Power Lunch - Stocking Stuffers: Big Tech & Health Care 12/23/24

Episode Date: December 23, 2024

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I am Mike Santoli, and today we've got a special edition of Power Lunch for you. We're stuffing your stockings with stockpicks. We're going shopping in tech, in health care, in energy, and for those last minute small caps to get you ready for Christmas and the new year. We also took viewer suggestions on social media, and our traders will weigh in on the names that you want to hear about. Here to help me spread some holiday cheer is Tim Seymour, Seymour Asset Management, and of course a fast money, Trader Tim.

Good to have you in the house. Thanks very much. Before we do get into those individual names, let's check on the bigger picture. Take a look at the Dow. It is the underperformer. Once again, this has been a rule recently, although barely below the flatline right now. The market actually has gathered some strength throughout the day. See the S&P 500 higher by about half a percent. Nasdaq composite up nine-tenths of one percent. And whether Santa Claus comes to Wall Street in these final few trading days or not, 2024 will still go down as a great year for stocks. The Dow up 13 percent.

about 25% for the S&P 500 and 31% in change for the NASDAQ right now. So, Tim, this is now going to be the second straight 20% up year for the SBA. In fact, could be the second straight 25%, I think, if you look at total return. What's your read, first of all, on a little bit of the turbulence we saw in the first few weeks of December? What's behind that? And do you think we're through it? Well, it's fascinating because it's been arguably one of the best 24-month periods on a rolling basis going all the back to that October 22 CPI.

But if you think about what has roiled markets over the last couple weeks, it's been a combination of higher interest rates. It's been a combination of a Fed, which I think is your biggest factor, really, of all those tail risks out there. And maybe it's not even a tail risk if it's the Fed, unless they do something really unexpected. I just think you're wrestling with expectations that were extraordinary in terms of where easing was going to be.

You've had a move also in some of the mega-cap tech stocks, which, by the way, have really outperformed that market broadening narrative that I'm sure we've had many times over the last six months. So I think it's a combination of higher interest rates, the dollars to be reckoned with. I think there are dynamics around after you have an election. You've priced in a lot of excitement around policy expectations, but the reality is policy is still yet to unfold. It absolutely is. And it's interesting you say that because the first half of this year was all about those seven stocks that everyone knew the names of. After that, you did get a broadening move. And then the last few weeks in particular, you know, those NASDAQ 100 type stocks have just grabbed the baton again.

Well, look at relative performance of the S&P or the NASDAQ to the S&P and semiconductors to the S&P. SEMIs kind of peaked to the S&P after a little bit of a kind of a big top in June. But I think the dynamic here is the reassertion of the triple Qs or the NASDAQ 100 against the S&P really since Thanksgiving. It's been almost a 6% outperformance. Semis have meandered a bit. but it's great for the overall headline index market because I think they will lead, but it tells you that that market broadening some of the factors that I think are headwins in terms of higher rates and whatnot are things that I'm not sure investors are really ready

to adopt right now. Sure. In fact, the upside contributors to the S&P, the biggest on the day, Invidia, Broadcom, meta, Tesla, Eli Lilly. So big year-to-date winners. In fact, we're going to get in more deeply to a lot of that, actually. Let's turn now to our first stocking stuff or segment for the hour. This is for the best picks in technology.

Some of the big names like Alphabet and Apple up over 30% this year, but can they continue their climb into 2025? Joining us now for more is Laura Martin, senior internet and media analyst at Needham and Company. Laura, great to have you. Thank you. To see you. So I think first, just to start pretty broad here, in terms of your coverage area, it does

span large and small, but do you feel as if you can actually wish for yet another? year when the largest, most obvious stocks in tech managed to carry the load, or is it going to be some reversion from that this coming year? Well, some of it is the political environment. We have a new head of the DOJ. And with polarized government, I think that new DOJ head is going to jettison a lot of the outstanding litigation. And the big tech that benefits the most from that is alphabet. So we think that we're going to get multiple expansion at Alphabet as sort of like the DOJ's suggestion to have them spin off Chrome, I think the new GOJ is going to walk away from a lot of that. So I see multiple expansion for Alphabet.

I also really like Alphabet and Amazon because of all of the back office work they're doing it driving generative AI investment, which is really helping their cost structures. We're getting costs up single digits with revenue up double digits, which is just making their free cash flow and therefore capital efficiency explode over at both to the upside with Amazon and Alphabet both. So Alphabet, I mean, you're implicitly making the case that there has been an unwarranted discount on Alphabet. And of course, it did get pretty cheap relative to the market and relative to its own history,

but that that was almost all about regulation or was it somewhat about, you know, whether, in fact, Alphabet was well positioned in terms of whatever it goes on in AI. Well, you saw that they just introduced the Wondry Chip, which technically is, you know, a generative AI chip. they could actually maybe break Bitcoin and blockchain. So I think they are really, they're sort of moving ahead in AI. They should have been ahead the whole time. But when OpenAI got to chat GPT and introduce that product first, it sort of woke the Sleeping Dragon.

And now I think Alphabet is on the case of generative AI. And they have a huge advantage because they have first party data from YouTube, which is the number one streaming asset, 50% more viewing than Netflix. They have search, which is, I think, getting replaced by Jenner. But they're doing a lot of the replacing. When you do Google searches, about 50% of them come back with an answer that basically replicates chat GPT, which encourages us not to go to chat GPT for the answer. So they're sort of, I'm going to call it, cannibalizing themselves at some level, which I think

is better than losing it to another site. So I think they're doing the right things now, even though they had to catch up. Yeah, and it's interesting in the sense that whoever owns the data now might even be in a more privileged position. You're hearing about Open AI, you know, the next generation are kind of running out of things to train their models on on some level. Amazon, though, quickly, might be in a similar spot. But what's in there in the story into the coming year that maybe is not already known?

Because it feels like one that got embraced by the street this year. Right. I think the big thing that I think if people miss Amazon, what they're missing is we're moving from an e-commerce business, which has 1% margins. to a company that's, I'm going to say, taking capital and reallocating away from that business, it's twice the size of Apple and alphabet, and it's going to grow twice as fast as Apple.

Like, that's amazing. And then also, what it's growing in is more profitable. So we get margins reported out for AWS 30%. Okay, well, the e-commerce business was 1%. And now we also get margins in advertising, 60% margins. So you're watching their margin expansion. which is also free cash flow. And I think its multiple doesn't reflect.

People think of it as an e-commerce company. The other thing is it's moving away from regulatory risk by going into shipping, by going into the like generative AI layer of AWS, moving away from consumer-facing businesses, which I think lowers its regulatory risk long-term. Hey, Lord, it's Tim. Thanks for joining us.

And I guess that third quarter profitability inflection in Amazon is part of what you're talking about in that free cash flow generation. Let's quickly jump to Apple. a ton of time. But the bottom line here is this is a story where I think most people probably would say we have not priced in AI or Apple Intelligence. Where are you this and where are you really on the multiple? So I think it's too expensive here. We have a company that grew like single digits, 2% at the top line, negative 1% at the EPS line. They're late to Apple Intelligence.

They have a one-year product introduction cycle, which means the earliest that we can get an iPhone replacement cycle is next September. And generative AI feels like it's changing the world every month, every two months, and Apple isn't keeping up with that kind of pace. Also, it's not building a backbone that other things are going to be built on and pay a tax or a toll to the underlying large language model, which will happen at both Amazon and Alphabet. So we're waiting for the iPhone replacement cycle. Apple intelligence has been disappointing.

Let's see if they do a better job this September. Meanwhile, let's be in other stock. Yeah, they've kind of known for sort of December meltup in Apple, whether it needs it or not. We'll see how that goes in the new year. Did Laura want to get you quickly on trade desks, somewhat smaller, play, kind of an interesting spot in digital advertising. Yeah, so I think these back to data, data is becoming more valuable. And the trade desk is the largest winner within sort of advertising technology in the open Internet, not a Waldgarden. And they're going to grow at 25 percent, and they have 40 percent.

margins. So nice software margins. And they are sort of the backbone for the ad agencies. So that's ours, like, dark horse hidden, and it's growing a lot faster than the big guys because it's a lot smaller. Yeah, a lot smaller. 60 billion market cap. And obviously, the advertisers, they need to find the eyeballs and such. So they're going to help them. Laura, thanks very much. Enjoy the holidays. Laura Martin from Needham. All right, ahead on the show, we'll continue our special stocking stuff for addition to power lunch after the break. We'll dive into biotech and pharma. We'll be right back. Welcome back to a special Stocking Stuffer Edition of Power Lunch. The pharma and biotech space has been a focus for investors with Eli Lilly having a big year.

And for one, it hasn't been the same for biogen. So how should you position from here and what other names should be on your radar? Evan Segramman is a biotech analyst at BMO. He joins us here with some answers. Evan, good to see you. Good to see you. Thanks for having me. Let's begin with Lily.

It's rallying again today. Obviously it's off its highs. The valuation is moderated, but what's the story and has it changed at all? So the story a lot last week, we had Novo Kagres summit date at disappointing most. So basically that was supposed to be Novo's answer to Zepbound. So that's kind of not really part of the picture now. My focus turns to 4Q where expectations are still pretty high. So I think for the full year, I think consensus or guidance is really important.

Next year, consensus is about $28 billion for all of Lili's Zepoundamundjara. about 26, that's going to set the tone. So we're really focused on that. And I think that that will really be important. That adverse surprise for Novo, though, I mean, is there any read-through at all, either pro or con for Lilly or for the entire area? I just wonder how fast, you know, these kind of new challengers might pop up. What it really showed me is that Lily Zepbound is one of the best products. It really threads the needle between efficacy and tolerability. So toppling that will be challenging. I mean, Novo had these lofty expectations and they really failed to meet them. Talk quickly about biogen. Obviously falls into the

kind of cheap, but maybe for a reason, bucket. Yeah, it's a bit of a disappointment. We're very excited about Lacanamab, Lecambi, when it was approved in early 2023, but it really has done nothing, unfortunately. This was supposed to revolutionize Alzheimer's. It wasn't a cure, but it was definitely a way to help these patients. And it seems that they're kind of stuck in a rut. My view, it actually goes back underinvesting in the pipeline. I think for a long time, they prioritize share buybacks over buying assets, and we're really seeing that with a thin pipeline. So investors don't have a line of sight into what drives growth into the end of the day. Does that mean M&A has to rise to the front? Yes, it does, but their balance sheets are a little strain,

so they can't go out and buy a $30 billion company. It's probably going to be in the $10 to $15 billion range, and that would still be a stretch. Vertex. Was a big disappointment last week on a trial and a pain treatment? What's your take on it? We like Vertex. We actually thought that that was a buying opportunity. Friday, they got an approval for their next generation CF product. So we're to from here with Vertex. In January, we have approval of their acute medication for pain, likely going to get approved. I think given the whole opioid crisis, that launch should be great. And then it's off to the race is more with CF. They're going to get incremental patients with this new drug, better margin profile, and better pricing. So, Evan, then let's talk about sentiment in the investor community,

because, I mean, we've gone from this place where Lillian Nova were a two-horse race. There was speculation of who might be the next takeout, a Viking, or some of those. Lilly does seem to have, you know, they are the goat, as you say. Ah, yes. But where are investors now in this trade? Because Lily is sometimes just a function of valuation. And as we look across broader healthcare but pharma specifically, there's certainly been an argument that some of the legacy, you know,

whether it's a Bristol or a Pfizer or J&J, there are players that might be more attractive as we look forward and just where the catalyst might be for the sector. A few things, sir. I think the obesity trade still works in 2025, but Lily and Novo have to execute perfectly. I think any faltering in 4Q is going to be a real problem. When it comes to the legacy names Pfizer, Bristol, you know, I think Pfizer had a good guide. That kind of got overshadowed. The guide was healthy, and it shows that they're starting to write the ship a bit.

I know Starboard kind of came in to shake things that were tried to, but it really takes a long time to write the ship. I think Bristol's interesting. I'm not at an outperform yet, but I'm watching the launch. of Kobenfi, their new schizophrenia drugs. So I think there are some value names in pharma. I'm still sticking with Lilly, but it's not my top pick for 2025. And that was a change in our outlook. How do you even begin to set assumptions or expectations for policy in terms of who's going to be running, you know, HHS and all the rest on down and what the priorities will be? And have we overreacted? And ultimately, the markets made a decision that this was gospel.

Right. So I think, you know, the whole, RFK thing when that was announced, the market freaked out, probably rightfully so, but the whole, there's a lot of uncertainty. The market doesn't like uncertainty. I actually like the FDA pick Martin Macri. I think he is, you know, he's not, you know, he's not like a Scott Gottlie, but he's not totally on the other kind of deep end, a little crazy. So I'm comfortable with that. And by deep end and crazy, you mean somebody who's very skeptical of various types of medicine. going to just blow it up, unfortunately. We don't want that.

That's not what we want. I think when it comes to RFK, it seems to be a lot of talk. Remember, when you get into a big organization like HHS, making big change, it's a complicated organization. It's very technical. And to make big changes is very challenging. Yeah. All right. So the benefit of it being complex and difficult to move is that maybe not much changes.

Overdone. Yeah. I guess that would be the case. But on the other hand, if you're going to have a more forgiving. M&A environment. That's what I love. That's what I love. I think that would be great. I mean, we talked about biogen having to buy. I'm sure Lily's going to have to buy even Novo at this point. So there's a lot of M&A that needs to happen. I also am thinking about rates, right? Lower rates could be good for small midcap biotech. I know that's the wild west of

investing. I love that space. But lower rates are good for the sector overall. Yeah. Well, we'll see if we're going to get them. Maybe. Maybe. That's fair. That's fair. That's fair. That's fair. Evan, great to talk to you. Thanks so much. Thanks for having me. Happy holidays. All right. Still to come. We'll explore one stock that was more like a lump of coal this year. Boeing, down 30%. We'll trade that name in Market Navigator next. Welcome back.

As Tim likes to say, a lot of money can be made when things improve from terrible to bad. So let's take a look at Boeing down by more than 30% this year, although the stock has improved relatively recently. Our next guest thinks it is prime for a comeback with improving technical momentum and renewed operational. Optimism. Joining us now is Tony Zhang, chief strategist at Options Play. So Tony, what are you seeing in the charts and how would you play it? Yeah, first thing you see in the charts is the fact that Boeing after the past three or four months have really struggled to kind of form that bottom. It really has started to show some improvement technicals. We broke out above that's 170 level, which is a key resistance level that it's been struggling to get above. But more importantly,

over the last couple of weeks, we actually got past the 200A move. average. And what's really interesting is on Wednesday's volatility, you saw Boeing didn't move at all. This really speaks to the strength that we started to see here from investors for this particular stock. And if you look at just the business, you know, the CEO's gotten past some really interesting milestones, gotten past a major labor dispute. You've got some funding now. And I think right now the hands down, the CEO's getting their hands in dirty and working towards improving the backlogs with both 737 and 787. programs continuing to get higher deliveries month after month. And that's really kind of what we're

looking for and onto the road for recovery for Boeing. How are you thinking about just setting targets or exactly how much of its many years worth of underperformance we might expect to get back soon? Yeah, it's hard to say. You know, that's really kind of the speculative nature of this particular stock. But this is really kind of where I think this is very early days. And I think for a lot of investors, the risk or reward is actually far more favorable right now. But there's no doubt that this is still fairly risky and very early in the recovery game as to whether or not they can continue to show some of the momentum that they've shown over the last couple of months. Hey, Tony, it's him. So going back to the charts and where you see both levels we think the stock can rally from, it certainly had a nice rally in the last few weeks off of a horrendous 2024. But the dynamic for me is this is a cash flow story. This is a reversal of cash flow. In other words, negative cash flow, 10 to 12 billion, has the potential to be possibly plus.

10 to 12 billion by 26. Where do you think the stock begins to incorporate some of those moves? And I mean, you know, really even levels on the stock that you think investors should watch. Yeah, the 200-day moving average is by far the most important one, I think, right now. We just cleared above that level last week. We really need to see that hold. We want to see the 200-day moving average continue to curl up and for the stock to continue to hold those levels. That would be the most important one, I think, for investors in the long run to keep an eye out on. I've been interested in kind of the sentiment swings on Boeing. You know, when they first had their issues, management production, obviously 737 Max, you saw the street wanting to defend it.

And then they kind of, I get capitulated and more or less turn net negative. What are you seeing in terms of positioning and expectations embedded in the market and options activity, things like that? Yeah, so we're starting to see some bullish activity here for Boeing in the options market. But I still, like I said, still very early days. We're not seeing a ton of volume right now, but I think this is really where an opportunity for investors early on to be able to try to get into what could be a long-term recovery for Boeing. You know, right now, the way that I think we should play this utilizing options is to still take advantage of the fact that implied volatility on Boeing options are still quite expensive.

And you can take advantage of that by selling options. So I'm going out to the January expiration. I'm looking at selling the 170 puts. Earlier today, you can collect about $4.30 by selling those 170 puts. And this basically obligates you to buy the stock if the stock's below 170 at January expiration, which is just below that 200-day moving average. And you'd be buying Boeing at that breakout level. So even prior to the breakout level that we're referring to,

and that's really kind of where I feel most comfortable buying this. Right now we're trading about 1.4 times sales. That's by far the cheapest of any aerospace company at the moment here in the S&P 500. And that's what I like is the low valuation. You know, we're starting to pay attention to this from a technical perspective. The risks are there and I want to reduce my risk by selling some puts here. Right. So you collect some cash on the way to perhaps buying the dip.

Tony, appreciate the time today. Thank you. Thank you. All right. Coming up, the key to a good stocking stuffer, keep it small. We'll focus in on small caps when this special edition of Power Lunch returns. Welcome back to Power Lunch. I'm Sima Modi with your CNBC News Update.

France unveiling its new government today, which will be tasked with overseeing the passage of the 2025 budget, Prime Minister naming former ministers and senior civil servants to the cabinet after the previous government was ousted over a budget fight. France is facing pressure to reduce its large debt. Whooping cough cases? At a 10-year high, that's according to new data from the CDC. As of mid-December, some 32,000 cases have been recorded. At the same time last year, there were just over 5,100 cases. Health experts say cases of the upper respiratory infection are rising as a result of waning vaccine protection, lower vaccine rates, and improved testing. And New York City's congestion pricing plan overcame a last-minute legal challenge today.

A New York judge denied attempts from four separate lawsuits to temporarily stop the pricing from taking effect on January 5th. Under the plan, most drivers will be charged $9 to enter Manhattan below 60th Street. Mike? Seema, thank you very much. All right, let's take a look at our next stocking stuffer, small caps, the Russell 2000, underperforming the major averages again this year. But with 2,000 stocks in the catalog, there has to be a few good values in there somewhere. Let's ask, Stephen DeNiclo, he's portfolio manager at Federated Hermes.

Stephen, thanks for coming on. Let's talk just, I think, big picture. You specialize in small caps. It's kind of like they keep pulling the football away. But do you see the makings of any kind of a company? Are we still in this mega-cap domination? Sure. I like that Charlie Brown reference.

I'm a big fan. I mean, I'm going to use a quote from Mark Twain, and he once said that I didn't have time to write a short letter, so I wrote a long letter. And I think that same thought process is going on in investing, where investors don't have time to do the work on these small-cap idiosyncratic stocks. So it's much easier to focus on these large, behemate companies that have the scale, innovation and margins that we have never seen before, historically, if you look over 100 years, small cap companies have outperformed because small caps are where the innovation happens.

Over the last five and 10 years, that innovation formula is upside down as the largest companies are generating the most innovation, the most attention, the most liquidity. There's been outflows out of small caps all years. So it's just easier to kick the football if it's a large cap company. Yeah, innovation and also inefficiency in theory is a source of those small cap returns over time. So talk about some of the individual names that you have zeroed in on. Lorne Holdings, for one. Talk about this one. Yes. Look, you just had a previous guest talking about Boeing and all due respect to Boeing.

My one thesis with aerospace is that we will continue to fly planes, okay? Air travel will continue to go up, whether it's a brand new Boeing airplane, and they've just restarted the 737 maximum. production, or it is an older plane that needs to be refurbished. Either scenario, Lord Group wins. This is probably, this is an IPO in 2024. This is probably the best small-cap company that I've seen in a long, long time, where they have a combination of a winning management team, extremely high margins, and a, pun intended, runway for growth over the long term. They have proprietary products, very small plugs, washers, valves, etc., seatbelts. and they supply those to the aerospace companies.

Now, whether it's a new plane or a used plane, you're going to need those parts. They charge a very, very high margin. There's a million parts in an airplane that it takes to build this airplane. The largest supplier is Transdime. They have only a 5% market share. Lord Group is one-tenth of the size. So if you just take a deep breath and say, what do I want to own for the next 10 years, this is something to put in that stocking and win over the long term.

All right. Relatively young stock, but had had quite a run. before a recent pullback. Sport radar is one, I admit to not being aware of even though I probably see the product all the time. Look, this is a pick and shovel's way to play the proliferation of online gambling. And so they own the data. They own the data for Major League Baseball, the NHL, the NBA, et cetera. And they sell that data to draft kings. And so if you believe there will be more sports betting in the future than today, sport radar. is a profitable way to play. They came public at a terrible time. At the peak of the small caps in

2021, the stock is down about 40% from that IPO price. A lot of people have lost money in this company. But if you forget the IPO price and look what they have done over the last three years, they have slowly grown profitability 30% a year. And they have twice the EBITDA today, then when they came public with a stock that is down 40%. That is a microcosm of what's going on in the small cap market guys. Nobody's paying attention. to these companies that are doing what they said they're going to do. They've just had a tough print in 2021 when there was this little bit of mania. Yeah, but by own the data, I assume you mean they have the rights to distribute it, right?

Correct. Yeah, correct. They're the brains behind the data that creates the sports book for a draft case. Finally, GMS. Let's give a thumbnail on that one. Absolutely. Look, I'm a long-term bull on housing. I think there's an under-supply and underbuilding and housing.

I think interest rates are going to be slowly go down, and mortgage rates are going to go down and 25 and 26. These guys are a distributor of wallboard. Sounds boring, except when you realize there's no such thing as a new wallboard plant. And so prices are in wallboard are poised to continue to move up. If you're a distributor, higher pricing is a good thing. GMS is sitting here at 11 times earnings, and it's very easy to come up with a double in their profitability over the next few years. Interesting. Yeah, it looks like been a little bit of a depressed multiple on those big concerns. Stephen DeNichael, thanks very much. Appreciate the time today. Hey, thanks, guys. Merry Christmas.

So the small cap trade idea. I mean, people have tried it. So those are fascinating picks by Stephen. And I can't opine on wallboard. I can talk about sports tickers and whatnot. But, I mean, the bottom line is I've seen underperformance in small caps that I think is a function of concern around higher for longer. Sure. The move in the long end, we know why small caps certainly have had a tough run. Some of this is a fresh run. It's a 6% underperformance in the last 30 sessions or so to the market.

Because I think the market, first of all, a lot of investors, I think, And I think it's a fair question. Why do I need to focus on small caps? When in fact there is mega cap growth and there's a place. It's some part of the portfolio right now. But to me, this is a place where I think some of the challenges and the outperformance of the market, the broadening of the market that was so exciting is something that if anything, that's come under question. Yeah, there's a case to be made that you need essentially a reset of the entire cycle. Like either bear market, things get cleared out and then small caps can maybe lead off the lows.

Yeah, I mean, maybe the dollar strength is something that's generally. And obviously a lot of the U.S. focus in terms of sub-industries are part of the new administration agenda. But for now, if I'm an investor, again, I'm not sure I even need to invest in small caps. Don't at me on Twitter. No, you're right. It's like 7% of total market cap or something. Mr. Rosal, 2010. Thanks.

All right. Coming up, the energy space, having a rough end to the year, down 13% in a month. We'll take a look at the names to watch across the group in the new year. Power lunch. We'll be right back. Welcome back to our Stocking Stuffer Special. Let's focus on energy now, which is one of only two S&P sectors lower on the year. Materials being the other.

Pippa Stevens joins us now to break down the different parts of the energy. So, oil and gas. Yeah, so let's start down because energy stocks are the second to worst sector so far this year. And looking into 2025, there is a lot of uncertainty around oil's price direction, thanks to possible tariffs and sanctions, as well as non-OPEC supply growth, meaning there could be a shift from oil to gas-exposed companies where the outlook is better, thanks to the dual-tailwinds of LNG growth and generative AI.

Newly created expand energy, which comes from the merger of Southwestern and Chesapeake, is the largest gas driller in the U.S. And then, of course, you also have to move the gas, which is just as important, and Kendra Morgan is one name to watch in the midstream, since it is the largest pipeline operator. It is really hard to build new pipelines,

and so infrastructure that's already in the ground is definitely seen as a premium advantage. Yeah, I think if you look at the places that have outperformed this year in a difficult year for energy, you know, clearly you're seeing it both in some of the places where there are renewable dynamics, but really it's a case of people looking to who has the technology and who's really succeeding. This is the year that a lot of folks rediscovered nuclear power. I was to play into an investable idea.

Yeah, so nuclear really took off this year. It was the year of nuclear power. And next year, could see even more announcements between the industry. and big tech, although there will also need to be progress on getting some of these small modular reactor designs off the ground. Independent power producer Vistra has been a big beneficiary since they own the second largest competitive nuclear fleet in the U.S. and could sign a very lucrative deal with a hyperscaler. But it is the second best stock in the S&P this year and after tripling. It might have gotten a bit ahead of itself. Camaco is another name to watch. They're

really the one-stop shop nuclear company since they've expanded beyond just mining to other parts of of the nuclear fuel supply chain and now own 49% of Westinghouse, meaning they also have exposure to that AP-1000 commercial scale reactor. Yeah, and Pippa, you did an excellent deep dive a couple weeks ago. And the story really around nuclear, to me, is about a structural deficit that's going on and a case where U.S. is almost one of the most aggressive countries suddenly in terms of exploiting. The question really for Comico is, and for investors, is what do you want to pay for this

company because there's extraordinary growth potential, but you've priced in a major, major, you know, multiple here. So it really is more about the opportunity. I've been investing in nuclear probably for 20 years with a lot of volatility. I think that's critical for investors to understand. This isn't a straight, you know, move higher. There are a lot of structural issues to work out. You did not rediscover it this year. It did not. That's right. It's time to take a look. I do. I mean, I have no basis for this, but I do wonder if the massive demand forecast that are embedded in a lot of these, like, you know, when these nuclear projects start to pay off, are going to come to pass, right?

Right now, we're extrapolating the AI demand curve. We'll see, obviously. Yeah, I think some of the risk. Well, the spot uranium market has been part of the fun here, right? You've seen a massive move in the spot market going into 24. It's actually struggled, really, for the last 12 months. But it's a case where I think there are a lot of utilities that are probably quite short. And AI is only one of the tailwind.

There's also just electrification and reshoring other things. So it's one part of the story. Another part of the story. So renewables, green energy. Yeah, well, it's been a really rough year for clean energy stocks as higher rates continue to take a toll. And then President-elect Trump has injected a lot of uncertainty around the future of the inflation reduction act. Now, a total repeal would be tough given how much money has gone to red districts, but projects could be delayed until there's clarity. Now, first, solar has held up better than the rest of the space, and they do have a moat of sorts, given that they're the only meaningful panel manufacturer in the U.S., which is especially important in light of tariffs.

There's also a name like Qantas Services, which designs and installs renewables projects, including transmission lines. And so it is a way to bet on the clean energy system without choosing one vertical or one technology. Yeah, I look at renewables, and again, I get back to a next era. And I think it's been a volatile trade this year, but they are really one of the leaders. And it's a story of efficiency and technology. I think actually it's probably the dirty stuff that's going to have a better year in 25. because, you know, you look at a Chevron that's underperformed massively, and yet their break-evens to pay that dividend and some of the dynamics, I think,

around the big integrates who are also in this space, and I think people will focus on that. Although everybody's favorite counterintuitive policy-driven trade is clean energy, right? I mean, it outperformed under Trump and underperformed under Biden. Yeah, that's right. I think that a lot of the time people think that those subsidies are necessary, when the industry can actually stand on its own two feet at this point. But when you've had subsidies for such a long time, It's seen as kind of integral to that story going forward.

And so now with uncertainty around the IRA, it's certainly getting hit from that. For sure. Pippa, thank you. Thanks. All right. Still to come. Time for a gift exchange. We gave you some names. Now it's your turn. We'll run through some viewer stock picks after the break. We're back in two. Welcome back. Time to wrap up our stocking stuffer special. We've got some gifts from the viewers to help do that. We asked on social media which names you wanted us to hit. Three stocks stood out among what you asked for in video. Lulu Lemon and Micro Strategy. Tim Seymour is still with us.

Snuggling with you, by the way. That's right. Cozy, cozy fire on a cold day here. Along with Lido advisors, Gina Sanchez, to give you their expert takes on these popular names. Gina, good afternoon. And let's start with you on NVIDIA. I tell you, it's amazing both that it's up so much this year and that all the gains happened in the first half of the year. Yeah, it is amazing.

and even more amazing that despite how much has been up, not just this past year, but over the last 10 years, it is still expected to go up next year. And if you look at what they're rolling out, you know, there over 50 times PE actually could be easily justified if you look at the Blackwell chip and the potential that that has. It is twice as expensive as the hopper, but depending on who you ask, it's anywhere from 15 to 30 times faster for AI interference testing. And that's a big big. deal. Microsoft has already signed up to be the largest buyer, along with all of the other cloud players. Yeah, it seems like they're going to have plenty of demand for it. I guess, Tim, the question is, you know, has the market priced it? You see things like Broadcon ripping as almost like the next wave of this trade. But I think, first of all, I think Invidia, the GB300 server chip March event, it will be a catalyst, will be very important to the stock. I think for investors, I think this may be the year of AMD again coming up. In other words, I think it, you know, down 20% on the year, not a reason to buy a stock.

But I think it is on a relative basis to itself, trading roughly 30 times forward. This is a stock that actually within the space and what you're getting for the distant second player, I like MD here. Yeah. And semis, of course, as a group have struggled. They've kind of lost their leadership profile. See if that changes after the first of the year. All right, Gina, next name, Lulu Lemon. This was, you know, a stock that did have its struggles, but has actually then had a bit of a renaissance. Yeah, it has definitely been clawing its way out of what is unquestionably a terrible year,

not only in its own performance, but relative to the S&P 500. It is just really, really been a laggard. But if you look at the forecast for next year, they're still expected to be somewhat soft. You know, I've seen numbers around 7% EPS growth for 2025. Feel soft, but if you look at what you're paying for Lulu Lemon and you look at the commitment that they're making to continue to innovate and sort of get that freshness and newness, back into the brand line. I do think that this is actually very attractively priced at right now. It's an interesting one, Tim, because, you know, it definitely is trading less expensive than it has for

most of its history. The issue is, is it a new dynamic here with competition, with resistance to full price and things like that? The competitive landscape is brutal. I think it's partly that. I think it's also, you know, Lulu goes into this period of call it slower growth and a lot of competition at margin levels, gross margins, and overall that I think are really going to be tough to maintain. So again, at a period of difficulty for this company's core business, I think the margin profile is really tough here. I think it's been a good snapback rally. I'm not sure what you do with it here. Yeah. All right. Third viewer pick, and it is no surprise that the crowd loves talking about this one, micro strategy. So, Gina, what do you think of this? It's a

leverage Bitcoin trade by design. That it is unquestionably a leverage. Bitcoin trade. And if you think about the volatility that comes with Bitcoin, put leverage on that, and that's what you're getting. And I do think that while, you know, you could argue that the turnover at the helm of the SEC will be beneficial and that Bitcoin has reached a number of milestones, I do think that the fundamentals are a bit unhinged here. I mean, Tim, not only do you have Bitcoin doing what it's done, micro strategy explicitly saying we're raising money in the capital, markets to buy more Bitcoin as much as we can at whatever price it's trading for. And then you have the stock itself trading at a premium to the Bitcoin holdings of micro strategy. And then you've got

double leveraged ETFs on Bitcoin. So in other words, there's a fever in this stock. So how would you even talk? Hard to question Michael Saylor's constitution here. He's made a bold call. I think the options market and when it really builds around what's going on in spot Bitcoin is going to be an issue for this company. Right now, what's your call? on Bitcoin, it's a function of dynamics around both the macro, what you think is going to be happening with the deficit. I mean, people that are out there investing in Bitcoin, it's not necessarily because it's just digital gold. And there is obviously a scarcity dynamic. So my view on Bitcoin in 2025 is really a function of what the market's going to do. We've had almost perfect liquidity

conditions and an election catalyst for Bitcoin. I think it's going to be tougher in 25. Yeah, it's really interesting how many things lined up. And of course, it really trades much more like the NASDAQ than like gold. Yeah, yeah, and that's okay. Gina, we gave the viewers a take on their favorite tickers. Let's talk about one of yours, Microsoft. So I'm a big fan of Microsoft. This is a stock that we not only own in our portfolio, but I own personally and have owned for a very long time. And I think that if you look at what Microsoft has been dealing with over the last year, it's really been, you know, meeting tremendous demand. That's been actually the biggest moderator of their growth. And so they're making huge investments. They are the, you know,

they're buying, they bought twice as many hopper chips from Nvidia and they are signed up to be the largest buyer of the blackwell chip. And if you look at, you know, just to harken back to the conversation you had with PIPA about nuclear, you know, Microsoft made a deal to buy, to restart three mile island and buy all of its energy capacity. Sure. I mean, Microsoft's actually been kind of sideways for quite a while. It's been pretty conspicuous. Well, it kind of peaked with the semis, right? I mean, that was the story this year. And your issue, one's issue with Microsoft is not really a function of where they are in three of the most important verticals in tech. It's really about the valuation. So as we look to an environment, if you think mega cap tech's going to outperform,

Microsoft's going to be there, but within that group, it's not my top pick. What is your top pick at the moment from the coming year? As we talked about it with Boeing, we've talked about this, I think part of picking a stock for an upcoming year, if that's what this game is, and it's not just a game, it's called investing. It's Nike, because this is a stock that's done almost nothing for two years after peaking, really at the end of 21. Elliot Hill, finally, I think, on this recent round of numbers, gave the kind of, I wouldn't call it a kitchen sink. And in fact, we've been waiting for Nike to actually be probably, at least with the change in the C-suite, the ability to do that. There's nothing exciting on the next three to six months in terms of both innovation and, I think, an inflection in margins. In fact, I think the guide on the 3Q minus negative low double digits is in the price of the stock.

That's the great news for investors here. This is still the global leader in the space. This is a company that relative to itself, I think, is now trading at realistic levels. And I think they are getting back to what they do well. But there's no question to me, this was a reset. This is what we needed to hear from a management team. They have not come in there and said, we're going to do a thousand great things, even though I think his tone was very good last week.

I think it's a story that it's going to be a positive 25. All right. Yeah, there's no doubt that there was a give-up trade in Nike, and now you have to kind of almost rebuild the faith in it. And with that, Gina Sanchez, thank you very much for the time today. Tim did want to just button up what's going on with the markets, because you did finally see what's expected to be the upward drift of this final few days of the year, maybe kick in this morning. Well, let's see.

And again, it's nice to see the outperformance of semis today. If you're someone's looking for the indices to go higher, I think semis probably will do it. It's been such a ride for mega-cap tech stocks, really since Thanksgiving. And if you look, also even since we had that August 5th bottom, I mean, the move across the space, especially mega-cap techs, has been extraordinary. It has been. Homebuilders also struggling along with semis. All right.

Thank you for watching Power Lunch. Our thanks to Tim Seymour for an extremely fun hour.