Names on tech stocks mar mary meeker will speak any minute the Halftime Report with stot wapner starts now live from the new york stock exchange. Good to have you with us on this tuesday, welcome, our Investment Committee today, joe terranova, jon and pete najarian, lets begin with the markets where stocks have lost some of their gains today but the june boon is still the best start to a month since october of 11 the s p up 5 with tech the best performing sector. All feels pretty good right now, pete, in tech world after, you know, a pretty good upset. Now its back, up 7 in june, led by names like apple and microsoft, some of the semiconductors having a great week and were talking about a lot of the quality names are actually leading us to the up side doesnt mean its going to last forever. I still think this is a trading environment. I still think its very, very shortterm just about everything we report to you guys as unusual activity doesnt even extend out past three or four days but much of it will get out there a month, maybe two months will this continue i think it will for a while, scott but i think when youre looking at the volatility trading 16 or lower thats an opportunity to tell yourself, i need to protect what i can buy when you can, not when you have to. You want that volatility on your side and right now, youre at the lower end of the scale i feel like we had a debate, doc, yesterday, that materialized between and we can make it into a bigger debate between when you would love i always like that. Petes view and joes view joe says, you know, stay away from the f. A. N. G. Type names, theyre too volatile, market goes up, theyre going to go up, market goes down, theyre going to go down pete says stay with that trade focus on the f. A. N. G. S are okay, still likes them joe, not that you dont like microsoft, whatever, but you know what im getting at you have a differing view on where you think tech is going to lead us. I dont think we differ on the fundamentals at all. I think facebook, obviously, in a strong market is going to see the revenue growth, its going to realize the value of instagram and the contribution but im looking at it and understand, first of all, ive told you this over and over again all year, i think the market goes through a lot of different places and ultimately ends up nowhere so were at the upper end of the range right now so when im looking at risk assumption on my part and im looking at communications services, ive got facebook, which has a beta of 1. 31 ive got alphabet, which has a beta of 1. 31 or i can own a disney or a verizon, which has a beta of less than 0. 80 and thats the direction im willing to take right now because last week, i stepped in, i bought the smh quality over high beta. Thats the argument. Exactly and the smh was enough for me. Thats enough risk for me to step because i dont have the confidence yet to borrow your term yesterday, on the unpredictability of the headlines that i could see were going to take out, lets say, the highs for the year in advance above 3,000. We do that, im completely wrong, pete is right, facebooks the place to be, netflix is the place to be, all the f. A. N. G. Names, high momentum not all the f. A. N. G well not all they are going to be the moon shots. The chips are up 9. 5 in a week, in and of itself the some of the other tech stocks that have rallied, amd up 19 , nvidia, 13 , lam, 12 , broadcom, 12 , cisco, 11 , sky works, 10 gains, doc and a lot of those have things that are inside of most cellular devices and or computers, of course and thats a great place to be. I talked, scott, about the big selloff that we saw and i thought overdone and facebook, for instance, when it was out there on a sunday evening that the d. O. J. Was going to be taking a hard look at them, maybe even antitrust yeah. Facebook fell from about 180 to 161 that monday, that selloff, that blood bath, 19, that was very, very significant. We thought into well oversold territory. It is now back today at almost touched 180, was an unusual activity that we had last week in weekly options. That stock surged all the way back its still up 3 today. Was up 5 at one point so theres obviously money that is willing to go into these on those steep sell ya selloffs same thing happened in apple from friday to monday. Just a week ago, now, 195 so, i mean, i think its pretty clear that even on days when the markets not really holding so well here today, wevegot mone being committed. I mean, the dow was up triple digits can i push back for one second on what joe was saying . Quality with beta, whats wrong with that trade . I dont understand there are quality names out there that do have beta so i still see those as the great opportunities and by the way, we always talk about this when you get those pushes to the downside whats a quality name with a lot of beta. Facebook. Facebook thats at a pretty high beta 1. 31. I love that name and i look at the quality look at the cash flows and look at where there are different verticals are right now. That is a name that i would say is quality and the more regulations that go at facebook, how much does that make them that much better of a moat around what theyve created. Does it bother you that the company has basically gone nowhere in the last 12 months. Yeah but thats not the way i view things, joe and i know today theres some, you know, weve got somebody, one of the analysts out there saying its only up 2 since last september. Really is that the way you look at this stock . Or do you look at this stock like we talk about every single day on this desk where it gets sold off and that creates what opportunity. When you get those selloffs not every selloff, pete, creates opportunity, equally if its a quality name, it does there are a lot of issues around facebook. From july to december, that selloff never was a Good Opportunity until december 24th. You dont have to buy the bottom you dont have to buy the bottom in apple when it goes down by the way, isnt that a quality name i think wed all agree on that well, whats wrong with that when it gets sold off inappropriately . Nothing but are you worried about regulatory risks as much around apple as you would be around facebook . No but i think those are headaches but lets look at facebook since a lot of this regulatory stuff has hit them, right . I mean, lets just look at the theres a three, four, five weeks, whatever you want to look at this is a name that has with stood, the more stuff thats been thrown at it, the less impact its had on the stock each time just like we talk about with trump dweetweets and everything else, the more you get this stuff, the less of an action youre getting and all of a sudden people look at the quality of the company and what they grow. Ill give you that. A lot of it is more noise than substance. Some of its selfinflicted but the key today to facebooks move is this, and, look, nathanson, theyre no joke. When they upgrade you in this sector, youre going to feel it. They go to buy today after downgrading the stock last fall, they go back to buy and the points that they raise, i want to bring out for all of you to discuss. They say the shift from news feed to stories, they had elevated operating costs, the market was ignoring the global risks and a lack of a third act. Now they say all better. Or at least on the road to being better, they go 210 on facebook im not no ones saying its not a quality name so what are we saying are you saying you cant own i want is that what were saying . Who said that who said you cant own it . Joe didnt say you cant own it. Im not saying that but i dont think you have the visibility if the headwind that has troubled facebook for the last year is dissipating and that headwind warrants a significant amount of spending on security which theyve already put in. Absolutely. Zuckerberg already told us. I agree with that that hit the stock, thats priced in. Is there an end to that cycle thats visible to the investor well, i think when people start to realize that instagram, you bring up stories, you look at instagram, for instance, and facebook themselves says, hey, look, we see this being 30 of our total ad revenue in the next couple of years. Thats one of the verticals im talking about. How about messenger . How about whatsapp when the monetization comes to those different names, you look at what this thing trades at, does it trade at an expensive valuation to you guys, considering the growth that theyve got . Absolutely not do you think the user base is comfortable with security and privacy . Have they they dont care oh. They dont care i disagree. How can you disagree with that have they lost a lot of people they are not seeing the growth trajectory. Because theyre moving in that shift because they got 2 point some odd billion folks using it there comes a point where youve got to have another act. The second act, instagram. The next one, messenger. The next one, whatsapp and then you know what comes next emercy ecommerce is the next one and nobodys talking about that either i know its a nasty thing, scott, but that we dont talk about a lot, but these guys will own Digital Assets i mean, bitcoin will be what bitcoin is, thats a Digital Asset, but this, facebook, with what mr. Zuckerberg is doing with being able to have a Digital Asset that is monitored from outside of there but used within facebook, in other words, their private block chain, this is going to be a game changer and facebook is going to be the first firm out there using it in that way im not buying it until we have highly unusual activity and i get to go to the telestrator and do it with you we frequently have high unusual activity with facebook we have had it recently yes just the other day. How right were they how right was that in the shortterm i agree with you that a lot of i think a lot of the noise, bad news, it has to be in the stock. What else could drop thats going to shock you at this point . Right and lets look, scott, at why facebook famous last words i was about to say, thanks a lot, scott it was taken down because of all of the regulatory they were asked to come before the eu, the uk, canada, congress, and Mark Zuckerberg himself made one appearance to my knowledge and that was in front of congress and that wasnt taken so well but what did they do then they spent like crazy. Thats why the stock came down so much. Because their spending went up so dramatically and now they have built, as you said, pete said, that moat that, okay, you want to compete in that space and you dont have 2 billion people on your platform, whoever you are, the next big comer is really snap and i think theyve made that huge recovery because theyve got an installed base that is still loyal to them, not in the same way facebook is, but theres still an awful lot of folks there. Now theyre talking about monetization there in a better way. How about apple pushing back towards 200 that stocks up 12. 5 in the last week. I thought it was dead who said it was dead . A lot of people said it was dead at 150 you tried to get lebenthal to buy it. Add to it whatever, yeah. Even weiss, the biggest naysayer on apple of all time owns it. He might own it or he might not. We dont know. I wonder how much stock apples bought back in the last two weeks. Can you imagine i would have to think and we talked about this on the show, i would have to think that apple has been buying back their stock. Monday after that d. O. J. Tweet and then the comments that came out and the facebook slam, apple was 170 or 171 a week ago yesterday, folks now its 195. Why again, i suspect the two of you believe that the d. O. J. Is just going to it was just a news story and thats going away were going into a contentious president ial campaign. Its Election Year bluster bluster it is but its going to be with us. Facebooks going to pay a fine of some sort, assuming that regulators can agree and get on the same page with one another and theyre not at that point yet. Thats a bipartisan thing too. As far as both parties arent real happy with what was going on with facebook for different reasons, but nonetheless, they both are sort of on that sure, youre going to hear a lot more about it as you march up to 2020 do you think theyll be forced to be broken up thats a foolish move if they do by the way, if they do, that could be very, very interesting for the stock as well in terms of i think thats completely foolish. What would instagram be worth, though, in their own, on the market let me say, ill give my prediction like i did the mexican tariffs. Not going to happen. Im with you. But im just saying not going to break up facebook youre going to hear a lot about it lot of people want to do it the president s going to tweet about it, elizabeth warrens going to stump on it. Break up the Chinese Technology companies too because youre going to need to. Well see what happens there. We mentioned some of the chip names. Are you a buyer of some of the chips . Chips lead you down, lead you up, smh is up 9. 5 in a week as i said, a lot of this is things that are in ipads, things that are in iphones, you mentioned, i think, sky,work, broadcom, several of these names, those stocks are supplying apple products, not just apple, other cellular devices as well, and other tablets other than the ipad but obviously, apple dominates that from a price standpoint and i think they continue to and obviously, rather than seeing cutbacks in there, oh, chinas not going to buy this or chinese not going to buy that, because theyre going to be nationalistic, no. This is still an aspirational item in every emerging market. But i think its all very shortterm i mean, i dont want to be in these names and just sit there and hold them and say, you know what youre not a believer in the overall market you think this has been too much too fast im skeptical about exactly that is it a little bit too much too fast and are we going to see selling and we see that combined with the folks who panic with that move to the downside, who overpush it and push it to the downside even further, but in the shortterm, how about that move in amd we talk about all that unusual activity wed seen in there scott stock was 28, a week later its 32. You got to be disciplined. Is it going higher it might be. I missed the move from 32 to 33. 5 but i want to be disciplined in this market and youve got to set your stops, both on the bad side and on the good side. All right healthy skepticism is a good thing. The question is how long will the rally roll on . Everybodys trying to figure out that question because its happened a lot in such a short period of time mike santolis taking a look at that for us today. Scott, look, this is the were up about 5 . I would call it much more of a bounce than a and you know, take a look at the elements of the rally. You guys were talking about and you play offense or defense, quality, well, heres the dynamic right here this is during the down swing from may 3rd to june 3rd when you saw the s p down 5. 7 and those low volatility stocks held the market together more than otherwise would have happened. Thats the splv right there, obviously more than 10 , 11 drop in the high betas so thats typically how the market rolls when its having a steep pullback as it did since then, obviously, you got a little bit of the reverse. So this is a mean reversion move, i think, right here, people got too pessimistic, probably, at the lows, treasury yields got compressed, well beyond probably what fundamentally they deserved and now youve seen a little bit of a release to the upside but really only have recovered, lets say, a little more than half of that high beta loss so it would seem to me if treasury yields continue to lift a little bit and relax, maybe you have more room to inch higher but youre running into certain ceilings like s p 2,900, which has been a tough point in the past and then the s p itself has started to run a little bit hot. I think we have a chart of the rsi, the relative strength index which shows the s ps recent move relative to its longer term trend, its gotten a little bit high on the charts and its swung from, like, the 30s up to the 60s. That tells you the market is has recouped a lot of those losses in a pretty quick relatively quick amount of time. Yeah and then some. Michael, come on over here, sit at the table with us lets hash it out a little bit more boy, the fed better do its thing. I mean, the market is so banking on rate cuts coming and goldman says yesterday, no cuts are coming what happens if theyre right and the markets wrong the markets not going to look like it does if theyre right. The market has to reprice lower because the market is repriced higher in the last week on the belief that theyre going to cut get the cut what if the market takes the view that, well, if theyre not going to cut, that means that the economy is good and this was just a growth scare, yet again, and everythings all good and earnings come out and earnings reinforce that view . Two distinctly different circumstances. Look, the Federal Reserve, when theyve cut in the past, 01 and 07 were bad instances where they cut and the s p six months later didnt respond in other instances like 95, 98, the Federal Reserve cut and six months later, the market responded to that cut. Im not necessarily sure that the Investor Community is focused on, well, whats the economy going to do . I think the Investor Community accepts, scott, that its a muted economy. Theyre more concerned on whats the impact going to be to the market so i think thats the big issue. I think the market is clearly based on fridays unemployment report, accept tant right now that there is going to be a cut, most likely in july and if it doesnt get it, youre going to have a tantrum is that whats going to happen i think the market doesnt get everything on the menu oh, but this is just a side dish, dude this is, like, the tomahawk steak. But if you get it for five. If you get the rate cut in july, you probably dont have a Perfect China deal, right . Or you probably dont have the market sitting at its record high at the moment you get the rate cut all that stuff would be unusual so i think you have to i think thats why, you know, we were talking last hour, and you know, you guys tell me, the vic vicks has been stubborn, has refused to go down because you have all these events in the 30day window. You bet you have the fed, the g20 and maybe china tariffs going through. And youre also dealing with a fed meeting at the end of july so, what does that tell you about what earnings were like in the two weeks prior . If you have an incredibly strong earnings season that lifts the s p to a new alltime high you could make the argument that, why are you going to cut rates if the market hits new highs, and earnings i just cant even believe the market sitting here at highs, you got a pickup in deals or not that far from new highs, pickup in deals and the fed is going to cut in the face of that because the president who tweeted ye