Power Lunch - S&P 500, Nasdaq rise as traders look past the tariff shake-up 02/04/25

Episode Date: February 4, 2025

The Nasdaq and S&P 500 are moving higher thanks to a strong gain in Palantir, as Wall Street tries to find stable footing following the latest developments on the global trade front. We’ll tell you all that you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Oh, welcome to Power Lunch. I'm Kelly Evans, along with Brian Sullivan. Tariff talk has subsided. Mexico and Canada get a delay. China hitting back, but not too hard. And tech is leading the way. That was almost a poem, wasn't it? The NASDAQ gaining more than 1% leading the way, Brian. But Kelly, some big pharma and makeup. Oh, my, slamming investor money. Look at Merck. Down almost 10% on new concerns around China. And Estee Lauder also crushed because of China and more job cuts there. on the way. 7,000, in fact. And Palantir is up more than 20% and on track for a record close, getting a huge boost on earnings, demand for AI. The stock is now, can I say sex-toupled in a year? It's up 500%.

Is that what that is? I think so. Sex-toupled? Talked me on that. Sex-toupled. All right, let's start now with meta. You may not know the parent company, but you know it's brands, Facebook, Instagram, and WhatsApp, and WhatsApp apparently is what's up, at least when it comes to the stock market.

You've got to do there, Kelly? Because this is the red hot stock story that others are not talking enough about. All right, check this out. Today is the 21st anniversary of Mark Zuckerberg launching what was then called the Facebook. It was a web page to, let's be fair, hit on other college students. It's now closing in on being a $2 trillion idea. It's up again right now to $706. And with this move, meta shares are now up 12.

sessions in a row. This, one of the greatest runs in the history of the stock market. And money invested at the IPO, caught 10 grand, is now nearly $200,000. And here's an RBI for you, Kelly. META's last down day as a stock was hauled way back in the Biden administration. Crazy. A couple weeks. But META has never been down under the Donald Trump administration. And maybe that's the point because some suggest that Mark Zuckerberg's transformation from really a guy that wanted to keep his head down during COVID to an in-your-face CEO-based Zuck. It's one of the reasons that Facebook meta has been on a run. Let's talk about it all and what exactly is going on with Stephen Levy.

He is the editor at Wired at Large or editor at Lired. I just gave you like a weird new promotion. Stephen, thank you. an author of Facebook, The Inside Story, and Sheriff Frankel, tech reporter at the New York Times, and author of an ugly truth, inside Facebook's battle for domination. So this is a hell of a story. Stephen, I'm going to start with you because they were moving, I called it their new Coke moment. You've got to be of a certain age to know what that even means, but you know what I'm talking about.

They changed their name to meta. They talked about the metaverse. You could buy, you know, fake land with real money. that seems to have completely vanished. I don't know what the company is now. Maybe you do. And why it's suddenly red hot? Yeah, there's a few reasons.

You know, one is the metaverse thing, which, you know, people mocked. But they actually wound up coming out of that with a pretty decent growing business with, you know, instead of big, heavy headsets, which they still make, with the glasses, which give you internet, the Ray-Ban glasses, which are pretty popular. But I think the biggest change in the company is they're still raking it in on social media while trying to get past all the problems they had with the content there. And that happens to align Mark Zuckerberg with the Trump administration, which for years had been urging it to, you know, do what they call free expression, which means, you know, basically let all misinformation flow on that. And Mark,

Mark has not only embraced that, but he's embraced sort of like the manliness aspect, the mannisphere thing of the Trump administration too, because he feels that he's peony criticism. He doesn't really worry about it anymore. And, sure, and that's it. And who do you think is the real Mark Zuckerberg? Because I don't know. Well, I think people close to Mark Zuckerberg see that the version of him who's out in the public

now showing off his interests in sports, showing off. his interest in fighting, in, you know, the various sort of outfits we've seen in, and that's the real Mark Zuckerberg. And they say that's who he's always been, that in his early 20s when he left Harvard and sort of started this company, that he was this version of himself, and that he was convinced for many years to be acquired a version, to sort of find the middle ground, to reach out to the American people, to be apologetic for mistakes his company made, and that he's now really come full circle to some of his sort of his origin story as it was. So I'm curious, I was going to say share about the stock.

I mean, from investors' point of view, the reason why AI has been so transformative is almost this kind of, you know, businessy thing of they get to optimize ad load, right? They can read, they can figure out the algorithms better. They can deliver better ads for you. They can command higher dollars. And yes, they're doing a lot of other things, you know, in the works as well. But that's what it really comes down to, right? Well, I mean, anyone out here in Silicon Valley has got to put AI into their pitch at the moment if they're trying to sell their company.

We've heard meta discuss how AI is going to solve everything for them from removing misinformation, disinformation in the platform, helping them sort through hate speech, improving ad revenue goals. AI is the hot buzzword, but I think part of the reason that that meta specifically is doing so well right now is really Mark Zuckerberg's ability to align himself with Trump to appear publicly with Trump and to show people, show the public. that some of those trust concerns, some of the concerns that Meta had as a company in Washington, D.C., aren't going to exist in the Trump administration. And by the way, we lost Stephen, hoping to get him back. But Shira, so we'll stay with you.

I get that, I guess, but what I'm trying to understand is, and I know you're not a stock person. Don't worry. You don't have to answer it directly. But how does that benefit the stock? The stock's up 12 sessions in a row. That's what we talk about. How does aligning with Trump further meta's interests

as a business, maybe it has something to do with TikTok's future? It could be. It could be that people are looking at meta and saying, right, well, Mark Zuckerberg is close to the Trump administration. He's not going to have the same sort of antitrust concerns in Washington, D.C. He's not going to face congressional hearings and fines for some of the problems on his platform. And Trump could force TikTok to still sell. I mean, they could, the main sort of threat to meta as a company has been TikTok. And if that's off the table, then the growth for meta going forward could be unprecedented. Yeah, and I think also just what I've kind of been impressed with Shira is the

willingness to completely pay. I mean, he renamed the company meta and now no one cares about the meta first, right? I don't even know what it is. Like I can buy fake land next to Snoop Dog or something. That's pretty embarrassing. And so he just said, all right, well, we're just going to move on, hop on the next bandwagon, which is much more profitable for meta. They're benefiting.

And so, like, let's not pretend that he's some visionary. I think he's just very practical. So, okay, now Trump's president. Well, now we're going to jump on that. You know, what I think people should look at when they think about that renaming of the company, when they think about Facebook changing its name to meta, is really just Mark Zuckerberg's ability to hop onto the next big thing. It's his ability to pivot his company quickly because of the way that the company is structured really under his control. This is a company which answers to one person. It answers to Mark Zuckerberg. So if Mark Zuckerberg says jump, the engineers say how high. He said, we're going for the metaverse. They went for the metaverse. That quickly proved unpopular. So now they're moving on to AI. It's, it's. investors like that about meta, and I think that Mark Zuckerberg is really leaning into that for them. It's quite the transformation, and that kind of the based Zuck has, listen, I don't know if it's going to ultimately benefit investors or not, but for the last 12 days, and longer than that,

Shira, it certainly has. Stephen Levy, if you're out there somewhere, we love you, we'll get you back on again very soon. Stephen Levy, Sheriff Frankel, talking about it. Thank you very much. And just a reminder, Kelly, because, you know, we have long memories here. Mark Zuckerberg made his first appearance ever on CNBC 21 years ago. Here it is. What is the Facebook exactly? It's an online directory that connects people through universities and colleges through their social networks there. You sign on, you make a profile about yourself by answering some questions. It was an interview with Becky Quick. Adorable. 21 years ago. I was a on a street corner in Singapore, randomly talking to people, they recognize me. Turns out the guy

was Eduardo Savarin's roommate at Harvard. Eduardo, of course, one of the co-founders of Facebook that got no fight. He ended up moving. On a street corner in Singapore, I randomly met the roommate. It's been fast. For those of us who remember when the facebook.com came to our college campus, and what a big deal it was, to see him take it from that which... You're bragging. Well, since I'm so young. You know, to take it from what could have been the What was the failed media? MySpace? Thank you.

That platform should have gone away. It should have been the next MySpace. To see him transform it into what it is today is a testament to the fact that he can continue to reinvest himself and this company to stay with the times and even stay ahead. And you say, oh yeah, we did get censored during COVID. And he goes on Joe Rogan. And he's got the hair. And he's got the videos of himself chugging a corse in a tuxedo while surfing off Kauai,

which I think he bought or he's like partially. owns, one of these islands, it's a hell of a story, but if you've invested in meta, you've made a lot and a lot of money. Especially lately. Still to come, trumping the norms. Nothing's ever certain in the markets these days. Now there is one certainty that the president will dominate the headlines and move stock.

So how do you navigate this tariff landscape that is next? Welcome back. It's like the markets version of keeping up with the Kardashians. Investors need to tether themselves to Trump. Yesterday, stocks started deep in the red because a truce. trade war seemingly had begun. By the end of the day, it was pretty much resolved, at least for now, but the president continues to dominate the headlines. We're in the middle of a transformative period for the economy, too. Investing norms, are they getting flipped on their head, or is high

valuation here to stay? Is growth still the backbone of this market? It's not a clear answer, given some of the problems of late, or is a rotation to value on the way. It's early in the year, but look at the Vanguard Value ETF. It's outperforming the Vanguard Growth Index. Is that just a hiccup or an emerging trend? Joining us now to discuss. and maybe debate. Cole Smead is CEO and portfolio manager at Smead Capital Management. And Chris Grissanti is here on set with us. He's the chief market strategist at MIA Capital Management. I think of Cole as a value guy, but Chris, I sort of think of you as a value guy, too. It's true. We're going to be singing to the choir today. Okay, value versus value.

What kind of value stocks are you in right now? So I'm really liking health care here, Kelly. Over the last two years, the S&P's up 54%. Health care sector's up 2%. So, and the earnings have come through. And with all this Trumpian angst, what we're looking for is reliable cash flow, reliable dividends, and that all kind of feeds into cheap health care stocks. Are there any growth stocks that you would look at, what we would traditionally call growth stocks, but I know you're often looking for a bargain. I don't know if there's many. Microsoft has been a little bit of more challenging story. Some of them have lower valuations. Anything there? Well, and I'd be careful. I mean, it's kind of not correct that value investors don't like growth.

Love growth. Just don't want to pay a ton for it. So I love, I love it. I love, Google. Google, at least until it had its recent run, was the only Mag 7 stock that was selling below a market multiple. So it's nice to go there. Love to have both growth and valuation. Don't get it a lot, but there's still some out there. Cole, I don't take you as the type who's like all that excited to comb through the Mag 7 ever, at least at these valuations. Where are you looking right now? Yeah, thanks for having me, Kelly. I think a really interesting theme that we're going to dig into a lot more in discussion with investors is talking about asset light businesses who produce low returns versus capital intensive businesses that are producing attractive returns.

So let's just use your discussion a second ago of meta. If I back out the stock-based compensation out of what the street expects meta to make this year, they're not going to make 43 billion in free cash. They're going to make $26 billion in free cash flow, a 40% reduction because that's how much stock-based compensation costs them last year. Now, that's still a lot of money, admittedly, Kelly, $43 billion. But when you compare it to the book value of the business at $180 billion, it means it's producing about a 15% return on capital when you look at cash returns.

Now, that's fine. But when you trade it eight or nine times book, that's impossible to compound money. Now, why I say that, Kelly, is because I can go out and we, as our investors, can go out and buy oil companies on either side of the border that are producing mid-teens return. on capital with cash. And so why would I go out and take that kind of risk? And ultimately, the stock market is functioning in a way where if your stock goes up, everyone rewards you and thinks you're more intelligent.

If your stock doesn't go up, you're an idiot. And the problem is neither may be true. But Cole, here's where I get stuck because I listen to your math and I go, well, that sounds sort of sophisticated and important. And then I just look at the performance and I go, I don't want to own energy stocks that go nowhere, right? Even health care. A compelling argument.

But, okay, until a few weeks ago, not much to show for itself. So how long am I waiting to see these returns? Or is the price return not capturing it? Is it really total return? Do I have to look at the dividend? Or is it a matter of time? Meta does higher CAPX as a percentage of sales than U.S. Steel does. That's bizarre because one's capital intensive and one as asset light.

Kelly, never forget, you cannot confuse brains with a bull market. We're doing that. we're doing that on the back of American exceptionalism, which is the largest debt binge in our history. We are not exceptional. We're the borrower. And that's what the rest of the world hasn't done. We're going to wake up just like we always do and find out we're human and we have folly. And our casino is just pretty big right now. Other than that, how is the play, Mrs. Lincoln? So pretty strong words from Cole, Chris. Your response, I mean, do you think that some of these crazy Mag 7 or tech stocks, it's just kind of a stoop?

I'd push back just a little there. And I'm a value guy too. I appreciate what he's trying to do. But what I would say, the difference in U.S. Steel and META or Amazon, which is another stock that looks expensive but that we like, is that they can dial down CAPX anytime they want. U.S. Steel couldn't do that. They've got to build their plant. They've got to buy the coal. So what we have here is an adjustable metrics. So if the economy slows or AI doesn't pan out, Microsoft and META, they're all going to be turning the dial and save tens of billions of dollars in. Here's where I disagree. Here's where I disagree with you. Sochi and Adela said, I'm good for $80 billion. If you look at the plant property equipment at Microsoft, that's a 50% increase in what the existing business did.

So the problem is they've all committed to everyone they're going to spend a lot of money. And the problem is there's no incremental return yet. And if there's not, people are going to be really disappointed. There is no profitability off of AI. It's something to say, but we will see what the cash returns bear. And like using the internet change our life. If it did, it just took over a decade to really profitably change the metrics of businesses. If it takes that, there's a lot of folly going on today.

Would you, Chris, the energy argument is one we've heard, and obviously, you know, it's been a fruitful area for some companies, not for others. Are there names there that you like? I find energy very difficult to invest in simply because it's so dependent on external factors, price of oil, obviously, and regulatory issues. So I'm more afraid of that than I am of health. health care by a long shot. I think the cash flows in health care are much more reliable. So energy, especially if Trump does what he says he's going to do and increases oil production,

that's not a great value. But don't you fear RFK Jr. when it comes to health care? It's not a political comment. I mean, in fact, I'm going to pitch a segment for tomorrow's show, by the way, about health care and RFK Jr. because we don't know what the new HHS if he gets confirmed is going to do. Right. So our job, Brian, of course, is to take that. Those stocks are down on exactly that news and say, is it in the stocks or is there more to come? Can you really beat up on the drug companies, for example? And we think, for example, Pfizer at eight times, Merck now at nine times, we think it's in the stocks. So, you know, we'll see.

Cole, quick, last question to you, same one I was going to ask, which is, you know, kind of looking at stocks the way you do, does health care come up? I mean, are there names there that you think absolutely you'd want in the portfolio? Yeah, we own Merck and Amgen, and we like those businesses. So we think, I agree with Chris. That's the one thing we probably agree on. But to his point, you know, where I would be scared of oil is if CAPX climbed. Trump can say drill.

You can't find anyone drilling. So this is not the first admin that he's dealing with. Drill Baby drill died a while ago in the pandemic. It ain't coming back. That's how people make money. No one's drilling. I know you've been looking at it. Are you still holding coal, those Canadian producers?

Because now we don't know if there's ever going to be Canadian oil tariffs. Smiling ear to ear, Kelly, with them. Meg, Strathcona and Sanofus. I just said John McKenzie, their CEO, came to our investment. or wasis yesterday. And you know what? This is going to eat into U.S. refiners, too. So the idea, this is only a Canadian problem. This is a United States problem. The question is who will eat the costs. Yeah, but you think, and Cinovis is up 6% today, Strathcona as well. So it could be a beneficiary. Those price pressures go in their favor.

Cole, thanks. Appreciate it today. Cole Smead Smead Capital Management. Chris, we'll see you for three-stock lunch. Great. Nice to be. All right. Meantime, the job market nationally continues to weaken the federal government, just reporting that the number of job openings fell to 7.6 million last month. That, my friends, a stunning drop of 1.3 million open jobs from last year and is now down by 4 million open jobs in just three years. Let's talk about that, the bond market. Anything else Rick Santelli wants to talk about with Rick Santelli?

Well, I'll tell you what, Brian, you nailed it. 556,000 jobs less than last month. $8,156,000 to today's $7,000,600,000. That's a whopper of a drop, and it definitely fueled roughly a three and a half to four and a half basis point. Parallel shift on the yield curve yields down. Definitely yields down. Brian, I want to ask you a question. Brian, one year ago today, February of 2024, do you think most people thought that Trump would be in the White House today?

Yes or no? No. Okay. Now, all the following charts are one year. And I want to keep in mind that the only way you really make money trading is if you know what moves the market. Now, I thank Chris for give me the term I needed. Trumpian angst. Trumpian axt is everywhere.

Publications on TV and magazines everywhere, especially the last 72 hours. But as you look at a one-year chart of two-year rates, 10-year rates, dollar index, and five-year break, even every one of those charts shares something. that the catalyst for every one of those moves is right in the middle of each one of those charts, September of 24. The action was the first rate cut of 50 basis points. The financial reaction is what we're still in. All of those moves started and all these trends still in place from that September move. So we could talk about the new administration and maybe things will change.

Maybe what looks like a tariff negotiation will change. Maybe what's going on with China will make the markets move more, even though we're extricating ourselves from China, from globalism in general. Those charts tell the real tale. If you want to trade the markets, keep your eye on the finance side. And that means keep watching the central bank. Brian, back to you. Well, it's a good take in the market.

That's what we do here. We look at data that we react to it and we put it out there and some people hate it. And they say, well, that's garbage. Say, maybe it is. But that's what the market says. and that's our job and our edict here at CNBC. Rick Santelli, no one does it better than you. Thank you very much.

All right, coming up, we're going to tackle one really key tech stock. Its earnings are out next week, this week. It's in Market Navigator next, as is the name. Well, guess what? The 24-hour trade war apparently is over, at least with Canada and Mexico. We'll see, and that's benefiting stock. the NASDAQ. Big tech stocks you might have heard about, like an Amazon, a Microsoft, a meta, whatever, up one and a quarter percent. And, oh, by the way, some of those big tech names are on the docket

to report their results this week. We don't mention that by accident. We mention it because this guy, right here, it's going to cue the animation market navigator, Dom Chu, who's taller in real life than he looks compared to the cube, because in the cube, but I'm not as tall as you are. You were a tall man, Brian. Yeah, there's a lot going on. It's not good. It's not good. All right, let's get it back to business here, because as Brian mentioned, it is a big week for tech earnings. Amazon is set to release their fourth quarter results on Thursday after the closing bell. Those shares are already up 40% in the past 12 months and more than 135% over the past five years. So our next guest says the online giant and web services cloud computing giant has a big base for a possible breakout. And she believes those shares have room to run. So joining us is Jessica Inskeep, Director of Research, over at stockbrokers.com. Jessica, this story for Amazon is one that's a catch-up story, right? It had been lagging for a number of years to its Mag 7 peers, but now it's finally caught up. But you think there's more room to run.

I'd like to know why. Absolutely. It's looking at the chart from a relative basis. So I'm looking at Amazon relative to the broader market, S&P 500. We had a large area of resistance that was formed around the beginning. beginning of 2020. Then that contributed to a lower high in the 2022 decline that we had for all of tech. And then that was a key area of resistance for 2024. So we just broke out of that through the end of the year. And now it's been tested once more and has been support. So that is a huge,

what I like to call big base breakout when we compare it relative to the S&P 500. Kind of like a technician's way of PE ratio. All right. So if you're looking at that way, then, okay, that means buy the stock, right? But you're thinking not necessarily just buy the stock, but get exposure another way. Absolutely. So earnings is coming up this week for Amazon. And when we're looking at options and we want to utilize options to deploy any type of strategy, there is a other component that inflates premium, which is implied volatility, which happens around earnings. Right now there's an implied move of about $16, which means it's reflected within the options pricing, even if we're going out further. So the way that I want to position this is actually to pay for long directional speculative exposure

via a cash secured put through what's called a long synthetic stock position. It's two options trades that I'm happy to walk you through. So first, or go ahead. Go through them. So I'm looking at about 38 days out close to the money, which just means the same strike price as the stock price. So 240 earlier today. If I were to just buy those calls expiring March 14th, it would cost me around $12. I have unlimited upside, but I'm actually not going to start capturing that once that volatility crush happens post earnings, as in premiums are going to deflate, which means I need the stock to move $12, which it could do, but that's still a big move just for me to break even. So the way that I want to fund that is I'm actually going to sell a cash secured put. I'm going to

the same strike, same expiration. I'm going to collect about $11 for that, which means altogether it's going to cost me $1.45 per share, so $100 shares, $145 total, to get a directional exposure with unlimited upside like that long haul has. I still have, of course, stock ownership risk if it were to move adversely. That's why the profit and loss diagram looks identical to owning a stock long. However, if you utilize options this way, I can set aside my cash and T bills. It doesn't have to sit in the stock. It sits as collateral until I am assigned, If I'm assigned, otherwise I capture the upwards potential if there is a bullish earnings move with very, very little costs this work. All right.

I like it. Jessica, using those components to build what would effectively be an ownership position. Jessica Inskip, thank you very much. We'll see you soon. Should have a show called Options Action. There should be some. We had one. Where we walked through.

What? We had one of those shows. When we walked through that. It looked like a Mondrian painting. The green and the red and then the 12 bucks and it's cash secure. Listen, I think it's great. I think the idea of being able to visualize being able to visualize being, long a call and short a put, but then looking the same as if you own the stock is a great way to

kind of visualize how options can. I have no idea what either of you just said, but it sounded great. All right. There you go. It's amazing, Kelly. Thank you both. After the break, look at shares of Mark. Down 9% today. A huge move as we were just talking up some positives about the health care space, but their full year guidance was short of analyst expectations, and it stems from a vaccine issue. We'll talk about that next. Welcome back to Power Lunch. I'm Leslie Picker with your CNBC News update. There is a new addition to President Trump's cabinet. The Senate confirmed former congressman in Iraq war veteran Doug Collins as Secretary of Veterans Affairs today. The department manages a more than $350 billion budget in overseas nearly 200 medical centers and hospitals. Robin Hood announcing today it is dropping plans to offer betting contracts on the Super Bowl. The change comes after the commodity futures Trading Commission raised concerns about their legality. Robin Hood announcing. Hoodhood says the 1% of customers who already placed trades will be allowed to either close their positions or take them to a resolution. 15.4 million people watched the Grammys on Sunday night. According to Nielsen, Vieriship was down nearly 10% from the year before,

snapping a three-year streak of ratings growth for the awards show. Grammy producers said they did not expect to see record-breaking ratings as they scaled back marketing for the awards in the wake of the Los Angeles wildfires. Kelly, I'll send it back to you. All right. Leslie, thanks very much. Shares of Merck are getting crushed today on pace for their worst day since 2021. Despite posting a top and bottom light beat last quarter, guidance the issue. The company is saying it's going to temporarily hold shipments of Gardasil vaccine to China after lower demand there. Joining us now as Guggenheim Securities and Biopharmaceutical analyst, Vamil Divan.

Vamil, welcome. And this is, I think, not something a lot of people had on their radars, which explains the stock reaction. Why is there very little demand in China for this vaccine? Yeah, so it's been a problem for a few months now. Back in the second quarter call in July, they mentioned there's seeing a slowdown and a buildup of inventory, and then again on the third quarter call, and now again today. And some of it ties to the macro economy there and just the discretionary spending.

A lot of the vaccine spending there would be out of pocket and people are just not, you know, comfortable spending right now on this vaccine. We've seen that with other companies and other sectors as well. So that's definitely a big part. There is some additional competition there as well. And then a little bit of some concerns around just the value of the vaccine. It's not being communicated properly in China. So a range of factors, but ultimately just not enough demand.

Inventory is building up. And so, yeah, they're halting the shipments. And it's a problem. Again, it's sort of driven the stock from 120 down in stepwise fashion to where it is today. But I think at least that sort of sets a floor probably now. They've really sort of stripped it out. They're not stripping anymore. And now people can focus, hopefully, on the rest of the business, which does have some positives that are being offset by Gardasil right now.

So, and some other analysts have said, look, overarching this, it's kind of like that compounds the existing problem, which is what happens with Ketruda in coming years. So kind of, what is the bigger picture? You know, how can Mark kind of show the community that it has exciting growth again? Yeah, so that's even before Garizzo started, their biggest product. Ketruda, Bronchology, $30 billion product is going to lose patent protection in 2028. And the price for that product is going to come down. We know that's going to happen. So they already had this issue to deal with Garzao's one of the big drivers to get them through that issue.

Now that that's slowed down and really sort of stop growing, they need to replace that. They need other assets. There's some stuff in the pipeline that's attractive. They do have a new product that they launched last year called Wind Revere, which is attractive. Also, it's tracking to be probably five, $6 billion. product, but they need more. I think that's what those questions on the call. And I think regularly they're getting asked questions now that whether it's internally or buying external assets, they need to give investors more comfort that they can grow later in the decade because

Ketriot is going and guard us still with the number two most of the products having issues. So we need a couple more products probably to offset the issues that they're facing now. I interviewed RFK Jr. I don't know about a year and a half ago, Vermeal, and I don't want to bring up politics into this except the fact that he's likely going to be the, health and human services. I mean, if he gets nominated, and it's about a 90% chance on online betting boards that he will. And he told me, and he said this many other times, that his whole family is vaccinated for pretty much everything but COVID. So, you know, it's a weird thing because he gets labeled this, he gets labeled that. Again, I don't care

about any of that, except as an analyst looking at companies that have heavy exposure to vaccine sales. Is there any way for you and your team to model this? Who wins, who lives? Who wins, who loses. Yeah, it is very challenging, I think for sure. So Merck doesn't have the COVID vaccine exposure, that Garda still in other vaccines are only a part of their business. Pfizer reported this morning. Also, they do obviously have a big COVID vaccine business. I think we try to be appropriately conservative as we go through the process. I think it's, Pfizer mentioned this morning, you know, vaccination rates in 2024 for similar in the U.S. to what they were in 2023. We sort of assumed a little bit of haircut on that going forward, whether it's because of actual changes in policy, which we think

are somewhat less likely, but just the rhetoric and the sort of maybe less pushing of the vaccine needs a fewer people getting vaccinated next year or in this coming, you know, in the coming fall, winter season. So, yeah, we just try to take a little bit conservativeism there. I think that's been a problem for Pfizer to just the uncertainty about the COVID vaccine sales and their sales from Paxlovit, they're antiviral for COVID, has just given investors sort of, sort of concern on what's the longevity of that revenue stream. Because unlike just like five, just like Mark, there's other products that they're going to lose patent protection on in the next few years. And how do they grow through that? So it's somewhat of a similar story between

the two now where they have big patent issues coming up. Their growth drivers, there's some uncertainties around. So we need again for both companies need more from the pipeline. And we need more externally brought in to get people comfortable that they can grow through these uncertain times. That said, Vermil, you have buy ratings on both of them with price targets. I don't I don't call it 30% above where they are now. Why? Yes, I think some of that is the pipeline. I think Pfizer, we do think there's stuff in the pipeline. They talked a lot about this today, too, in oncology,

outside of vaccines in the oncology. You know, Sly specifically they were working on some stuff, potentially obesity, metabolism that could be attractive. So we think people are overlooking those assets, and they're not giving them enough credit. I think just because there's so much scrutiny on the COVID side of business, though, that's overshadowing what we think is good progress of making elsewhere. Very interesting.

Vermil think. Is it a more challenging? Go ahead, yeah. You were saying it's more challenging. Ongoing issues they're facing. I think that's where I think us and others are looking at what can be in the pipeline. There's nothing near term. We look at a year, a couple of years from now.

There is some stuff. It might just take time or to recover from these setbacks. Understood. Appreciate you joining us this afternoon. Vermeal. Vamil, DeVan with Guggenheim. Yeah, thanks. All right.

Coming up next, could Trump actually create a sovereign wealth fund, even with U.S. debts and deficits that are going up, we're going to dive into that hot button issue coming up. And a reminder, we are taking nominations for our 13th annual Disruptor 50 list of private venture-backed companies. You want to nominate somebody, you go ahead. You scan that QR code right now, unless you're doing something incredibly dangerous, that don't do that, or go to CNBC.com slash disruptors. We're back after this. All right, welcome back. President Trump making huge, huge news yesterday, signing an executive order to clear the way for maybe the creation of a sovereign wealth fund. The EO was basically to explore the possibility of creating one. Anyway, the idea is well into its infancy, but the idea is still out there.

Still a lot of questions. But number one for many people out there on the internet and even in person is where is the money for a sovereign wealth fund? going to come from. Well, here's what Commerce Secretary nominee, Howard Lutnik, said about the issue. If we are going to buy 2 billion COVID vaccines, maybe we should have some warrants and some equity in these companies

and have that grow for the help of the American people. And your next guest wrote a piece questioning the idea of a sovereign wealth fund when Trump first plowed the idea on the campaign trail. He actually talked about it in his first time in office. Biden then also

talked about it and now Trump is talking about it again. You follow all that? Joining us now is Douglas Holts-Aken. He is the president of the American Action Forum. Douglas, Trump was sort of hot on it in his first term. Biden actually floated the idea last year. Now President Trump is signing an order to explore the creation of it. Why wouldn't it be a good idea? Well, it looks like a solution searching for a problem. They've mentioned a bunch of uses of the Sodomwell Fund. So vaccines, well, we have the NIH and you can fund that. Infrastructure, we had a bipartisan infrastructure bill. We can do more of that. Counter the Belt and Road, the Chinese initiative. Well, we have the international development finance corporation, put more money in that. The reality is we have

programs and national priorities, and they can be funded. And the source of that money is ultimately going to be the U.S. economy and the tax power of the federal government. So I don't know what problem we're solving if we were to create this. And to create it, you have to raise taxes and stick it in the fund, not spend the money. And that is not something this Congress or administration does very well. Because the countries that, and for people not listening, a sovereign wealth fund, for lack of a better term, is a government that is generally a rich government, puts a bunch of their excess cash flow into an investment idea, and then they go out and buy stakes or by companies. Singapore has one, Norway has one, Saudi Arabia has one, a few others, but those are the big three.

The difference between us and those three nations is they're not running gigantic and growing debts or deficits. Correct. You use the word surplus. We haven't seen that since 2000. And so our problems are the reverse. We don't are trying to struggle to figure out where to put our surpluses. We need to control the growth rate of big federal spending programs, provide taxes,

to fund the ones that we were holding on to. And that is the challenge for the United States, not dealing with excess funds. Is there any scenario under which this could make sense? It's hard for me to imagine. And I know I don't want to reign on the president's parade and run the Secretary of the Commerce, but, you know, the idea that we're going to have warrants,

equities to do a COVID vaccine, that's called nationalizing a pharmaceutical company. And I don't think that's something that they intend to do. People like to do equity investments, but they're also risky. And so you're putting the taxpayer dollars at risk. You know, we've gone through this same discussion when we talk about funding Social Security and using equities. We go through this discussion all the time. And there's no magic here.

You cannot do financial engineering to solve our fiscal problems. You need to raise taxes, cut spending, and make things balance up. I'm also curious that kind of is a parallel argument to the one over the years about allowing Social Security to invest in the stock market, which I kind of like. Maybe I'm the only one, but it just, the idea that building wealth in the long run kind of comes from that exposure, and yet we have this massive kind of wealth pot

that we need to grow its wealth and it can't access that. So I know there's many more sophisticated arguments against this, but is there a way in which Social Security could kind of, you know, try to act out some of this to kind of shore up its own funding and to solve some of those debt and deficit problems that a lot of people say the sovereign wealth fund wouldn't solve?

Well, I think there are two issues. The first is using equities to fund Social Security. You know, we broached this idea under them, President George W. Bush, and, you know, a lot of people don't like the idea of the government having a big fund of equities, which telling people how to run their companies, being majority owners, nationalizing companies. His approach was to let individuals make those equity investments. That sort of addresses the power issue. but it doesn't address the risk issue, which is equities are riskier than U.S. Treasuries,

and as a result, you expose people with the possibility that you get a downturn just as they're about to retire, they don't have the money, and that argument ultimately, I think, won the day back 20 years ago. Will we take another run out? Actually, I hope so, because we need to deal with Social Security, which is an enormous fiscal problem for the United States, and having that debate would be healthy. But I don't think, you know, it worked the first time. And I'm skeptical will work again the second time. Interesting. Well, it's still kind of fun to contemplate.

Think about what could solve all of these issues then. Doug, thanks very much today. Thank you. Douglas Holtz Aiken. Coming up, we'll bring back Chris Grisante of MAI Capital. Get his top picks for 2025 in Three Stock Lunch. Welcome back. It's time for Three Stock Lunch.

And we're going to tear through it, Chris, in the final couple of minutes. It's Chris Grissanti with MAI has our trades. Let's start with Pfizer. It was briefly mentioned earlier in the red disappointing start to the year, despite health care being up, but you're sticking with it. Yeah, disappointing only in the sense of the stock was down today, but I thought that the earnings were actually pretty decent. And look, Kelly, we're not talking in video or Google.

This is at eight times earnings. It's got a six and a half percent yield. If they can get to 11 times earnings, you hold it for a couple of years, you can make 30, 40 percent on the money, even in a crappy market. What about Airbus? It's the foreign competitor to Boeing. It's the opposite of Boeing and the stock. market. Yeah, I really like this one, Brian. And the reason is there's a whole bunch of,

forgive the pun, tailwinds here because you've got Europe, which is underperforming. Europe has been underperforming is due for a turn and is actually starting to turn. Of course, their main competitor, you know, Pepsi to Coke, Boeing is in the penalty box, to say the least. And, you know, they're in a secularly growing industry and they have a great product and a massive backlog. So, and it's a relatively cheap stock that's had some supply chain issues, but looks pretty good right now. And from that to Domino's. Dominoes. I wanted to give you three non-tech names. Dominoes, the stars seem to be finally landing up.

But they used to say this was a technology company that delivered pizza. Right. They used to say that. Yeah, you know who said that Domino's? Exactly. In the 2010s, was any stock better than Domino's? They were like, they didn't. It's been a different story later. No, it has been.

And do you know there's innovating pizza still? You think you could innovate pizza anymore? 15% is already stuffed crust. They are moving from Uber Eats to DoorDash. They got a lot of things coming. Watch the earnings. in late February for same store sales, but I think finally we're going to get some traction there. Yeah, it's hard to keep it evading on the pizza category. Right, for 150 years. Is stuffed crust still

considered innovation? No, but, but it depends on what you stuff it with. So what are they stuffing with? I can't say. Cheese, well, cheese. The idea is they put cheese in the crust. Yeah, but are you coming up with something? Why don't they come up with a tomato pie? You know what that is from Trenton, New Jersey, and you put the sauce sauce on top? No, no one under the age of 15 is going to eat that. No one. It's, Papa's And so Trenton is a, I'm telling you. It's never going to happen. Del Lorenzo's tomato pies, you got to go. Final parting thought on the markets.

I mean, beyond what you've said, where you're looking for value. I think value continues to lead the way this year because there's more certainty in cash flow and dividends than there is in tariffs and everything else. We'll see. Chris appreciate it. Chris Grisci. That was fun. Thanks for watching. Closing Bellsos right now.