The last few years, as you know. Is value back . Its hard to say whether its back yet. I mean, its been probably three weeks where the value has started to reassert itself. But after five years of underperformance of value versus growth, the spreads in valuation are at provocative levels. Cheap stocks are as cheap as they get. Expensive stocks are reasonably expensive. And that spread has widened to the point where in the past, if you tried to capitalize on it, you would have been really wellregarded. Josh, yeartodate, value outperforming growth from the february 11th bottom, which, by the way, we mark the onemonth anniversary of today. Energy is up 12 , industrials up 10 . Financials are up up 13 . Is this the start of a broader trend . Well, i think if it if the trend of growth substantially outperforming value continues for much longer than it already has, it would be an almost unprecedented length of time through history. So to some extent, just on a mean reversion basis, you think about the rubber band, as far as its ever been, what i wanted to ask you, rich, im curious your thoughts, the trat additional value stocks in some cases are the most expensive stocks in the market. So areas like consumer staples, nothing cheap about them. Utilities, you could make the argument are not cheap. And typically they are. What does that say to people who are trying to capture value through an index approach as opposed to stock picking . Are they in trouble if they end up in the wrong sectors . Well, its always important to understand whats creating the value. In this case, its been this massive super cycle in commodities and Capital Spending, which has now basically imploded. And so whats gotten cheap are commodity companies, energy companies, the suppliers and Service Companies that service those. The lenders that lend into them. And some of the industrial cyclicals that provide parts and materials to that sector. And i think in every value cycle, its different. So if you are going to try and say sectors are value versus looking at specifically what is value, this time, value is financials, energy, commodities, basic materials, industrial cyclical. Weise, it raises an interesting question. When people look at the destruction and devastation thats taken place in the energy space, they say, okay, yes, theyre cheap. But theyre real cheap for a reason. And im not sure theyre coming back in any meaningful way any time soon, once the Short Covering has ended. And maybe today is part of the story. And its running its course. Financials, though an interesting different area when it comes to that bird. Financials are. And financials, because even though their earnings models have been significantly impinged, by, for example, dodd frank, theyre still ridiculously cheap trading at 08 levels, which is where frankly they thought they were going bankrupt. In terms of energy stocks, some will come back, some will go bankrupt. So you have to be very selective. Cant go out and buy group commodities. Rich and i were talking about this earlier. I dont regard a lot of commodity stocks as values. I dont regard them ever as value stocks, because its such you know, theyre so heavily weighted upon what capacity is out there, what producers are doing. And so forth. And then youve also got the cycles. So i would stay away from those. Energy, though, there is definitely some values there. Barrons, this weekend, guys, im sure all of you saw it, asking the question whether value will return in a meaningful of way. Rich, its an article in which youre quoted in, in which you say its hard to tell yet, sort of the point you just made. When will you know . How long do you have to wait before you really become a believer . Well, look, normally what causes the cycle to turn is the final capitulation when you say were in recession. Now whether we actually get to recession this point in time, we clearly are in recession in the commodities and sit big ticket Capital Spending items. And so the question the difficult question is this the worst it gets . And you dont need a rebound in those for the value cycle to start working. You need an end to the deterioration. And i think were very close to that. Just look at things like the rig count. The rig count in the United States has fallen from 1,400 rigs to 600 rigs. Thats a pretty big negative factor in economic activity. It cant fall by another 800 rigs. There is not another 800 rigs to fall. And, in fact, the rig count will probably bottom out somewhere close to where it is today. So once we get that kind of sense that were not going to have these incremental negative pieces of news weighing down on the economy, thats when youll know its turned. And thats probably over the next six months. Hang on. I want to hear from pete. We havent heard from pete yet. Near the end of the deterioration, those are the words that rich used, youve had people last week start to come out of the woodwork now saying oil has bottomed. You saw the big pullback in some of the financial names over the last many months. Now some people say, okay, maybe jamie dimon put in the bottom, because those stocks have rebounded significantly since the day that he bought jpmorgan shares. Do you buy it . I would buy into it, if, indeed, we hit the bottom in oil. I dont know whether we have or not. I think where we find ourselves now is where the energy space is moving into a different area. Different range. We were talking about 25 to 35. Now maybe it moves up a little bit, scott. Maybe its going to be 35 to 45. If thats the case, then i think its much more of a comfortable feeling about the dash for trash, as those energy names, a lot of them we put out there. There is still debt there. Weve got to see oil continue to make this rebound. The xle today getting dragged down immediately. You look at the rest of the market, relatively flat, but oil down three or four percent, pulling down the energy space once again. The value growth question, though, i still want to go back to that for a second. Google, apple, why not have both . Why not have value with growth. I mean, i never liked to take either out of the equation. I want both. And if i can find both, and i think there are many names out there, but technology i think is the best space. Youve seen that the socalled fang stocks, for example, which had outperformed and now underperforming. Only facebook is the one that continues to perform relatively well, and even it is up only a couple of Percentage Points yeartodate. Let me ask you this, rich i was looking at google before. And you bring it up. Google selling at what, 22 pe 18 forward. Okay, on this year. So 50 premium to the current s p multiple. Yet the bottom line was growing at 10 . Do you regard that as value stock . You know, what we wind up trafficking in is things that are more extreme value than that. I cant tell you that i would not be interested in google. But if you look where google was couple years ago. It was a 12 forward multiple. It was a 12 forward multiple net of a big amount of excess cash on its balance sheet. And you were effectively this is the time when people were completely discounting googles ability to be successful on the mobile side and that apple was just going to win everything. And you got that for free. Thats real value. I think googles fine. But i think when you talk about some of the banks, some of the energy, some of the industrials, youre talking about companies that are trading at multiples of six or seven times what they should be earning. What they will be earning when the environment normalizes. Thats true for big banks. I think its true for energy companies. Its not true today. So but thats when you will maximize your return. If you wait for it to be true, if you wait for the bottom everybody on the bottom set. On that note, lets talk about one of the stocks you do like in the area in which you just spoke. And thats citigroup. Make the case. So citigroups trading at about 70 of its tangible book value. That is quasi bankruptcy level. Thats the level that it traded at in the financial and depths of the financial crisis. And citibank has seen its earnings rebound from a negative number to they made around 17 billion last year. Theyre supposed to earn five and a quarter a share roughly. The stock in the low 40s. So youre talking about an eight current multiple, and people dont like it, because they think that the companys return on equity is impaired by the regulatory environment. The reality is, they have done a spectacular job in recovering to a reasonable return on equity. Especially if you consider some of the trapped capital thats trapped because not because of regulation, but because of their own tax loss carry forward. Because of their deferred tax asset. If you back that out, its already earning a incident return on equity. And theres up side, if it Interest Rates happen to go higher. So to me, this is a nobrainer. You get to collect your 10 , 9 return on equity, which youre buying at 70 cents on the dollar. And you have a free option for the company to earn substantially more money, if Interest Rates go up. The day dymond bought, that seemed to mark the financial space. What did you think when you saw that news . Was it a meaningful event for you . As an investor . If you think about the point in time that he did it, he did it when the when there was crisis around the Energy Portfolio of these banks. It was it was a thinking, oh, no, here they go again. Theyre going to finance the biggest disaster of a sector as they always do. And he was making a very compelling point, which is, if we had the loss kind of loss ratios in energy we had in the depths of the last oil price collapse, it would barely make a dent in their quarterly earnings. And he is stepping up and saying, im going to put my money where my mouth is. So, yes, its definitely compelling. The other area i want to get to one more stock before we go to break. That being murphy oil from the energy space, as we sort of look at where in the patch theres value. Why this one . Well, murphy is interesting. Because the first thing that happened is that the Major Oil Companies held up much better than the independents, for exactly the reasons mentioned. There is less leverage on them. And youve got to be very, very concerned about the bankruptcy risk in companies when you dont know what the Short Term Energy price is. Murphy was sort of one of these in between companies. It fell sharply, as a levered company. But it it doesnt have the imminent bankruptcy risk. So when you compare murphy and its very interesting, because it never got the high multiples that some of the highflying Fracking Companies got. And even today, murphy sells for like 8 a barrel of reserves, you take eogs and the pioneers. Theyre still at 25 a barrel of reserves. Even after they have fallen. So there are big mismatches where you can if you can just take a look, you can see some real valuation. Its amazing. You look at the performance of murphy, both yeartodate and then over the last month, its stunning. I hope you bought it before it started to go up. So its up 40 in a month. It is. Murphy bottomed right at the time that the pressure was the greatest on the independents to raise capital, dilute their shareholders, and there was uncertainty. And they havent had to do a capital raise. But the fact that some of their peers successfully raised capital, all of a sudden took some of the pressure off. And this was one that had a very small bankruptcy risk, but was priced as if it had a big one. Yeah. Incredible move in that stock. All right. Heres whats coming up on the Halftime Report. Barrons says one retail stock could rally 30 . I love the smell of commerce in the morning but does our desk think it should be on your Shopping List . Plus, the pay debate. Show me the money chipotle turns up the heaten its executives. Time to pay to Stock Performance. Should others follow suit . And, Value Investor rich pzena is giving us his best new stock idea. That and more ahead on the Halftime Report. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Welcome back to the Halftime Report, Starwood Hotels receiving an unsolicited bid today, potentially disrupting marriotts plans. Our susan lee is here with details. Hi, scott. Lets show whats on the table. Offered 10. 8 billion, and stock bid to buy up Starwood Hotels and resorts, which represents 63, 74 a piece. And that would have created the Worlds Largest hotel group in a deal still endorsed. The board says it would carefully consider the outcome of these discussions with this new consortium bidding. Who is this new bid coming from . Being led by china. The Group Includes jc flowers. They are offering 76 and all cash bid, which represents a significant premium to marriotts offer. So who exactly are they . They really paid up 1. 95 billion for the waldorf astoria two years ago. The company also reportedly bought up Strategic Hotels and resorts from blackstone for 6. 5 billion. And then theyre a diversified group so they are an Insurance Group as well, bought occupy fidelity for 1. 6 billion. And you throw in stakes, of chinas biggest, like icbc, european insurers and also under their umbrella, asset managers, you name it. This company is only 12 years old. And it was started by chairm chairman wey with 60 million back then. Getting an insurance license is not easy, a heavily state regulated sector. And i should point out that he is married to the revered chinese leaders granddaughter. So there you go. Thats the new bidder for starwood. Back to you, scott. All right. Thanks so much. Weise, whats the deal here . First of all, that makes it a lot easier to get a license. So there are two trades here. Meaning there were connections. Right. The first trade is, this is part of the devaluation you want. Which the Peoples Congress came out and said, its not happening. That came out of there. So put that trade off, one of the most trades out there. This is a legal way to get money out of the country. Buying assets, buying oil. So expect to see many more m as. As a matter of fact, buying part of pbr, petrobras, one of their sub acid areas. On the cheap. Exactly. So if the current devalues by 34 , think about it this way. Even if they pay up a little, theyre still paying with a much more powerful than when it devalues. Saving much money. Exactly. Right. From highend hotels, to highend retail, michael kors shares have soared 36 this year. Of the rally might just be getting started. Barrons saying this weekend that shares of the retailer could go another 30 over the next year. Its our call of the day. Is it a good one, though, josh . I would say no. And i like the company a lot. I think there will be better tactical opportunities to be a trader in this name. And i would just say, if your general habit is buying stocks that are 40 above their 200day moving average, youre probably a serial underperformer. This is not where you would be initiating a new position. Its had a vshaped ridiculous run. If you miss it and it does another 30 , i apologize. But better odds are, youll have another crack at it lower. Let it consolidate recent gains. Problem is, the others weise have had pretty good returns too, right . Coach is up Something Like 20 . Yeartodate. Even though as josh points out, kors is almost 50, however, kors is coach is a much multiple. I sold this as a trade two weeks ago. What i would say is momentum cant continuously report earnings. Its not something i do after its had this big run. But it could probably still go higher. You have to pause. You wait a little bit. But there are a lot of reasons and compelling reasons why barrons suddenly likes the stock. To joshs point, you cant chase it. This move is just too dramatic, too fast. Why not ralph . Why not ralph . Because i think the expansion levels its going the other way. Im telling you right now, theyre Different Companies in terms of which one is growing geographically, which has better growth in certain areas of the market itself. Theyre talking about the mens wear being one of those. I think the geographic this is a company thats just now really getting themselves pushing outside the United States. Thats an area of growth for themselves. And you look at the revenue, scott, absolutely incredible growth when you look at that. Even with all the Share Repurchases and the currency. Im going tell you the tricky part of this. And by the way, i was long from when it went public for almost two years. And i really like the company. Theyre trying to do something that almost no one else has ever been able to do with the exception of ralph, which is transition from a super highend luxury brand to a mass market brand that has cache no one does it. Now youll start seeing merchandise in lowerend department stores. Its not a given that the highend stores will rain their cache and keep their customer. Isnt that part of the reason that drove the stock price . Its not helping. Maybe that was seeing it in tj maxx and places like that certainly wasnt helping the brand. Youre 100 right. And thats the coach story, right . Coach was this premium gotta have it brand. And then they commit suicide. Does mill annia trump want to wear kors six months from now . I dont know if kors was ever a real highend product. But we have different views on whats highend. Highenough end for me. Okay, coming up, tesla shares have taken a hit this year. But one analyst says stocks about to go into overdrive. That trade is ahead in the blitz. Plus an experimental cannabis drug has one stock up more than 100 today. We have the details coming up, and rich pzena is buying one tech stop for the very first time. Hes going to share his idea, just ahead. [plumber] i need to be where the pipes are. So i use quickbooks and run my entire business from the cloud. I keep an eye on sales and expenses from anywhere. Even