Smiledirect begins trading as a public company. Should you buy the stock today our Investment Committee weighs in and caterpillar shares getting a down grade its our call of the day Halftime Report starts right now. Welcome back, everybody. Thanks for joining us here today, the overall market doing well headed for seven in a row. Up 121 points and longest streak in a year and smiledirect just opening moments ago as carl, morgan and john just showed you. That opening not what the markets showed down 14 at the moment and off 3 bucks. A lot of optimism going in on smiledirect. The head of the ipo saying it is trading well or bullish upside potential. That is certainly not the case smiledirect sdc a new issue down 14 right now. All right, lets go now to the macro set up stocks there higher on trade headlines and easy move by europe central bank. If we do close higher on the dow, like we said, lucky 7 7 higher sessions in a row and longest streak in a year your stat of the day, nearly 100 of the s p 500, about 20 are up more than 10 this month thats only eight days of trading, including today so, the question to your gang today is very simple joe, ill begin with you, is the path all clear for the bulls to take this market to new highs . Because were close. The market has been rallying over the last ten days or so you and i have talked about that i had some calls on the iqq and i continue to maintain those calls and the market is moving higher favorable conditions a lot of that has to do with the advanced decline line of the New York Stock Exchange as we talked about yesterday made an alltime high yesterday you were also seeing rates with modestly beginning to back up. 177 is where we sit for a ten year right now overseas the german ten year and yields relaxing some of the real selling pressure that you saw there in terms of yield. We have financials participating right now and the path of least resistance is higher margaret, welcome we have josh, jim, thanks for joining us thank you what is your take are you bullish or does this feel like were getting a it allal bit too hot . Smiledirect ipo one stock, not exactly overwhelming demand. Clearly the, market is and t driven by any earnings in our mind, some mind for cautiousness ahead, particularly as we go into earning season for the third quarter. Interesting to note, you know, conferences are going on health care, technology, industrials and none of those companies have taken the opportunity to lower guidance, if they want to blame the macro, they could have. Interesting dynamic. We havent yet seen that, but i would say, you know, we have trade that is getting resolved to some extent, but we still have tariffs in place and theyre still negatively impacting the markets. So, brian, pretty complicated situation here we talk about secondary risks like iran, russia, north korea, brexit and still focused on u. S. china trade tensions. The last week and a half of a rally. It is a heck of a rally. Value stocks cruising. And, up for unfortunately, i cay it is a sustainable until you get resolution of the trade talks. This rally is based on last week both sides coming together and agreeing to meet that is the bare minimum as far as a step forward. There is no agenda set yes, there is President Trump put out a twoweek delay in the tariffs last night thats meaningless, as well. We are a long way from resolution now, with that having been said, i dont think this is a time that you sell because the market is so volatile, it could easily go up further, as well as go down the thing to do in this situation, in my opinion, is go for cash flow generating companies. Stocks that are buying back their shares companies that are increasing their dividends. Thats a sign of how healthy they are and how they can make it through thick or thin, whatever the latest trump tweet is or whatever the latest message from the global times in china. I think i got that newspaper right. Look at the intels of the world and look at Cisco Systems just to name a couple josh, i mean, what do you view as the biggest risk right now for stocks the biggest risk for stocks its been the last couple days, last seven days. Were not talking about the risk, were talking about three weeks ago. Three weeks, thank you long day three weeks ago it was all risk. It was all fear. Suddenly now everything is fine. Whats changed well, first of all, if youre making investments based on the headline of the day, you should give the money to somebody else who is a professional. Thats one two, if youre somebody that thinks trade is now resolved or you believe in a tweet about trade or, you know, somebody from the white house saying were going to have a meeting, were not going to have a meeting. If thats the basis behind which you log into a brokerage account and buy yourself something give the money to somebody else. Big picture the most important thing going on right now, brian, to answer your question, the value momentum switch like the question on every professionals mind right now is, are there legs to this is this just about rates backing up and then maybe one side of the trade being too crowded or is this the start of something bigger i want to give you some numbers that i found mind blowing today. The dow jones Market Neutral value index had its best day on monday since inception going back to 2001 just an absolute monster move. 3. 5 in one day. That is a Market Neutral index it is not meant to do that what does that tell you hold on, you take a look at what is going on with the Market Neutral momentum, its worse two days in ten years, down 4. 5 monday and another 4. 5 tuesday. If youre an investor right now and you look at your portfolio and you find a huge overweight towards momentum, a huge overweight towards growth, a, you really felt it this week negatively and, b, you might want to look at your Asset Allocation and ask yourself, have i been ignoring too many sectors in the market and not exposed to sector stocks this might be the wakeup call that you needed. One last thing on this, i am hopeful that this is the beginning of a change. We want to see these value stocks back in the game. We want to see them within 5 and 10 of new alltime highs. Not 20 away if this market is going to continue higher. So, to that point, i think its a very positive development to get that rotation this week and i hope its not a short lived thing. I like it, josh, because were also going to talk about some names that we dont normally talk about that have done well. I want to go back to leslie picker who has been all over the sm Smiledirect Club for trading and sitting down with the cfo and cofounder and a first on cnbc interview. Lesl leslie. Im here with the cofounder of smiledirectclub and kyle wailes thank you for joining me today unique outcome here because you priced above the range and stocks trading lower in its opening trade. Alex, what do you think happened you know, were here to build longtime value with the stock so, you know, how it priced today i dont think will dictate what were doing here. You know, kyle. I think thats exactly right. What were focused on here are our members over 750,000 served and our investors. Our investors are with us for the long run right. This is day one. You know, it looks like it opened up a little bit lower, but were focused on 12 months, 24 months and creating fundamental value for our investors. People are focused on teledentistry and the competitive dynamic surrounding this space how would you, kyle, characterize the barriers to entry for what you do and the pricing dynamic as a result of that yeah, so, very, very strong if you think about the past five years and what we built in this business starting with the omny channel presence that we have. Over 300 smile shops around the country and also internationally growing, as well a program that our Balance Sheet today makes it affordable and accessible for millions of consumers around the world the vertical integration and the economics that that drives within our business and the Doctor Network that we have and our better is better approach to how we empower our members with their decisionmaking around orthodonic care. Lots of barriers that we built in this business not to mention, you know, one of the most important ones, as well highly considered purchase they spend up to a year or in some cases longer as theyre doing research they see our brand and the satisfaction that our members have and see the scale over 750,000 consumers served to date the positive reviews we have online you have to do all of those together the smile, pay, omni channel presence to make it work to that point on vertical integration, you do control kind of the entire supply chain but the one thing you dont control are the actual orthod t orthodontists and dentists themselves how do you control for reputation without controlling the actual doctors who are providing the care that you all serve . Yes, so, were here to provide the teledentistry platform our doctors have at least four years of experience before they come with us kyle, i want to read something to you something that the American Dental Association has put out a press release saying that they essentially, the orthodontic treatment if not done correctly could lead to potential bone loss, lost teeth, jaw pain and other issues. They flagged these issues with the ftc and previously with the fda and specifically calling out your devices what are the risks that cthat consumers should be aware of so, any time you do something disruptive like we are, the status quo is always going to push back on that. That is what youre seeing there. When they file that with the fda, in particular, i think its important to point out, as well. The fda came out and immediately shut that down right after the fact that it happened. Its important to know, these are our doctors, patients. 250 doctors across the state today and you have to be state licensed in every state and they are making the clinical decision to treat that patient or not treat that patient and its ultimately their decision that they go through. We served over 750,000 members to date. I think you can look at the Consumer Sentiment online. Over 100,000 reviews on our website. Over 50,000 reviews on google. Very, very positive Consumer Sentiment overall and i think the data speaks for itself when you look at the true health and efficacy of our product. Alex, i want to talk to you about automation any part of the process, the supply chain that you could automate further that could help improve margins . Absolutely, better is better is one of our philosophies and we started down the automation path and some things we need to iterate on and see the next evolution on as we get through this year and next year. But its definitely something that were laser focused on and working towards, you know, the best process that we can get to. All right, alex and kyle, thank you so much for joining me stocks down a little over 11 right now. Brian, back over to you. Great interview there no matter what happens with the stock today, two very rich guys that are sitting there 7 or 8 billion market cap any take on this name . I think the implications for the market are, obviously, this ipo is disappointing im not surprised that it is disappointing. Listen, if youre going to step out as an investor and look at these ipos and now you have smile direct in front of you, okay, am i going to go buy smiledirect or look at a crowd strike which is down 30 do i look at slack, which is 40 and is now 25. Do i even look at uber which was 44 and now is in the mid30 range. So, those type of ipos, technology oriented, theyre far more attractive to me. Let me ask some broader question you dont have to answer about smile direct per se. But with uber and lyft and some of the others. Used to be youre privet for a couple years and eight, nine and ten years. And private equity, im not knocking the whole industry. Venture capitalists get theirs and theyre leaving the scraps to mom and pops. I would call it latestage growth. Or latestage no growth the potential for growth. But, really, what the earlier ipos did and the kind that people all ran to were you had hockey stick and youre not getting that investors are looking and, plus, seeing the rotation that we were talking about. Getting out of momentum stocks at the time when some of these were going public. You add those two together you have to be careful what youre going to do because the fundamentals still arent there. I used to sell ipos as a broker when i was a retail broker and i think the big take away is like back then they would deliberately engineer a pop. Guaranteed money almost yes and the clients that would want to do it were gamblers they werent real investors. They were like, oh, i think this thing would pop 15 and the manager would say, okay, youre not getting any more of the next deal you had to be somewhat cool about it if you were in the middle of that those people now are more likely to be getting in on venture funds and trying to own these things before the ipos than they are to be waiting for their merrill guy to call him and say, hey, good news 200 shares of smiledirect. I think thats a big change in the dynamic of markets and how we bring these days. Look at some of these owners of these stocks. Youre seeing the big mutual funds. Fideli fidelity fidelity. Thats what im saying. They already own it but the retail version, you know last guy on the totem pole. Can i go to your question about five versus ten years. The later round private equity firms are not making money on this. Look at a lyft or uber by the way. By the time the Venture Capital companies can get out of that, a remarkable reduction in valuation. I think this would put the pressure to go public earlier to have that pendulum swing back the other way and it will come from the private equity and d. C. Firms. They need to make money. I know a lot of private equity guys that have giant, giant yachts some things work where are the customer yachts, brian . If youre in a venture fund and youre excited because out of the 20 positions in that particular fund, air bnb, uber, lyft in that fund. Im with you. Thats my point. But they have business considerations because they have investors. The point im trying to make is having done this for two decades so much money being extracted before these companies go public, the big names the best performing stocks, the best performing ipos are names we never talked about or heard of avalara, those are the five best ipos of the past 12 months how long can we talk about alacos i just want to be accurate of what we are talking about. Money coming out no money comes out from the Venture Capital investments until six months after the ipo nobody is coming out at that last private round money is coming in the way it changes is just like ceo if investors vote them out investors start ignoring the ipos that are sucked out early and bankers will have to switch it up and start offering more value. In other words, folks, its up to you heres whats coming up on the Halftime Report. Big calls on caterpillar why one analyst says stays away. The best debate in our call of the day. Plus, service with a smile hot new ipos smiledirect making its debut. E ould you buy it . ThInvestment Committee weighs in do you have concerns about mild memory loss related to aging . Prevagen is the number one pharmacistrecommended memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Dow trying to make it 700 days in a row and right now lets get to julia with an alert. At t striking a deal with j. J. Abrams, new tv projects for all of its platforms including hbo max and make movies for Warner Brothers and bringing his Games Division and all the different divisions under the same roof for the first time now, this deal is reportedly worth some 250 million, according to hollywood reporter. Worth noting this is just the latest for top content creators. Netflix payede eed hundreds of millions it does say he will continue with his current commitments to paramount until those are expired and he does have the star wars movie he is making for disney and a project he produced for apple tv plus but for now the rest of his work will be for warner media back over to you. Another big signing in the streaming wars before we get to the call of the day, anybody have a take on at t had its ups and downs, shall we say. We own at t and a deleveraging play. They have the content and made too many accusations this is a stock you want for the next three years, you get paid 5 . The stock is low today because at the same day theyre signing j. J. Abrams for a gigantic deal. Signing deals for those who made one or two shows why they need to make some structural change and its great. The only good news, josh, will now be run over by the producers bigger yacht so, its all fine. All right. Caterpillar and deere in the red after wells fargo downgraded the stocks between rocket perform rate demand is at or near its peak and probably begin to slow in 2020 it is your call of the day so, again, joe, its not a knock on cat and deere they like the dividend yield 1. You get the exposure to brazil i disagree with this call, though i think deere and caterpillar longer term will be okay i also believe, if there is some form of a trade interim resolution, a lot of it will centered on ag and youll see increased plantings and the need for moredisagree with that call. I think the call theyre making is a little too late brian, i own caterpillar. I disagree with the call, but its not a stupid call look, if we keep muddling through a scattered brain approach to trade, we will get a recession and stocks like caterpillar will go down the problem is, this stock is generating a lot of cash so, if you want to be short this, the down side is a lot less than the upside is when you consider that at the last quarter they bought back on that 5 of the shares outstanding year over year they increased their dividend by meaningful amount just a few months ago so, lets just say we give a 50 50 chance of china being resolved if thats the case, you have much more upside than you have downside it will go down if china is not resolved by the end of the year. Your probability weighted and expected return is positive on cat. Deere, ago, you can have that trade. I have no issue with it. Is it a 50 50 chance we get a deal what do you think . Is it that high . I mean, thats what the market is trying to anticipate here its a black box on when we will get the next twe