Power Lunch - Tesla’s technicals, biotech’s bounce and trading stocks at 52-week highs. 11/22/22

Episode Date: November 22, 2022

Tesla’s stock has been cut in half this year, trading way below the average Wall Street price target. A technician tells us where she thinks the stock goes next. Plus, money has been rotating into biotech stocks. Is the sector recession proof? And the trade on IBM as the stock hits a 52-week high. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Great to be with you all today and nice to have your company. Here's what's ahead. Tesla tanks, the stock cut in half this year, trading well below the median price target of Wall Street analysts. But what do the technical say? We'll take a look at the charts to determine the stock's next move. Plus, getting defensive money rotating, it has been rotating into biotech. Gillian, up 26% over the past month.

Amgen, 13% are investors hiding in biotech as the threat of a recession looms. We'll explore that one later this hour. Contessa. Tyler, good to see you and good to see you, everybody. Stocks hired this afternoon brushing off those COVID concerns out of China. The Dow trading near session highs up 319 points or nearly a percent. The S&P 500 also up a percent or 40 points in the NASDAQ composite up nearly a percent, up 100 points. The best performing S&P stock is Best Buy. It hiked its outlook and beat earnings estimates right now up 11 percent.

But the worst performing, look at dollar-tebron. down almost 9%. It issued a disappointing outlook and crude trading back above $80 a barrel this afternoon. It's up a percent on the day after Saudi Arabia said OPEC Plus was sticking with its output cuts. Tyler. And there goes oil. And as Brian pointed out, oil stocks moving as well. So is Wall Street just simply out of touch this year's massive tech sell-off has sent many stocks sinking well below the street's ever-b bullish estimates. To name a few standouts. Crowdstrikes average price target on the street is 71% above its current price level. Zoom Info's is 73% above. And Tesla, 77% below its target. Warner Brothers Discovery also priced well below its target

price on the street. And look at MongoDB, the database platform for developers, an average price target of $311 a share. That's 111% above its current value. How about that MongoDB? Remember Mongo Jerry who had a song way back when? I can't remember what it was. But Brian would know. Let me share it. Let's bring in Jessica Inskeep, Director of Product at Options Play. Jessica, welcome. Good to have you here. Are the stocks priced right or is Wall Street just wrong? Such an interesting question. So to add on a layer to that, Tyler, I love. to look at next year's estimates for earnings per share versus revenue growth and earnings per share growth in PE ratios to give an indication that overvaluation or what the hype really

is there. Pulling from that list, I did find a couple where there was actually one that was undervalued and the technicals matched up. But it is interesting if you have a lot of analysts with that type of forecast and with that theme of automation and software and services, perhaps there's more to that story in addition to. Well, why don't we start by having you walk us through what you see in Tesla? It's chart action and the fact that it is trading so far below what Wall Street thinks its price should be. Talk us through it. Yeah, so Tesla I found very, very interesting. If you're looking at its current support zone, which is about 17, 180, that was created all the way back to late last year. Now, that support zone was extremely important to get Tesla above its' standard. It's

200 daily moving average, which is such a bearish signal. Now, since we're testing that, and I want to say hanging on by a thread is what I'm going to call that, Tyler, we're below that 200 daily moving average. And if this zone is not supported, then I would expect Tesla to move lower. What about Marvell? I mean, here you've got data infrastructure. They do sort of semiconductor, things like that. What are you seeing about Marvell, its price target, and where its actual prices? Yeah, so Marvell was that good one I found off of the list. So they are trading at 15 times next year's earnings. They expect 20% EPS growth and 15% revenue growth. So relative, the S&P trades

at an average of 17 times earnings. So that's really good from evaluation perspective. From a technical perspective, so I see where Marvell fell right below its 200 weekly moving average. So that's strength. And on the surface, that is. is going to be a bearish signal. However, bullish divergence is forming. And then we look at Marvell in comparison to its sector. It's actually showing an upwards trend. So that's where in this type of environment, we have to layer on how securities are performing relative to their sector to see if there is any positive momentum. So this was my favorite one from the list, if you will. I want to get onto Crowdstrike, but I want to go back to Tesla because what you said was

really interesting there. If Tesla's price can't hold the list. level where it is today and continues to lose relative to its 200-day moving average, that it's kind of look out below. I'm going to ask you a question that isn't technical. It's more, I guess, fundamental or personal. And that is, is Elon Musk helping or hurting Tesla right now? So I wouldn't bet against Elon Musk. He is a smart mind, and those people have ways to drive innovation.

He had to raise a lot of capital to get Twitter. which means he had to sell a lot of shares, which implemented quite a lot of supply into the marketplace. And those support levels are defined by an area of supply or demand. And if you have an influx of supply, you head down to that area of support where we are. So the influx, really, I think Elon Musk infiltrated the supply of the shares, which really caused it to go down. So it will be most likely supported. That's really interesting. Well, let's move on.

Talk us. I've eaten up time here. Talk about CrowdStrike anyway, just for fun. Yeah, sure. CrowdStrike, I think, is interesting, and I've read the analyst reports on this one, and they seem like they're going to be a leader within their industry on the surface well below its 200 weekly moving average. It looks like it's not doing very well and testing its lowest of low support levels.

But this is where a relative basis chart is extremely important, and it is forming consolidation, which is such a great sign. So that means overall within its sector, it is primed for that bullish momentum. And perhaps that's where those overhyped valuations are coming from. All right, Jessica, thank you very much. Have a great Thanksgiving. Jessica, in skip of Options Play. Now to retail, the S&P Retail Index is down about 30% so far this year.

Black Friday, widely expected to be challenging. But some retailers are set to come out ahead. Let's bring in Kevin Mon, President and Chief Investment Officer at Henion and Wall. asset management. Kevin, good to see you. We had some bearers of good news today. You have Best Buy with a beat, American Eagle with a beat, Abercrombie and Fitch with a beat. Their shares are responding as though Santa is going to deliver more gifts. What are they doing right? Well, let's start with retail sales. As we know, Contessa, retail sales brew by 1.3% in October exceeding estimates. And retailers across the board in terms of Q3 earnings have done better

than many anticipated. However, it appears as though the consumer is now putting more in their credit cards and dipping more into their personal savings to help keep up with these inflated prices. Just consider these two stats. In the third quarter, the total amount of credit card debt rose by 15% versus the third quarter of last year. That's the fastest rate of annual growth in over 20 years. In addition, the personal savings rate in our country has dipped to three the lowest it's been since 2008 and roughly half of what it was prior to the start of the pandemic. So the question remains beyond this holiday shopping season, which I do believe will be relatively good for retailers, how much longer can consumers continue to spend?

How much of that goodness for retailers is that prices are higher? And so their gross sales are going to be greater, even though they may actually, buyers, shoppers may buy less but spend more. It's a great question. But if you look to some of the recent earnings reports, Tyler, you sold that Walmart beat on their top line and their bottom line. Loos beat on their top and their bottom line. In fact, Lowe's, which is a retailer, as we know, of home shopping supplies beat for the 14th consecutive quarters. There's an area that I think is prime for opportunity given that mortgage rates are now above 7% and Americans are less.

likely now to buy or sell new homes and probably more likely to fix up their existing homes, given those inflated wholesale prices. So it really then becomes a question of what consumers are looking for this holiday shopping season. And it appears as though they want value and convenience. And we're better to turn for value and convenience than retailers such as Walmart and Amazon. Okay. Who else? You've said Walmart now a lot of times they get associated with value a lot. Amazon, of course, is there any other retailer that you think really could have some steam through the holiday season and into the beginning of 2023? Good question, contest it. And any retailer that has an online footprint to complement their in-store sales, that fits right into the convenience

aspect of what consumers are looking for to help stave off these inflated prices and also shop from the convenience of their home. Target has been expanding their online footprint, but they have so many internal inventory management issues, I think it's going to be difficult for them to come out on top even after this robust holiday shopping season. Walmart has been very efficient in expanding their online footprint. And I really do believe that Amazon is going to be the primary benefactor of this holiday shopping season. And they certainly need it after how far their stock has pulled back thus far this year. Kevin, I'm curious how much you're factoring in what's known in the retail industry as shrink, which is shoplifting.

We've heard from the National Retail Federation saying it's not just casual shoplifting like teenagers going in and snatching something, but that organized crime is behind it. I'm seeing estimates here that it's costing retailers nearly $100 billion a year. Does that factor into your outlook? It absolutely does. And that's why we're looking to at those retailers that, again, have that online presence. at shoplifting continues to increase and the amount of items that are getting stolen continue to increase, especially in the total dollar amount of those items that are being taken.

So look for those retailers that have that online footprint, look for those retailers that are able to provide good value, and also look at the inventory levels of these different retailers. We learned from Target last week that, in fact, going forward, they're going to look to focus less on consumer discretionary items and more on consumer staples items, fearing that the recession is going to get worse in the months ahead in 2020. So I think it's a question of which retailers and also how much of an online footprint they do have,

Kintessa. Kevin, we are very thankful for your perspective and your expertise. Thank you for joining us. Thank you. Happy Thanksgiving. You too. All righty, coming up, the three Cs, China's COVID cases, crypto's collapse and chip over capacity. There are a lot of Cs in there. A breakdown of the headlines.

in today's power rundown plus the biotech bounce, the sector outperforming the S&P over the past two months. Is it recession-proof? And should you follow the money? As we head to break, take a look at shares of Jack in the Box. The stock lower on a downbeat outlook, citing inflation's impact on margins. Keep it right here. Jack in the Box. Cratory. Three big stories impacting the markets today, and they all start with the letter C.

China, crypto, and chips. Let's begin with Eunice Yuni Un in Beijing, where COVID cases are rising, and public places are locking down once again. Eunice. Thanks so much, Tyler. Well, Beijing is a near ghost town. The capital has shut parks and malls. It's urging residents to stay at home. Officials said that as of Thursday, residents are going to have to show a negative 48-hour COVID test to enter public places.

The city has already been discouraging people. from coming into the Capitol by increasing its testing requirements. And tonight, Shanghai announced that it's following suit, saying that it's going to require daily COVID testing for four days for inbound travelers. Now, the total case count of new cases for the country has reached nearly 29,000. In a global context, that's tiny, but it's what the authorities here have described as grim. So around Beijing, cities such as Shizhajajong, and Tianjin have been ramping up mass testing.

Down south, Guangzhou has said that it's imposing tighter lockdowns for more districts. Out west, Chongqing says that it's been urging residents to abide by stricter stay-at-home orders and not to travel out of the city. Now, Nomura estimates that localities accounting for about 20% of China's total GDP are now under lockdown or restrict. Tai? You know, you make a really key point there. 29,000 cases on a population of more than a billion is really, you know, a rounding error. I mean, if you got the illness, it's no rounding error, but you know what I'm saying here.

I have to think that I have, I think you've really nailed it there. I mean, I have to think that Chinese consumers and the stocks that benefit from their spending are really suffering here. They're definitely suffering, mainly because of all the uncertainty that these lockdowns, as well as the overall policies and the confusion over the policies creates. The leadership on a very high level appears to be wanting the local authorities now to be much more targeted and specific in their measures. But the challenge that they've been facing is really translating this on the ground. The local officials are still very much incentivized to keep cases near zero. And in fact, state media in that their explanation this week about the reopening rules have been running a series, but they keep describing zero COVID as a magic weapon.

So as long as zero COVID is still the standard and the method, the primary method that the authorities use to try to reach that goal, which is lockdowns and quarantines and shutdowns, as long as those two things are in place, it's really difficult to see how economic activity or consumption gets back to normal. Ty? All right. Thank you very much, Eunice Yun. We appreciate your stand up for us tonight. The next stop, though, is Wilmington, Delaware as bankruptcy proceedings begin for FTX,

and the price of Bitcoin falls to roughly 16,000. Amon Javers is in Delaware for us. Now, Amon, bring us up to speed. Well, Contessa, at this hour, the bankruptcy hearing here in Wilmington has rapid. up for the day, but I've got to tell you the mood among the attorneys emerging from the hearing room today was this could take years. They say this will be an extraordinarily litigious process because of all the different people involved here, potentially up to a million customers involved here at FTX. So what we're told by the FTX attorneys is that the

company is experiencing cyber attacks on a regular basis. They've engaged a cybersecurity firm that they won't name for security purposes. They also say that there are, substantial assets that are missing here. The FTX attorneys now saying that the previous administration at FTCS under Sam Bankman-Fried describing that as the emperor had no clothes running FTX. Now, a judge ruled in a dispute that we had during the course of this hearing. The company argued that the customer names here should remain private. That is, people who bought crypto using this exchange did it with the expectation that they

should be private and that that customer list represents a substantial asset. if it's kept private to FTX, that it could maybe sell in the future to raise money for all the people it owes money to at this point. The judge ended up deciding with that, even though the U.S. trustee here argued the opposite, saying that there needs to be transparency into who a lot of these creditors are. So one interesting question in all of this is who are these customers at FTX. One possibility that is out there is that you have a lot of customers here who could be Chinese nationals and there's a law in China which says you're not allowed to participate in the cryptocurrency market. So those Chinese customers hypothetical, but if there are Chinese customers,

they could be in trouble with Chinese authorities if their names are revealed as part of this process. So for now, for a variety of reasons, the judge here guys saying that he's going to keep those names private on at least an interim basis. That fight expected to continue this overall bankruptcy expected to go on for years now. I mean, there's so much to impact. there. Does the U.S. Court have any reason to consider whether Chinese nationals who are breaking the law should keep their names out of the press? And two, if you had an expectation of privacy and the company is in trouble legally, does that really matter? And should it be kept private just so that potentially you can recoup some money because your name gets sold and therefore

made public? I don't know. There's so much there. I'm curious. Did you? It's a great question, contessa. Did you see any customers of FTX in court? Was there any sort of like outcry or or public interest in this hearing? There were a lot of lawyers in the court, not a lot of members of sort of the general public, but there were lawyers in the court. Several of them spoke in the hearing who were representing various what they call ad hoc groups of customers. Some of those ad hoc groups apparently really ad hoc, you know, assembled over the past 48 hours or so. But there are a lot of customers out there who are hiring attorneys banding together and trying to fight for their assets here. So, and the attorneys representing their interests were here in the court as well. The two attorneys

who spoke in the proceeding representing customers said that they do want those customer names to remain private for now. They sided with FTX here against the U.S. trustee. The judge decided with them and the names were not going to get access to them anytime soon. But that could change. The judge said, he recognizes that there's a push and pull here between privacy and the value of transparency, which is always the case in bankruptcy courts. All right, Amen, Amin Javers, we appreciate it. Now to chip companies, which have gone from shortage to surplus and are now beginning to assess the financial fallout. Christina Parts of Nevelas has that story from the NASDAQ. Hey, Christina. Hi, Tyler. Well, inventories once again increased over the last quarter, leaving fabulous chipmakers

with a dilemma, stockpile, cut prices to sell fast, or do they just throw in the towel and write off their excess inventory? On today's earnings call, analog devices, for example, said they have opted for higher inventory levels to deal with their own backlog, aka stockpile, while other companies have opted for a write-down because they are unable to utilize the supply they committed to. Take, for example, Corvo. They took a $110 million charge against their commitment because they simply didn't need the chip products anymore. Other firms are stuck with large purchase commitments due in the next 12 months or so. Qualcomm, for example, owes $13 billion just in the next 12 months, and that accounts for roughly 70% of its cost of goods sold.

You can see other names on your screen right now, like Nvidia, AMD, Marvell. They'll have large commitments as well that are due in the next year or so. So what drove this over supply of inventory? Well, you have companies that overordered during the pandemic to guard against any supply shocks, and now we're seeing demand weaken in the consumer end markets, all while manufacturers are actually making smaller and better chips. These levels, too, that I've been talking about, don't actually account for the major push across countries around the globe to localize supply chains.

Think like the Chips Act. And that could mean even more supply in the next five to ten years. But animus right now seem to agree on the street. that levels should improve by the second half of next year. All right, so what about investors who are worried about high inventory levels and potential writedowns that could cost companies millions, as you point out? Yeah, so there's a few examples. Several analysts report, I'll take Wells Fargo, for example. They suggested to stick to software and IP chip stocks like cadence design systems as well as synopsis.

And if you look at just synopsis performance, it's outperforming the S&P 500 year-to-date, down only about 10%. And they're also bullish on names with smaller purchase. commitments and larger exposure to the auto sector because that's holding up a little bit stronger. And those three names are on semi, Wolfspeed and Amberlla. Tyler? All right, Christina, Christina Ports and Avalos. Thank you very much.

Further ahead on the show, flip-flopping, a new report from Redfin showing the number of investors purchasing homes fell 30% over the past year as prices fall and rates remain high. Plus, water cooler conflict. It is the ongoing debate since the pandemic. Should employees have to return to the office full time? We'll hear from one CEO weighing in in today's working lunch. Up next, Carl Icon's bet against GameStop keeps paying off. We'll have details when we return.

Carl Icon apparently winning the game, the short game. The activist investor has reportedly made a huge profit betting against GameStop. According to reports, Icon began building a short position at the height. of the meme stock mania, meme stock mania back in 2021 when Gamestock was trading above $400 a share. Game stock has now lost more than 70% of its value from that all-time high in January of 2021. Our own Scott Wapner reports that ICON is still short the video game retailer, but the size of the positions not disclosed and a little bit unclear. Let's get to Brian Sullivan now for a CNBC news update.

Hello, Brian. Hello, Professor. Here's what's happening at this hour. Two people are dead after the helicopter crashed in Charlotte, North Carolina, went down on the side of Interstate 77. Police say southbound lanes will be closed until about midnight as investigators comb the scene. NBC affiliate WCNC reports the helicopter belonged to another local TV station. Soccer star Cristiano Ronaldo will not be going back to Manchester United after the World Cup.

Ronaldo says he and the club are ending his contract. early. Manu says Ronaldo is leaving, quote, with immediate effect. Move comes after he criticized the club's manager and owners in an explosive interview. And students said at Kentucky elementary school have held a novel food drive and had a lot of fun doing it. They got local residents to donate nearly 2,900 boxes of cereal, which were then set up at a domino chain that snake through the school. Cereal will go to food resource centers across two school districts. We'll call that the ultimate.

Domino Run. Back to you and Cheerio. Well done, Brian. Well done. That's pretty good. Science and cereal all at once. Look at all those different brands there. Okay, folks, ahead on Power Lunch, getting vaccinated against a recession. We'll speak to one analyst that is some biotech bets that could withstand a downturn. Plus the 52-week high club.

A number of names hitting that milestone today. We will trade them in today's three-stock lunch week. We are back into this. Welcome back, everybody. The Dow right around session highs, Dow and S&P, both up. About 1%. The NASDAQ is about three quarters of a percent higher right now. Oil prices higher by about 1 percent, though off the highs of the session. This on a report that the EU is softening its stance on the Russian oil price cap plan. Let's take a look at biotech now, which has really been holding up well amid the volatility and fears about a recession. The biotech ETF, the IBETF, the IB. is up nearly 10% over the last month. Is this a good place to hide?

And if so, what are some of the best names inside this texter? I think I just totally pulled a switcheroo there. Tecter. Yeah. Michael Yee is managing director at Jeffrey. Sometimes it happens that my mouth gets ahead of my head. Michael, let's talk a little bit about biotech and what's behind this general move higher. Hey, well, it's great to be here.

good to see you guys. I think it's pretty simple. Over the last month or two, obviously, the market and investors are quite concerned about where inflation is going, whether we're going into recession. And you look at some of these names like Biogen and Gilead and Vertex. These are companies that meet or beat earnings. They raise guidance in the last quarter. And I think you and I would both agree that visibility on cancer drugs and new diabetes drugs and new obesity drugs are pretty visible over the next 12 months. So we think it's been a great place to be. We think people are touching on to that, but we still think there's more to go.

I want to go through the individual names, but I'm just curious. Why do you think that they were underowned, you know, two, three months ago? Yeah. I mean, I think if you look at the first half of the year, there was certainly a concern about drug pricing. There was definitely concern about growth. And quite honestly, I think most people were assuming that we're still coming out of a post-COVID recovery play. So you go back to the first half of 22. Obviously, again, you look at where tech stocks were, you look at where cyclicals were.

These stocks were on a tear. You look at where Facebook and Google and all of these others are today. There's been a complete reversal as people are fearing inflation, rising interest rates. And again, obviously rotating into things are a little bit more defensive. I guess when you see up 27%, up 26%, up 44% year to date in a year where most things are down, you begin to naturally, one might ask, am I too late to nibble at these? I assume you would say no. Well, I think on one side, Tyler, you got to remember these stocks were super cheap and super well-owned.

So even though they're up 20, 30, 35, 40% off the bottoms earlier this year, where people hated these names, didn't need to own it, certainly price and concerns. sure, we've had a nice move off the bottom. Secondly, they're still not expensive. So it'd be one thing to say they're up and they're trading at huge multiples. But you take a look at something like Biogen, which is still trading up maybe 17 or 18 times. You look at something like Gilead, which is trained at 11 times. I think they beat the quarter still cheap. So we still think there's room to go. I don't think anyone thinks the recession or anything is going to end tomorrow. And I still certainly think there's a good place to own some exposure to biote.

We're showing the stocks as you're talking. And what's remarkable is how much they are mirroring one another. I've got Amgen, Biogen, Gilead, and Vertex, in that the moves from October to November are sharply higher. So let's take a look at Vertex Farma, which is up 44% year to date. Michael, what's behind it and why could this move even higher? Well, two things. One is that Vertex has been a great growth story.

It's been a great story. But importantly, over the last six months, a lot of pipeline data came out. So without going to all of them, they certainly have three or four more drugs coming out and reading out data. It's actually a new non-opioid, non-addictive, new pain pill that has data next year, which could be huge. Think about that, a non-addictive, non-opioid drug with phased for data next year, and a whole lot of other pipeline things. So that's a good story, no generics, and now a pipeline coming on. Talking about some of those others, a lot of that's just new pipeline. Okay, and of the rest of the group, Gilead is up the least amount, up 18% year to date.

What's Gilead story moving into 2023? Well, this one, if you take a look back and pull up that chart, that's the one that's sort of, unfortunately, done the worst. It's got the least expectations, the most underowned of all of these stocks. Hasn't done anything since the appetite C days. Boy, what a blast to the past. And all of a sudden, people figure out, boy, this one's the cheapest, and a number. 10 times. They got a 4% dividend yield. Appreciate that's not so important now. But look, we want to own names that have low expectations. They're not going to miss the quarter. Guidance is fine.

They're cheap. And there's been a huge rotation to someone. So a little bit more of a underowned cheap story versus, say, a vertex or a biogen, which maybe you might get to. Those are some stories with some big pipeline drugs right behind it. Michael Yee. Thank you very much for joining us. Appreciate it. Good to be here. All right, let's give you a quick market flash. Shares of Manchester United, the football team, are soaring and were briefly halted following a report from Sky News, that the team owners are set to announce that they will explore financial options, including a potential sale. That would be more news on a day that they have parted ways with their star player, Ronaldo, Cristiano Ronaldo, that is.

Up next, today's working lunch, John Ford's interview with the CEO of Mass Mutual, that is ahead. We will be right back. The last three years have been a wild ride for the markets, but it turns out they've led to a boom in the life insurance business. This week, John Ford brings us up close with a CEO who says consumers are thinking more about their own mortality and options for relatively safe returns, John. Yeah, Tyler. Roger Crandall is CEO of Mass Mutual, and it's a role he's held for about 12 years.

He told me the company is having its third record year in a row as safety comes back in vogue. Mass Mutual has a big presence in its market segment with about $11 billion in revenue, more than $300 billion in assets under management. One of his focus areas lately is using technology to simplify the process of onboarding new customers and improving employee productivity. When it comes to improving in his own job as CEO, old-fashioned mentorship helps. It's nice that he can get advice from his uncle Bob, who was a transformative CEO of American Airlines. He invented frequent fire miles, among other things.

He was known for paying a little bit of attention to costs, famously taking the paint off the planes to reduce the weight of the planes to reduce fuel consumption. So I was well aware of his role in business. And I became interested in markets. I became interested in business. But most importantly, when I became president and CEO, he became an incredible mentor for me to talk about, how do you think about a board? How do you think about assembling a management team? How do you think about all the things you don't learn in business school or really in many jobs until you become a president or CEO, among other things? I'd had one boss at a time my whole career.

You become a CEO. You have a board. How do you think about, do you rotate people on committees? Do you not rotate people on committees? I mean, so anyway, he was a great. And I'm fortunate he's in his mid-80s and I still talk to him frequently and he still gives me a. He still gives me some good things to think about about business, too. Crandall, Roger, not Bob, now has Mass Mutual leaning into flexible work arrangements as he pushes to help the company figure out which teams need to collaborate in person frequently and which can spend more time remote.

It's not as simple as it looked a couple years ago. We can measure all kinds of, I'll call them first order productivity effects. And I think what we found is probably similar to what others found. when we first went fully remote, our productivity by those measures was fine and, in fact, improved, in part, frankly, because people work more hours, right? They were working different hours, but they were working a lot. I think the stuff that's tougher measures, what I'll call the second order effects, and that is, did you consider all the options to reach a great decision? Did you just kind of plow forward kind of too quickly, right? So the value of kind of in-person kind of

collaboration. Wait a second, I wanted to follow up with you on that walking out of a meeting, which is kind of hard to do on a Zoom call where we roll from 359 to 459 to 559. And those are the places where being in person matters a lot. So what we're seeing, and we're trying not, we're very firmly saying we're not doing a one-size-fits-all. Roger has an economics background with Chief Investment Officer for Mass Mutual through the financial crisis 15 years ago. So he's got an interesting, nuanced view on weathering volatility and the importance of innovation, I guess you could say in that way he takes after his uncle Bob. You know, it's so interesting because the insurance companies have had to position themselves

to weather the storm, so to speak. The life insurance companies are very rate dependent, and now they're starting to see a return on that. How does he think about positioning the company, positioning all of those assets under management so that whatever comes down the pike, whether it's a pandemic, whether it's a cybersecurity attack, that Mass Mutual is in a position to handle it. Yeah, he talked about actually cybersecurity as being one of the issues and the benefit that they have based on their structure not being publicly traded to look longer term and structure themselves for that. It is one of the challenges as well as figuring out, again, on the technology side, how to

position themselves to serve a customer who's used to getting things right now and not having to send in paperwork. They're using technology for that. One of the things that people maybe sometimes overlook about big insurance companies is that they often make a lot of money in insurance, obviously, but they also make it on money management. That's right. Mutual funds. Yes. Oppenheimer, they own, I believe.

Well, yes, they do annuities. They've got 401K plans, also as well as life insurance, long-term disability. So they've got to manage all of those assets and invest them wisely so that they can pay out when they need to. And, you know, he reflected on the financial crisis and particularly the real estate fall out from that and how he wished he had positioned the company differently in some little ways. But overall, they did very well. It was that counterparty risk that they had where others weren't positioned as well and they had to be very careful. You know, the other thing is insurance companies are seen as stodgy, but really insurer tech is turning this industry upside down. And the way that FinTech is doing for financial services, insurance companies, in large part,

our financial services, and that he was talking about it, right? How do you onboard clients more rapidly? We're seeing it in property and casualty insurance as well. So how does he remain adaptable and flexible? Well, where I thought you were going, where I'm going to go with that is in risk management, right, which we're in a time where we're thinking about that differently, especially when it comes to crypto. He and I talked about crypto and how you've kind of got this domino effect, which we saw happening also during the financial crisis. drew that parallel, at least within that narrow segment of crypto and how it's important, not to think you can do risk management entirely different just because it's a different

decade. Some things hold true. Do you see what John did, what media managers everywhere are telling their people to do? That's a great question, Contessa, but my answer is going to be something totally different. There's a question I thought you were going to ask. I want to answer the question that I want to ask. I love that. Thank you, John Ford, for the lesson in insurance, leadership and media training. manager. There you go. Up next, we'll trade names hitting new 52-week highs in today's three-stock lunch. Time for the three-stock lunch, and today we're sipping on some names hitting new milestones.

IBM is trading at its highest level since February of 2020. O'Reilly Auto and Pepsi are both hitting fresh all-time highs. Is there more room to run here, or is it time to take some profits? Let's ask David Wagner, he's portfolio manager at aptest capital advisors, has our trades today. All right, first up, IBM, would you buy it or let things cool off a bit? Just last Thursday, I asked the rest of our team. If IBM was trading it at 52-week high, would you notice? Well, not a single one of us actually did notice, but it shouldn't come to a surprise really to anyone, because the stock tends to be very defensive in nature. Between the consulting and software business, almost 70% of their revenue, well, it's reoccurring. And if you compare that to a lot of their peers who tend to be more transactional in nature,

they're closer to like low single digits in recurring revenue exposure. The struggle I get here is the multiple. It's trading at say the same level as a Google, which is definitely going to probably make investors scratch their heads given the growth profile differences between the two companies. The other thing that probably worries me right now is that growth that's probably going to start to slow in 23. One, they won't be a beneficiary of the mainframe cycle. And two, their booked a bill has been less than one over the last two quarters.

I think this is going to pressure their free cash flow goal of $35 billion. in 2024, though I don't really see the manager team throwing the towel in on that target just yet. I admire what Krishna has done as CEO, but I'm on the sidelines here. It's tough for me to own a company with slowing growth next year at a relatively high valuation, even if it's a 5% dividend yield that's safe. All right, let's move on to O'Reilly. Can they keep it going? Yeah, I think the one thing that really sticks out here, Tyler, to me, is the O'Reilly story is the efficiency in the supply chain. In the auto parts industry, you need to have the right parts in the right place at the right time, which has definitely allowed them to increase their market share against

other mom and pop shops, thus consistently beating a lot of their difficult comps, really across a board. You then couple of those market share gains with pricing power, then you get a company that's able to leverage their margins, which is something that the market is really loving right now. I think the one concern I have here right now is Miles Driven. What happens to Miles Driven with higher gas prices and a work from home environment? Well, if you look year-to-date, Miles-driven is actually down only 1% versus a year-to-date in 2019. And that's what gas prices say, maybe 60% higher than where you were three years ago. So you're still seeing that the consumer values mobility. They value driving despite obvious headwinds.

So I continue to like the stock. I'd probably prefer a copart over longer periods of time. But if you want to mean valuation, I'd probably go out of zone. But O'Reilly's still fine. All right. Our final name today is PepsiCo. Would you avoid it? Would you sip it or would you guzzle it down? I'm not sure there. But I'll be honest right now. Staples, they're expensive. They tend to trade at a 20% premium to the market, and they're closer to like a 40% premium right now. And then you look at Pepsi, and it's probably the most expensive house in the most expensive neighborhood trading close to maybe a 50% premium. I understand that you get a lot of earnings resiliency with two-thirds of their revenue coming

from North America. But hey, you know what? Demand elasticity has really been stellar for them. Just look at this last quarter. Pepsi printed a 16% growth, organic growth profile off of a 6% cop for a staple, you know, benefiting from a 17% rise in pricing and only a 1% decline in volume. This tells me that consumers, where they're continuing to pay for what they want and Pepsi, they sell affordable indulgences.

Maybe not the nectar of the gods known as Bush Light, but, you know, indulgences nonetheless. Yeah. You know, investors just haven't seen the trade down here to beverages like you have in other household products. This is a safe trade and a safe place, so I'd probably hold it if you owned it right now. David, nutritionists everywhere are cringing at your use of the word staple with PepsiCo because they don't think it belongs. in any pantry.

David. Yeah, right. Well, you know, occasionally, right? David Wagner, nice to see you. Thank you. David, working in the kitchen today. Going to be working there on Thursday, too. All right, still to come, a new report from Redfin shows the housing market may be spooking investors looking to purchase property,

but the chaos could be good for regular buyers. We'll explain that when we come back. Potential homebuyers are moving to the sidelines, and a new report shows real estate investors are two. Diana Oleg has a look at the latest numbers. Hi, Di. Hey, Ty. Yeah, investors don't want to get into a market where prices are weakening. So big surprise, investor home purchases dropped just over 30 percent in the third quarter compared with the same time a year ago, and that's according to Redfin. This is the biggest drop in investor sales since the Great Recession, minus, of course, a brief pause at the start of the pandemic. Now, the drop in investors outpaced the overall market drop,

where sales were only down about 27 percent. The investor's share of sales also came down, but just slightly to 17.5% from 18 a year ago, and it was actually still up compared with pre-pandemic levels. And those investors who are still buying are paying more. The typical price paid up 6.4% from a year ago. Markets seeing the biggest investor pullback, Phoenix, Portland, Oregon, Las Vegas and Miami, just to name a few of those on the screen. They were the big pandemic hotspots, but not so much now.

So not great news for the eye buyers, like Open Door, which have been buying far fewer homes now to flip. Redfin recently announced it was shuddering its iBire program. Zillow did that last year. This does not appear to be hitting the single-family rental reeds, though, which also invest in homes, but they have the rental model as opposed to the fix and flip, and rental demand is still strong, even though rents are coming back a little. Now, this pullback, just another effect of rising rates on the economy.

Back to you guys. So these companies are reducing the volumes, the numbers of properties that, they're buying. Is that, am I understanding correctly? Correct. So, so it's come down by 40 some percent in some areas. 30 percent. And it's 30 percent. And that's big companies as well as individual investors, which really make up the milk of the investment market. Yeah, yeah. So what would, what would change it? Falling interest rates? Well, falling interest rates for one, but the question is prices. I mean, do investors pulling out help prices or hurt prices? And you can make the argument either way because it means that maybe regular buyers, not having to compete against investors,

could come back into the market now, but would they support prices or would prices continue to come down because all these all cash buyers have left? All right. You decide. Like the debate team, you know, take both sides of the argument. Diana, thanks very much. We've got a 350 point gain on the Dow right now. Thanks, everybody, for watching Power Line.

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