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ETF Strategist

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ETF Strategist

Millennials and Gen Zers are the two most likely generational groups to have exchange-traded funds in their retirement accounts, at 81% and 75%, respectively, according to a report by Nasdaq.
“The continued growth of retail investors investing in ETFs is certainly not going away,” said Alison Hennessy, head of exchange traded product listings at Nasdaq.
Here are two things investors starting out should keep in mind.

Oscar Wong | Moment | Getty Images

John Healy began investing in exchange-traded funds when he was about 18 years old.
Back then, Healy said he worked as a security guard in a beach club earning an hourly wage of “$12 a pop” and relied on message boards on the internet to figure out what to buy or sell.

Today, Healy is a 25-year-old law clerk in New York City with a financial planner guiding his investments.
What hasn’t changed? His interest in baskets of securities designed to closely track an index.
“ETFs are still a vehicle for me to get action in the stock market,” Healy said.
He’s not alone. Young investors are tapping into exchange-traded funds at high rates.

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Here’s a look at other stories offering insight on ETFs for investors.

According to an annual report by Nasdaq, millennials and Gen Zers are the two most likely generational groups to have ETF holdings in their retirement accounts, at 81% and 75%, respectively. 

The survey polled 2,000 U.S. retail ETF investors in March. The report defines millennials as those born between 1981 and 1996, and Gen Z as those from 1997 to 2021.
The trend has been growing for the past three years, or since Nasdaq has been conducting the report, said Alison Hennessy, head of exchange-traded product listings at Nasdaq.
“The continued growth of retail investors investing in ETFs is certainly not going away,” she said. 

Why ETFs have gained popularity

ETFs listed in the U.S. hit a record-breaking $900 billion in inflows and about 600 ETF launches this year, according to ETF.com.
The investment vehicle has been growing in popularity among investors in general in part due to the lower associated costs, tax benefits and accessibility compared to mutual funds, experts say.
“What really attracts investors to the ETF structure in general is, they’re easier to buy and sell directly on a brokerage account,” Hennessy said. 
The same can’t be said for a mutual fund, experts say. 
If you’re an active investor, you have the ability to make intra-day trades with an ETF, whereas a mutual fund won’t actually process your buy or sell order until after market close, explained Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

Meanwhile, associated fees with ETFs tend to be much lower compared to mutual funds and other index funds.
Index ETFs have a 0.44% average annual fee, half the 0.88% fee for index mutual funds, according to Morningstar. Similarly, active ETFs carry a 0.63% average fee, versus 1.02% for actively managed mutual funds, Morningstar data shows.
And ETFs do not typically trigger capital gains taxes, Lucas said.
“That’s what makes them so tax efficient,” he said. “For younger investors, you know really what you’re getting and there’s no surprises.” 
When Healy began investing as a teenager, he was mostly driven to do so by his parents, who instilled in him the value of saving and investing his money, Healy said.
“Now I’m living on my own, and I have my own personal finances to worry about,” he said.
Gen Z investors who are starting out need to keep in mind two elements, according to experts.
1. Research what your exposure could be
There are more than 3,800 U.S.- listed ETFs available in the market now, and a perk to consider is their transparency, said Hennessy. 
“The vast majority of ETFs are disclosing their holdings,” or what’s held in their portfolio, she said. 
To find out what sectors, companies, industries or risks you may be exposed to, look up the information on the ETF issuer’s website, Hennessy said.

For example, say a fund’s name includes the term “international.” You may want to know what countries or classifications the fund focuses on. 
“You have the ability to really drill down and look at the exact holdings in the fund,” Hennessy said.
2. Take note of ‘wash sale rules’
Be mindful about so-called “wash sale rules,” Lucas said. 
The IRS guidelines essentially blocks you from writing off a loss if you repurchase the same or an identical security within a 30-day window before or after the sale, he explained. 
If you sell an ETF at a loss, and you buy it back or a similar one within that time period, you cannot get the benefit of the tax loss. 
It can be easier to get around wash sale rules with an ETF compared to mutual funds, but you need to be careful how you handle it, experts say.
“That loss that you would of taken just gets added to your cost basis to potentially take later,” Lucas said. More

About 49% of employed travelers are “laptop luggers,” or those who plan to work at some point on their holiday vacation, according to the Deloitte holiday travel survey.
Travelers are making other workarounds to be able to go on trips, such as driving instead of flying or cutting back on other expenses, experts said.

Baona | E+ | Getty Images

Americans are determined to travel this holiday season — and certain workarounds are helping them take those trips. 
The ability to work remotely is a major leg up when planning out itineraries.

About 49% of employed travelers are “laptop luggers” — those who plan to work at some point on their holiday vacation — up from 34% last year, according to the Deloitte holiday travel survey.
This flexibility allows workers to take trips they might not otherwise, or stretch their trips for longer, according to the survey.
While there are more laptop luggers across most age groups and income levels, Gen Zers, which Deloitte defines as those born between 1997 and 2012, and high earners make up the highest shares, at 58% and 52%, respectively, according to the survey.
Deloitte polled 4,074 American adults in September. Of that group, 2,005 were identified as holiday travelers.
The change in laptop luggers is “a pretty high jump. It’s almost across all income levels and age groups,” said Eileen Crowley, vice chair and U.S. transportation, hospitality and services attest leader at Deloitte. 

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Since the pandemic, remote work has become a priority for job seekers, said Julia Pollak, chief economist at ZipRecruiter.
In the third quarter, 51% of surveyed job seekers said the ability to work from wherever they want is a top reason for remote jobs, up from 40.8% in the first quarter of 2022, according to ZipRecruiter data.
“The value to U.S. workers of being able to work from anywhere has clearly grown over the course of the great remote work experiment,” she said.
In addition to working during their trip, travelers are coming up with other workarounds such as driving instead of flying or cutting back on other expenses, experts said.
“People are willing to cut corners to save money, but they don’t want to skip the trip entirely,” said Ted Rossman, an industry analyst at Bankrate.

Who’s spending on holiday travel this year 

High earners are driving holiday travel and spending trends this year, according to experts.
When it comes to holiday travel, 52% of shoppers with incomes of $100,000 or more said they can “easily afford” that expense, according to Morning Consult, a survey research firm. That is the highest share compared with mid- to low-income groups. 

Bloomberg | Bloomberg | Getty Images

“Higher-income consumers are not nearly as price sensitive,” Stacy Francis, president and CEO of Francis Financial, a wealth management, financial planning and divorce financial planning firm in New York City, recently told CNBC.
“They’re not nearly as budget conscious as people in lower-wage-earning brackets,” said Francis, a member of CNBC’s Financial Advisor Council.
Among generational groups, millennials, or those born between 1980 and 1996, have the highest budgets and longest travel planned. According to the report, millennials plan to take about 2.6 trips over the course of the holiday season and spend on average $3,927, per the Deloitte survey.

What’s making holiday travel possible this year

More than 4 in 5 holiday travelers, 83%, are finding ways to save money this holiday season, such as driving instead of flying, according to Bankrate.
“Most of these people are still traveling, they’re just doing so differently to cut some costs,” Rossman said.
Separately, about 50% of respondents are cutting back on other expenses and 49% are picking up discounts and deals, according to the 2024 Holiday Travel Outlook by Hopper, a travel site. 
Among other strategies, 22% plan to travel on off-peak days and 21% are using credit card points or miles to cover some of the cost, the Hopper report found.

If you do plan to pull out your laptop and work during a holiday vacation, make sure to review your company’s rules around remote work, said Pollak. Some companies require employees to work from their home, from within the company’s home state or within the U.S. unless otherwise authorized.
“You risk getting your access shut off, being punished or even having your employment terminated if you try to work from elsewhere,” Pollak said.
Touch base with your manager or director about the idea as well, she said: “Some managers just care that you’re getting the job done and aren’t concerned how.”
Finally, you want to make sure the location you plan to work from has a strong electric grid or service and Wi-Fi is reliable.
“If you’re on the hook for work, make sure you are somewhere where you can get it done,” Pollak said.
Spending on experiences such as travel and concerts spiked after pandemic-era lockdowns and restrictions because of pent-up demand from Americans, experts say.
Yet even after several years, travel “seems to be something that’s sticking,” said Deloitte’s Crowley: “People are placing value and making room in their budgets for travel.” More

Roughly 1 in 3 adults ages 18 to 34 in the U.S. are living with at least one of their parents.
More than half of Gen Z adults say they don’t make enough money to live the life they want due to the high cost of living, according to a 2024 survey from Bank of America.
More than a third, 36%, of Americans said in a 2022 survey that more young adults living with their parents is bad for society.

Approximately 1 in 3 U.S. adults ages 18 to 34 live in their parents’ home, according to U.S. Census Bureau data.
The pandemic caused more young adults to return home or remain living with their parents into their late 20s and 30s, but aside from that spike, the numbers have remained fairly consistent in recent years.

Pre-pandemic, the most recent surge in the share of 18- to 34-year-olds living with their parents occurred between 2005 and 2015, according to data from the Census Bureau.
“Those were the times coming [during] the Great Recession and coming out of the Great Recession, and there were a lot of media narratives at the time about millennials eating too much avocado toast to live on their own,” said Joanne Hsu, a research associate professor at the University of Michigan who co-authored a 2015 study on “boomerang” kids for the Federal Reserve.
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“What we found was that part of the reason we see this escalation of young adults not leaving the nest or returning to the nest is this idea that it was harder and harder for them to weather shocks,” Hsu said.
Economic shocks are significant and unexpected events that disrupt financial stability and markets, which then affect households’ income, employment and debt levels. The 2008 financial crisis, the Great Recession and the pandemic are all examples of economic shocks.

More than half of Gen Z adults say they don’t make enough money to live the life they want due to the high cost of living, according to a 2024 survey from Bank of America. A significant number of millennials and Gen Z adults lack emergency savings.

‘Why rent and give my money to someone else?’

Victoria Franklin, left, has lived with her mother, Terilyn Franklin, right, in Oceanport, New Jersey, since she graduated from college in 2019.
Natalie Rice | CNBC

Victoria Franklin, 27, moved back to her mom’s house in the summer of 2019 after graduating from college to search for a job in business administration.
“I ended up bartending and waitressing until October [of 2019], where I got my first offer,” Franklin said. “So it did take a little bit longer than I expected.”
She found a job in her field in New York City, which required a two-hour commute from her mother’s home on the Jersey Shore.
“I thought, you know, in six months or so, I’ll move into the city, be closer to the job,” Franklin said. “And the pandemic threw a wrench in those plans.”
Franklin decided to continue living at her mom’s house after switching to a fully remote job in fall 2023.
“My mentality is why rent and give my money to someone else when I can start to own?” Franklin said.
Franklin said she’s saving between 40% and 50% of her income, with “a big chunk” allocated toward a down payment on a house.

While living with parents can provide personal financial benefits, experts say this trend can negatively affect the economy.
“We do also have a situation that what is really good for an individual person or an individual family is not necessarily good for the entire macro economy,” Hsu said. “One of the big boosts to consumer spending is when people form households.”
The Federal Reserve estimated in a 2019 paper that young adults who move out of their parents’ home would spend about $13,000 more per year on things such as housing, food and transportation.
Watch the video above to learn more about why the trend of young adults living with their parents is continuing and what it means for the economy. More

Dominika Zarzycka | Nurphoto | Getty Images

The postelection rally has hit some turbulence in recent days, giving investors a bumpy ride in the near term. However, these choppy markets can harbor plenty of opportunities — for those who know where to look.
Investors shouldn’t focus too much on short-term volatility as they position their portfolios. Recommendations from Wall Street can help them make informed decisions on stocks and seek solid long-term returns.

Top-rated analysts pay attention to multiple aspects when selecting stocks of companies with solid fundamentals and strong execution.
Bearing that in mind, here are three stocks favored by the Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Amazon
We start this week with e-commerce and cloud computing giant Amazon (AMZN). The company impressed investors with third-quarter beats on the top and bottom lines, fueled by strength in its cloud and advertising businesses.
In reaction to the solid Q3 print, Monness analyst Brian White reaffirmed a buy rating on Amazon stock and boosted the price target to $245 from $225. While the analyst acknowledged regulatory pressures, he remains bullish on AMZN as he thinks it will continue to “capitalize on the cloud, expand its digital ad business, innovate with AI, realize efficiencies from a regional fulfillment network, and leverage a leaner cost structure.”
White highlighted that Amazon’s revenue growth accelerated to 17%, with significant profit upside. Notably, Q3 operating profit exceeded his estimates, driving record operating margin at 11%. He also noted the sharp sequential rise in operating margins at Amazon Web Services, or AWS, and International business. Based on the solid results, the analyst raised his revenue and earnings per share estimates for 2024 and 2025.

White also pointed out Amazon’s focus on reducing costs via improved efficiencies and new initiatives such as regionalizing its U.S. fulfillment network. The company now aims to regionalize its U.S. inbound network and leverage advanced robotic innovations across its fulfillment network.
Overall, White sees lucrative growth potential for Amazon across e-commerce, AWS, digital media, advertising, Alexa, robotics, artificial intelligence and other avenues.
White ranks No. 38 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 69% of the time, delivering an average return of 20.4%. See Amazon Stock Charts on TipRanks.
Uber Technologies
We now move to this week’s second pick, ride-sharing platform Uber Technologies (UBER). The company recently delivered better-than-expected third-quarter revenue and earnings. However, it missed Wall Street’s expectations for Q3 gross bookings.
Nonetheless, Evercore analyst Mark Mahaney remains bullish on UBER stock. He reiterated a buy rating with a price target of $120, following a series of investor meetings with management.
Mahaney thinks UBER will gain from autonomous vehicle rollouts, given its position as the largest ride-sharing demand aggregator. He added that better availability of robotaxis on the Uber platform will drive improved customer service through shorter wait times, broader ride selection and possibly lower prices.
“UBER believes that the economics it can offer AV owners can be compelling, allowing them to generate very high margins and better fleet utilization than they can develop on their own,” said Mahaney.
Based on his discussions with management, Mahaney explained that the deceleration reflecting in Uber’s Mobility bookings growth in Q3 and the estimate for Q4 is due to the negative demand elasticity caused by the surge in insurance costs and a slowdown in “party hour” bookings, or those that take place during evenings and weekends. He thinks this deceleration will moderate, given the slowdown in the rate of insurance cost increases, growth prospects of new products such as Uber for Teens and Uber for Business as well as potential improvement in consumer discretionary demand.
Finally, Mahaney remains confident about Uber’s ability to consistently boost its earnings before interest, taxes, depreciation and amortization and free cash flow margins over the next three to five years, supported by multiple measures to drive cost efficiencies.
Mahaney ranks No. 34 among more than 9,100 analysts tracked by TipRanks. His ratings have been successful 64% of the time, delivering an average return of 28.9%. See Uber Technologies Stock Options on TipRanks.
Block
Finally, let’s look at fintech giant Block (SQ). The company, formerly known as Square, narrowly beat analysts’ earnings expectations but missed revenue estimates for the third quarter.
Following the results, BTIG analyst Andrew Harte discussed the positives and negatives of Block’s Q3 performance. He noted that the company’s initial FY25 gross profit growth guidance of at least 15% almost met the consensus estimate at 14.9%. However, Q4 gross profit outlook of 14% fell short of expectations due to the shift in the timing of certain expected benefits from Q4 to next year.
The analyst thinks CEO Jack Dorsey did a good job in highlighting the company’s lending products and explaining how they are fueling the growth of Block’s ecosystem. Despite the soft Q4 guidance and management’s commentary indicating that investors will have to wait until the second half of 2025 for growth acceleration, SQ stock continues to be a top pick for BTIG.
Harte cited several reasons for his bullish stance, including Block’s track record of surpassing guidance and the stock’s attractive valuation at 12-times FY25 EV (enterprise value)/EBITDA. He added that the company is in the early days of fueling increased product adoption in both its Cash and Square ecosystems, indicating continued growth potential ahead.
“Block is just beginning to integrate its Cash App and Square ecosystems, which could create meaningful flywheel effects over time,” said Harte while reiterating a buy rating on the stock with a price target of $90.
Harte ranks No. 152 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 75% of the time, delivering an average return of 63.8%. See Block Hedge Funds Activity on TipRanks. More

Black Friday to Cyber Monday is one of the busiest shopping periods of the year as consumers try to maximize the weekend’s deals.
Retailers tempt shoppers with incentives and discounts. But these are not necessarily the best prices of the year, according to shopping experts.
Here’s what not to buy on Black Friday and how to snag the lowest prices overall.

A customer visits Macy’s Herald Square store in New York City during early morning Black Friday sales, Nov. 24, 2023.
Kena Betancur | Getty Images

Typically, the five days beginning Thanksgiving Day and ending Cyber Monday are some of the busiest shopping days of the year.
This year, the number of people shopping in stores and online during that period could hit a new record, according to the National Retail Federation’s annual survey.

But consumers trying to make the most of the Black Friday sales may not be getting the best prices of the season.
According to WalletHub’s 2023 Best Things to Buy on Black Friday report, 35% of items at major retailers offered no savings compared with their pre-Black Friday prices. The site compared Black Friday advertisements against prices on Amazon earlier that fall. 
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“Some Black Friday deals are misleading as retailers may inflate original prices to make a deal look like a better value,” said consumer savings expert Andrea Woroch.
This year, in particular, some of the deals are already as good as they are going to get.

“Those holidays have gotten a little watered down because retailers want to maximize the selling days,” said Adam Davis, managing director at Wells Fargo Retail Finance.
“Compounding the importance of stretching the holiday season, retailers are facing a shorter selling season between Thanksgiving and Christmas — almost a week shorter in 2024,” he said. “That will force the retailer’s hand to be pretty promotional in November.”

Concerns about shipping

There’s another good reason to shop early.
Consumers are increasingly concerned that their online orders may not arrive in time for the holiday — and rightfully so.
DHL Supply Chain’s new CEO for North America, Patrick Kelleher, recently told CNBC that items may arrive later than in years past, especially those ordered around big dates such as Black Friday and Cyber Monday.

In a period of such high volume, third-party shippers are particularly strained, according to Lauren Beitelspacher, a professor of marketing at Babson College. An ongoing labor shortage also means that some companies simply cannot hire enough workers to sort, transport and deliver packages on time.
“We are very spoiled; we got to the point where we think of something we want and it magically appears,” Beitelspacher said. But at the same time, “we’ve learned how fragile the supply chain is.”
When there are more packages to ship, shipping times increase, which can also boost the chance they may get damaged, lost or stolen en route — not to mention the risk of “porch piracy” once an item is delivered.

What discounts to expect on Black Friday

“You are easily going to see 20% to 30% off,” Davis said — but “not necessarily storewide.”
Depending on the retailer, some markdowns could be up to 50%, according to Beitelspacher. However, premium brands — including high-end activewear companies such as Nike, Alo or Lululemon — likely will not discount more than 20% or 30%, she said. “It’s a fine balance with maintaining the premium brand integrity and offering promotions.”
As in previous years, these companies are aware of how price sensitive consumers have become.
“The holidays are a time people want to treat themselves, but they also want to make their dollar last longer,” Beitelspacher said.
To that end, retailers will also try to lure shoppers to spend with incentives, such as a free gift card with a minimum purchase, Woroch said. “Many stores will also offer bonus rewards when you spend a certain amount on Black Friday.”

What not to buy on Black Friday

Typically, Black Friday is a great time to find rock-bottom prices on fall clothing — including flannels, denim, coats and accessories — as well as televisions and consumer electronics. 
But hold off on beauty and footwear, which are typically better buys on Cyber Monday, Woroch said.
For those planning a trip, “Travel Tuesday” is a good time to snag discounts on airfares, cruises and tour packages, with many hotels offering 20% to 30% off best available rates. Travelers can check out Travel Tuesday deals from 2023 to get an idea of what to expect this year.

With toys, it could pay to hold out until the last two weeks of December, and holiday decorations are cheaper the last few days before Christmas or right after, according to Woroch.
Exercise equipment, linens and bedding tend to be marked down more during January’s “white sales,” she said, and furniture and mattress deals are often better over other holiday weekends throughout the year, such as Presidents’ Day, Memorial Day and Labor Day weekends.

How to get even lower prices

Woroch recommends using a price-tracking browser extension such as Honey or Camelizer to keep an eye on price changes and alert you when a price drops. Honey will also scan for applicable coupon codes.
If you are shopping in person, try the ShopSavvy app for price comparisons. If an item costs less at another store or popular site, often the retailer will match the price, Woroch said.
Further, stack discounts: Combining credit card rewards with coupon codes and a cash-back site such as CouponCabin.com will earn money back on those purchases. Then, take pictures of your receipts using the Fetch app and get points that can be redeemed for gift cards at retailers such as Walmart, Target and Amazon.
Finally, pay attention to price adjustment policies. “If an item you buy over Black Friday goes on sale for less shortly after, you may be able to request a price adjustment,” Woroch said. Some retailers such as Target have season-long policies that may apply to purchases made up until Dec. 25. More

Jonathan Raa | Nurphoto | Getty Images

Company: Meta Platforms (META)

Business: Meta Platforms builds technologies that help people find communities and grow businesses. The company’s products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, wearables and in-home devices. The company operates through two segments: Family of Apps (FoA) and Reality Labs (RL). FoA includes Facebook, Instagram, Messenger, WhatsApp and other services. RL includes augmented and virtual reality-related consumer hardware, software and content. Facebook enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Instagram is a place where people can express themselves through photos, videos and private messaging. Messenger is a messaging application for people to connect with friends, family, groups and businesses across platforms and devices.
Stock Market Value: $1.39T ($554.08 per share)

Stock chart icon

Meta Platforms in 2024

Activist: ValueAct Capital

Ownership: n/a
Average Cost: n/a
Activist Commentary: ValueAct has been a premier corporate governance investor for over 20 years. ValueAct principals are generally on the boards of half of ValueAct’s core portfolio positions and have had 56 public company board seats over 23 years. ValueAct has previously commenced activist campaigns at 26 information technology companies and has had an average return of 54.63% versus 30.16% for the Russell 2000 over the same period.

What’s happening

Behind the scenes

ValueAct has extensive experience in mega-cap technology companies, most notably Microsoft and Salesforce. ValueAct CEO Mason Morfit was on the board of Microsoft from March 2014 through the end of 2017 as the tech giant transformed into a cloud-based enterprise software business and went from a $250 billion market cap company to more than $3 trillion today. At Salesforce, when a handful of activists were engaging, the company opted to add Morfit to its board on Jan. 27, 2023, and the stock has more than doubled since then.

Now, ValueAct has engaged another titan of the market, Meta Platforms, announcing an approximately $1 billion dollar position in the company. Meta’s products enable people to connect and share through various platforms and devices, including mobile devices, personal computers, virtual reality headsets, wearables, and in-home devices. The company operates through two segments: Family of Apps (FoA) and Reality Labs (RL). FoA includes social media applications such as Facebook, Instagram, Messenger and WhatsApp, while RL includes augmented and virtual reality-related consumer hardware, software and content. This has been an extremely volatile year for Meta’s stock price — with dips below $400 per share and highs above $600 — giving ValueAct many opportunities to acquire its position at a favorable price. With the stock price up about 56% in 2024, ValueAct still sees significant untapped value in Meta.Meta is expected to deliver $30 in EPS by 2026, which at a 20-times multiple would put the company at approximately $600 per share. This EPS can be broken down into the company’s two segments: $40 EPS from its core FoA segment and -$10 EPS from the RL segment. This would place the valuation of Meta’s core FoA business at $800 per share, while its RL segment would be valued at -$200 per share, or a $400 billion drain on the company’s valuation. This -$10 EPS from the RL segment is made up of -$7 from the RL division and -$3 from AI spending. ValueAct has shown at Microsoft and Salesforce that it is very good in helping companies trim fat and build muscle. There is certainly some fat in the RL division that can be trimmed. The AI spending, while concerning to some in the market, can be the muscle that strengthens Meta’s core FoA business. AI will provide benefits to many companies, but one of its best uses is to create value in consumer internet and matching-based business models that are monetized by connecting their vast audiences to relevant content or services, such as such as Spotify, Indeed.com and Expedia. When AI and GPU computing power are applied to these business models, it can lead to significant improvements in matchmaking and monetization. This is because at the end of the day, AI – even generative AI – is just pattern spotting and pattern recognition, so its application can inherently enhance user-product matching and preference alignment. Meta can be one of the biggest beneficiaries of this market in its core FoA business with respect to delivering content and optimizing advertising. The second lever for AI growth for Meta is the impact of how developers are using large language models (LLMs) to create technologies. Developers are increasingly using multiple LLMs within the same project, so they rely on tools that enable different models to work together. Currently led by OpenAI and Microsoft, companies are competing to control the tools used to layer these LLMs, which are necessary to run and develop new technologies. To enter this market, Mark Zuckerberg has open-sourced Meta’s “LLaMA” model, a high-performance AI model designed to compete with OpenAI’s GPT and Microsoft’s Copilot. The decision to open-source LLaMa has helped build Meta’s role in the AI ecosystem by driving LLaMA adoption. It should more than justify Meta’s AI spend. So, if Meta continues to bleed the RL division at the same pace and gets absolutely no value from its AI spend, it will have a $600 stock in 2026. However, if ValueAct can do what it has been able to do at Microsoft, Salesforce, Adobe and others – help grow the muscle and trim the fat – RL’s -$7 should decline substantially and AI’s -$3 will be money well spent and be a significant value creator, as opposed to a drain on value as the market attributes today. Even a neutral valuation ($0 EPS) for RL/AI would place Meta at $800 per share, implying 40% growth from its current price. And if AI prospects become positive, which seems very plausible given these potential avenues of growth, RL/AI should actually contribute to EPS growth. Thus, 40% growth almost becomes a floor that underscores the significant upside for Meta.
This is not ValueAct taking a “flyer” on AI. First of all, ValueAct is a very thoughtful and diligent investor and doesn’t take “flyers.” Second, ValueAct has extensive experience from both sides of AI. The firm has been in the boardroom at companies like Microsoft and Salesforce, two of the largest developers of AI. And the firm has been an active shareholder at companies like Spotify, The New York Times, Expedia and Recruit (Indeed.com) some of the largest users and beneficiaries of AI. So, when ValueAct invests in AI, it isn’t just spit balling. The firm thoroughly understands AI and how its customers can use it.
When thinking about how ValueAct will approach this engagement going forward, we must address the elephant in the room: Meta is a controlled company, with Mark Zuckerberg holding approximately 61% of the company’s voting power. While most activists would never bother with a controlled company for obvious reasons, ValueAct actually has a strong track record of creating value at controlled or quasi-controlled companies, including engagements at Martha Stewart Living, The New York Times, 21st Century Fox, Spotify and KKR. In these situations, ValueAct averaged a return of 124.12% compared to an average of 30.79% for the relevant market benchmark. This is because ValueAct understands that activism is about the power of the idea; the power of the argument; the power of persuasion. As such, even in its investments in non-controlled companies, the firm almost always only takes one board seat because it is confident that its ideas will resonate. However, given Meta’s controlled structure, we don’t expect ValueAct to push as hard for a board seat here as it might at other portfolio companies. In a controlled company you can almost be as effective as an active shareholder as you can as a director. That being said, given ValueAct’s track record of board success, particularly at other mega-cap technology companies, shareholders would be well served if Meta added a ValueAct representative to the board.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

The Three Mile Island restart could mark a turning point for a nuclear industry that once faced a wave of power plant closures due to poor economics.
The fortunes of the industry have shifted dramatically this year as the tech sector turns to nuclear power to meet the electricity demand of artificial intelligence.
Constellation Energy is confident the plant will restart on schedule in 2028, supplying power to Microsoft and helping to stabilize the grid.

Cooling towers at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

MIDDLETOWN, Pa. — The owner of the Three Mile Island nuclear power plant is embarking on an ambitious plan to restart operations before the end of the decade, marking the latest chapter in the history of a plant that symbolizes the future promise, past struggles and lingering fears of nuclear energy in the United States.
The twin cooling towers that stretch hundreds of feet above the Susquehanna River just south of Middletown, Pennsylvania, went dormant in 2019 after billowing water vapor into the sky for four decades. Its owner at the time, Exelon, permanently shut down the Unit 1 reactor, citing “severe economic challenges.”

Unit 1 is one of a dozen reactors that closed in the U.S. over the past decade as nuclear industry struggled to compete against cheap and abundant natural gas. But the fortunes of the industry have shifted dramatically this year as deep-pocketed technology companies turn to nuclear power to meet the tremendous electricity consumption of their future business: artificial intelligence.
Constellation Energy, the plant’s current owner, plans to restart Unit 1 in 2028, subject to monitoring and approval by the Nuclear Regulatory Commission. Constellation, headquartered in Baltimore, spun off from Exelon in 2022; it has the nation’s largest fleet, or group, of nuclear power plants, operating 21 of the 94 reactors in the U.S.
“This is a plant that we ran and ran very well,” plant manager Trevor Orth told the NRC at an Oct. 25 meeting. “We shut it down. We understand how we shut it down, and we have a good idea of how we’re going to restart this.”

The main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

While Constellation will restore the plant, it will ditch the name Three Mile Island. The plant will be rechristened the Crane Clean Energy Center, after the late CEO of Exelon, Chris Crane. Constellation said the restart will cost $1.6 billion, financed by the company’s own funds.
(Take a deeper look inside the Three Mile Island nuclear power plant here.)

Microsoft has made the restart of Unit 1 possible through an agreement to purchase the full electricity output from the plant for 20 years, a sign of the growing role the tech sector is playing in shaping the future of the U.S. power industry.
Microsoft said the agreement is part of its strategy of meeting the growing electricity needs of its data centers with power that is free of carbon dioxide emissions in an effort to mitigate the impact of its business on the climate.

Part of a control panel at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

Those data centers are playing a critical role in the U.S. economy, housing servers that run the cloud computing that businesses and consumers now rely on for life’s digital daily tasks. They are also essential for the development of artificial intelligence, technology that is viewed as critical for the nation’s future economic competitiveness and national security.
With four years until the planned restart, one of the big uncertainties is whether Constellation can deliver the power to Microsoft on time. Nuclear projects are notoriously plagued by long delays, big cost overruns and cancellations. But Unit 1 is in good condition and Constellation is confident the plant will restart on schedule, said Bryan Hanson, the company’s chief generation officer.
Most of the restoration at Unit 1 will be normal maintenance work that Constellation conducts regularly on its fleet of nuclear plants, Hanson said during an Oct. 30 tour of the plant.
“Not an ounce of concrete needs to be poured, not one piece of rebar needs to be tied, not one cable needs to be pulled. The infrastructure is here,” the executive said. “The challenge of delays — I don’t see it.”

A control panel in the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

Constellation’s decision to restart Three Mile Island follows Holtec International’s decision to restart its Palisades nuclear plant in Michigan. Palisades is poised to become the first reactor to restart operations in U.S. history in 2025 after shutting down.
Holtec has plans to nearly double the power capacity of the facility in the 2030s by building two small modular reactors, next-generation technology that promises to make nuclear plants less costly and easier to deploy.
Amazon and Alphabet’s Google recently announced investments in small modular reactors.
While Constellation has not committed to building a small modular reactor at any of its plants yet, Hanson said the company is open to working with the tech sector to build new nuclear reactors in the U.S.
“If our customers come to us again, like a Microsoft, and say ‘we want to help you build new nuclear’ — we’ll probably join hands and figure out a way to do that,” Hanson said.

Lingering fears

Unit 1 is a short walk from the site of the worst nuclear accident in U.S. history.
The partial meltdown of the Unit 2 reactor at Three Mile Island in 1979 had a chilling effect on the development of new nuclear plants in the U.S. Unit 2 has not operated since the accident and is being decommissioned by its current owner, Energy Solutions, a private nuclear services company.
Unit 1 operated safely and efficiently before it was shut down for economic reasons, said Mike Goff, acting assistant secretary for the Office of Nuclear Energy at the Department of Energy.
But Pennsylvania state Rep. Thomas Mehaffie said his constituents have mixed feelings about the restart of Unit 1, particularly those who are old enough to remember the accident at Unit 2.

Pennsylvania state Rep. Tom Mehaffie speaks in front of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

“Of course people who were here during that time frame, who are older — there is concern. There always has been concern,” said Mehaffie, who represents the communities around Three Mile Island at the state legislature in Harrisburg. Mehaffie’s father was a union electrician who helped build the nuclear plants.
Hanson said the nuclear industry has learned from this chapter of its history.
“The 1979 accident taught us that our standards weren’t right at the time,” Hanson said. The U.S. nuclear industry today has the best safety, reliability and operational standards in the world, he said.
While some constituents have concerns, others see the economic value that the restart will bring, Mehaffie said. The restart of Unit 1 will bring an estimated 3,400 jobs to the region, according to a study by the Pennsylvania Building & Construction Trades Council.  

Grid reliability

The planned restart of Three Mile Island is also a step to help ensure the region’s electric grid remains reliable, Mehaffie said. Unit 1 will bring back 835 megawatts of carbon-free electricity, equivalent to the consumption of more than 600,000 homes, at a time when the grid is on the brink of faltering.
Electricity demand is outpacing supply, as power plants, particularly those that run on coal, are retired faster than new capacity is built, grid operator PJM Interconnection warned in July. PJM operates the grid in Pennsylvania and 12 other states.
“Grid reliability is everything,” Mehaffie said.
PJM has forecast that electricity demand will surge nearly 40% by 2039 due to the expansion of data centers, manufacturing and the electrification of industry and transportation. Meanwhile, 40 gigawatts of power generation is at risk of retirement by 2030; that’s about 21% of PJM’s installed capacity.
“We’re seeing potentially catastrophic early retirements of dispatchable resources,” Mark Christie, a commissioner at the Federal Energy Regulatory Commission, said during a public hearing Nov. 1.

A cooling tower at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

Federal energy regulators are worried that tech companies’ pursuit of deals that redirect power from the electric grid directly to their data centers could exacerbate supply shortages and threaten grid stability.
Microsoft said the electricity it will be purchasing from Unit 1 will feed into the grid and will not directly power its data centers. Microsoft is committed to bolstering the grid as it secures power for its data centers, said Alistair Speirs, senior director of global infrastructure for Microsoft’s Azure cloud platform.
“When we operate in the community, if we’re not stabilizing, adding resiliency to the grid, then it’s hard for us to keep our social license to operate,” Speirs said.
Microsoft is not involved in the physical restoration of the plant, Hanson said, but Constellation is providing status reports to the company.

Restoration and restart timeline

Constellation laid out how it plans to restart the plant in the company’s first public meeting with the Nuclear Regulatory Commission on Oct. 25. While Wall Street is generally bullish on the restart, Citi has cautioned that Constellation could face challenges in completing the project on schedule.
“Given the regulatory and physical challenges, we assume that [Constellation] is likely to experience some delays and cost overruns to execute on the restart,” Citi analyst Ryan Levine told clients in an Oct. 14 note.
Citi initiated coverage of Constellation with a neutral rating in October on delay concerns. Constellation’s stock has gained more than 90% since the start of the year and 12% since the Three Mile Island restart was announced Sept. 20.
Levine is an outlier. The vast majority of analysts rate the stock a buy or strong buy, with the average price target predicting more than 23% upside.

The turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

Hanson said crucial and expensive equipment such as the steam generators and main power generator have undergone inspection and maintenance by Constellation and are in good condition.
The steam generators were replaced in 2009 and are ready for restart, he said. The internals of the main power generator, built by General Electric nearly 50 years ago, were replaced a little over a decade ago, he said. The main generator has been cleaned and needs some routine maintenance, he said.
The plant’s main power transformers need to be replaced at a cost of $75 million to $100 million, Hanson said. The transformers are on order with delivery expected in late 2026, he said.
One of the cooling towers has been gutted and will be refurbished. The analog control room will remain the same with the exception of some rewiring, Hanson said.
The simulator that mimics the control room also needs to be restored so plant operators can be trained there. One of the most critical items for restoring plant operations is training operators for NRC certification, a process that takes about 18 months, Hanson said.

The turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC

Constellation is currently prohibited from operating and loading fuel into the reactor vessel because the plant was permanently shut down. Constellation plans to file an exemption request in November that would remove these restrictions if approved by the NRC.
“That will officially mark the start of our restart activities,” Dennis Moore, senior manager of licensing at Constellation, told the NRC.
Constellation plans to file a request to change the plant’s name from Three Mile Island to the Crane Clean Energy Center in February. Later in 2025, Constellation will submit filings on the plant’s technical specifications, environmental impact, emergency plan, and site security plan for NRC review, the company said.
Constellation intends to send an operational readiness letter to the NRC by July 2027. The company would then begin testing and return to power if the NRC determines that the plant is ready to operate and authorizes placing fuel in the reactor.
In the meantime, Constellation does not need NRC permission to “start turning wrenches and doing restoration work” at the plant, said Scott Burnell, a spokesperson for the regulator. The NRC will be monitoring the work to make sure the regulator’s requirements are met, Burnell said.
The restarts at Three Mile Island and Palisades will likely secure NRC approval, Goff said.
“They are an independent agency, but I expect if the safety cases are presented, they’re going to approve it,” Goff told CNBC in September.

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Processed food stocks tumbled on Friday as investors feared a crackdown under President-elect Donald Trump and ally Robert F. Kennedy Jr.
The declines came after Trump named Kennedy as his nominee for secretary of the Health and Human Services Department.
Kennedy, who ran as an independent candidate for president before throwing his support behind Trump, has pushed for major changes to the FDA, including the removal of nutrition departments.

A chip and snack food display at a convenience store in Miami Beach, Florida.
Jeff Greenberg | Universal Images Group | Getty Images

Processed food stocks tumbled on Friday as investors feared a crackdown under President-elect Donald Trump and ally Robert F. Kennedy Jr.
Soda titans PepsiCo and Coca-Cola dropped more than 4% and 1.3%, respectively, in late-day trading Friday. Cheerios cereal and Betty Crocker cake mix maker General Mills fell more than 2%, as did Conagra Brands, the company behind Reddi-wip.

Campbell Soup, which makes Goldfish crackers and Pepperidge Farm cookies, retreated close to 3%. Kraft Heinz, known for its macaroni and cheese and Oscar Mayer hot dogs, eased 2%.
Frozen potato supplier Lamb Weston, whose french fries are sold in chains including McDonald’s and Chick-fil-A, dropped more than 6%.
The declines came after Trump named Kennedy as his nominee for secretary of the Health and Human Services Department, which oversees the Food and Drug Administration and Centers for Disease Control and Prevention, among dozens of federal agencies. Trump’s selection of Kennedy, a noted vaccine skeptic and conspiracy theorist, drew criticism from some politicians on Capitol Hill as well as public health experts.
If Kennedy wins approval from the Senate, he will also oversee Medicare, Medicaid and the National Institutes of Health.
Traders are wary that Kennedy’s “Make America Healthy Again” focus will result in increased scrutiny of companies behind some of the best-known snack, packaged food and soft-drink brands. Kennedy, who ran as an independent candidate for president before throwing his support behind Trump, has pushed for major changes to the FDA, including the removal of nutrition departments.

“They’re not protecting our kids,” Kennedy said of current regulators in an interview with NBC News last week. “Why do we have Fruit Loops in this country that have 18 or 19 ingredients and you go to Canada and it’s got two or three?”
Fruit Loops are made by WK Kellogg Co. The stock bucked the trend with an advance on Friday, but finished down more than 4% on the week.

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