We'll see you tomorrow morning on Squawk Box. You might see us all day long. Thanks for watching. Closing bell starts right now.