Lennar upgrade, private market investing: Market Domination

It was a quiet day on Wall Street, with the S&P 500 (^GSPC) and the Nasdaq (^IXIC) closing at record highs. The Dow Jones Industrial Average (^DJI) closed 52 points lower.

One thing investors were watching was Federal Reserve Chairman Jerome Powell's semiannual testimony before the Senate Banking Committee. Powell says the Fed needs to see more data showing inflation is slowing before cutting rates. Claudia Sahm, the founder of Sahm Consulting and former Federal Reserve Board Economist, says the Fed is in a difficult balancing act but that the central bank has, so far, brought inflation down without a recession occurring.

Hamilton Lane Co-CEO Erik Hirsch tells investors how they can learn to navigate opportunities in the private market, while Hennessy Energy Transition Portfolio Manager Fund Ben Cook explains why he thinks ExxonMobil (XOM) is a better energy sector pick than First Solar (FSLR). Wedbush Securities SVP of equity research Jay McCanless also joins the program to explain why he homebuilder Lennar (LEN) to Neutral from Underperform.

Market Domination anchors Julie Hyman and Josh Lipton also take a look at some of the day's trending tickers, including Tesla (TSLA), Nvidia (NVDA), Albermarle (ALB), Boeing (BA), and Oracle (ORCL).

For more expert insight and the latest market action, click here.

This post was written by Stephanie Mikulich.

Video transcript

Hello and welcome to market domination.

I'm Julie Hyman that just lift in live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

Here's your headline blitz.

Get you up to speed one hour for the closing bell rings on Wall Street.

We know that reducing policy restraint too soon or too much could stall or even reverse the progress that we've seen on inflation.

The committee will continue its practice of carefully assessing incoming data and their implications for the evolving outlook, the balance of risks and the appropriate path of monetary policy.

Well, he does have to prove uh to foreign leaders, but I think more importantly, he's got to prove to the American people.

Uh and certainly members of his own party.

He's got a press conference that he'll give at the end of the summit where traditionally uh the president talks about the things that have been decided and it presents uh the successes of the summit and we'll be watching carefully how he speaks what he does.

Uh That'll be a big test both for the allies as well as the Americans.

It's a two way short.

You've got people that are shorting it because it's an overheated stock.

Uh They're seeing that.

Wow, this run up is just tremendous.

It's got to come back to earth.

And also now it's a short because it's a hedge to the market.

People are shorting nvidia in order to hedge their entire portfolio and hedge and hedge their tech holdings.

We got one hour to go until the market close.

So let's take a look at the major averages here and given that we heard from Jay Powell that he still seems to be sort of inching closer to a cut in interest rates from the Federal Reserve.

That in his first day of testimony before congress today before the Senate Banking Committee, tomorrow before the House Financial Services Committee, a stock sort of treading water here.

One could say, uh remember, of course, we're getting inflation data that is coming to us on Thursday, but right now the dow uh heading lower after peaking earlier in the session now down about 67 points, the S and P 500 still hanging on to a gain of about 1/10 of 1% as a reminder, six straight day of gains.

If it closes higher today, that will be the 36th record that we have seen for the S and P 500 this year after it closed a record yesterday.

The NASDAQ also closed a record yesterday.

We'll see if it too can hang on to those gains in the last hour of trading.

Also, I wanna take a look at what's going on with interest rates, given that we heard from Jay Powell today.

Uh, we are seeing a little bit of an increase in that 10 year yield to 4.3% still, uh, a pretty low level here.

And let's, uh, take a look as well at what's going on sector wise here.

Today, we've got materials and energy trading, lower financials and consumer discretionary trading higher.

And as for the much ballyhooed dominance of large cap tech that is continuing today, NVIDIA shares are climbing, getting some more positive analyst chatter.

They're up by 2.4% today.

And if you look at the year today chart, not quite at another record today, just below the record close where it was in June, but still up 165% year to date.

We are also shares of Apple, Google Amazon and Meta hired today Microsoft, the only one of those that is not higher on the session, Josh, all right, Julie for more on the markets including a second half outlook and the role the presidential election could play.

Joining us now is John Lynch, Chief Investment Officer Comerica Wealth Management, John, it is good to see you.

So what we did hear from Jay Powell today on Capitol Hill.

Here's how Ian Shepherdson over at pantheon macroeconomics uh summed it up, John.

He said Mr Powell remains reluctant to signal the onset of monetary easing.

Well, in advance scarred, he says by the birth of inflation in Q one.

But reading between the lines, Ian says we think his base case is a September easing.

Does that sound right to you, John?

Good afternoon, Josh.

Yes, I think chair Pell not only scarred by inflation from the past couple of years, but inflation in the late seventies and early 19 eighties, right?

He doesn't want to make that mistake of the burns fed.

Uh But I do think he uh Julie mentioned earlier that he was inching towards the hike and I thought that was a perfect or towards a cut.

And I think that's a perfect description.

I do think the Fed will cut in September.

Uh We've seen weakness in Ism manufacturing, we've seen weakness in housing and now we're starting to see cracks in the labor market for three years.

We've spoken solely of a single mandate for the Fed and now we're finally seeing the second mandate which really gives them the 12 punch to be able to cut in September.

So what does that set up imply then for stocks here?

I mean, as I mentioned, you know, it feels like another day, another record, you kind of shrug at this point, but we're there, you know, we have been seeing quite strong performance even if it's small.

Every day for the stock market.

Does that continue?

I'm not sure.

I think we, we have to see is, is more clarity from the fed, more clarity from the data.

You know, this is a big month.

We had obviously the jobs report, we have second quarter earnings, we have the fed meeting at the end of the month.

Uh, and then Thursday's CP I report.

So I don't think you're gonna see as much as you would from, you know, what we used to call the Humphrey Hawkins testimony, right?

The uh, the eight pressers after each fed meeting is certainly more important I think than the congressional testimony today, uh this week.

So I do think Julie that, you know, we're going to see a cut in September, a cut in December as well.

But after that, that's what the market has to figure out.

I'm not convinced we really want to see more cuts because to the degree we're able to get the federal funds rate more in line with nominal GDP growth.

If you want to think about 3% inflation, 2% GDP.

If we get the federal funds rate at 475 to 5% range, that's probably as good as it gets.

So it's really gonna come down to earnings as opposed to the Federal Reserve as to whether or not this market can keep climbing.

So le let's talk about earnings, John, I'm just curious, what, what are your expectations?

Uh for corporate profit growth, not just this earnings season, but for the year, John, I think the most important thing for this earnings season, really frankly, I don't care what, you know, whether they do 8.5 or 9.5% earnings growth for the second quarter for the S and P 500.

I'm more interested in what companies say about the second half of the year.

We're looking at about again, eight or 9% for the third quarter, but the big number is the fourth quarter.

Uh consensus estimates 17 18% uh year over year in the fourth quarter.

I'm really hard pressed to see that number.

So specifically to your question, I'm below consensus for this year.

I'm at 2 37 50 in operating earnings, the streets about 245.

I'm really hopeful that we get good clarity on guidance for the fourth quarter and frankly the first half of next year, the first quarter of next year at a minimum.

Uh, at which point that would make me more bullish on earnings.

Uh the streets at maybe 275 next year.

I'm at 260.

Uh, you know, we're at 5500 a lot of good things have to happen.

Now, fundamentally, now that we've done so well, technically, and I'm not convinced that earnings will be as high as the consensus currently anticipates.

What about sort of historical trends as well here, John, because there's two things potentially moving in the market's favor on that front.

One is that, uh, well, we saw, uh, the S and P 500 gain almost 15% in the first six months of the year.

It tends to do well in the second half when it's had gains of at least 10% in the first half.

And secondly, it's a presidential election year and we also tend to see um, some gains for stocks accelerating in the second half of the year in presidential year.

So what then do you do with that?

Yeah, technically, technically, it's a beautiful market.

Uh you know, we've seen 5500.

Once we broke through 5250 our technical target was 5550.

We were able to achieve that.

But the mass has to work for fundamentally uh for that number to be justified.

But technically, to your point, looking at the first half of the year north of 10% we identified 10 times in the past 30 years where we've had a 10% plus gain.

Uh And in the second half of the year, we had a similar outcome.

So that, that bodes very well.

Uh As much as I'd love to see 6000 on the S and P I wanna make sure, you know, earnings can justify it.

And to your point about uh the election year, I think it will be really important for investors to focus on what, what the market does the 90 days from August 1st to November 1st because more often than not, that is the, that is the true indicator as to whether or not uh the incumbent or the challenger is victorious.

The market's down.

Uh the incumbent party or incumbent uh president tends to lose if the market is up during that period.

You tend to see uh a different outcome, John A add up, add it up for us.

Give us the bottom line here, you know, for investors who are listening, how do I want to be positioned in this stock market?

John, what are the sectors that, that look attractive to you?

Yeah, bottom line right now, 5550 on the S and P A really good number.

Technically what we're looking at sector wise, we want exposure obviously in technology and and communication services, but I really want to see a particularly new money coming in on a more uh balance basis.

Don't jump all in at once.

Uh Look, look for equal weighted S and P type uh performance.

Uh We're starting to see some traction uh but it's been lagging to the uh to an extreme.

So I think that bodes well for, you know, a a broadening out of participation.

So for example, post debate, we saw energy and financial start to do a little better.

And I think that's really a reflection of a market voting and saying, OK, maybe it'll be a less burdensome reg regulatory environment.

So try to barbell the risk if you will between what we're seeing on the runaway train from technology and communication services, but find some of those uh you know, financials and energy to balance out a portfolio.

John, good to see you.

Thanks for joining us.

Thank you Julie.

We're just getting started here on market domination.

Coming up.

Oil giant BP warning of second quarter profit declines will check in on the stock as well as a few other trending tickets on the other side.

Plus Jay Powell was in the Senate today for the Feds twice annual testimony.

We'll speak to Claudia some later in the hour about the path ahead for rate cuts and at 330 at the latest edition of our series, goodbye or goodbye.

We're breaking down two stops to help you make the best move your portfolio.

Stay tuned, more market domination after this.

Checking in on some of our top training tickers today.

Tech giant oracle has reportedly ended talks on a potential $10 billion server deal with Elon Musk's artificial intelligence start up Xa I.

That's according to the information, Musk's a Ixa I is now buying chips to build a data center on its own.

Instead according to that, those Exxon chairs took a little bit of a tumble when Elon Musk Musk tweeted about this or a about it.

I don't know he tweeted about it.

Um I can't let it go after all this time, I figure that out.

It's fair.

It's fair anyway.

But he still said nice things about oracles you see in this uh tweet here or he just lost patience.

It sounds like and wanted to move faster.

Yeah, I mean, listen, it stocks down today.

But if you pull back this chart, I mean, Oracle has enjoyed a nice run.

It's still up nearly 35% this year and there are plenty of bulls on the street who will argue its position, the public cloud market is getting stronger that you know, Mr Ellison is proving his company's credibility as an A I platform.

So Musk or no Musk, in their opinion.

Nice one this year for Mr Ellison.

Yes.

So this pull pull back is a bit of a blip if you look at it in that context.

All right, moving on BP shares slipping today as the energy giant anticipates weak oil refining output to negatively impact its second quarter profits by up to $700 million.

That that was the headline set this doctrine lower.

They talked about a significant lower refining margins are right down on the value of a plant in Germany, Julie.

It sounds like about $2 billion and in turn, that would have this impact on on Q two earnings.

Yeah, we heard some similar commentary from Exxon yesterday.

Although yeah, although the factors of putting pressure on refining margins here in the US and in Europe are different in Europe, there's more competition for fuel imports from Asia, other parts of the world.

That's not so much the issue here.

But um that German plant where it's gonna see reduced capacity is the second plant after a shell one that's planning a move like that starting in 2025.

So that's interesting here.

Um If you look, I also thought it was interesting.

I looked at BP year to date, the shares are down about 2.5%.

Exxon is up 12%.

But wt I crude has done better than both of them.

So we have seen oil sort of outpacing what we have seen from energy stocks themselves.

BP reporting by the way, second core results, July 30th.

So we'll get the full numbers, then you will.

All right, moving on.

Boeing has announced its second core delivery numbers and saw the total number fall over 30% year over year.

Yahoo finances pros to Iranian joins us now to break down the numbers pros.

So not surprising that we saw this number come down, but it's reflecting a changing reality and you know, you know, the number, uh overall the 136 deliveries down 32% compared to a year ago overall.

Uh the 73737 max program 70 deliveries in Q two down from 100 and three a year ago.

So that's again, a 30% decrease there, you know, and, and recall that Boeing had a 38 plan plan per month uh delivery target, uh with the, with the stretch goal of 50 they're nowhere near that and it's probably not gonna be any time soon before they hit that again.

Given the recent issues with that plane.

Also another plane, the, the Dreamliner uh nine deliveries in Q two down from 20 year ago, that's been the source of a couple whistleblowers that we've seen for that plane.

So, you know, they're just ad mired in some issues here with production and obviously the government's on them for that and it should be just like, you know, we'll see what happens with them, right.

And we just got the news of the criminal settlement yesterday.

We also, and this is more of an optics story maybe than a fundamental story.

But there was a United flight that was a Boeing plane that lost a wheel, which I guess is a fluke thing that happens sometimes but, and optically with everything else going on, it's just not helpful.

Yeah, it was a 30 year old.

It, it was a 757, I think, uh United Plane, I mean, 30 year old plane tire falls off, you know, any of the year.

This is just a thing that happens.

But given all the issues Boeing is having right now with safety and, and just quality issues, it just adds again, more, more fire to this sort of.

Um, um, well, on another note and something else that you cover closely obviously is Tesla, Tesla stock has been on a winning streak recently, but in terms of market share, according to some new information from Cox Automotive, not so much on a winning streak.

Well, a preliminary report came out that showed that Tesla the EV share Tesla's EV share in Q two in the US below 50% for the first time ever.

Uh at 49.7% I believe uh preliminary results here, they didn't say who exactly took share from them.

But yeah, it's another sort of peg and news peg that's not so positive for them.

But also it, it talked about how EV sales are growing in this country.

And we're seeing other automakers perhaps Ford Volkswagen, Hyundai, Kia, they're growing their EV sales.

So that's a good thing for the overall pie.

But for Tesla, you just couldn't maintain that massive uh just market domination.

Uh It's OK. That's right.

That's right.

And, and you know, and this also, this also tells us why Tesla has been leaning into all of the other stuff that is trying, you know, the Robo Taxi, the A I the, you know, all of the other stuff because if it just was depending on being dominant, having market domination, if you will, um then that wouldn't be enough for shareholders going forward.

Right.

Right.

It's the other place.

It's, it's like you said, the A I Robotics and increasingly energy storage, which was noted in their out of an alignment, their Q two delivery report.

Oh, we, we deployed 9.4 gigawatts of energy deployments.

Energy storage is a big deal gonna bring about that later this week.

Uh So, uh it's a high growth, high profit margin area of the business that many are seeing as, as maybe a catalyst for them.

Beyond Q two A deep and a show name, wordplay.

That's a professional.

That was the best.

It could be a tr I don't know only if we ask for it.

All right, thanks, appreciate it.

Well, Federal Reserve chair J Powell, speaking carefully about the path of rate cuts saying he did not want to send a message to markets, but he did suggest that keeping rates high for for too long could have negative effects.

If we loosen policy too late or too little, we could, we could hurt economic activity if we loosen policy too much or too soon, then we could undermine the progress on inflation.

So we're very much balancing those two risks and that, that's really the essence of what we're thinking about these days.

Joining us now, Claudia Sam Sam, consulting founder and former Federal Reserve Board economist Claudia, it's good to see you as has been written about a lot recently, including by you, there's that balance of risks, but maybe the balance is shifting.

Do you think that um that Jay Powell adequately captured that in his uh in his testimony today, JP L did a great job today communicating, this really is one of his strengths, getting a clear message across and it's a difficult one.

The, the most important balancing that we've seen is inflation has come down.

That is going to be the reason when the Federal Reserve begins to cut interest rates.

We've made a lot of progress.

We're not there yet, but we've made a lot of progress, a potentially worrisome sign and yet there is, it's important what's going on in the labor market.

And he was very clear multiple times, the labor market has cooled translation from fed speak, the inflation risks are not coming out of the labor market.

We're not the labor shortages, we're not the, you know, the, the price pressures that is so important and yet we have come out of this cool period in a very strong place, an unemployment rate just above 4%.

That's really good.

Right?

So we're still balancing risk, but we are balancing risks in a place that probably was unimaginable a year ago.

Like it was supposed to take a recession to make this kind of progress, which would not have been the way to go.

Claudia.

I I um when you are watching the labor market, what data, what specific metrics are you watching?

Claudia?

I'm curious everything.

Uh it, the labor market is so essential to what's happening with uh what will end up happening with American consumers and that feeds back into the, the labor market and then that's the whole economy, right.

So we, it's just so essential, the tricky thing when watching the labor market is you have to look for the subtle signs, right?

When you talk about the risks that are, that are brewing because by the time we are having hundreds of thousands of people losing jobs at once, then it's too late for policymakers.

Like the Federal Reserve has tools that take some time to work.

They don't want to wait until that point.

Right.

They want to see the signs, the, the more subtle signs.

And that means you have to really get down in under the hood and look at what is, uh, could be going in a good direction or a bad direction.

And that's the stage we're at because things are good in the labor market.

There are some signs of weaknesses and yet there's nothing that is, you know, the alarm bell is sounding right now thankfully, but you're, you know, keeping an eye on all the pieces.

But, you know, so everything from unemployment to payrolls to who has those kinds of jobs.

And for this cycle, it's been so unusual to really look how we are in the, you know, healing process by getting back to something that looks like normal has been important.

Um Claudia, since you're here.

Of course, we have to talk about the Psalm rule.

I think we, I, I know you, you probably don't want to talk about it every time.

But it, but it, you know, it has been creeping closer, this, this palm indicator that you developed.

Um, looking at the three months a month average change in the unemployment rate, um, as a potential indicator of recession as it happens.

Our Jared Blicker wrote about that in this morning's, uh, Yahoo Finance Morning brief newsletter and he pointed out that if either one of the next two unemployment prints is 4.2% or more, it could trigger the.

So rule and show that potentially that's a recession indicator.

How, how are you currently thinking about that?

You will notice the answer to the last question was not, I'm just looking at the song rule.

Uh It is important to look at the changes in the unemployment rate.

That is an important dynamic.

It has been very consistent with the, with the recession indicator does is it's trying to get at this.

What, what's the threshold for that increase?

That is that happens right inside of recession.

So recessions already started.

It's not a forecast.

But what can we say very reliably in the past and we're getting close to that threshold now, it's a, it's a pattern that is held up, held up very well in the past and I do not discount it.

And yes, these increased the unemployment rate, you know, clearly you're getting to a place that is uh consistent with recessions we've seen and perfectly so since the 19, since 1970.

So we don't want to discount it.

There have been some very unusual features of this cycle with uh the labor force.

We had millions of people drop out of labor force when COVID showed up very disruptive.

In the past few years, we've had millions of immigrants come in and help build those labor shortages.

And one reason unemployment rate goes up when you have a lot of people coming in to look for jobs, it takes new job seekers some time.

It's good.

We've got them that's gonna help our productive capacity and ability to, you know, meet demand down the road and yet for a while it can temporarily increase the unemployment rate.

So that's going on under the hood.

We don't know how much of that's going on versus there's just less demand for workers.

And that's, those are the signs that typically would feed into a recession.

And Claudia, I'm just interested.

Why did you create, um, the a rule in the first place?

What was sort of the motivator there and to the extent that it has worked that it's, it's reliable.

Uh Can you quantify that Claudia for what, what's the, what's the batting average there?

I did not get in this business to like, uh pontificate about recessions and if they were here coming, no, the, the reason the indicator exists is I had a policy proposal to start fiscal stimulus, send out stimulus checks and in particular, as soon as a recession hits, so have kind of that, that front line defense against recessions to help people and get a t economic condition.

So it just goes out the door when it's time and that, that was the reason and that's why it needed to be simple, wants to be legislation and it needs to be highly reliable because it was to help drive policy.

And it was designed for fiscal policy which can act very quickly having it in a discussion about what should the fed do?

Is it time to cut interest rates?

That's not what that tool is thinking about because fed policy, interest rates, they take more time to work.

You would never, if I were to design an indicator for the FED, it would not be one like the Psalm rule because it's much more in, in the moment.

So Claudia, to be clear, you think the fed should start cutting in September, right?

You don't think they should wait for the Psalm rule to be triggered.

The fed.

I think the fed has a very good case to begin a gradual reduction in interest rates based on the path of inflation itself that we have made a lot of progress.

And you want to be able to do this gradually and the fed should be out of the way, so to speak.

By the time we get to the 2% target.

And it's to me, it's very clear looking at the data, looking through a lot of the noise that we had to be in this year that where we are headed.

And we want to do this gradually.

And I think the risks are building particularly now that the, that the uh labor market has showed some, then the labor market has quote normalized.

Like we're really kind of back to where we were before the pandemic, which was a very good place for the labor market and inflation has not totally but largely normalized.

It's made a lot of progress to 2%.

The one thing that has not begun to normalize is the federal funds rate.

So, you know, getting all of that synced up together is the the Feds next challenge.

And I given what we know now it's appropriate for the Federal Reserve to get going on the cuts.

Claudia always love having you on the show.

Thanks for making time for us.

Thank you.

Coming up.

It's the latest edition of our series.

Goodbye or goodbye.

We're breaking down two stocks to help you make the best moves for your portfolio.

Stay tuned, more market domination after this.

It's a big noisy universe of stocks out there.

Welcome to.

Goodbye or goodbye.

Our goal to help cut through that noise to navigate the best moves for your portfolio today, we're taking a look at the energy sector in the face of economic and political uncertainty.

I'm here with the Energy Transition Fund portfolio manager, be cook and it's good to see you.

Good to see you being here.

So let's get to the stock you like that is Exxon here, one of the energy majors, of course, it's been moving somewhat into the energy transition in the past few years, the stocks up about 7% over the past year.

So that's the chart that we're showing there.

And as I mentioned, it, it's integrated so it's produces oil refines oil and makes it into other stuff.

And then it also has some, a bit of a renewable business.

Yeah, that's right.

You know, like the integrated business model because it affords flexibility to generate consistent financial results through the cycle.

The ups and downs got you because it has that sort of diversification.

If one part of the business isn't doing as well.

Exactly.

If commodity prices are high, they're making money in the upstream business.

If commodity prices are low, their feed stock, they may be making money in the refining business.

So tends to balance out the ups and downs the business cycle.

And so, and when you look at the sort of history of how they've managed the business cycle to your point, right.

You think they've done that pretty successfully?

Yeah, we think they have and more recently through acquisitions and through the drill bit, they've done a great job at growing their upstream business, just this earlier this year, they closed the pioneer natural resources acquisition, a very sizable upstream acquisition in the Permian Basin.

But they've also, uh you know, they've made tremendous success in discovering oil resource in Guyana.

And we're starting to see the fruits of that uh those discoveries now with significant production volume growth.

And you think they'll have a favorable outcome in Guyana because of course, there is now a quest by Chevron to buy Hess Exxon has been sort of if not protesting that acquisition, at least sort of exercising its ability to protest that acquisition.

Yeah, that's an ongoing issue for both companies, but we don't believe that's an impediment to getting the deal done.

The Chevron has deal and we think it's ultimately an area for future growth for Exxon as well.

And then also when you're talking about any of the any of the oil majors, you talk about cash return, that's a big part of the story here.

And Exxon has been pretty steadily doing that.

They are obviously a household name, but they are probably best in the business at returning capital to shareholders.

And it, you know, it's a function of capital discipline, it's being measured in terms of spending.

But with the cash that's being generated, they first pay down debt and then ultimately return cash in the form of dividends and share repurchases and they're doing that um to to a great extent today.

So we really like the aspect of the cash return profile for Exxon.

Now, whenever we talk about any of these stocks that are guests, like you have to talk about what could be a potential risk here.

Sure.

And for there you're looking at the sort of more macro environment as a potential risk.

Yeah, we are, you know, uh, Exxon's fortunes are tied to the level of commodity prices, both crude oil and natural gas.

And, you know, we were, we to see a weakening, weakening in the global economy and a weakness in commodity prices.

It would certainly have an impact on their upstream and even their downstream results.

So any kind of weakness to the global economy would certainly have an impact on the company's equity performance.

Do you see that happening at all in the coming year?

No, we've got an accommodative fed.

We have global monetary authorities that are acting almost in concert to ensure that their economies are stable and growing.

And so it's not likely that we see weakness in crude oil prices in the near future.

All right.

So that's the stock you like, you hold it in your portfolio.

Let's talk about the stock you don't like as much and that is for solar.

The stock has actually done quite well over the past year.

It's up about 19% here, but this is one that maybe is going to go either way, depending on how the election goes.

Yeah, potentially it could, you know, we have the ability in managing the Hennessy Energy Transition Fund, the ability to invest in both renewables as well as traditional hydrocarbons.

And we've chosen to deemphasize the exposure to renewables.

And this is the one of the primary reasons a company like first solar obviously benefits from a domestic supply chain.

Uh but there's, there's protective policy measures in place for uh you know, tariffs uh that help them generate revenues on their solar panels, they benefit from investment tax credits.

These are all things that depend heavily on policy and depending on the outcome of the election, those supportive measures could potentially evaporate on them.

So it's a risk we prefer not to take got you.

And then if we are looking at other um the the sort of bigger picture here, the energy transition does seem to be sort of losing some steam.

Yeah, in our opinion, you know, there there is an uneven pace of transition.

A lot of it is, is the uncertainty of policy across geographies, but it's also uh issues uh associated with a reliability, you know, solar panels obviously can only generate that power when the sun is shining.

And so there needs to be some sort of backstop for power generation, either uh a hydrocarbon based solution or a battery.

And right now, battery scale technology is just not there.

And the other issue um really is uh you know, cost cost advantages and if you add the cost of batteries or some other solution on top of solar, obviously, solar power becomes less attractive from an economic standpoint, right.

Although to be fair, the cost of panels has come way down.

It has in comparison to where it was just a few years ago.

But I guess you have to think about that total cost that you're referring to, which is a good point.

Indeed, let's also talk about interest rates.

This has been sort of an obstacle for the renewable industry, but you know, uh rates maybe are gonna come down at some point in the future.

More than likely they will, there is probably a non zero chance that interest rates uh stay where they are right now or potentially go higher.

But it is a risk to the company.

If they do project development costs, make up a significant component of the return profile for investors.

And if interest rates go higher, that cost of capital eats into the returns of the project developers, we've seen it happen with wind, we think it potentially could happen with solar.

Another reason for us to sit on the side for solar.

Gotcha.

So just like we talked about the risk to the upside for Exxon.

Let's talk about the risk to the downside here.

We kind of referred to it sure that interest rates start to come down, right?

Or that the energy transition starts to pick back up.

I assume also if you don't have a change in administration maybe that would be more positive, correct the status quo in the executive branch of Biden election victory, victory would certainly extend.

I think the favorable tax credits that the company enjoys and the tariff policy, the protective tariff policy that we see.

On the other hand, if we see a Trump victory, many of those supportive measures could, could go away and would be obviously be a detrimental trend for first solar.

Again, those are risks that we prefer not to take with our portfolio.

Gotch.

You want something a little more reliable in your view like Exxon?

Got it.

All right, thanks so much, Ben.

Appreciate it.

And you don't have a position for solar.

We should mention to our viewers.

All right, thanks for being here.

Appreciate it.

And thank you so much for watching.

Goodbye or goodbye.

We'll be bringing you new episodes at 3:30 p.m. Eastern.

There are just over 20 minutes left until the closing bell.

But today we're looking at how to navigate the private markets with the Yahoo finance playbook.

Lack of liquidity has raised concerns for private investors, but our next guest sees some opportunities ahead.

We're joined now by Eric Hirsch, Hamilton Lane, CO CEO Eric.

It is good to see you.

So maybe just start high level with us, Eric, you know, um when you're talking to investors, clients about private markets, um what are you telling them, Eric?

How do they look?

Well, first of all, happy to be here.

So thanks for the opportunity.

I think what you're seeing is tremendous amount of flow particularly from retail investors coming into the private markets.

I think what we've all been seeing, seeing and hearing for the last couple of years is reality, which is the public markets right now are dominated by a very small number of high performing stocks and that is carrying all the indices.

Once we get past that, the picture a lot less attractive, if you think about where jobs are being created, where growth is occurring in the economy, it is by and large happening in private companies.

And so the way to access that is actually coming through the private markets and the performance has been there, the opportunities are there and that's why we're seeing the flows of capital like we're seeing them and what's happening to the valuations there.

Eric because as you say, in the public markets, yes, they're dominated by a few names.

But that means that we have been seeing a lot of records for the major averages in the public markets.

But on the private side, there haven't been that many deals right there haven't been a lot of exits.

So I wonder what that picture looks like.

I think private capital has been a little more patient and so I think what you're seeing is deal doing is there, it's not at record levels or anything close to it.

I think the markets are kind of adjusting to a lot of instability right now.

So rate cuts coming election cycle coming.

And I think the result of that is that you've got buyers and sellers kind of squaring off against each other.

Questioning is now the time that's beginning to and I think the sort of the pictures are becoming a little bit more clear and so we're expecting to see and are beginning to see the volumes picking up on the valuation levels.

I think the story for the public markets is a lot less attractive.

You have a tremendous number of unprofitable public companies trading at really high multiple still and that has not yet sort of flushed out.

I think again, sort of the rise of the these sort of big tech businesses are kind of pulling everybody along with them.

That's not what we're seeing across the private market segment right now.

You know, one data point, I'm curious about Eric and I bet you have it, which is, you know, when we talk about uh the retail investor, your average retail investor, what is their private market allocation, Eric?

And has that evolved?

Has that changed at all over the last few years?

For the vast majority?

The answer is simple, it's zero.

They have not really had a good opportunity, good access point, right, price structure, right, legal structure to access these markets by and large.

It's basically been 50 years of this asset class dominating by institutional investors and that finally is over.

Uh there's now a multitude of products that are attractive that are more easily available.

And the technology changes are coming to make that access point even easier in the form of things like tokenization.

I I know you're a big proponent of tokenization, right?

Uh And I'm, I'm curious if you do see more of that in on the private side, you know, will, will individual investors, retail investors still have to have, you know, will they still have to be accredited?

Will they still have to have a certain amount to invest?

For example, how will all that shake out?

Yeah, I think think it, I think we think about tokenization more around kind of an access point.

So think about sort of the private markets kind of heretofore have really been about writing a check and no one wants to write checks these days, we want to use something like an apple pay.

And so I sort of more equate that the token world to more of the apple pay just simple ease of use.

That is not structurally changing, kind of who the investor type is.

It's really more we kind of meeting the investor where they are, which is you want to operate in a digital passport environment with a digital wallet, you wanna make sure that you're sort of tracking things again in that more digital way.

And so tokens are the way to go about doing that.

So I think it's just simple and more of an easier way to transact Eric.

I wanna get you out of here on this.

Let's say, you know, you're a retail investor, you're listening to this, you're curious, you're like, you know what, maybe I will shift uh somewhat from, from public to private.

What are, what do they need to know Eric about that just in terms of, you know, some big picture themes in terms of duration, time, horizon volatility.

Well, I think it's interesting, I mean, most of the capital that we're talking about for the retail investor is not money that they're gonna spend on groceries next week.

It's really about capital that people are putting away for retirement.

So by definition, it's already long term capital and we would say investors should adopt that long term mindset.

So if we look at the institutional world today, on average, about 15 to 20% of their assets are in the private markets, not alternatives, just the private markets.

And so that has served them well, typical institutional investor has a higher return than the typical retail investor again because adding that kind of higher return mix, but you're right duration, longer, less liquidity.

Uh But again, if we're talking about retirement assets, I would think that investors would be happy to trade off things like longer duration and liquidity for much, much higher returns.

If this is capital, it's already gonna get locked up for a long time, Eric.

Thanks a lot.

Appreciate it.

Thank you.

Coming up NVIDIA shares climbing today.

Thanks to one analyst raising their price target on the stock up next.

We've got some of the top analyst calls of the day when market domination returns time.

Now for some of our calls of the day, key bank capital markets lifting its price target on NVIDIA does remain overweight on the stock as it sees NVIDIA continuing to quote dominate one of the fastest growing workloads in cloud and enterprise here.

The company raising its price target to $180.

You see about 50 bucks above where it is today as NVIDIA climbs, that doesn't reach a new record.

But basically it seems like it's that time of year where a lot of these different analysts do sort of some supply chain checks, try to figure out what's going on and it's actually a bigger note on what's happening in the demand market for chips.

NVIDIA is just one of the names that's mentioned.

Yeah, he did some dig into your point.

This is this is key banks, John and and he says despite the impending launch of Blackwell second half, not seeing any signs of demand pause, right?

Investors like the sound of that says interest and demand in GB 200.

Nvidia's super chip greater than we initially had size as such.

He told his clients he thinks current demand for GB 200 should support data center revenues of over 200 billion in 2025.

His numbers have been pretty consistently big here and that, you know, there have been questions around that demand pause that he addresses.

I also thought he was interesting.

He said demand for the iphone 15 is getting stronger.

That was the other thing he found in his channel checks as well as build expectations for iphone 16.

And he talks about A I a little bit around that.

So that was, you're waiting now, you're waiting for Tim Cook.

Take the stage unveil that new 16.

You're waiting.

All right.

Albemarle, that's another one shares.

Slide.

Check that out after U BS trims its target on the stock selling lower lithium prices.

Wow.

Down about 8% here.

Uh So stock did get hit team at U BS.

They did maintain the neutral rating, so they didn't switch that up, but they did clip their target.

They go to 109, to reflect our view of lower lithium prices.

They think the company will post one of the weakest earning per share growth rates and chemicals in 24.

Julie.

Yeah, those album Earle shares uh, have been slumping.

They're now at their lowest since uh 2020 they've consistently been the worst performing stock in the S and P 500 today with that 8% drop.

Um, they're also down about 36% or so year to date.

So we definitely have already seen weakness in the anticipation of lithium pricing being a headwind for the company.

And uh let's also talk about one final one here that's Wedbush upgrading Lear from underperformed to neutral today.

The notes citing the stock price moving through $144.

That's the price target that had been in place from Wedbush.

And we've got the analyst behind that note, J mccanless, who us now, Wedbush Securities, Senior Vice President of Equity Research Jay, it's good to see you here.

So you're not saying everything is fantastic for, for Lear, it's basically that maybe it is uh you know, now pricing in a little more realism perhaps for, for the outlook.

Yep, thanks.

And I, I think that's, that's well said.

Um you know, we think the entry level buyer um not just for Lenar but also for, for Horton LG I and, and me where we're still underperform rated um that, that buyer is having a real struggle with affordability and the builders are trying to, to bring prices down, provide more incentives uh to make these homes more affordable.

But right now, like you say, um the, the stocks have certainly priced in, I think a rougher environment in the back half of the year.

But uh for some of these names, we still think there's some downside but uh Lenar moved through our target.

Um And we also, what we talk in the note is uh they've announced publicly that at some point they're gonna be spinning off some of their land assets.

Do you think that could be a positive catalyst for the stock?

And, and timing has not been announced by Lenar?

But we just wanted to highlight it as, as a risk to uh people who might be on the short side of this trade.

And, and you did talk about that, Jay this, this potential catalyst, the land spin off And as you, as you noted, uh company isn't offering details.

But what, what could that uh potentially mean for Lenar?

So what theoretically what lands spin and that's our name, not theirs.

Um What lands spin would do is create a just in time lot factory um for Lenar when they have a buyer, when they want to start a spec home, they could essentially order a finished lot ready to go.

Um And that would allow Lear to focus on, on what it does very well, which is build homes um and allow other outside entities to, to focus on the land development side.

And um his land development has just as many challenges I would say is, is actually getting the homes built.

Is this a a model we have seen the other homebuilders employ uh successfully?

Yeah.

Um Dr Horton owns uh a um majority stake in a company we do not cover called four star.

Um four star performs kind of those same functions for Dr Horton now.

Um And it wouldn't surprise me in the future if some of the other builders decided to go this route.

Uh because what we have seen is that the larger builders um want to have more of what we call option lots rather than owned lots on their balance sheet.

Uh They believe and, and have demonstrated, I think in, in the past that having less owned land on the balance sheet improves returns and improves returns on equity.

Jay just look at the coverage universe, you know, neutral lenar, neutral pulte neutral KB home underperformed Dr Horton in broad strokes, Jay, why the, you know, kind of skepticism still about the sector?

Yeah, I think it's the affordability challenge I mentioned earlier, but also, um we've called out the fact that new home inventories um are at at multiyear highs now.

Um It, it feels to us like the builders may have started a few too many specs at the beginning of the year when mo most people thought mortgage rates were gonna be going a lot lower than uh the seven and change where we're sitting today.

So I think it's a combination of a little too much supply on the market and again, the affordability being stretched.

Um And I would say also in terms of, of what we're what the street is expecting for gross margins, uh It just feels like to us, consensus estimates are still too high for especially some of these entry level builders that run or perform rated on.

Uh There seems to be a lot of competitive discounting in the field and the builders are starting to throw in add ons we haven't seen in a long time like um putting blinds in the house, furnishing the full suite of appliances, et cetera.

So lots of those things and including mortgage rate buy downs we think are gonna be gross margin negative uh and might push consensus estimates lower.

You know, Jay.

And there had been some talk about maybe some of the builders backing off of those a little bit, but it sounds like you don't see that happening.

No, I I think with, with 7% plus mortgage rates.

Um again with, I think a little bit of maybe a little extra, too much supply in the field.

Uh It doesn't feel to us and, and we, we, we try to take a look at as many of the online promotions that, that our builders publish.

Uh if anything, it seems like the intensity and, and maybe the dollars involved in those promotions have moved up a little bit, especially in the last 30 to 45 days.

So may slow down at some point on once.

They, once they've moved through some of this inventory, but at this point, uh it doesn't seem like it's slowed Jay.

So you got plenty of skepticism about names in your coverage.

Reverse, but give us what you like, Jay.

What, what do you tell clients is a buy here.

Um Yeah, builders.

First source is a product name, the tickers Bldr.

Um That, that's a name that if that, if we were to see a pullback in mortgage rates or, or something else that turns sentiment positive on, on single family construction, uh that's 75% of their business is single family.

And, and we think the purest play that we have on, on construction right now.

So, uh we, we'd highlight that one on the product side.

And then um we do have one small cap builder where we have an outperform rating.

Uh that company LNC the Tickers LSE A.

Uh And we feel like it roughly 50% of book value.

Now that, that, that's way too cheap for, for that stock um that the builder focuses on um mainly on Florida and Texas right now and also has some California exposure.

Jay.

Always good to have you on the show, my friend.

Thanks for joining me.

Thank you.

While we're wrapping up today's market domination.

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