tv Fast Money Halftime Report CNBC January 4, 2016 12:00pm-1:01pm EST
>> seasonally, amazon has performed that way though. it rises into the holiday season. it sells off before we get those numbers, which we could start getting some stats fairly soon. >> if you've been on break, welcome back. we'll see how the afternoon session settles. for now, let's get back to headquarters. scott wapner and the half. >> all right, guys, thanks so much. welcome. let's meet our starting lineup. joe terranova is here along with jim laventhal. calls of the day. what those downgrades for netflix and amazon mean to your money. these top performing fang stops topped out. and the winner is our trader of the year shares his strategy. what worked, what didn't and what you can learn from our portfolio challenge. we do begin with the global sell-off. stocks falling in asia all across europe and, now, here at home, on this, the first trading day of the new year.
after chinese economic data disappoints. that market sinking a stunning 7% in today's trade. oil, a big story as well at this hour. it is moving all over the place. as tensions flair up in the middle east. we do begin with equities. josh, happy new year to all of you guys. a reality check, right? new year, same old problems and they start with china and global growth concerns. >> sure, so today it's china. but i think, and i've been saying this for a while now, this is a continuation of what we've seen all of last year. the difference is, today, the averages are getting hit. the leadership stocks are getting hit. but we've been watching this rolling correction take place beneath the surface of the market really going back since april and may when the new highs versus new lows topped out. advance/decline fell apart sector by sector succumbing and yet that has been masked by the outperformance of, let's call it, 10 or 20 really big, really important, really great stocks
within the s&p stocks within the s&p 100. that's now over. the fang stocks are down today at the same time. this is only the fifth time that's ever happened. and the realization that 55% of the s&p 500 is trading below its 200-day moving average is really starting to catch up with those leaders. and they're all getting hit double. if you look at the worst performing three sectors today, it's the sectors that have held up the best throughout 2015. it's financials, it's consumer discretionary, it's tech. >> on a red day across the board, health care materials, industrials, each down more than 2.5%. as josh sasd says, if you have the leadership group, the so-called fang stocks, and a few other stocks, fall out of favor. and people have said, well, okay, growth is going to be replaced by value. if you have no resumption or pickup in leadership by another group what do you have?
>> the market searching for a couple of things. the market wants growth. everyone's discussing for potential for value to come back in 2016. that would be phenomenal. the market pays a premium for growth. we have absent revenue growth. we have absent economic growth. we actually have signs, that economically the u.s. is beginning to -- >> and that is going to get full of a lot more people. >> the last thing you look for in terms of rewarding equity prices is buybacks. companies can't buy back their stocks right now. that's something they'll be doing after earnings in february. i'm not surprised by the performance we're seeing here. december wasn't good. november wasn't good. we borrowed in october from december's gains. >> this doesn't feel, though, like an overreaction to me?
>> it doesn't. >> based on the manufacturing numbers. manufacturing pmi over there was disappointing. getting notes today from some folks who say, well, yeah, okay, we know that. the services pmi, which is out in the next few days or so, is the one that's really more important. it's going to give you a better read on what's happening certainly from a consumer standpoint from china and that's what matters more now. >> let's talk about that. that is the question, whether services has taken over for manufacturing. that question has been asked for quite some time. i think really what we're supposed to ask is a question of where geographically does growth come from. i agree with what joe said. you have to have some economic growth here for stocks to go higher. i think you're going to get that growth from the usa as opposed to europe or china. we've got this whole week to hook at the ism or nonmanufacturing service index, comes out in the a couple of days be, and job growth. if we continue to get job growth, we will get economic
growth here in the u.s. and it will propel the rest higher. >> two things getting missed in the shuffle, forget about the china data, because what happened in the market on thursday, the last day of december, told you everything you needed to know about where the trend was heading for this year. you had a last 15 minute v vomtoriam across the sectors, and the fang stocks are not getting hit today on china, they're getting hit because people have 80 100% gains in these names and they were pigs. they didn't want to pay the taxes for fiscal 2016 so everyone wanted for the calendar to turnover to sell today. big mistake. >> no, it's actually a smart move -- >> we're going to talk about the netflix downgrade in a bit. >> think of it. so 7% sell-off in met flnetflix. are you better off take the hit last year and paying 39% on your taxes or taking a 7% stock carrying over?
>> you're going to pay eventually when you sell. >> eventually. >> if you sold today, you sold into a down 8% gap in netflix. >> i'm just saying, people will view that differently as far as the tax consequences. i always think that's a bad decision to make your buys or sales based on taxes. >> i agree. >> are you changing any of your opinion on the market for the next few weeks or months based on what's happening today? first day of january really doesn't give you any information on how the market is going to perform. the first month of the year does. okay, january's performance, 74% of the time, has influence on where the overall market is going to be. >> in my mind, like mikeeverybo until they get hit in the mouth. then when they get hit in the mouth, the other part of the statement is how long can you endure that, unless you're knocked out, then you're gone. today, people got hit in the mouth. the 7% sell-off in the fang
stocks, netflix in particular. that's painful. how many long can you take that kind of pain? a lot of people are going to hit the exits today and tomorrow and i think just as josh said that's the wrong thing to do. i don't think that's the right move to make there, judge. i don't think you're judging the whole year based on what happened overnight in china, with that reading, and the market reaction to it here. there were stocks i bought this morning, stocks that i bought that i'm very happy with right now and many of the stocks have made nice moves to the upside. >> i want to bring in our first guest. mohammed al arian. happy new year, welcome back. >> and to you, scott. >> what about this market today, overreaction or justified? >> no, justified. i'll start where josh said, which is this is the continuation of last year, with two important qualifiers. so the continuation is growth.
you remember me warning about the three unhinged markets, high yield, emerging market currencies and energy? we had the risk of more unhinged segments. secondly, we're not going to get the liquidity support for a while. central bankings are now on divergent path. we're not going to see stock buybacks for a few weeks. what you're seeing is the general theme of fundamentals pushing markets down but liquidity not being there to push it back up. >> so we have all of these chinese concerns. we have our own economic data, which has not been great. and you have some folks on the fed who are intense on raising rates four times this year, even as we're having a conversation about jpmorgan lowering their q4 gdp. how does that all work out, mohammed? >> i don't think you'll get a
reversal in policy, but you may get a couple of hikes at most. i don't think you'll get four. i think the economy continues to improve. the issue isn't the economy as such it is prices that have been decoupled from the economy from fundamentals by lots of liqu liquidity injections. so the question is can you maintain this gap between fundamentals that are down here and valuations that are up there. you only can do that if there's more liquidity. that's why we got to keep a very close eye on what companies do. the issue, scott, is this is not about beta. this is about alpha. this is about alpha in particular in the stressed sectors that are being forced to delever. >> i'm looking at that, a note from you today which suggests one of the areas of great distress is energy, commodities. you say maybe it's time to take a look, albeit in it the right
places. >> i will tell you it is absolutely key. you have mining stocks that are getting demolished. especially single asset companies. that don't have any diversification. we see massive distress from companies that have overlevered. even more traditional companies are getting beaten up really badly. if you had the right vehicle that locks in patient capital, this is a very attractive median term opportunity. this leveraging is going to go on in waves. >> very important how you decide of what those vehicles are and what you should be invested in this distressed space. don't buy etfs. don't make passive investments. be specific about the companies and the commodities you would like to have a play in. >> correct. this year is going to be all about exploiting volatility, both on the way up and the way down. we're going to have overshoots.
we're going to have undue correlations among asset classes. and this is a market that speaks to the ability to understand these overshoots and exploit them. >> you think we're going to have a day of reckoning, so to speak? and not only equities but home prices and other assets, which have become somewhat inflated because of where fed policy was over the last many years? >> this is a bigger issue. i have a book coming out on this in three weeks time. it basically argues the path we're on, which is liquidity supportive growth, where we have borrowed growth from the future and returns from the future. that path is going to end. but it can tip one of two ways. and how it tips is not predestined. so i agree with mr. grant that this current path of central bank supported growth and asset values is likely to end. where i disagree with him is that the outcome is not predestined. we can tip either way.
that's why it's really important to retain optionality and resilience in your investment positioning. >> we'll make that the last word. mohammed, thanks so much. coming up, should you be prepping your shopping list for a big relief rally after today's sell-off? a strategist joins us with where he recommends putting some money to work now. and from first to worst. netflix plunging today after a big year. is it time to bail on the so-called bank stocks? a look at the s&p sector heat map. we showed you where the worst spaces were. the dow jones industrials off 424 points. you're watching cnbc, first in business worldwide.
all right, we're back. take a look at the fang stocks. netflix was the bester er iper of 2015. it is the worst stock in the s&p 500 today. netflix and amazon both downgraded to neutral. we've talked about whether it's time, i don't know how you even argue with these calls. if you're saying, okay, now's the time to take some chips off the table in these names. make the argument on the other side. >> there's nothing about these that are surprising. you knew these calls were going to come as we entered the new year. once you got past the tax selling, you were going to get selling pressure. the question you ask yourself with these four names is where are they. are they neutral relative to the s&p. where are they relative to the s&p?
mohammed brings up a good point. this year is about alpha, alpha creation. if you tell me these stocks, and i believe they will, will outperform the s&p, then these are four names -- >> you still think they will? >> i still think these four names will continue to outperform the s&p and that's the most important. >> do you use a 7% drain on netflix to buy today? cramer said don't be a hero on day one. >> agree. agree. >> you guys have seen -- look, we've had a real crash of august. that's the day when you put in ridiculous prices and they eventually come to you. you don't get them all. you do it with five names. if you get two of them, you have a grand slam. 400 points in the dow is not what it used to be. when you're at 17,000, 18,000. 400-point sell-off is really not the end of the world. we're not quite there. i think cramer's right. the second issue, this is probably the more important issue to think about, is that
you could have sustained that performance in a small group of stocks for a really long time. think about the market topping out in 1966. but the nifty 50 names kept run until 72. >> so don't give up on the fangs just yet? >> yeah, these are the companies delivering three times the growth the s&p is delivering and they continue to return cash to shareholders in some cases, it shouldn't shock people if they continue on. that's not to say they will. but it's absolutely got precedence in u.s. economic history. >> you also need a technical breakdown confirmed and you're not witnessing that in any of the four. >> i'm a value guy. you know the val eyuations on t stocks that that you won't see it in my portfolio. what's the valuation you're looking for? is there a number or you're letting the momentum go? >> i don't look at the valuation at all. i'm looking at the momentum. i'm looking at the technicals.
>> but the momentum now is, you know, shoddy. >> one day. >> you can't look at that. >> 2 1/2 hour event. >> amazon has had an average pe of 100 times earnings over the last ten years. the stock has returned 1400% since 2005. with these names, the people that are involved in them are not at all fundamental valuation conscious. they're looking at price to earnings growth at best, but most likely, they're saying what's been working over the last two weeks. that's a whole different ball game. >> yeah, and did the story break down? because i don't believe anything that happened in the market here caused people to not renew their subscriptions to netflix. >> cites three things, rising churn, rising contract costs and -- >> all of that was the same as it was last week on thursday. now, you had $100,000 and you bought $100,000 worth of netflix. you made 130,000 last year. obviously, was up 130%.
now, take a look at what has transpired today. if you sold last week, then in order to avoid taxes and so forth, okay so you're paying 55% in most states, somewhere around there. 55% to the federal government, versus $7,000 that you're going to pay if you had to, you know, take care of that today. i don't think one makes any sense versus the other. if somebody does, then i guess you want to hold on longer. >> as we continue to watch what the markets are doing. wonder how investors should manage the volatility that is likely to continue. joining us from new york is a well-known investor. stephanie link, portfolio manager tiaa-cref. more than $800 billion under management. happy new year, good to see you. >> happy new year. >> give us your view on the markets today and how it has you as a portfolio manager with a lot of assets under management, trying to figure out what to do.
>> well, i look at december, the last couple of weeks in december and the first couple of weeks in january. they're usually very volatile in general. that said, clearly, the reaction in china was much more severe. i think it's related to the currency concerns more than anything. until that stabilizes, i think you're going to see volatility. what i do as a contrarian investor, i'm looking for opportunities. reverse to the mean kind of ideas at the beginning of the year and looking for blue chip quality companies, good management companies that are doing something to help their businesses grow. clearly, i'm also looking at yields. if you can get quality companies, blue chip companies, with a 4% dividend yield, and you feel good about their balance sheets, i think it's a good opportunity in this kind of environment. >> are you a good buyer of stocks here? >> i am a buyer of stocks here, for sure. i do think that you are going to see strong earnings.
you're seeing good decent growth. i think margins are going to stay pretty stable. again, i'm looking for quality companies that get oversold in that volatility. when that yield starts to get real attractive, that's when i'm buying. >> you think chevron and walmart fit? >> it's interesting, i have not been a fan of walmart for a very, very long time. but you know the stock has underperformed massively. expectations are so low, in fact, only five analysts on the sell side have buys on the stock right now. so that's actually the lowest amount of buy ratings in a decade. we know why, they're going to be heavily investing in their business and the payback isn't going to be until for three years. if you look at the benefits they're going to see from oil, not just the consumer, but also their truck fleet. they have 6,600 trucks that are going to benefit as the oil price comes down. so oil price helps consumer. it also helps their cost structure.
at a dividend yield with a $20 billion buyback, i think that's an interesting story. it's a good setup. >> stef, we'll see you back on the desk soon, i hope. stephanie link. jimmy. >> i think they're good -- >> you're a value guy. >> they're good from a point of view of yield. when you're talking about value stocks, cheap valuations, good yields, good balance sheets, what you're talking about is a margin of safety. some value of protection. i don't particularly like chevron because i'm not bullish on oil. walmart i think is in a problem spot right now because the consumer's migrating out of walmart, into targets and kohl's. but having said that, i think stephan stephanie's idea is the right one. look for yield, look for good balance sheets. we don't know where this market's going to go. >> you buy chevron today if your time horizon is 3 to 5 years? >> you could but you have to buckle the seat belt.
you could be prepared you have a downturn in oil. despite some, you know, pretty significant saber rattling between two big powers in the middle east. there's not that much upward pressure and you could see a downdraft in oil that could make chevron texaco swoon as well. >> tensions in the middle east are escalating between two major oil producers. middle east expert and commodity strategist makes sense of the oil trade as saudi arabia cuts off diplomatic ties with iran. plus, there's a new drop trader on the halftime show and he is about to get a new accessory for his wardrobe. will it match his beard?
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hello, everyone. here is your cnbc news update. israeli police releasing two photos of a gunman suspected of killing two people and wounding several others in a tel aviv attack last week. relatives recognized him from closed circuit video that aired on news reports. ferrera making a flat debut in milan as they completed its separation from its parent fiat chrysler.
fiat is pocketing more than $4 billion from the offering but now will have to make due without the big profits of the luxury unit that contributed 12% to its earnings in 2014. a federal judge ruling that camille cosby must testify in a defamation suit filed by seven women who say her husband, bill cosby, sexually assaulted them. the judge set down her request to squash the subpoena. and anti-saudi rally after saudi arabia announced it will sever diplomatic relationings with iran. the saudi foreign minister telling reuters it will also stop all air traffic between the two countries and will prohibit saudis from traveling to tehran. back to you. tensions are rising. >> yes, they are, and we are watching crude oil as a result of the tensions between saudi arabia and iran causing volatility in the market today. crude now lower. let's bring in rbc capital
markets global head of commodity strategy. nice to see you. i don't know, 1% seems somewhat muted of a reaction. >> this had been several years ago, before the north american energy story, oil would be way up on this. these are the two big heavyweights in the middle east. there's concern about tensions in saudi arabia where the oil is located. now geopolitics really doesn't factor into the markets unless a physical supply disrupts and i think that's what people are waiting for. >> not only do people think that's going to happen, they think there's going to be more supply coming on the market if the sanctions are lifted on iran. you have an oil supply of 2 million barrels a day. you've got 3 million if iran comes back online. >> the iranians talk a big game about what they can bring on. at some point, they say 1 million. we think it's probably 375,000 to 500,000. still, the market doesn't need that crude and it doesn't need it this quarter. >> so where's oil going? >> we think oil goes higher in
the back half of the year. we're not particularly constructive for this quarter. the main lift could be geopolitics. i wouldn't write off something potentially happening in the eastern provinces. that's where the shiites live in saudi arabia. that's where the oil is located. >> extension, what sends it to 50? >> extensions at this point, i mean, we really have to see -- >> i mean, is that what your forecast of 50 in the back half of the year is based on, gee political tension? >> no, it's based on slowing production. particularly slowing nonopec production. geopolitics would be extra gravy to get prices higher. >> one quick question, russia seems to be pumping all out. does that ruin the nonopec supply argument at all? they're really going all out. >> the big surprise of last year if you had asked analysts is russia going to be up or down? people thought russia would be down. the fact they're at a
post-soviet high caught the market by surprise. we think russian production will come down a bit this year. we think it's our wild card factor for the oil markets. if russia's up again year on year certainly that would be a bearish development. >> anything from libya? >> watch what happened in libya today. we had isis actually show up at the facility. so we actually have for the first time an isis attack on a major libyan facility, so i am not estimated about getting those libyan barrels back on the market in a sustained way. >> i think the headlines for today are arguably the most bullish oil headlines you've gotten in the last 25 years. yet the response in oil, it's absolutely incredible. if you would have presented this headline ten years ago, 15 years ago, the price of oil would have been 15% higher. but the question for me, and i will pose it to you. the united states and the russians, do they pick a side here? if they do, the argument for $50 oil could present itself. do the russians support the
iranians? does this little crisis get deeper? >> i think it gets deepercily because the iranians are going into elections in february. their hard-liners have been incentive to make the moderate president look bad. these demonstrations work for them. the americans are between iraq and a hard place. we knee gosh ainegotiated the dy hate. but saudi arabia is our big region ally. the russians fascinate me because putin is becoming the big world peacemaker. >> you think everybody just stands on the sides? >> the u.s. continues to call for calm. i don't see us actively getting involved in this one. >> as we wrap it up, let's try and make this a six-month trading or short-term investing call. you think oil's going 50 in the second half of the year? mohammed says, hey, if you go in the right places, now is a good time to look at some of these distressed assets, mostly
stocks, do not buy etfs. do we like the strategy? >> one thing we haven't talked about is the u.s. is starting to export oil. that's just an indication of why you're not seeing a response today to saudi arabia/iran news is there's so much oil in the u.s. i think you have to wait a lot longer for more supply to get shut in. >> if the u.s. has a hands off approach, then in six month, oil is right where it is now, it's fairly valued. more importantly where does it get in terms of investing in energy companies? you need to begin to see m & a. you need to see that. ultimately that will mark the bottom. when that happens, then we'll get excited. >> good to see you. the steep sell-off to start this new year. but the glass is still half full. his bullish case is coming up. along with his top sector picks for 2016. plus, what's working today, the athletic stock that's getting a big pop on two upgrades. halftime's back just after this. eligible for medicare? ] that's a good thing,
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moves. red all over the place. what catches your eye? >> red all over the screen. what catches my eye is the idea that first of all we are, again, still hovering around our lows of the day. the s&p 500 now below that 2,000 mark. if you take a look at the sectors, maybe it's a little intuitive that the less risky or perceived risky sectors out there, utilities, telecomb, the more defensive names, are the ones leading the charge. what catches our eye are these four sectors. they make up around two-thirds of the s&p's weighting. just tech alone is around 37%. the four biggest sectors in the s&p are really dragging things down and that's going to be a huge weight and albatross around the markets. with the regard to the volatility picture, no surprise here, it is elevated. we're not nearly to the point, okay, the vicks is around the
point of 22 points right now. let's look at the last year. we saw more heightened volatility around december. we got around 26 points there. and then remember markets in turmoil back in august, august 24th, we got above 50 in terms of the intraday readings there. again, scott, heightened volatility. not a great start. however, from a volatility standpoint, we did have higher levels over the past few weeks. we'll see if it gets to that point in today's trading or beyond, guys, back over to you. >> our next guest has a more upbeat take on today's market move. one of wall street's biggest bulls. 2300 price target on the s&p this year. good to see you. >> thank you very much. >> so what's the story with what we're witnessing today? we know the first of the year doesn't really tell you much but we don't usually have a first day of the year this ugly. >> i don't usually do first day moves very well.
i don't really interpret them as having long-term consequences. look, there's tax issues here. there are issues in the middle east. and all i'm -- >> i'm curious you're not mentioning, though, china, right, that's the biggest concern of all, isn't it? >> i don't want to mention china because i just don't think the news out of there was all that earth shaking. i mean, we know that their purchasing managers manufacturing index has been below 50. if you look at the official number, what's interesting is there's an output component that's been consistently above 50 since 2009. it's been the employment component that's been dragging it down. i think it's productivity. i'm not at all impressed by the apparent weakness in the pmi. >> what about the weakness in the leadership stocks, those so-called fang stocks? >> you guys covered it extremely well. it has a lot of profits on those stocks. maybe people for tax reasons didn't want to take them at the end of last year.
maybe they're cashing in some of the chips now. if they're cashing in the chips now, it's a lot of money and they have to put it somewhere. >> in the market of extraordinarily narrow breadth, if those stocks start to roll over, don't you have somewhat of a problem, ed? >> well, absolutely. unless the global economy continues to grow. i mean, i don't think we're looking at any gangbuster growth in the global economy. but, you know, oil prices, when you calculate what that means in terms of outlays, people around the world are spending $2 trillion less on crude oil. and that's got to be stimulative. not only does it have to be stimulative, but you can actually see it in the data. global oil demand is growing rapidly. the problem is the supply. but that's not a problem. i mean, it is a problem for the oil producers, but i think it's going to be very stimulative. >> 2,200. what do you think we'll get on
the s&p? >> well, i'm looking for earnings to grow again. they were flat last year. i don't think there's that much downside there. because energy's only 3% of the s&p 500 now on an earnings basis, so i'm looking for 7% growth in earnings over the next two years sequentially. i think there's some upside in the valuation multiples. >> last year, everyone said, well, manufacturing is weak, global growth is nonexistence. but at least we've got housing. housing is strong. and household formation is about to be kicked in. there was a housing number on december 28th that was shock to the market. i think that is the seed of today's sell-off, not china, so i'm with you on that. >> i think this is the humbug sell-off. we didn't get our santa claus rally so we're mad. >> okay, but can the housing story -- >> -- some other issues in addition to housing that just weren't delivered. i think there's a little bit of frustration with that.
but i think, you know, nobody knows when the millennials are going to move out of the basement. >> remember, it's cozy down there. >> it's cozy down there. they are starting to move -- >> they got directv, a fridge down there. >> the gen-xer s may have to tae their place. >> they have the windfall from oil/gasoline prices and they put it all into savings. >> it sounds like you're making the case that discretionary stocks are an area you like. >> the stocks that are down today are the stocks i like. >> it's good to see you. >> thank you. >> coming up, gm gets into the ride sharing business with a key investment. and more bad news for american express. we're trading all that and much more in the blitz. plus, the books are closed on the 2015 portfolio competition.
also, big tech down, transports down. where can you find safety in the sell-off? we have the safe haven trades. plus, the big cap names that kind of got left out in the cold last year that could be poised to shine in 2016. i'm here at the nyse. back over to you. >> for good reason, given the sell-off. the books are pulled on the 2015 portfolio competition. each panelist was given a theoretical $100,000 to invest as they fought for the title of trader of the year. here's a look how it all played out. >> joe, you're making a trade today, what is it? >> i began with a very deliberate approach. we're now fully invested. >> i do think they have catalyst. that's one of the reasons i chose all of these. >> can't have the sixth favorite stock in there. >> i figured i'd merge a little bit of what we do. >> can i tell you something, i really bombed last year. this year, what i'm doing is a
little bit more akin to what i do in real life, which is rules-based, a little more systemic. >> you better make a trade. >> i'm ready. >> i don't want an excuse at the end of the year. >> joe who just got into virgin america, he sold out. >> he's used all 52 trades already. just kidding, joe. >> joe's trying to outsmart himself. >> does it make you nervous you're only ahead by 40 basis points versus me? >> you and i -- we've been duking it out. >> you see any opportunities? >> there's got to be some out there. my lack of trading has been -- >> jim said the gap is closing. >> you made four trades. you bought four stocks. >> i sold four names last week at higher levels. i bought them back at lower levels. >> i had to cauterize the wound. now we're asking for help. help pete. >> trying to make the trades
short term. trying to give them three or four days, they work or they don't and i'm on to the next one. >> your hands are tied in the kinds of moves you can make. >> no. >> to your point is could i if i wanted to, no, i could not. >> great. >> two weeks left. >> i know. >> i got to start trading. >> really? >> there you go, josh brown in the lead, better than 10%. >> i think joe's a little confrontational in the video. >> the highlight is you bullying pete which is something that would never happen in the real world. i enjoyed that immensely. >> congratulations on winning this fine accessory here. the top trader belt. you said your strategy this year is going to be more akin to what your real life strategy is. >> yes. >> what does that look like? >> so in real life and the way we ran the strategy last year, we'll do the same thing this year, is rules based. there are several reasons for that. the first is, eliminate
behavioral biases. the second is, if you don't have a plan in anything in life, business or trading or investing, you're much more prone to errors. if you do have a plan, even if it doesn't put you in first place, at least there's a rhyme and reason behind everything you did. and i was partially fortune as well and the whole thing came together nicely. >> you stuck with your guns, right? if a stock broke its 200 moving day average, you got rid of it. >> right. >> if you had a certain percentage gain in a name no matter how much you liked it, you got rid of it. >> yep. and that cawas the key. that led to a lot of difficult decisions. >> disney, right? you got rid of disney. i remember this day. i want to say it was at 125 bucks or somewhat like that. you had a nice -- a really nice gain in it and then got out of it. >> yeah. now, here's where the rule base comes in. had i been making a qualitative decision instead of quantitative one, i would have said, "star
wars" is coming out and the espn thing -- but that's not what i want to do in a one-year contest. what i want to do is say, look this is what we said we're going to do. we're taking it. and if it makes me feel so terrible i can own some more outside of the contest. >> facebook, by the way, was your most profitable trade of 2015. and you still look it both in play terms and in real terms? >> yeah, well, i own facebook in real life. it's pulled back from i don't know nine points now. again, this comes back to having a plan and executing it and taking your own behavior out of the way. >> maybe that's the best thing to leave this particular conversation on. as we look at the new year's competition. what investors can take away from the contest itself, the way you think about the market. a lot of it is what you just
discussed. focusing on different areas of the market to invest in. >> people can say, well, you won the contest because you were running a running a momentum/growth strategy and that's what was in favor last year. that's partially true. here is the other side of that. had value stocks been the leading names, that's what my portfolio would have owned based on this strategy. when you're owning strength and owning market leadership, all that other stuff you can be agnostic about. it's cheap, it's expensive, it's a great ceo. they have a hot product. forget about all that. make the decision that you're aware the market has already picked up on those factors and instead focus on owning the best stocks in the market with a one-year time frame. with a five-year time frame, it's trickier. if this contest is 12 months i don't have time to catch falling knives or wait for a catalyst to play out and be event driven. forget it, i want to own the names everybody else wants to own and i want to walk away when
it's time. >> good stuff. tune in all this week, we are going to unveil the halftime portfolio stock picks from 2016. we'll hear from stephanie link and joe terranova tomorrow. you can follow all the action on cnbc.com/pro. coming up, diamonds in the ruff. tiffany and lululemon getting upgrades today. the stocks are on the move at this hour. we're going to debate the calls. as we head to break, stocks are -- some stocks are rallying. stocks are off the lows. those stocks doing pretty well led by chesapeake up 5%. we're back right after this. equals great rates. it's a fact. kind of like reunions equal blatant lying. the company is actually doing really well on, on social media. oh that's interesting. i - i started social media. oh! it was my...baby. ...of fixodent plus adhesives. they help your denture hold strong more like natural teeth. and you can eat even tough food.
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we're back. markets are a big drag on this first trading day of 2016. though it is worth pointing out i pose we are off the worst levels of the day. the s&p 500 as you can see right there has retaken 2000, but big weakness among financials, tech, health care, and terlts materials among others. american express dropped from its partnership with fidel ilt. >> may be the worst dow component. i don't see any sign that the price action wants you to come in here and call a bottom just yet, but it's getting really cheap.
i think it's 11 times earnings at this point and buffett is always out there. i wouldn't be a seller either. >> jimmy, jeffrey says tiffany is their best new idea for '16. >> i will keep it simple. the stock trades at 17 times this year's earnings. it's easily a 30% to 35% gain from here. should you worry about china? yes, of course, but that's already priced into the stock. >> doc, lululemon upgraded at both wells and jefferies. the stock is up 6.33%. >> and fbr sgrupgraded them as l at the end of last week. the few stocks getting love today, there's more money heading into that. they're pushing it up a lot. this one trading near the highs of the day up almost 4 bucks. >> general motors investing a half a billion dollars in lyft. >> let's talk about gm. i like it here versus 30. i said it at the end of last year.
i like the straigtegy. as far as lyft, i like what management is doing. they have a strong management team in place. >> here is a wild card. mcdonald's. let's see the chart, please. mcd, upgraded to buy, increases the price target to 135 bucks. >> wow. >> do we like this stock? >> love it. >> defying all lodge i can. >> we said when they went to breaking their own rules about when breakfast would be available that it was a brilliant idea. you have to believe it's maybe 1 in 8 or maybe 1 in 6 people that actually go there have experienced that 24-hour clock for that breakfast. i think it's a great move. i think the stock goes higher, and i think this is the catalyst. >> the bigger thing with mcdonald's, breakfast was a huge momentum changer in terms of sentiment towards the stock but i also think just this idea that everything they had done was wrong for so long just having new blood running the company sometimes makes a huge world of difference because the fundamentals haven't really turned that much here, not quite as much as the stock price has. >> as we're talking about china obviously one of the catalysts
for this market sell-off we're seeing which as we mentioned is off the worst levels, chinese stocks getting hammered. chinese stocks like 567adr's tr. >> that's 99 million investors. not one of them has more than a decade's worth of experience. it's not a professional market. >> good to see you again. "power" begins now. good afternoon, everyone, and welcome to the first new year's edition of "power lunch." happy new year sort of, i guess. stocks getting hammered today. that is anything but happy. the dow right now down 373 points off the lowest levels of the day, but the dow now tracking its worst first trading day of a year since 1932. i don't even remember that. nasdaq falling as you see there 2.5% at 4881 and the s&p 500 down 2% at 2,157. three big themes driving the drop, of course.