Power Lunch - The New Bull Market, and From Short to Shirts 6/12/23

Episode Date: June 12, 2023

Stocks continue to creep higher little by little, especially in tech. But there’s something about this tech-driven rally that’s different than previous times. Could it be what finally slows the upswing? We’ll explore. Plus, New York Yankees legend Derek Jeter is getting into the clothing game. We’ll talk to him about his new sportswear line, Major League Baseball rule changes and much, much more. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome, everybody. I'm Tyler Matheson. Coming up, the new bull market stocks continue to creep higher little by little, especially technology shares. But there's something about this tech-driven rally that's different from previous times. Could it be what finally slows the rally down? Plus, from shorts or shortstop to shirts, the Yankees legendary Jeter getting in the clothing game. We'll talk to him about that new venture, but also about baseball. Does he like the pitch timer, the clock? Is it going to attract younger fans speeding up the game? We look forward to that interview. But first, a check on the markets. Let's take a look.

Shares of Tesla up for the 12th straight session, its longest winning streak on record, a gain of 35% over that time. The stock has doubled so far this year. And a farmer deal to tell you about Novartis buying Chinook Therapeutics for $3.5 billion. Chinook's ticker is KDNY. The company has a leading candidate.

to treat a rare kidney disease. And Carnival Cruise Lines getting an upgrade at B of A from a buy to buy from neutral, excuse me, the price target going to 20 from 11. And J.P. Morgan also upgrading Carnival and upping the price target there to $16. Carnival shares popping today. And is this the kind of broadening out that the bulls say can power the next leg of this bull market? Up 20% from the lows and history says we should keep going. Let's bring in Mike Santoli for more on that.

Hey, Mike. Hello, Tyler. Yes, that is sort of this simplistic definition of a new bull market, up 20% from the lows. But other things have also fallen into place in recent months. You know, the S&P 500 got above its 200-day average. That's a longer-term trend line. And that trend does continue to point higher. Now, history does not say it's a foolproof indicator.

About 90% of the time, one year out, the market is higher still. Although you have some big fall. signals in 2001 and 2008, though those did not necessarily pass all those technical tests. I do think some parts of this new bull market talk are also somewhat textbook. And this is stuff we've talked about along the way. A really almost textbook, comprehensive, washout, October low, and then a big rally through a midterm election. I mean, that's the most bullish year of the four-year cycle is midterm election years. January, flush of new money, took last year's laggards much higher. And you've got these very good breadth of

momentum signals. So all these things did fall into place, but it doesn't feel exactly like it's in gear because of those breadth issues. It's been an underachieving bull market, both in the magnitude of gains we've gotten overall in eight months, but also the number of stocks that have participated. It hasn't been as narrow as the last couple of months, but it definitely has left something to be desired. Also on the credit side, you've seen things be okay, but they have not improved very much. And I think it's more of a little bit of an in-between area. And, you know, Kelly, I would say essentially if October was the low, first of all, it's down more than 15% from where we are right now. And so you could say, fine, October's the low. It doesn't mean you're going straight up from here.

But also it might mean that forward returns are not as wonderful as they typically are coming out of a bare market if we did not see that kind of comprehensive flush. And of course, still big questions about the Fed and the economy. Mike, what would you say is the most important thing, either from a trading point of view or macro to watch here for the next development? Well, from a trading point of view, I'm watching the next pullback. The market's a little bit overbought. You want to see it broaden out. And broadening out could mean that the S&P comes down while most stocks do okay. The volatility index cracked below its bare market, lower end of its range. That's something that does tend to happen when you are kind of transitioning into a broader uptrend. But on the macro side, obviously, I think you have to get more comfort that the market

can handle a higher for longer fed if that's what we're going to get. And that the economy, me is not just kind of slowly sagging into a formal recession and maybe you can hang out for a while. I'm on board with the idea that the market has now priced in a little more likelihood of a soft landing, which we may or may not get. All right, Mike, thank you very much. Let's move on now as NASDAQ continues to lead the market higher, which names might be ready to cool off and which ones really haven't joined the rally just yet. Christina Parts in Evelace, looking at the overbought and the oversold.

Christina. Well, Tyler, if you want to be. different in all our retail investors watching, then you might consider avoiding Tesla, as it's the most overbought stock on Wall Street right now. The technical metric, which is often talked about on CNBC as RSI, the relative strength index, measures the speed and magnitude of recent price moves. So if an RSI is above 70, it's considered overbought. If it's below 30, it's oversold. So you want to be between that 30, 70 range. More importantly, though, it can indicate a security may be ready for a reversal in price. And that's what we talk about it. So Tesla's RSI, for

example, is well over 90 right now. That stock is up, what, over 25% in the last three weeks or so, and is on par right now to have a 12-day upstreet. Meta is at 74 RSI, signaling that the stock is more crowded than Apple, Amazon, Netflix, even Nvidia is lower on the RSI scale, despite its 165% run-up year-to-date. It's not all about tech on the NASDAQ. You got non-tech crowded names as well, including Fox Corporation, utility firm Constellation. energy, end phase, and even match, the operator of Match.com. On the other end of the spectrum, Dollar Tree hasn't been a favorite for a while. It's RSI is about 24.

The stock is down, what, 17% in just the last three weeks or so. Excel Energy is up there. Starbucks, also in oversold territory. Speaking of oversold, regional banks saw their RSI as low as four just in March. But as we use the KRE ETF as a good brommer. That's been on a tear right up about 20% just in the last month or so. as investors look for some rotation away from tech and all of that concentration risk. Tyler?

All right, Christina, thank you very much. Now, while we've all noticed that big tech has been leading in a big way so far this year, our next guest has run the numbers and says, in fact, this is the most concentrated market ever. With us now, Tony Sakhanagi, senior research analyst at Bernstein. Tony, welcome. Good to see you. When the market gets this concentrated and when 10 stocks are driving the performance, the way the Big Ten has since the lows in October. What tends to happen next to the market

and to those 10 stocks? Good afternoon, Tyler, and thank you for having me on the show. Yes, this is the most concentrated market ever. About 90% of the returns since the beginning of the year have been driven by 10 stocks in the S&P 500. And the contribution of those stocks, those 10 stocks have generated nine and a half points of return this year so far. We haven't seen anything like that before. So we went back and we looked at the last 45 years or so since 1980. We divided each time frame into half year period since we're half a year so far. And then we looked at, okay, what happens in concentrated markets?

What happens after the six months period where you have 10 stocks really driving the market? And, you know, somewhat comfortingly, we found that the market does okay. It kind of performs in line with history over the following six and 12 months. Those 10 stocks tend to modestly underperform, however. So collectively, in periods of concentrated market performance, what we found over the following six months and 12 months, those 10 stocks have generally underperformed by about 400 basis points. And what does the market do in that time?

underperforming the market by 400 or four points, four percentage points of return. As you look at these amazing contributors this year, NVIDIA up 164%, Apple up 40%, meta up 120%. What does the market typically do in that ensuing six months? The market is usually up, but not as much. So on average, over the last 45 years, over any six-month period, the market is up about 6% in those six-month periods following concentrated markets. It's up a little less than that, about five, five and a half. So encouragingly, we haven't seen markets collapse following concentrated

markets, and we haven't even seen the large stocks collapse after very concentrated return. So to some degree that is encouraging. Now, I would underscore, we've never seen a market like this, right? This is the highest level of contribution from 10 stocks we've ever seen. I was going to ask, Tony, what are the historical antecedents? Is that the word to this experience? You know, I can think of dot com, but to your point, that wasn't necessarily mega caps. Or I can think about the nifty 50, but that was a little bit different period of time. What would you say is the historical analogy here? Yeah, actually, there isn't really, they're not defined by unique time periods.

And they've occurred during different periods of history. You know, oftentimes you have the market up a little bit and 10 stocks are driving all of it. What's really unique here is we have a market that's up a lot and all the big stocks are up. So if we look at the 10 biggest stocks in the S&P, seven of them are up more than 35% year-to-date. We've never really had that. So it's typically environments where we have big stocks that are having big moves. And many of these stocks underperformed last year. And so we are having some catch-up and mean regression.

And that's to find this period. And to some degree, that's what's happened in the past as well. The only thing that might, you know, make me a little concerned about that is that, okay, in the dot-com period, a lot of these were startups with no money. They just had big prices, but they weren't necessarily the biggest market caps. You almost don't want the biggest market caps to be swept up in some kind of speculative mania. I'm not saying we should go that far yet. I mean, Nvidia's numbers are real. But, you know, when trillion-dollar market caps start rising like this, do you ever worry about, you know, how much they could fall and the impact that would have?

Sure, there's certainly risks. So these 10 stocks that have powered the market this year, they're trading at 32 times earnings on average and six and a half times sales. The market's trading at 18 times earnings and 2.2 times sales. So these are tech companies. Tech companies typically traded a premium, but the multiples for these stocks have gone up a lot. They've gone up about 50% this year. So almost all of the gains has been driven by multiple expansion, not earnings going up. And so clearly, Kelly, any time you have that kind of market expansion, a multiple expansion, excuse me, there is some risk that a triggering event, you know, whether it be macro, a deeper economic falloff than most anticipate, or whether it be an exogenous shock geopolitically,

there's much more risk because the stocks that have been powering the market are expensive stocks. Let's talk a little bit about Tesla, which is one of those 10 mighty stocks that have been contributing so much. I think it's on a 12-day wind streak or something. I believe I'm correct on that. What do you think of that company's shares right here at today's price? Would you buy them? I would not buy them, Tyler. I do worry that the next year or so will be difficult fundamentally for Tesla in the sense that they're trying to grow very rapidly, you know, 30 to 40 percent this year. They want to grow 50 percent next year. And right now they really only have too high volume cars, the Model 3 and the Model Y. And they've run into some saturation limits on how many of those

cars they can sell. And that's why they've been discounting. And they want to keep growing for another year and a half until new models come out, you know, largely at the end of 2025, that will be meaningful. But in the meanwhile, trying to, you know, grow 30 and then 50 percent on top of one another, without new models, they think will be very challenging. So we've seen price discounting. I feel reasonably comfortable that we're going to see more discounting through the remainder of this year and into next year. And that's going to put pressure on earnings and cash flow. And so I do worry about Tesla over the next, you know, 12 to 15 months. And Elon Musk has conceded on earnings calls. Like, you know, the next year is going to be pretty tough for us. And that's really the

underlying reason why. Very interesting take on Tesla and a very insightful history lesson. Takanagi, always good to see you. Likewise. Thanks for having me. Coming up, the Fed's next rate move just 48 hours away. We'll be back in D.C. for a special two-hour Fed show. Up next, will the Fed or the economy be what derails this market rally or something else entirely? And as we had to break, a power check, Catalan finally reporting results after three delays. And even though the numbers weren't good, the stock is jumping. It's up about 8% as investors seem relieved they weren't worse. On the downside, NASDAQ of the trading company itself. Down 11% after paying $105 billion to buy Adenza, a software firm owned by Toma Bravo.

It's NASDAQ's biggest deal ever and investors sending the stock sharply lower. Powerlunch is back after this. Welcome back to Power Lunch. While we've seen this bull rally, the economy is still hanging over the market. Bank of America's CEO Brian Moynihan telling us last hour his thoughts on the current state of the economy. Take a listen. The economy is slowing down. They're guiding it down. Will be a soft landing. Our economists think it'll be a recession, but a mild recession. And unemployment moves up in the mid-fors. But that used to be full employment, honestly. So it's not quite the disruptive thing. Now, will that have an impact on all the economy? And will that ultimately have an impact on financial services? Of course it does. But the reality is, is that it's really going to come down to. People are employed and people are spending a little bit more. Companies will have revenue and they'll be okay. So as the market seems to be pricing at a skip on hiking rates at this week's meeting,

our next guest is expecting a deepening profits recession and tightening liquidity. He's focusing on high quality and less economically sensitive parts of the market. Joining us now is Dan Suzuki, Deputy Chief Investment Officer with Richard Bernstein advisors. Not going into venture capital like CalPERS as Dan. No, Kelly, I think this is not the time to be peddled to the metal arm risk here. I mean, if profits were surging and liquidity, we're improving, and yet, cheap market, that's one thing, but clearly, you know, the aspects of opposite on all those three fronts. So I think this is the time in markets where, you know, you don't need to be

on your desk and fetal position, but you do need to be a little bit cautious here. But how do you wake up every day and look at Nvidia and look at Tesla and look at these mega caps and not go, why not just sit there and take the, you know, collect the money and not have to hear angst from clients if you are? Well, Kelly, that's just human psychology, right? People want to chase the thing that's gone up. But, you know, if you just, if you stay focused on the fundamentals, history shows that that's a bad idea. Momentum works until it doesn't.

And so I think the only way to continue to sort of compound, you know, outperformance of the long term is to stick to the underlying fundamentals. And the underlying fundamentals here, unfortunately, you know, you have a profit cycle that's weakening. You have liquidity that's tightening. And you have a market that's trading at 19 times earnings with big parts of it trading, you know, basically 25 to 30 times. So I think that begs some risk, at least with regards to the overall market.

I think if you want to dig underneath the surface and avoid those areas of froth, there's tons of opportunity out there. But then again, it comes down to your time horizon. Well, let's get to some of those because we just heard Tony Sakhanagi say that during these periods where there's high market concentration in the ensuing six months, those stocks that were part of that concentration tend to underperform the overall market. which kinds of stocks will overperform the market over the next six months, those that haven't taken part so far? Well, Tyler, I think you just answered it right there. I think that either way the economy goes, those stocks are probably not going to be the leadership.

Now, I think really, you know, the economy can go two directions from here. It can get worse or it can get better. Now, in the scenario where it gets worse, I think that's where the companies with less economic sensitivity that trade at much cheaper valuations are going to hold. hold up a lot better, you know, than, you know, the handful of stocks that are driving performance today. But on the other side, where things get better, you know, you've seen it just over the last couple weeks. You know, if there's a little bit of optimism around growth, there's tons of stocks out there trading at basically, you know, close to single-digit multiples, but they're

going to see their earnings accelerate much, much faster than these expensive parts of the market. So why would you pay up for these areas when, you know, there's going to be plenty of growth in that scenario? So let me ask you to get a little more specific. Let's, on the same. Under scenario number one, where things get a little bit worse, you want what kinds of shares, what sectors or types in terms of large cap versus small cap? And in that scenario where things might get a little bit better, you seem to be saying there's still growth areas of the market that are not these overplayed ones. Sure.

So, Tyler, in the scenario that things get worse, you want the companies that are going to have those resilient earning stream, that more resilient revenue stream. I think classically, you know, from a sector perspective, you know, that's healthcare staples utilities because you're still going to get sick. You're still going to feed your family. You're still going to heat your home. But also you have to look beyond that from an asset class perspective. I think treasuries actually look very attractive here, particularly on the long end of the curve, having a little bit of gold in the portfolio. There's a lot of ways to get defense in the portfolio.

But then, you know, in the optimistic scenario, everything, you know, small caps, value, you know, cyclical stocks. are incredibly cheapen out of favor here. All right, Dan, thanks. Appreciate it. Dan Suzuki. Thanks, Tom. Thanks, Kevin. All right, no one knows greatness wins better than five-time World Series champion Derek Jeter.

And that's why he named his new athletic wear company after that motto. We'll speak with the Yankees legend live coming up. Plus, rising risks, the stretch of middle America known as Tornado Alley, getting bigger because of climate change. The scramble to adjust before disaster strikes again. We'll discuss that on Power Lunch when we return. Global warming is having a profound effect on extreme weather, including tornadoes. They're happening much more frequently.

You probably sensed it. And sometimes in places that have rarely seen them before. And that has huge implications for residents, business owners in the path of those storms. Diana Oleg explains in her continuing series on the rising risks from climate change. When a powerful F4 tornado plowed through rolling four, Mississippi in March, residents were largely unprepared. This area hadn't seen a tornado in over half a century. It's pretty clear that things are happening, which means as a city, as a community, as a homeowner, that folk need to be more serious-minded about being prepared.

The U.S. saw six times more billion-dollar severe storms in the past decade than in the previous two decades. Those are the storms that produce tornadoes. So far this year, tornadoes have taken at least 58 lives across 10 states, already surpassing the annual average. Much of that is because the season is starting earlier and tornado Alley is expanding due to a warmer climate that makes storms ripe for rotation. Northeast Texas, eastern Oklahoma, the Arkansas River Valley, the mid-south. These areas are expected to cease a near doubling of storms that. produced tornadoes. The difference between tornadoes coming through Kansas and coming through Mississippi is simple density. Both states have nearly the exact same populations, but Mississippi

is roughly half the size of Kansas. There's more things, more people, more of us, and more of our possessions in the Mid-South. You combine that with an extreme socioeconomic vulnerability, and that has increased poverty rates and lack of sheltering and poor, in many cases, substandard housing. The recipe is for disaster across some of these areas. The majority of residents in Rolling Fork had neither homeowners nor renters insurance, precisely why the widening of Tornado Alley is fast becoming a new focus for insurers. If we continue on the trend that we're going, that means that these economic losses are going to become in the hundreds of billions of dollars in a calendar quarter. We need to make sure that we have an infrastructure, we have a capital

mechanism that we have a connected community mechanism to be able to respond to these events. But it's all happening, Dixon says, at a time when insurance dollars are diminishing. And so insurance capital becomes a precious finite commodity. Prices go up. Coverage changes, coverage options begin to bit tighter. Deductibles go up. And global reinsurer capital declined by 17% or 115 billion dollars during the first nine months of last year because of so many climate disasters. As a result, reinsurers are raising prices, limiting coverage, and even exiting some markets in order to improve returns. Now, we've already seen major insurers like State Farm and Allstate recently exiting California

due to rising wildfire risk. Climate and insurance are now increasingly at odds. Back to you guys. Still remember Munich Re, one of the first to get vocal about it because of that impact. Diana, thanks. Let's get to Contessa Brewer now for the CNBC News Update. All right, Kelly, the Biden administration has stopped taking mobile asylum appointments at a Texas border crossing. Humanitarian groups warned that groups in Nueva Laredo, across from Laredo, Texas, were extorting migrants on the Mexican side of the border, making them miss their asylum hearings unless they paid up. U.S. Customs and Border Protection did not comment to the Associated Press on whether that was the reason it stopped taking appointments there. A British committee is finalizing its report into Boris Johnson's Partygate scandal. Its results should be shared with the public sometime this week.

Johnson is facing sanctions for misleading parliament about gatherings and government buildings that breached COVID-19 pandemic lockdown rules. The former British Prime Minister stepped down as a lawmaker Friday. And Reddit experienced outages earlier today after thousands of communities in the online forum went dark to protest a policy change to charge third-party apps for access to its data. Reddit says the blackout caused stability issues on it. sight. Kelly? Yeah, apparently others have gone this way, but

Reddit seeing more of a protest. Contest the thanks. Still ahead, Derek Jeter is getting in the game, the sportswear game, that is. We'll discuss his new clothing line, his latest thoughts on Major League Baseball and a whole lot more. Power Lunch is back in two minutes. Welcome back to Power Lunch.

We're about to talk to Derek Jeter about his new clothing company, which sells direct to consumer, but several more established brands are actually moving away from that model and going back to the old wholesale model. Courtney Reagan is here. We can't take the wind out of a sales court just as Derek Jeter is setting up this big. I know I've never been to lead in to Derek Jeter. I hope I don't disappoint everyone. But Kelly, as you might understand, every brand, of course, wants to own

the consumer experience and the data. But after years of focus on the direct-to-consumer model, more brands are realizing the value of wholesale for brand discovery and often a lower cost of customer acquisition. So Nye exited around half of its retail relationships between 2017 and 2021. Now it's coming back to Macy's and DSW and the news sent shares of DSW parent DBI soaring just last week. Levi continues its direct-to-consumer push, but its wholesale business grew 25% last year. PVAH is deepening its wholesale partnerships. Cosmetic Brain Elf said its ALTA business grew 70% last year. It's expanding what it sells on Target, Walmart and CVS. And after 108 years of only selling direct-to-the-consumer, LLBin moved into

wholesale in 2020. It's expanding into more retailers telling me it diversifies its geographic reach and serves as a growth vehicle. Meantime, even fast-growing direct-to-consumer companies that relied heavily on social media marketing can see that model doesn't often work as the only way to sell. I mean, look at all birds. It moved into wholesale last year after struggling mightily as a public company. A change is afoot. Maybe if you're Derek Jeter, your name alone gets you through, you know, but the marketing, yeah. Perhaps, but marketing is really key for some of these brands. Brand discovery is really big, of course, when you're first starting out, and if you're

any retailer and they have space for you and a consumer is walking in for something else, and then they see your brand, then they discover it. Maybe then they go DTC. What about the brand that I'm aware of mostly via online called VWRI? Oh, yeah, yeah, sure. I think they're in stores. They may even have some stores now. Yes, yes.

They are starting into these retail partnerships. They were principally and very successfully, as I understand. understand it and online? And I think that's what happens with a lot of these sort of hip new brands, and they use social media marketing as well. But once Apple changed some of those privacy, you know, some of its privacy policies and the data, it's getting a little bit harder for some of those brands to really go after, target, and hold on to those consumers. Apple killed the small startup business. That's the message here. I mean, in some ways, I think that there was a very big impact there was. There was. You're absolutely right. Court, thank you very much.

you're the warm-up act for Derek Jeter and his friend. Now to a company that is using the direct-to-consumer model while trying to disrupt the sports apparel market. It's called Greatness Wins. It was launched last year by Untucket founder, Chris Riccobono, with an assist from a few power players. Derek Jeter, Wayne Gretzky, Misty Copeland, currently offers men's and boys athletic wear

with a women's line coming this fall. Here to discuss his latest venture, baseball and more. Derek Jeter, New York Yankees' legend, and MLB Hall of Fame. as well as a co-founder of Greatness Wins and Chris Riccabono, the founder of Greatness Wins. Welcome to all of you. I'm thinking, you know, a hockey player, a baseball player, and a ballet dancer walk into a bar.

It sounds like the beginning of a joke. But this is no joke, Chris Rickabono. This is a legitimate performance-oriented athletic apparel company. So the question is, what is it that makes your products materially, pun intended, different from a shirt or a pair of shorts or a hoodie that I could buy from a big company that has a four-letter name that begins with N. Hey, thanks for having me. I think there's a few reasons. You know, over the pandemic, I had a little extra time, and I was thinking of another area that I could possibly disrupt.

And the one thing that stuck out to me was the quality of athletic apparel. And then you had on the other side the athleisure brands, and athlete's fit great, very high-quality product, but they weren't designed with performance in mind. So I saw a gap in the industry and thought, we need to create a high-quality athletic apparel brand, one that not only performs great with upper-end fabrics, but one that looks great, fits great, last, doesn't pill, wash as well.

So to me, this is kind of a niche in the market that wasn't there that we're solving. So you would say, I'm taking it here, Chris, and I have some of your untucket products. They're very good, love the fit, love the look, the whole business. You would say that Lulu Lemon does not produce a quality performance-oriented garment for yoga people and workout? Or am I taking it too far? No, they make a great product.

I just don't know if it's designed first with performance in mind. I think it's designed first with look in mind and then to perform. For us, it's all about performance. Our fabrics are tested, and the first thing we are thinking about is how is this fabric going to perform. you know, when running or lifting or working out. But at the same time, we know that people want this modern fit. They want something that fits consistently over and over again, and they want something that lasts. So I just think it's a little bit different for us is that performance is first and then quality and performances first. And then second is how do you look? Derek,

you've grown up wearing other companies' brands. I can remember seeing you in the swoosh and other products. How would you describe these as different, number one, as you experience them and wear them. And number two, how involved have you become in literally helping with the design and the specifications and so on and so forth? And I promise you we'll talk baseball in a minute. Yeah, well, first of all, I want to say thank you to Courtney for trying to bust our bubble before we even came on.

But I think, you know, one of the keys are when you have a new company or, you know, a startup because we're still a startup, we're fairly new. we have the ability to adjust on the run. So I'm sure there will be some adjustments along the way. But yeah, you're right. I've had great relationship with athletic brands throughout my career, with multiple athletic brands throughout my career. I think any time you've had that type of experience,

you always think of ways that you can do things in your mind a little bit better. And as Chris says, we're focusing on performance, quality of fit, sustainability, comfort. But look, I don't have a bad thing to say about any of the brands that I've been involved with or been associated with, but I think at the same time, I've been able to learn. So when you say my level of involvement, look, I'm involved from, you know, the creative aspect, the marketing aspect. You know, I met Chris probably, I would say we were getting close to about two years ago and we started talking about the, he was telling me

about his idea and he wanted me to be involved. And I said, well, hey, look, you know, if I'm going to be involved, I'm going to bring the knowledge that I have in the space. We all know how much knowledge Chris has in the space. And, you know, we'll see if we can create the next great athletic brand. And we're pretty excited what we've been able to accomplish, even though we are a startup company here. Derek, I'm going to sneak in a quick one that is both sports and investing, if you don't mind. But we've seen the huge popularity of these kind of investing in sports as a portfolio opportunity, a lot of private equity and other things. Fenway, I think, is a prominent example. But the performance of the teams isn't actually that great. Do you think

this is something that more investors should get involved with? Or do you think we should kind of pull back from this idea and maybe go back to kind of the traditional way of doing sports, ownership, and access? No, I think people are always going to invest in sports. I think there's one thing that always year in and year out, people enjoy watching sports, but it's the one thing that you have to enjoy live. Because in this day and age, with all of the phones and how information is transferred from person to person, I mean, you have to watch it live, otherwise you miss it. So I think investing in sports is still something that is a positive. I obviously am coming from being an investor in a team down here in Miami with the Marlins organization. So I don't think that's going to

change it anytime soon. You have to watch it live or you miss it. That sounds like a yogism, Derek. I think you're on the right path here. He took that guy. I just did part of Yogi's documentary that just came out. I saw you in it and I have to tell you it was a great film. I can't recommend it. It is one of the sweetest films you'll see this year. Really lovely. Let's talk about baseball, Derek, if you don't mind. And Chris, I know you understand. I want to probe Derek a little bit.

There have been some changes in the way the game is played at the pro level, the pitch clock, the taking away of the shift, all by way of trying to speed up the game, get more action into it. What do you think so far? Well, I think, Tyler, you look at it, you know, every sport has made changes throughout the years. There's been rule changes in most sports. I think baseball has sort of lagged in that aspect for many years. But ultimately, you have to listen to the consumer,

and the consumer in baseball is your fans. And, you know, you talk about the, I don't want to say the younger generation, because then it makes us, I'm not just saying me, it makes us seem like we're getting there in age. But I think the younger generation, they don't really necessarily want to sit there for three and a half, four hours in their seat watching a game. They want things to happen.

They want instant gratification. They want things to happen quickly. So I'm in favor of some of the rule changes. I was on the competition committee when I was part of the ownership group in Miami. So I'm in favor of it. I think it's gotten a positive reaction from the fan base. And, you know, it's starting to show because the games have sped up. And I think the fans love it.

They sure have. I mean, I used to tune in to watch you and the Yankees, and I'd tune in at a quarter of 10, let's say. And it would be in the seventh inning. Now the game's over. Yeah, it is. And look, I mean, I have four kids now under six. so I can't stay up that leg myself. Another person I'm going to set up a play date with, by the way.

Derek, Dieter, just two quick questions, if you don't mind me sneaking him in. One of them's pretty loaded, but you got any problem with the Saudi Arabia fund? If Saudi Arabia or one of its investment partners were to buy an MLB team, is that a problem for you? That's way above my pay grade. I think that's a conversation you can have with the commissioner. I'm sure you can get them on your show. I understand wanting to defer that one. The next one is maybe even harder.

Should the Yankees send Vol? to the minors to get a swing back? Wow, you know what? I mean, look, I'm going to tell you something, baseball is a game of failure. And I don't care how good you are. I don't care if it's your first year or your 20th year, you're going to go through times when you struggle.

And usually you're not as good as you look when things are going great, and you're definitely not as bad as you look when you struggle. So I think he's making an adjustment. In all fairness to him, I haven't had a chance to watch too many games down here in Miami. But I'm sure everyone speaks very highly of not only his how he performs on the field, but who he is as a person. And I think that gets you pretty far. So I wouldn't give up on him yet. I'd give him a little time. All right, Derek Jeter, thank you very

much. Chris, Rickabono. Thank you. And let me just add, Chris, you are royalty in my neck of the woods, okay? Don Bosco, all the rest of it. Every day, people talk about, you know, I don't have to tell you. So congratulations on all your success. And I hope that this venture, you know, maybe Under Armour Nike, don't hope so, but we're all rooting for you. Thank you very much. Thank you both for your time today. Let's go to break, shall we? First, a quick mention, June is Pride Month, and CNBC is celebrating all month long

with stories of corporate leaders. Here is Joey Gonzalez, Barry's boot camp, founder and CEO. I grew up gay and Latino in a very homogenous part of the United States, and I was definitely made fun of, left out. But what that did to me was it really fueled the fire from within. and inspired me to want to grow up into an adult that built a community and a culture of inclusiveness at Berries. And I feel like that's living proof, A, that adversity can fuel greatness, and B, that it's our will and our spirit that dictates how we handle the deck that we're down.

Welcome back, everybody. Let's get a quick check on the markets. Dallas cut its gains about in half, but is still up 64 points right now. The S&P is still above 4,300. In fact, has actually picked up some steam. 4321 lately. Look at the NASDAQ up 1.1%. So really, it's just the Dow, where we've seen things kind of moderate somewhat. And shares of Truest are not directly responsible, but they are falling to this afternoon. The company's CFO just said top-line revenue is likely to fall 3%. Those comments were made at a Morgan Stanley Financial Conference.

The stock is moving as a result. It's down almost 4%. And coming up, Oracle, one of the best performers on the S&P ahead of earnings after the bell. we will trade it and other movers of the day in three stock lunch. We'll be right back. Welcome back, everybody. Time for today's three stock lunch. First up, Oracle shares, up 6% today, all-time high as the company is set to release.

Fourth quarter results after the bell, with most analysts anticipating strong quarterly results with positive comments surrounding the cloud business and AI. Here to help us trade this stock and a couple of more. Eva Ados, Chief Operations Officer at ER Share. Ava, welcome. What's your take on Oracle? So it is a buy. We have owned this stuff for a long time, but it was our number one wait back in the fall when the market rewarded profits overgrowth. Now, even though it appreciated by 45% year to date, I think it's still undervalued. I think there's still more room to go, especially given the AI news with strategic acquisitions when it comes to generative AI.

They can now leverage the huge infrastructure they have and the huge market share to compete with open AI. another major generative AI players. So that will give them a growth spin. So what's interesting about this company, it's now changing from a value play to back to growth play after so many years. So I'm very excited about the company. I think there's still room to go to buy.

All right. Let's see if there's as much enthusiasm for biogen. Those shares are slightly higher today. Alzheimer's drug got unanimous backing by that FDA advisory panel pushing it for traditional approval. shares are already up about 14% this year, Ava. What would you do with it? I would buy it, but for the short term.

So not as much excitement here. Just because I do recognize that that can be a short-term catalyst with the FDA news. And so the stock might do great in the next couple of months. But for the long term, if you see, if you stage fundamentals in the last three to four years, they have been in downward decline. The profits and revenues have dropped by 30 to 40%. their margins are shrinking. And so I wouldn't hold it for the long term. I think that's going to be a short-term play. All right. Finally, Ava, Sentinel 1, the shares are up nearly 8%. Morgan Stanley,

upgrading the stock, calling it an overweight, long-term share gainer. But the stock is still down nearly 30% for the month because of a miss in quarterly revenue and weak sales guidance. What do you think here? It is a hold just because, as you said, it has dropped significantly in the last month. So it's not, price okay, but I do like the category. So I do like growth and I do like speculative companies at the current market. I think the current market is benefiting these type of companies. However, when it comes to top competition, it has great competition with CrowdStrike and other major cybersecurity companies. And so I do not like their competition. I do not like them from a

competition point of view. And I do not like their margins. They're the lowest in their category. So I would hold them, but I'm not that bullish on them. All right, Ava, thank you. Appreciate it. Still ahead, hotel operators, checking out of San Francisco and a legendary investor handing over the reins, those stories and more when Power Lunch returns. Welcome back, everybody.

A little less than four minutes left in the show and a lot more stories to get to. So let's not waste any time. Twitter isn't paying its bills, as we learn, seems month after month. But this time a report and plan, platformer says they haven't been paying Google for cloud surf. I'd be more scared of Google than a typical landlord. And since November, they haven't paid rent on their offices in San Francisco.

How can Twitter get away with this? Let's ask MSNBC legal analyst Danny Savalos. Danny, thank you for phoning it. All right, what's your take on this? What's the end game here? It's one thing for a business to renegotiate its large contracts with a provider, but it's another thing to just say, we're not going to adhere to our current contracts and breach them. You know, one thing is renegotiation. The other one is breach of contract. So this has got to be problematic. It could just be. You have two titans of industry here. Each are afraid to sue each other like two gunslingers in a dusty street. So what is the outcome? Does this go to court eventually or what? Well, you know, as is often the case, sometimes when a large company decides I'm not paying the bills, the other company might say, well, it may be cheaper for us to negotiate.

but certainly refusing to adhere to the contract and perform is not negotiating in good faith. It should not be mistaken with good business bargaining strategy. So, yes, that is an option to go to court, but the reality is these big corporations, they make a business decision. They assess what it would cost to go to court and get a verdict versus take the hit and try to renegotiate. Fascinating stuff. Danny, thanks very much.

Danny Savalos, MSNBC legal analyst. All right, moving on, the legendary. investor George Soros, handing over control of his $25 billion empire to his son, Alex, the fund that is, speaking to the Wall Street Journal of the 37-year-old heir, said he grew up self-conscious of his family's wealth, yet is, quote, more political than his father. And he wants to keep using his family's wealth to back-left-leaning politicians, more political than George Soros, who, of course, has become a major target of people on the right. And you could see that, and there's been a little bit of a succession, I don't know if we call it,

issue over the years. It's a great piece, Greg Zuckerman. And, you know, this makes it clear that choosing Alex was going in a very specific direction. Alex makes no bones about the fact he's going to make it even more political. And we'll see what is in store for that fund. Basically saying, bring it on. Yeah. Oh, yeah. Former Prime Minister, Sylvia Berlusconi died over the weekend at age 86, RIP. The longest serving Prime Minister in the country's history, he also faced a lot of scandals and made some questionable comments, incredibly successful businessman and media mogul. He was really in some ways the leader of the Italian populist movement, the founder of it. He can be likened to the Murdoch family in his acquisition or building of media assets.

He can be likened to Donald Trump in the way he behaved and sometimes maybe misbehaved. Oh, you could say be sort of founder of an era. Founder of an era. In many ways. Barra Lascone. All righty, more and more hotel owners writing off San Francisco while Los Angeles and New York are nearly back. to 2019 levels of occupancy, uh-uh, not San Francisco, still lagging far behind crime of the quality of life issues, keeping tourists and conventions away, reasons cited by park hotels when it walked away from two properties there.

And it's not the only company to give up on the city. I think what's happening here in large part is the fall off dramatic of the convention business. Bingo. It's really sad. Just want to mention the latest in I-95 FedEx after that bridge collapse, saying that they're monitoring the situation, going to do what they can. Incredible to see the entire southbound part of that highway destroyed. It's going to be months before it's back in use. A 43-mile detour for people to get around it at the time. Wow, crazy.

Thanks for watching Power Lunch, everybody.