Latest news with #JimGillies
Globe and Mail
28-05-2025
- Business
- Globe and Mail
Is Medpace Stock Worth the Hype? Here's What Analysts Think.
Explore the exciting world of Medpace Holdings (NASDAQ: MEDP) with our expert analysts in this Motley Fool Scoreboard episode. Check out the video below to gain valuable insights into market trends and potential investment opportunities! *Stock prices used were the prices of April 23, 2025. The video was published on May 27, 2025. Should you invest $1,000 in Medpace right now? Before you buy stock in Medpace, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Medpace wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!* Now, it's worth noting Stock Advisor 's total average return is957% — a market-crushing outperformance compared to167%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Anand Chokkavelu, CFA has no position in any of the stocks mentioned. Dan Caplinger has no position in any of the stocks mentioned. Jim Gillies has positions in Medpace. The Motley Fool has positions in and recommends Medpace. The Motley Fool has a disclosure policy.
Yahoo
27-05-2025
- Business
- Yahoo
Nike's Turnaround Story
In this podcast, Motley Fool analyst Jim Gillies and host Ricky Mulvey discuss: Nike's return to Amazon. The fundamentals and risks of investing in turnaround stories. A fitness company with a potentially brighter future. Then, Motley Fool Chief Investment Officer Andy Cross and senior analyst Asit Sharma interview PubMatic CEO Rajeev Goel about trends in digital advertising and his company's future. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $340,468!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $37,070!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $639,271!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join , and there may not be another chance like this anytime soon.*Stock Advisor returns as of May 19, 2025 This podcast was recorded on May 22, 2025. Ricky Mulvey: Are you buying the Nike turnaround story? You're listening to Motley Fool Money. I'm Ricky Mulvey joined today by Jim Gillies. Jim, good to see you. Jim Gillies: Good to be seen, Ricky. Ricky Mulvey: Today is a good day to zoom out. There's some little news going on, but to be honest, it's a little bit of a slow news day. I think it's a good time to talk to you, especially because you like looking at valuation stories. I think today is a good day to talk about turnaround stories, especially with Nike, where Nike's CEO Elliott Hill is now trying to appeal to retailers again after the previous administration focused on a direct sales route. Here's the newsy hook. Nike is back to selling its products on Amazon. This is five years after pulling its products from the e-commerce giant. We'll get into the turnaround story, but what do you think of this Nike's move to reverse course on direct sales and say, "Hey, actually, outside retailers are good at selling our shoes and apparel?" Jim Gillies: I'm going to put it what Winston Churchill said way back in the day. It's nice that Nike does the right thing after trying all the other alternatives. It was dumb to pull it off. It's only the biggest online marketplace in the world. Why would you want to sell your products through there? Who knows? In other news, why would anyone want to sell in Costco, for example, or through Walmart? Why would you want that kind of relationship? I have fond memories of looking at Foot Locker after Nike pulled, the same thing. We're going to emphasize direct to consumer sales, so we're going to sell less through Foot Locker. In the process of being taken over by Dick's Sporting Goods, Foot Locker had some long dark tea times of the soul there before basically striking things with deals with Adidas or Adidas, depending on how pretentious you want to sound and got on with their business. With Nike deciding they could do it themselves and trying to disintermediate people and trying to take the profit for themselves, now they're coming back, scrunching back to people. Thank goodness it hasn't been a complete and utter failure. I know we're going to really drive toward turnaround stories, but this is an iconic brand. It's an iconic company with products and athletes that people identify with. Obviously, Michael Jordan, Tiger Woods, and various lesser beings as well. This is a company that maxed out. It's been, I think, three and a half years since it topped out. I know we're going to go down the turnaround thing. One thing I'm going to say about when you are playing in turnaround stocks, realize most of the time, turnarounds take a long time to turn around. That's not a unique insight. Peter Lynch said that, and I think one up on Wall Street, which was published in '87 or something like that. Turnarounds take a while. Nike's shed almost two thirds of its value over the past four years. Have we made the turn yet? I'm not entirely sure. Ricky Mulvey: Nike is also in a tough environment to turn around, announcing that it's going to hike prices on June 1. The company did not mention tariffs, but CNN reports that they just said, "We are regularly evaluating our business and making pricing adjustments as a part of our seasonal planning." Jim, I think we're going to see a lot more of that, especially from retailers. Just we're not going to put blame on anyone, but we are going to raise prices coming into the summer. Jim Gillies: That's the lesson of Walmart and President Trump jawboning them down last weekend. The second they say, "Our costs are higher, so we're going to have to pass a law on the costs caused by tariffs," and they got spanked. The signal that sent was, "Everyone else who is also going to raise prices, everyone's going to do it." Come up with literally any other explanation. It's going to happen and people are going to have to pay for this. Just don't point blame the general DC area is all. Look, they've also, of course, if they're going to do price hikes, part of that you got to pay the Amazon [inaudible] now, too. That's part of it. It's going to be interesting times for Nike in this new higher cost environment. I'll leave it at that. Ricky Mulvey: It's also incredibly difficult for a brand to come back from being a discount brand back to we're going to sell things at full price again because you've trained your customer base to wait for the discounts to come, and then good luck to you if you can stop that game. It's incredibly difficult. I don't want to discount Nike's ability, but there's also a pricing game that's going to be tough for them. Jim Gillies: One hundred percent. Ricky Mulvey: Let's talk about the turnaround story itself. It is difficult for companies to turn around. Nike has the Win Now plan, which is focusing on retail partners as we mentioned. There's some focus on brand. There's a shakeup in the technology division. You've seen a lot of turnaround plans, and it's easy for investors to get excited about them to want to hop on board and see an undervalued stock and get on that train. What do you specifically think of Nike's Win Now plan? Jim Gillies: I don't know what to think about the Win Now plan. I will say I've seen various other win now. I guess no one could see the air quotes, so it was wasted motion. I've seen other turnaround plans, and we remember the ones that work, and the ones that don't work tend to disappear into the ether along with the executives that trundled them out. I have very fond memories. This is a technology space. This is a few years ago. Someone had come from a very high profile technology company. We'll just put it that. I saw a presentation from them, which their version. The technology space, it's not important who it was, but they stood up and spoke very confidently about their version of the Win Now program, how they're going to win back customers for the technology products that they were offering. I remember watching this and really noting the enthusiasm of the executive who had come over from a much larger company and how much deference he was being given in the room because this guy a very important executive from a much larger company than us now. I think the plan and the person lasted less than 18 months. No, I'm not talking about Pat Gelsinger and Intel. We have seen this story before, and the principles that I have when looking at any turnaround, first of all, turnarounds are difficult, and a lot of time turnaround doesn't happen, and it's not that the company turns around. It's the company turns around on the person who's trying to drive the turnaround. We go get the latest savior. The second thing is, it's probably going to take you a long time and longer than you expect, so you have time to go into a turnaround story. You have time to maybe gauge a few quarters. Don't even throw any money at it or throw 0.1% tiny starter position just to make sure you keep paying attention. I'll give you a couple other turnaround scenarios. Right now, there's a lot of people getting very excited about United Health Group which has fallen like 50% in a month or whatever it is. There's a bunch of executives who have committed capital in the open market, and everyone's yay. You know what? Let's just see how this plays out. I'm going to point you in the direction of Boeing, as well, which the two airliner crashes of the 737 MAX, which kicked off a lot of the problems with Boeing. Those were in late 2018, early 2019, and people were rushing in in 2019 and 2020. It's like, "This is one of the great American success story companies." It's intrinsically required company in the defense industry as well as the airline. It's part of an airline duopoly. If you rushed in in the first year of that, boy, you've been waiting a long time for your money. Even like I mentioned earlier with Nike, Nike's probably three years into their turnaround. I'm not sure they're going to turn yet. Certainly, if you look at expectations, this is a company that as recently as 2021 had revenue growth over 20%. It's going to decline this year, and if you believe consensus estimates going to decline next year and going to decline the year after. One of the turnarounds that actually turned that I can appreciate is Chipotle. Chipotle in 2015, a very bad, terrible, awful year. Ricky Mulvey: It kept giving people food poisoning. Jim Gillies: In various locales and different types of food poisoning, too. It's nice that they went for diversification. You don't like E. coli? No problem. We've got norovirus. By the time you come along in 2016, the stock had already been knocked down by about 40 or 50%. You come along in mid-2016, it's like, "Evaluation is much better. They're still got good growth plans. They've at least paid lip service to improving the quality." We understand why they had a lot of the food-borne illness issues that they had. Ironically, a lot of it was tied to their whole food with integrity thing where you can't get one type of potato to make your potato chips or make your French fries, like McDonald's does, where they have a very specific French fry specification and they go everywhere. A lot of it was because local farms has had tainted lettuce, and they tried to do local. You come in about mid-2016, you've well cleared the 50% drop, and they've paid lip service. They've closed the stores to do a proper clean-up, everyone. They introduced more training, and they come out and say all the right things. Was still dead money for another two and a half, almost three years. It was only after Founder Steve Ells is gone, and they bring in Brian Niccol from Taco Bell, which is still hilarious to me. Only then did Chipotle have its renaissance, and it's done very, very well, but the people who ran in in the first couple of months probably paid more than they needed to, and they were very early. I look at a Nike and go, "We're about three years into this. Is any of the moves they're doing gaining traction?" I don't know. I'm still like, You know what? I'm still taking my time because I'm not sure there's a lot going on." Ricky Mulvey: Elliott Hill came in as CEO in 2024. It was John Donahue, who is there from 2020-2024. The new leadership has not had three years to really implement a new plan. It's been less than that, Jim. Doesn't sound like you're interested in Nike. I'm not getting you to bite on Nike. It's at historical multiple. It's like 20 times earnings for an iconic brand. I would bet that in 10 years from now, 20 years from now, people are still buying Nike shoes, not that I agree that is. I have no prediction, but you're not biting on Nike. These things are difficult. Are there any current turnaround stories that you're more interested in? I know you like looking in the dark corners of the market where not a lot of other people like paying attention, but when you grab your flashlight and search around the attic, are there any better situations for retail investors than Nike right now? Jim Gillies: I'm going to give you one that's going to get me some grief, but that's OK because I live on grief and tears, so that's good. In the spirit of Charlie Munger's try to destroy a cherished belief at least once a year, a company that I very publicly mocked on Fool24, Fool Live at the time, called out their now former CFO as being, I'll say suboptimal, I said nastier things, but that's OK. If you had told me that I would be an owner of Peloton today, I'm not sure I would have believed you, but the whole concept of Peloton is fine post COVID, because Peloton spent the COVID bubble completely overbuilding and pushing as far away as possible, any suggestion that they were nothing more than a COVID growth story. No, no, we're fine. Of course, they overbuilt all of their fitness gear, which is very low margin, as opposed to their subscription business, which is very high margin. They plowed all their capital into their treadmill and bike business and then had to sell it at just brutal discounts. The CFO, again, had no idea what the F in her name meant. She very publicly said, "We have no need to raise capital 12 days before the company raised a billion dollars in capital." When the CFO doesn't know what's coming, you don't exactly engender optimism in that they know what the hell is going on, but flash forward to today, the froth has been largely cut. The people who were intent on empire building are gone. They have hired a guy who on paper looks great. It comes from Apple-connected Fitness, was one of the pioneers there. That's the new CEO. He's been a Peloton member since 2016, himself, some subscriber, so he uses the product. It basically boils down to the new management finding and nurturing the real business hidden underneath this COVID era empire excess. Of course, Peloton was down 99% at one point. This has been bombed out. Why would anyone go here. If you look at the last three quarters, they have beaten and raised their guidance each time. You look at the full-year quarter, they have a June fiscal year, so they're three quarters into fiscal 2025. They came into fiscal 2025 with a prognostication of various things. The main things I'll say is adjusted EBITDA 200-250 million and free cash flow, which is not something this company was familiar with for the last couple of years, generating at least 75 million in free cash flow. That's what they came into. After one quarter, they bumped their guidance up, and the free cash flow guidance became at least 125 million. After two quarters, again, bumped guidance up, and cash flow became at least 200 million for the year. By the way, after three quarters, they've actually done 211 million in free cash flow, which is not what people were expecting from the corps of Peloton. This most recent thing is they're going to do free cash flow in the vicinity of $250 million. They've already got 211, like I said. They are now trading for about 13 times at least as of a couple of days ago, I haven't looked at today. Trading at about 13 times free cash flow. Have 1.5 billion in debt, and some of it's very expensive debt, but I think they're going to pay it off fairly quickly. They got $1.5 billion in debt with about $910 million cash against it. They're going to take out about $200 million in convertible debt, which matures next year. That'll be gone. Probably going to take out a couple hundred million dollars on the credit line, which is a very high interest rate. When they do that, it'll automatically drop their interest rate down, so now you've got another engine contributing to the cash generation story. They're really focused on keeping the subscriptions that they have now. They've deemphasized the hardware model. I just look at this and go, "I think Peloton not only can be a multi-bagger from here or here being six dollars when I was looking at it fairly recently. I think you could see a world in less than five years where Peloton goes from six 25 to 30." It's bought out during that interim. I'm more interested in that kind of a turnaround, where the bombing happened, and it's just rubble everywhere, rather than the fits and starts at at a Boeing, at a Nike, at an Intel. I mentioned Pat Gelsinger earlier. I'm more interested in I want to see blood in the streets or my turnaround target then I get interested. I don't see that with Nike. Ricky Mulvey: Importantly, you used a free cash flow metric for Peloton. That means that company is generating a profit for listeners making sense of that word salad. That's a great place to end it. How about that? Jim Gillies, thank you for your time and insight. Appreciate you joining us on Motley Fool Money. Jim Gillies: Thank you. Ricky Mulvey: What does a more open Internet mean for ad sellers? Motley Fool Chief Investment Officer Andy Cross and senior analyst Asit Sharma interviewed the CEO of PubMatic Rajeev Goel, on our Fool24 livestream. We're just going to play a portion of the conversation, where they talk about ad buyers shift to streaming and what investors need to know about this ad seller's future revenue growth. Andy Cross: Rajeev, one thing we love to dig in through is really the competitive advantages of the companies we invest and we follow and PubMatic is a recommendation across many of our services. I want to talk a little bit about Activate, Convert, and Connect. Just some of the new initiatives you've brought to the platform, especially tied to AI, but really, as you're looking to serve different parts of this market that is just all blending together with all the different players that are connected into serving advertisers to consumers as the advertising market is not just growing, but as you mentioned, really evolving toward more programmatic spend. Rajeev Goel: I think the great thing about our platform is how we connect all of these different segments of the market together so we can enable their businesses and enable them to transact. Convert is our commerce media platform. I gave a couple of examples earlier of Instacart data, for instance, is available on our platform. If a marketer wants to target people that are shopping for specific products, or maybe it's a conquest where you say, "If they bought Campbell's soup, then we want to show them an ad for the alternative." Instacart doesn't have a huge amount of digital ad inventory, in that people go on Instacart and they purchase their basket of groceries, but then that data can actually be applied outside of Instacart itself. We can extend the value of that data. Now, streaming inventory is a great place to extend the value of that data. If we can play on Instacart data onto, let's say, Roku inventory, that's a huge win for everybody involved in that process, including the consumer, by the way, who's going to get a much more relevant ad as they're watching content on Roku. The beauty of our platform, Convert for commerce media, Activate for buyers. We have our core SSP for publishers, and then we have a product called Connect, which I'm sure we'll get into, Andy, which has to do with curation and sell-side targeting. More and more, this targeting is moving to the sale side of the ecosystem rather than the buy side. We can bring all of these pieces together to enable a customer to vary efficiently and with a high degree of performance, drive the transactions and the outcomes that they want to drive. Asit Sharma: Rajeev, I wanted to ask you a question about where advertising is going in the current sort of macroenvironment, maybe some longer term trends. I think you've peripherally touched on this as you've been talking. In your last earnings call, you mentioned a shift in marketing funnels from sort of top of the funnel activities to lower level activities. I was curious, if advertisers are shifting from brand-building activities to more performance marketing, how does this benefit PubMatic and how are you all positioned to help advertisers go a little bit lower down the funnel? Rajeev Goel: There's no doubt that there's a degree of uncertainty out there, US trade policy, tariffs, all that kind of stuff that is causing some unease. The good news from my perspective is having been doing this as long as I have, we've managed through multiple economic cycles, and so we've seen this playbook of when the cycle shift happens, how does that play out into advertising? The good news is that advertising always comes back bigger and better, and in particular, digital advertising. Advertising has been around for hundreds of years, and it's not going away. What typically happens is the underlying shifts that were happening maybe slowly in the ecosystem, those get accelerated. A couple of things that I'm anticipating. Number 1 is, I think we're going to see a more pronounced shift of dollars from linear TV into streaming. No secret that obviously the eyeballs have shifted into streaming. The COVID pandemic was a big accelerant for that, but new households that form if you're in your 20s or your 30s, nobody's subscribing to Comcast or something like that, they're all going for streaming. The eyeballs have shifted, but the dollars have lagged. Right in the middle of the upfronts, this is when the big TV companies, the broadcasters, and the streamers, they go and they present what's their content slate and try to get advertisers to commit big budgets. When I talk to advertisers and agencies, I'm hearing who's willing to step up their commitment given the uncertainty, particularly because if you don't buy in the upfront, there's what's called the spot market. That's the real-time market where you can buy without having made a commitment. The spot market is available to you. I think we're going to see a lot of dollars move into the spot market in particular around streaming. Spot tends to be much more heavily programmatic dominated, and so we think that's a big upside potential for us. The second, Asit, is what you mentioned around performance. The other thing that happens is usually a CFO is now getting into the CMOs here and saying, "Hey, we got to make sure every dollar of ad spend is super accountable. We need to know granularly what's the ROI. Otherwise, it's potentially on the block for being cut." That means that I would expect to see a shift of ad dollars from brand orientation toward performance. What does that mean in terms of performance channels? CTV is a performance channel. Commerce media is a performance channel. You have closed-loop reporting, the ability to measure what kind of sales happened. We have a lot of advanced data and targeting. I'm sure we'll talk about cookies, but it's been a big transition, and we've been a leader in that transition away from cookies. A lot more advanced data like people logged in. I think we're going, in a good position, to be able to manage through that shift for publishers to drive more performance ad spend. Actually, I'll give you two more things. The third is more supply path optimization. If your CFO comes to you and says, "Hey, we're going to have to ratchet back the ad spend by 5, 7, 10%," then the first place you're going to lean to is to say, "Well, how can I protect actually the media spend, but how can I get more efficient? How can I take cost out of my supply chain, out of my buying process and supply path optimization?" Our Activate solution with its AI capabilities is a great way to do that. Then, lastly, I think we're right at the cusp of this AI revolution. Usually, what happens in a macrocycle is people are much more willing to try new solutions. When you're making 100, 110% of your plan, your motivation to try something new is very low. It's like, "Hey, why rock the boat?" But if you're coming in at 80 or 90% to plan, if you're a publisher or an advertiser trying to drive your sales, then all of a sudden you're willing to try new things. I think there's a lot of AI solutions out there in general, but we've been doing a lot of AI or new buyer platform that we announced last week with AI-driven workflows. I think we're going to see an acceleration of interest and trial, a lot of these new AI solutions. Asit Sharma: Rajeev, we've talked about a lot of technological advancements and potential tailwinds up until now. We're about halfway through. Before we jump into questions about AI, I want to draw everything together. Can you give us, from a financial perspective, a sense of the revenue CAGR we should be expecting, shareholders should expect, let's say over the next three and then maybe five years. Rajeev Goel: Sure. I'm happy to share what I can in terms of forward-looking projections. Let me give a little bit of context on the business just from the last couple of quarters. In May of 2024, so almost exactly a year ago, one of our large DSP buyers, they made a technical change to how they bid. I won't go into too many details on it, but they went from first and second price actions to really managing first price only. That was a significant headwind for us. The same time, we saw a nice tailwind in political ad spend. Obviously, last year, presidential cycle, big cycle, so there was a lot of political ad spend, particularly in the second half of the year. There's a lot of noise in the numbers right now, and so what we started to do middle of last year is just to break out, if you look at our business excluding that DSP and excluding political, so the putting the take what is the growth in the business look like so that investors could get a clear picture of what is the underlying business. How is it performing? That underlying business, by the way, is about 70% of our revenue, so I'll see a very significant chunk of it. In the second half of last year, that underlying business grew 17% on a year-over-year basis, pretty good. That growth accelerated in Q1 to 21%, so we're seeing a really nice trajectory in the business. Our reported revenues the entire business, they've been uneven. Uneven because we took that hit in Q2 of last year, and that persisted into Q3. Then we had uptick from political, so Q3 looked pretty good, and Q4 came back down. When you look at the total reported numbers, there's some unevenness. We are really targeting to grow at over 15% per year on a sustained basis. When we look at our underlying business again and the trends there with that 21% growth in Q1, and we think about even in the near term with the macro-uncertainty, we think we can continue to grow at that 15% plus rate. I think there will be quarters where we're above that. But I think that 15 ish percent is a good number. Asit, our market is growing in the 8-10 percent range. Digital advertising programmatic digital advertising. That 15% also implies sustained market share growth. Ricky Mulvey: I'll put a link to the whole interview in today's show notes, which members of any Motley Fool service can access. As always, people on the program may have interests in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Andy Cross has positions in Amazon, Apple, Chipotle Mexican Grill, and PubMatic. Asit Sharma has positions in Amazon, Costco Wholesale, McDonald's, and PubMatic. Jim Gillies has positions in Amazon, Apple, Chipotle Mexican Grill, Costco Wholesale, and Peloton Interactive and has the following options: short July 2025 $6 puts on Peloton Interactive. Ricky Mulvey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Chipotle Mexican Grill, Costco Wholesale, Nike, Peloton Interactive, PubMatic, and Walmart. The Motley Fool recommends Campbell's, Instacart, and UnitedHealth Group and recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy. Nike's Turnaround Story was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-04-2025
- Business
- Yahoo
Are Retail Stocks a Bargain?
In this podcast, Motley Fool analyst Jim Gillies and host Ricky Mulvey discuss: Fund managers cutting their positions in U.S. stocks. How long-term investors should react to fear in the markets. If Abercrombie & Fitch's stock deserves to be in the bargain bin. Then, Motley Fool personal finance expert Robert Brokamp joins Ricky to discuss what your tax return reveals about your finances. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Before you buy stock in Abercrombie & Fitch, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Abercrombie & Fitch wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $524,747!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $622,041!* Now, it's worth noting Stock Advisor's total average return is 792% — a market-crushing outperformance compared to 153% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 21, 2025 This video was recorded on April 15, 2025 Ricky Mulvey: Fear is back in the market. You're listening to Motley Full Money. I'm Ricky Mulvey, joined today by Jim Gillies. Jim, it is so good to see you on the Internet. Thanks for being here. Jim Gillies: Thank you, Ricky. Ricky Mulvey: I want to talk about this fund manager story. Fund managers are pessimistic, Bloomberg reported a Bank of America survey that basically found that investor sentiment regarding economic prospects is the most negative in three decades. Fund managers are dramatically moving out of United States stocks. They were 17% overweight in February and now a net 36% underweight in April. That's a move of about 50%. What's your reaction to that? Is there any notes that regular investors, us retail folks should be taking from this move? Jim Gillies: Sure. I'm probably going to give some conflicting stories this week, but they are what they are. Whenever I hear the word pessimist, I'm always reminded of my favorite science fiction author Robert A Henlan who said a pessimist is correct oftener than an optimist, but an optimist has more fun and neither can stop the march of events. I understand the pessimism, but I choose to be an optimist. This concept of underweight US stocks versus overweight, I hope most individual investors aren't bothering with that type of thinking. I am a fan of hedging with cash in your portfolio. I'm a fan of moving slow, acting slow. I'm a fan of long-term thinking and of not getting terribly specific with allocations, which this seems to be, I understand the pessimism regarding economic prospects. I believe we'll talk more about that. But the overarching reality, I like to remind myself to be the optimist in pessimistic times, what I like to remember is the quote from Shelby Davis, which is, you make most of your money in bear markets. You just don't realize it at the time. Time and again, that has proven beneficial for me, I'll put it that way. Ricky Mulvey: Well, I think when I started working at the Fool, we got into the 2022 bear market, and one of the things you told me is basically, the more disgust I feel when I hit a buy button, it usually ends up being a much better decision three to five years from now. There's a couple of companies I want to talk about in a bit where I'm feeling some disgust at the idea of buying them. Jim Gillies: Good. Ricky Mulvey: Within this survey, the one thing that's a little interesting is how this is playing out in cash allocations, which currently stands for these fund managers at about 5% of assets. Is that number meaningful? That doesn't seem very fearful. Jim Gillies: I don't view it as fearful. I usually am around 5% in most market conditions, and I have been so for nigh on 30 years. I guess if I've been peak fear for three decades, I don't know, I don't feel that way. I will say that I was a little concerned, so I'm going to go with the negative economic prospects here. I was a little concerned about market valuation, about bluster coming from the direction of that White House you all have in Washington, DC. But more than that, the tariff nonsense Canadians got a sneak peek of, of course, Canadian. We got a sneak peek at the tariff nonsense, we were the first ones to get targeted. Maybe that's what had me a little bit, I'll say ahead of the curve in terms of temporary repositioning myself, 50 for state nonsense, valuation, frankly, for a lot of, especially the MAG7, was generous, shall we say. I actually took my cash position temporarily up to close to 25%. But all through that, I didn't feel particularly fearful. I felt particularly opportunistic, saying I think I'm going to get better prices. Now, I am no longer 25% cash or 25% ish cash. Probably deployed a third to half of that cash back into shares as well as indexes at lower prices. I think that's fine. And that's actually, I think, a hidden benefit of things like index funds, particularly in tax-sheltered accounts, where you can get in, get out quickly based on the whims of the market. I'm typically a pretty slow mover anyway. But in this case, it seemed reasonable to do, but I don't know. Maybe I'm hard-wired against fear, I think, because, 25% cash, even 5% cash, that ain't peak fear. I like to call it peak opportunism, because if I'm correct at elevated cash levels, I'm going to get better prices. I have no idea where the S&P 500 say is going to be or the TSX composite. I have no idea where it's going to be in three months, six months, a year from now. I just know that during times of pessimism, historically, it's been a good idea to be deploying money. I'm not going to, you know, insult anyone's intelligence by doing the whole buffet, buy when there's blood in the streets. We're nowhere near blood in the streets level. It's been an interesting few months, and I always like how people seem to forget that markets fall, too. When you've had, like, 2023 and 2024 were pretty good markets,2021 was a pretty good market in the second half of 2020 and so 2022 shouldn't be feared. It was opportunistic. I think, even with the nonsense that's been battering the news stories for the past three, four months, it's not a time to be pessimistic. It's a time to be how can I improve my station three, five and 10 years from now? Ricky Mulvey: Well, one area of the market where investors are really pessimistic, one I know you follow closely is the retail landscape. State Street's S&P retail ETF, which has gobs of different types of retailers from some food retailers, clothing retailers, specialty retailers. That's down about 16% from January, and that is 2X, the decline of the total S&P 500 down about 8% from the start of the year. Seems like it would be a lot more given the point of the news cycle that we're in we're coming up on earnings season, and before we get into specific companies, do you think more retailers should be getting in front of tariff news, talking to investors about their supply chain, pricing scenarios, what they're going to do? Like before this recording, I went to the Investor Relations page of one of your favorite retailers, Academy Sports and Outdoors. There's not a whole lot of chatter on there about how they're going to handle these potential supply chain challenges as the stock has been battered this year. Jim Gillies: I think retailers should get ahead of it, and I think we should all pay attention to the fact that it probably doesn't matter because, you know, they will be reacting. Let's call this what this is. This is mainly the China problem. We buy a lot of stuff from China, and that is where a lot of the back and forth tariff, I'll hit you with reciprocal tariffs. Well, I'll hit you. That's where a lot of it has been recently landing. It's very confusing, frankly. Like, I don't know anyone's really keeping track of it, the whole thing. I think you have to be in front of the tariff thing, but I think you're not going to really be able to say, specifics with great detail. Even if you do, I'm not sure it's really going to do much in the here and now, which is why I buy with a 3-5 year expected time horizon as a minimum, because I don't know how the world's gonna look in five years. I know it's going to look different because, I think back five years ago now and we're in month number 1 of COVID and well, that was a party, and no one saw that coming five years before that. It's not a retailer, but it is a restaurant company, restaurant franchisor, which I've talked about before here, but they just reported this company called MTY Food Group out of Canada. Not that the ticker really matters at this point, or the name, but they in their most recent earnings release, which was last week, they said tariffs were in front of mind, and they got in front of it like you're talking and they noted that in both the US and Canada, where they operate, most of their input costs are sourced domestically. There's some mitigation there. And then there was always, you know, what they said was potential impacts through our strong supply chain and procurement capabilities, or that they would mitigate, sorry, these potential impacts through the strong supply chain, procurement capabilities, strategic menu adjustments, and when necessary, pricing actions. They had raising prices for customers, which of course is the problem with tariffs. It amounts to an inflationary tax on the end consumer if an American, that's on goods brought into America. You're going to be paying more, that they had pricing at the very end. We're going to try to mitigate as much as possible on the way in, but we might have to resort to price hikes. And I suspect that that will be the stance of pretty much everyone in the space. The other issue, I think, is, I'm not sure the market really believes these tariffs are here for the long term. I think they look at the first Trump administration where tariffs were on, tariffs were were on, tariffs were offs. Oh, we've got ourselves a brand new North American free trade deal. I think that, there's probably a lot of people saying, yeah, this is of the deal. Style stuff coming out of the president's office. This is probably going to ultimately look a lot like the first administration, because the other thing that I am reasonably confident in saying is that while all presidents, I think, look to the stock market as one of the indicators of the job they've done, I think the current president has a particular love of the stock market and going up. I saw a clip of him yesterday or day before talking about, don't worry about short-term pain because, you know, look at my first term, where the markets were up. I think he said 87% or whatever. We all have a tendency to hew toward recency bias and to look at everything that's happening right now and extend that, forever thing. I think, you know, look, watch retailers, by all means, retailer management team should talk about this, but I'm not sure they're going to really be able to do much about it in the immediate term. It's going to take a few quarters, maybe years to restructure, and by then, we could have a whole different set of challenges. Ricky Mulvey: We'll see. One day, people are upset about tariffs. The next day, we'll see if people are really excited about tax cuts getting extended. One retailer that's on my radar. I'm working out a thesis for it, so we'll see if we can do this on air, is Abercrombie and Fitch. I don't have a position in the company, but it's one that is on my watch list, and I'm thinking about picking up some shares. If you're listening to this, depending on when I may or may not have a position, I truly don't know if I'm going to buy. Basically, Abercrombie over the past few years has been able to grow earnings, grow sales. Right now, its investors are putting the stock in the dumpster. It trades at about seven times earnings and cash flow. When we look at the prior year, comp sales are up about 14% year on year. The vast majority of sales are in North America. When you look at the manufacturing supply chain, which they give to you in an Excel format, which I then have to run through an LLM to pull out the information, only about 5% of their workers are in China, where the real trade war is brewing, and the majority are in India, Bangladesh, and Vietnam. This is also the exact kind of manufacturing that I do not expect to move back to the United States in a meaningful capacity. I think it's going to be they're trying to get the high level. Yeah, I don't think you're going to retrain Americans to sew jeans together. I just I simply don't. For $5 a day. At the same time, management's meaningfully buying back shares. They have about 1.3 billion dollar share repurchase authorization for a 3.5 billion dollar market cap. They're doing that when the stock is way off all time highs, which I like to see. I think that they have good clothes. I've been to their stores. I think they have a good selection. People who are much smarter about fashion than me, shout out Mary Long, says that her friends and her are like an Abercrombie Fitch. I think maybe the stock's at a discount. That's the pitch I'm working on. What would you press me on if I were pitching this company to you at a Motley Fool Investor meeting? Jim Gillies: Well, I'll hit that. I will say a couple of other little notes about this company. I've not looked at it in a long time. I looked at it back in the day, like 20 years ago. I mean, I'm someone who thinks a black T shirt is the height of fashion. So I mean, let's be honest, you know, this is not exactly my Bailewick I like that it looks like the last five years, they produced about the $1.34 billion in cumulative free cash flow. Love that. Fiscal 2022, that was rough, probably tied to the post-COVID supply chain nonsense we got to live through that I guess people have sort of forgotten. That was a cash-burning year. That five years 1.34 billion free cash flow includes a cash negative year, kind of like that. I like that they paid off all of their debt. I don't count operating leases as debt because it's not. So they paid off all of their debt before they really geared up their buybacks in fiscal 2024. I like that. They appear to be buying back their own stock at any price, however, most of their Q4 prices came at a price double that of today. I wonder if they've got a model we got a number of companies I like to follow where they ramp buybacks because they have a good appreciation for their own valuation. I'm not sure Abercrombie's behavior, behavior is a language. I'm not sure that their behavior would indicate that they are running from a valuation model. Of course, they can't help what shares do. I guess my first question would be, how certain are you that they can maintain their fingers on the pulsive fashion, which is the problem for every clothing retailer, including Abercrombie? Will fickle customers migrate away? Will customers in a recessionary world migrate away from a higher-cost provider like Abercrombie? You can also throw in any number of other retailers in there. In other words, if they're trading for about seven times earnings and cash flow right now, is that because we are at peak earnings and cash flow, and they're trading at, say, 20 times forward peak earnings and cash flow? Are they going to cower and conserve cash now versus the buybacks they've been doing? This is a company that has about 900 million to shy, 900 million cash on the balance sheet. Are they going to deploy that or are they going to sit and cower? Are they committed to continuing to buy back stock? Are they willing to borrow to buy back stock? Like, have they made that? Because that is usually something I've seen a few retailers, estimating where they are in their own cycle, say, oh, our stock is such a bargain. We're not going to exhaust our cash hoard. We're going to put it on the credit line that tends to not work out too well. Then probably the next question I would have for you is, again, looking back at 2022, which was the post-COVID supply chain mess for again, far beyond Abercrombie, was many other companies in this space. But if we are worried about a supply chain issue, and it wasn't just China that was hit with tariffs, of course, as you mentioned, India, Bangladesh, and Vietnam, those countries also got, slapped with a strange percentage of tariffs before it was walked back for 90 days. Are we going to see in early July? Are those going to come back, and what is going to happen? I would say, are we going to have a repeat of 2022, cash flow-wise, because the supply chain just gets tossed into a meat grinder? There's a lot of questions there, and probably ones you can't answer in this format at this moment. But that's what I would look at. Ricky Mulvey: I'll address a few of them, and then we'll wrap up. One, I'm really bad at identifying fashion trends. One of my goals this year is to learn how to match clothing. In fact, when I got out of college, I went to Ohio State, Abercrombie's in Columbus. I interviewed for two jobs there. I didn't get them either time. One, because I was bad at identifying fashion trends, I think, and probably my personality. Another time, because they did that, like, dinner where everyone goes, and you have the job applicants meet with people who work there, and you try to socialize with them. One of the people who works there said, I see no reason to ever see stand-up comedy live in person when I can watch it on Netflix and I may have implied that I thought that that was an idiotic take. Anyway, all of that is to say, my trend vibe is not as good. Look, I understand the risk involved, but maybe the supply chain stuff is not like COVID because this time it's completely self-inflicted, which can also be undone. I would say that I think they've done a pretty good job so far, selling clothing in North America and expanding their supply chain outside of China to prepare for these disruptions, and maybe, just maybe, it's an OK 3-5 year bet. Jim Gillies: First off, I feel you in the job interview. I once interviewed at Fidelity back 20 years ago, and I knew I wasn't getting the job when I got into an argument with the portfolio manager who I was interviewing with, in fairness, he was wrong. [laughs] Sorry. I guess my thing is, what would they do? Another question I would have here is what are they going to do in terms of their growth plans? Because I would agree with you. I think they have done from very brief look at this company, and like I said, I gave a bunch of things. I really like what they've done. How much of their CapEx is going to new store growth? In this moment in time, would they slide back their new store growth development in order to husband a bit of cash, focus on the buybacks, because if you like it at 140, you should like it at 70. Again, are they actively holding down the amount of inventory they're holding in anticipation of some of the problems yet to come? Agree completely with you, self-inflicted problems could be fixed with the stroke of a pen, also self-inflicted, so we'll see. Ricky Mulvey: Let's leave it there. I feel our engineer, Rick Engdahl, saying, Please let me edit this show. We will let him do just that. Jim Gillies, thank you for being here. Appreciate your time and your insight. Jim Gillies: Thank you very much. Ricky Mulvey: Up next, Robert Brokamp joins me to discuss what to look for in your tax return and what that information says about your financial future. The finale of tax season is here. If you're listening to this show, well, there's a good chance you've already done your financial scavenger hunt and confirmed that you paid the taxes that the IRS already knows you owe them, or that you're getting back an interest-free loan from the federal government. Bro, since the first thing people are going to look for is how much money they're getting back, let's start there as we're looking at your tax return tarot card, what it says about your financial situation. What's a good strike zone for this return? What's a good benchmark to know if maybe you owe too much or if you're getting too much back? Robert Brokamp: Well, everyone does love a refund, but as you suggest, every time you get a refund, you're essentially gave Uncle Sam an interest-free loan. According to the IRS, as of April 5 of this year, more than two-thirds of the returns that have been processed have resulted in refunds, with the average amount being $3,116. If you instead had that earning, say, 4% in a savings account over the past 15 months, you'd have earned around 150 bucks or so. Not a major amount, but not necessarily chump change either. Ideally, you'd owe money, so you had use of that money for 15 months. But you don't want to owe too much because then you'll owe a penalty as well. To avoid a penalty, you have to satisfy one of three criteria. Your tax bill has to be less than $1,000, or you paid at least 90% of what you owed on this year's return, or you paid 100% of what you owed on last year's return, though, if your adjusted gross income is 150,000 or higher, you'd have had to have paid at least 110% of what you paid last year. The sweet spot is owing several hundred dollars, and I know that sounds counterintuitive. Everyone loves a refund. But as long as you're earning a return on that money that you eventually paid Uncle Sam, you'll actually come out ahead. Ricky Mulvey: Let's say you're off, and let's say you're getting a lot of money back from the federal government or your state government. After you celebrate, maybe go on Amazon, you could go to the casino, if you want, with that tax return. What should you do immediately after? Robert Brokamp: Well, first of all, I don't recommend any of those. [laughs] I'll just say this. Whether you get a refund or you owe money, you should always first start thinking about whether anything is going to change this year. It could be a change in your family makeup. You're getting married, getting divorced, you're having an extra kid, or a change in your income, up or down one way or the other. Then, you have to factor that into how much you should have withheld this year, and you do that by submitting a new W-4 with your employer, if you're working for another company. Just keep in mind, though, that we're already 3.5 months into 2025. If you got a big refund, you've already had a lot withheld more than you probably should, to figure out how much to have withheld from your paycheck. IRS does have a withholding estimator at Also, most of the online tax prep companies have W-4 calculators. Even your payroll provider might have one. If you're self-employed, you have to pay estimated taxes four times a year. If you do that and you pay too much, just don't pay as much, so basically, you just want to change it so that you're paying less throughout the year. But then set up some automatic savings plan with the extra money. You don't want that extra money just sitting there in your checking account; do something smart with it, get it to a high-yield savings account, or get it into a retirement account. Ricky Mulvey: Sounds a lot better than taking a trip downtown. What are your options, then? That's if you're getting too much back and you've celebrated, you make some adjustments. What are your options if you owe too much, if you're not owing several hundred dollars, but several thousand dollars back to Uncle Sam? Robert Brokamp: Well, so again, you would first of all, want to immediately change your withholding right now so that you can have more withheld this year, so you're not in the same situation come next April 15. But if you sit there at your computer and you do your taxes and you see that you owe several thousand dollars, the first thing you want to make sure you do is still file the return, even if you don't have the money to pay it, because if you don't file the return, you're going to pay two types of penalties, failure to file penalties and underpayment penalties so you definitely want to still file the return. ow, if you don't have enough money to pay the bill, the IRS does have a payment plan, and you can apply for it online. You still are going to pay the underpayment penalties until you can pay it off, and they can be steep. It's charged on a monthly basis. If you can, it might be better to borrow that money somewhere else at a lower rate to pay the bill, maybe friends and family, if they're kind enough, rather than let the penalties accrue with the IRS. There are a few circumstances in which the IRS will waive underpayment penalties, such as someone experiencing maybe a major casualty event or a disaster, or the taxpayer retired after reaching age 62 before the current or preceding tax year. Do some research to see if any of those waivers will apply to you. In some circumstances, you can actually get your bill reduced by applying for something that's called an offer in compromise, but you really have to experienced some significant hardship for that to get approved. Ricky Mulvey: I consider all of our listeners friends, Bro. Do you have a good email for anyone who may be owing a lot in taxes, looking for a personal loan to reach out to you? Robert Brokamp: Yeah, it's rickym@, no, I'm just kidding. Ricky Mulvey: For those who have filed their taxes, we'll go to the financial planning side. You've paid. Maybe you're in the good strike zone, or you've taken care of it if you owe too much, or you're getting too much back. What would the financial advisor look for if I were to bring them my tax return this year? Robert Brokamp: I think one of the most important things they're going to look at is your adjusted gross income, which is on line 11 of your return. This is your total income minus some special tax breaks such as educator expenses, student loan interest, pre-tax contributions to IRAs, and HSAs. Knowing your AGI is crucial to determine your eligibility for all kinds of other tax breaks and things. For example, your AGI plays a part in determining your ability to contribute to a Roth IRA or a Coverdell education savings account. It determines your eligibility for many tax credits related to having kids and paying for their dependent care, and paying for their education. Your AGA plays a role in how much you'll pay for Medicare premiums and your eligibility for premium subsidies through the Affordable Care Act, even your ability to deduct medical expenses, especially in new years where you have a lot of medical expenses, and plenty of other things, really. It's an important number to know. Something else on your tax return to look for might be how much you're paying in taxes on interest, dividends, and capital gains. If these are coming from investments that are for retirement and you're not close to retirement, it might be better to have those investments in your IRAs and 401(k)s, and then you use your taxable brokerage account for more tax efficient investments like stocks that don't pay dividends, maybe municipal bonds, if you're in a high tax bracket or a high tax state. If a financial planner is looking at your return, they're going to look at your current tax bracket and then estimate where it will be in the future. If you're in a lower bracket today, especially compared to where you'll be in retirement, they'll likely recommend that you consider contributing to a Roth account or maybe doing some Roth conversions where you turn traditional money into Roth money. Finally, if you're below a certain threshold, your long-term capital gains on stocks held in a regular old taxable brokerage account may be tax-free. Those thresholds for 2025 are if you're single, so not your gross, your taxable income, a little over $48,000, if you're married filing jointly, almost $97,000. Basically, you sell the stock. You do have to enter the capital gain on your tax return, but because you're below in a certain tax bracket, it's going to be tax-free. Then you can buy the stock back immediately. You don't have to wait 30 days like you do with tax loss harvesting. Just know that before you do this, make sure you understand how much in gains you can harvest before they become taxable. Ricky Mulvey: One thing I want to underline is where your stocks are placed. I think many of our listeners are reviewing their stocks on a more regular basis with everything going on with the tariff chaos. But one thing you can do that's productive that you mentioned, is making sure those dividend-paying stocks and ETFs are within your Roth accounts. Then if you have maybe a stock that really likes to buy back its shares or the company likes to buy back its shares or a higher growth idea that you're buying on sale, that you have a lot of conviction for in the next 3-5 years, that makes a little bit more sense in your taxable account. One thing you can also think about is what to do to save on taxes next year. We usually think about this at the end of the year, but we're already talking about it in the segment. You're already reviewing your tax filing. Bro, what can you do right now to save on taxes for your 2025 bill? Robert Brokamp: Well, the most obvious things to do are to make the most of pre-tax accounts. Traditional retirement accounts, flexible savings accounts, health savings accounts. One thing that I think people don't appreciate is with pre-tax retirement accounts, you save on your income taxes this year, but you still have to pay FICA taxes. That's Medicare and Social Security taxes. But with FSAs and HSAs, they're actually exempt from both income taxes and FICA taxes. They're actually provide even more tax benefits. If you're self-employed, man, there are so many opportunities to write off legitimate expenses. Just make sure that you know which ones are legitimate and you keep good records. A lot of great retirement plans for self-employed folks. Consider maybe taking the home office deduction. If you are charitably inclined and you have stock in a brokerage account that has appreciated, I think in almost every circumstance, it makes more sense to donate appreciated stock than to donate cash because basically you're passing the capital gain on to the charity, charity doesn't care because they're tax exempt. Again, you can buy that stock back immediately with the cash that you did not donate, and you don't have to wait 30 days. Also, if you're over 70.5 and you're charitably inclined, you can do what's called a qualified charitable distribution from your traditional IRA to a charity. That way, the distribution is not taxable to you, plus it can reduce your required minimum distributions in subsequent years. I think just in general, whenever you're thinking about decisions that affect your taxes, I would say, use a tool to estimate the impacts of various decisions. Most of the online tax prep companies, TurboTax, TaxAct H&R Block. They have tax estimators. Just make sure that when you use it, you choose 2025 and not 2024. But they're really handy for making decisions like, Okay, what if I do this? What if I realize this capital gain? What if I make this type of a contribution to an HSA? How does that affect my taxes? Finally, I'll just say, if tax time was hectic this year because you were always scrambling to try to find all your documents and things like that, save yourself some time next year by coming with a system now that tracks and collects all the important documents throughout the year. It could be an actual folder that you keep in your office. It could be a folder in your inbox that you email, important tax information to yourself. It's all in one place. That way, you have it ready for next year's taxes and keep track of anything that you need to carry forward, such as capital loss carryforward. You make sure you don't forget about them when you do your turn next year. Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow. Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Gillies has positions in Academy Sports And Outdoors, Amazon, and MTY Food Group. Ricky Mulvey has positions in Academy Sports And Outdoors and Netflix. Robert Brokamp has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, Intuit, MTY Food Group, and Netflix. The Motley Fool recommends Academy Sports And Outdoors. The Motley Fool has a disclosure policy. Are Retail Stocks a Bargain? was originally published by The Motley Fool Sign in to access your portfolio
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30-03-2025
- Business
- Yahoo
Looking Back on Berkshire Hathaway's Outperformance
In this podcast, Motley Fool analyst Jim Gillies and host Ricky Mulvey discuss: How Apple has driven Berkshire's performance. Disney's flat returns over the past five years. A jeans manufacturer that is smashing the market. Then, Motley Fool personal finance expert Robert Brokamp and host Alison Southwick discuss why you should think about taking a financial health day. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $288,966!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $42,440!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $526,737!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of March 24, 2025 This video was recorded on March 25, 2025 Ricky Mulvey: Warren Buffett's still got it. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Jim Gillies. Jim, how are you doing? Good to see you. Jim Gillies: It's good to be seen, Ricky. Thanks. Ricky Mulvey: We're five years away from the COVID time, and it's time to check in on some of the cycles of long-term investments. I think Berkshire Hathaway is a good one to talk about. You were talking about it yesterday or a couple of days ago on the morning show, because there is something surprising for this business that is keeping about one third of its market cap in cash. Nasdaq up about 170%, S&P up a little less than 140%, Berkshire Hathaway, 200%, a three-bagger over this five-year time, outperforming the tech stocks, outperforming the broad index. Any reflections on that and maybe why the cash isn't a drag here? You always hear about that cash is a drag on your investments, not the case at Berkshire Hathaway. Jim Gillies: Sure. I found this little factoid, as well yesterday when I was going through the Globe mail over breakfast, and Berkshire tripled over the past five years. What? I went and looked and it has, which is interesting because it's both my longest held stock as well as my largest personal holding, so it works really well when you just ignore your largest personal holding and let the magic continue happening. Now, I think, the cash, while significant, a lot of the performance, you can probably chalk up to how well the Apple investment worked out for Berkshire. A lot of that cash has been raised in the last year, as Buffett has dramatically scaled down the amount of money invested in Apple, though he's still got a fairly significant piece there. As well, you want to look at a few of the things that Buffett has been invested into that have not worked out because he's done what I consider to be the Holy Grail and being perfectly blunt. It's something I continue to work on myself, is when you've made a mistake or an investment that's not working out, blow it out the door. Just be done with it. We saw that with the airlines during the COVID shutdowns. That may or may not have been a mistake, frankly, but I understand why Buffett got out of them, and as well, it would be very, very bad. It would be a bad look for them to have gotten bailout money when Buffett's in all of them. I think he got himself out of the way of that, the IBM thing that wasn't a great deal. I think that overall, you've got Buffett just saying, "Look, in this brave new world, we have tech stocks, growth stocks, AI, all this wonderful stuff." Buffett has just provided a really good example of, "I'm going to stay within my circle of competence. I'm going to stay with reasonable valuation." We've seen most recently is the five large Japanese trading houses that he's been very enthusiastic about, as well as up to the ante there. The famous letter to investors, Buy American. I Am, reflecting that the American market is still, and I say this as a Canadian, the place to make money. He's stuck to his long-term principles. He has avoided the noise of the world, which I would advocate everyone should do, especially right now. It seems like there's a lot of noise going on. I think that Berkshire has done an admirable job of just sticking to what Berkshire has been doing since the 1960s and the investing that Buffett's been doing since the 1940s, arguably, at least the '50s with the Buffett partnership. It speaks well to what can happen when you buy even a large, slightly boring company at a reasonable price, which it was in 2020, I would argue is still reasonably priced today, and just get out of the way and let people cook. I think it's been an excellent case study in a world where we are. I'm as guilty as the next guy, where we're looking for signs every day, and we have to talk about investing every day. We are on an investing podcast right this very moment. Buy good companies run by good people, let them work their magic, and just step back and let it happen and pay a reasonable price, of course. Got to throw that in. Ricky Mulvey: To be clear, Buffett engages with investing every day, and you can engage with investing in news every day. It's that you don't have to make a decision every day, which is what separates long-term investors from traders. Buffett spends a lot of time reading annual reports, doing that kind of thing, taking information in and allowing cold strikes to come. One of the things I'm seeing on the Internet right now, speaking of people making decisions is there's this take of looking at the Berkshire cash hoard. Right now, Uncle Warren has about tripled his position in cash and short-term investments in the past few years. The take is that Warren Buffett must see a crash coming. He's getting ahead of it, so he can buy stocks on the cheap when it inevitably comes. Therefore, as an individual investor, I should start selling a lot of my stocks and follow in the footsteps of this investing grip. What do you think of that? Jim Gillies: I think that's wrong. I think it's silly. I think it's misinterpreting what Buffett is doing. I'm now going to tell you the correct interpretation of what Buffett is doing. How arrogant is that? I think what Buffett has been doing is number 1, he has raised cash, and it's been invested at the best interest rates we've seen in 15 years, so treasuries and whatever. Look, that's not going to set the world on fire, but it's better than just sitting in cash with nothing. You got a bunch at five and 6%. The second thing, though, is, let us not lose sight of the fact that Uncle Warren is 94 years old. He will be 95 in August. We're talking about the last five-year period. I hope I'm wrong, but I think over the next five-year period, I think we'll see the departure of Warren Buffett from the stage. I think Buffett is setting up Berkshire for the next leg of Berkshire's growth and Berkshire's history without Buffett at the helm, and I think the giant cash balance, yes, if a market crash comes, he's supremely positioned, but I don't think that's why he's done it. I think he's doing it to set up for his successors. I tend to revert to the Peter Lynch, which I'm going to mangle the quote, but hopefully you'll bear with me. It's, "More money has been lost preparing for the next crash than is actually lost in the next crash." I think Warren E. Buffett is probably supremely aware of the futility of that comment. I think people who are predicting it, they're adding two and two and getting six, if you catch my meaning. I think they're going a little bit too far. It's my longest position. I've owned it since the late '97 or '98. I was trying to remember when I first bought my first shares. I've never sold a share. I was hearing then Buffett's too old. Why are you buying Berkshire now? The best days are behind it. Buffett's too old. He's going to die soon. Twenty-eight years later, here we are. I don't think we're getting another 28 years out of Uncle Warren. Again, I hope I'm wrong. I think it's Buffett looking out as he's always done for his legacy and for the investors who have trusted him and now their families who have trusted him with their money, and I think he's setting it up for when he departs the stage, and Greg Abel and Ajit Jain have taken over and the Ted and Todd on the investment side. That's what I think's going on, but I spend almost 0% of my time worrying about what Buffett does. He's bought this or sold this. I own Berkshire because I'm going to let him do that, and I'm going to go do something else with my time. Ricky Mulvey: Expectations for the next five years, not worrying about it too much. This is a sleeper stock, a bedrock of one's portfolio to keep moving. It's one that I have threatened to buy, the B shares. Don't get any ideas, Jim. I need to just do it at some point, and when I'm allowed to, I'm talking about it now, so I can't do it in the next few days. It's pretty hard to convince me not to buy Berkshire stock increments to hold for decades long periods. Let's talk about another American institution that has not done a whole lot for its investors over the past five years, and that is Disney. If you look at the five-year chart, it has returned 5% to investors over the past five years. If you want to be nice, we'll give them that dividend payment that started last year 1%, so maybe a 6% total return for your money for sitting on your hands for five years. When you look back at this American institution, Disney and its underperformance, over five years, which is long enough to test a thesis. What do you think? Jim Gillies: I'm going to go you one better. Since Bob Iger became CEO, which is October 2005, don't tell me he was out of the way during COVID because he just set up his underling to get shot, and then he came back to save the company. People can't see me doing the giant air quotes when I say save. Of course, he threatens to leave every three weeks or whatever it is. Since he became CEO, total return of the S&P 500 is about 610%, 620%. It's about a 20-year period, October 2005, almost 20 years. Disney's total return is 430%, so it's underperformed the market by almost 200 percentage points. I think Disney, they're in a really tough spot because what more worlds are there to conquer? They own childhood between the Princesses and Pixar and the Muppets and Marvel and Star Wars and insert other names here. I don't put all of this down. I'm not the world's biggest Bob Iger fan as you probably have already claimed, but I think Disney's a great investment for Bob Iger, but it's not been a great investment for other people, as you've laid out and as I up the ante on. It's not Iger's fault incomplete because the world has changed. I was saying beforehand, the Internet has ruined entertainment, because you can get everything for free, if you know how, number 1. I'm not advocating piracy, but the piracy rate's not zero, and it's easy if you are so inclined, but you've also got movies, it's almost like they've taken a page from the music industry, and the music industry held on desperately when CD sales were driving everything in the late '90s and streaming took off and piracy took off, and basically, now you've got the Sportifies or the Apple musics of the world, but artists make almost nothing now unless you're a megastar. That's what's happened to entertainment, as well. You're scared to go out and do something new and take risks on unproven stories because movies are expensive. Maybe they don't have to be. Studio A24 could maybe give you some lessons on that, but what's happened is movie studios by and large, to make their money, they are relying on sequels, spinoffs, and remakes. The problem becomes is that in order to do these, inevitably, they have these giant budgets. I'll give you a couple. Snow White is currently out there. There are some problems with that movie. The other one I always like to talk about is Indiana Jones and the Dial of Destiny, which was the fifth Indiana Jones movie. I know, I know. For the people out there listening and saying, "There are only three Indiana Jones movies," yes, you're correct, but there apparently was a fifth Indiana Jones movie called Dial of Destiny. The production budgets run super long and they get super bloated. Then you have your advertising budget, which is only about 50% of the production budget, maybe a little bit more, maybe a little less. Then you don't get the full box office. Disney would get about 60% of the domestic box office, maybe 20-40 percent of the rest of the world box office. In a case like Indiana Jones and the Dial of Destiny, because that's a movie that's largely done, their production budget was somewhere 300 and 380 million dollars. That infers an advertising budget in the 170-million range, so your profitability hurdles like about 510, $500 million. The box office was 384 million, which means that Disney's rake from that was under 200 million. They made about $11 million in domestic Blu-ray sales Blue-rays are gone. Essentially, physical media sales are basically gone. Disney took a bath on that. What does that matter with when we talk about Snow White? Well, Snow White, it's the live-action remake of a beloved film. Just like Indiana Jones, the Dial of Destiny, it's a new take on a beloved action hero, I would argue they shouldn't have done, but the production budget for this iteration of Snow Whites in the 240-270 million range. By the way, Disney has a habit of underreporting their costs. See, the Acolyte for which they did their streaming service, Disney Plus, advertising budget 240-270 million. Let's say they did about 120, 130 million dollars. Your profitability hurdles somewhere in the 360-400 million dollar range, which means you need about 750-770 million to break even. First weekend, they did $86 million around the entire world, and box office typically falls 40-50 percent in the second week. The chances of Snow White breaking even, frankly, I think, are probably low, and you now you don't get the kicker of DVD sales or you could have a movie that lost money, but you'd make it up on DVD sales. You don't have that anymore. Sorry, Disney Plus streaming doesn't cut it. This is just Disney's problem. This is all of the streamers. I've been saying for years, streaming is a race to the bottom in the entertainment industry. I think there's one company that's figured it out and that's Netflix. Frankly, the quality of what Netflix puts out isn't that great, but then you go look at another company, so I will argue vehemently that Apple TV Plus is producing some of the best content in the world right now. We've all heard about Ted Lasso. That was a fun show. Severance is excellent. Slow Horses is excellent. For All Mankind is very good, but it came out last week that Apple has lost a billion dollars on this. They've got Shrinking with Harrison Ford and Jason Segel. They've got a Mythic Quest, which is one of the guys from Always Sunny in Philadelphia. It's his other show. They've done a really good job of presenting a lot of shows, but they're blowing a billion dollars a year. The only reason they can do that it's because they're Apple, and a billion dollars is what you'd find in Tim Cook's couch. How long can you do it? Ricky Mulvey: You like following a lot of weird companies, companies that people don't talk about. No, that's where you often find value as an individual investors. The small caps that other people aren't talking about. Jim Gillies: I'm mildly insulted, but OK. Ricky Mulvey: Are there any surprising outperformers, underperformers over the past five years that you want to highlight as we close out the show here? Jim Gillies: Sure. I'll give you one that I really like, I own it, and I've recommended it, so I'm not without bias here. We've talked about it before. Kontoor Brands, the parent company of Lee and Wrangler Jeans, and in the process of buying the Helly Hansen outdoor wear brand from Canadian Tire. That company, since it bottomed in 2020, when they cut their dividend to zero temporarily, and management went up on the mountaintop and basically proclaimed, "It's coming back. We're bringing the dividend back. Don't you worry." Didn't matter. Stock went from $45 to I think it bottomed to 12. Today, I think it's a $65 company. The interesting thing about that is about a month or so ago, it was a $90 company. Why is it $65 now and it actually dip below 60. It was very interesting to me because one of the things that happened was they preannounced their Q4 numbers and the market said, "Yay." Then a couple of weeks later, they were doing an investor conference. They had to do it. They had to preannounce some stuff. Then when the actual numbers came out a couple of weeks later, the market said, "Boo, same numbers." Completely different reaction. As well, they are making that acquisition of Helly Hansen, which some people are a little worried about. I think it's a great move. It's a great brand. The current owner of Canadian Tire, which owns a bunch of retail stores in Canada, they've signed a deal with Canadian Tire to continue offering it, so you're not going to lose Canadian sales. It's reasonably priced. This is a company that can very easily do 300-400 million dollars in free cash flow a year without breaking a sweat. They've generally been very good at allocating their capital. There's a lot to like there, and it's one third cheaper than it was a month ago. Again, it's the parent company of Lee and Wrangler Jeans, and over five years, it's a five-bagger before dividends, which are large. If you bought back at 12 or $15 at the bottom, when the dividend come back, I think you're making now and the dividend came back in December of 2020. Management followed through on their promise to bring it back as fast as possible. If you bought back when everything looked terrible and everyone's upset, not only have you made five times your money, but you're now getting a yield on your cost basis, I think, 12% range, which sounds good to me. Ricky Mulvey: We literally have to end it there. Jim Gillies, appreciate you being here. Thank you for your time and insight. Jim Gillies: Thank you. Ricky Mulvey: Have you ever taken a financial health day? Robert Brokamp and Alison Southwick discuss how it works and why it could be worth your time. Alison Southwick: Spring is here. It's a perfect time to throw open the windows, both figurative and literal and emerge from the funk of winter. The light starts to shine brightly on the things we've perhaps neglected like, say, wiping down your baseboards. Mentally, it's also a great time to clear some cobwebs because there are probably some dusty corners of your financial life that you've managed to avoid. But not any longer, because you, dear listener, are going to get stuff done with a financial health day. Robert Brokamp: We the Motley Fool believe so much in having a financial health day that we've been doing it in our office, and then virtually for 15 years. It all began back in 2010. When the Fool was having what I guess you would call a regular physical health day, had classes, we did workouts together, nurses would come and take vitals and give flu shots, things like that. The idea of having a financial health day sprang from two events. One was that a visiting CEO gave a talk to a gathering of Fools and said that every employee at his company gets a financial plan based on the belief that a financially secure workforce is a more productive and dedicated workforce. At around the same time, Ron Lieber of the New York Times wrote about having his own financial health day. This was on the heels of the Great Recession. The New York Times had temporarily furloughed some employees. Ron was one, so he decided to make the most of that time by doing things like writing his will, opening a higher-yielding savings account, submitting flexible spending receipts, stuff like that. He figured that his financial health day saved his family $2,000, and that was back in 2010 dollars, so today, there'd be almost $3,000. We at the Fool began holding our own financial help days that featured classes from internal and external experts, opportunities to meet one on one with experts and the Fool's HR team. We threw in some goofy little contests and raffles to add in some fun. The main benefit was that employees were encouraged to use company time to tackle personal financial tasks. While you may not have an employer like the Motley Fool, you can do what Ron Lieber did. Clear your calendar and focus on getting financial stuff done. Alison Southwick: You might be thinking, "Why would I blow a whole day on doing pesky financial stuff?" Well, because, as with most smart money decisions, future you will thank you. Robert Brokamp: For our financial health events at the Fool, we give employees a checklist of more than 40 things to consider getting done broken into various categories, such as investments, retirement, cash management, insurance, estate planning, employee benefits, other things like that. I can assure you, anyone who accomplished five to seven to 10 of those tasks is going to be a much wealthier person in the future. To illustrate the possibilities, I'm going to highlight some of the things that actual Fools have accomplished during any of our financial health events, and I'm just going to estimate how much that could pay off over a year and over 10 years. Let's say someone had $25,000 emergency fund, they were just holding it in their 0% checking account, and they move it to a 4% high-yield savings account. Well, after one year, they've increased their net worth by $1,000. After 10 years, it's more than $12,000. What if someone analyzed their budget, found ways to save $100 per month, and they use that $100 instead to invest it and earn 8% a year? Well, after a year, you're going to have more than $1,200. After 10 years, you're going to have more than $18,000. What if you found a way to look at your budget and say, "You know what? I can boost my 401(k) contribution rate by 1%." If your household income is $150,000, you get 3% annual raises, and those investments also earn 8%. After a year, you're going to have more than $1,500, after 10 years, almost $26,000. Then finally, what if you have an old 401(k) from an old employer sitting in that 401(k), maybe it has some fees associated maybe with mediocre investments. You instead roll that over to an IRA, and you reduce your expenses and/or increase your returns by just 0.5% annually. After a year, you have more than $1,000. After 10 years, it's almost $20,000. You can see how just making a few changes on your financial health day could boost your debt worth by literally tens of thousands of dollars over the years. Alison Southwick: The benefits aren't just financial. They're also mental. Robert Brokamp: In his article about Financial Health Day, Ron Lieber wrote, "To be a modern American consumer is to be plagued by a never-ending guilt-inducing stream of undone tasks. Knocking these things off can get rid of that low-grade anxiety that results from the under-optimization of your financial life." I think most of us can relate. Right now, I suspect there is some undone financial task that is just nagging at you, eating at you, something that you know you should take care of, but you just haven't had the time. Your financial health day is your time to finally get it done, along with maybe a few other things, and I can guarantee that you're going to feel much better at the end of the day. Alison Southwick: Hopefully, everyone listening is convinced like, "Yes, I am now going to have my own financial health day. Bro, you convinced me, but now how? What are some of the best practices for making the most of your financial health day?" Robert Brokamp: I think it would certainly help to have some preplanning and prioritization beforehand so that you could hit the ground running. Maybe spend an hour or so before your actual financial health day creating a rinked to-do list so that the entire day can be spent getting stuff done. You can just start by asking yourself, "What few things can I do that will boost my net worth the most over the next one to 10 to 20 years?" That said, not everything you need to accomplish can be assigned a dollar figure. Some of the most important things are more, you'd say, defensive in nature, such as things like freezing your credit, getting enough life insurance, getting or updating your estate plan and encouraging your relatives to do the same. Keep that in mind as you consider what to accomplish. Doing this during a weekday, I think, can be important because many of these tasks require interacting with people who work 9:00-5:00 jobs such as insurance agents, financial planners, attorneys, maybe the HR team at your office, but even doing it on a Saturday or Sunday is going to really pay off. If you're married, it will be helpful to do this together so that you can each get each other's input, and you'll reduce the number of times you can't cross something off to do this because you need something from your spouse. Then finally, just do everything you can to remove any distractions. Clear your calendar, silence your phone, turn off social media, drop the kids off with friends or relatives, and spend the day maximizing your money. Alison Southwick: Bro, you've been touting the benefits of a financial health day for over a decade now. Has anything changed in your advice to people? Robert Brokamp: I'll start by saying that what began as financial health day at the Fool is now financial health week, which we did just a month ago. We just realized, frankly, that we're trying to do too much in a single day with all our classes and our events and our 40 plus item checklist. If you do your own financial health day, you may feel the same way. You'll feel very good about everything that you accomplished, but you may as all feel like there's plenty more to get done. The best practice for many people might be to have a financial health day once a month, at least for a while, and then maybe once a quarter as a maintenance financial health day. As the saying goes, "Every journey starts with a single step," so start with a single financial health day. I guarantee, it'll make you richer and make you feel better. Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow. Alison Southwick has positions in Apple. Jim Gillies has positions in Apple, Berkshire Hathaway, and Kontoor Brands. Ricky Mulvey has positions in Walt Disney. Robert Brokamp has positions in Walt Disney. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, International Business Machines, and Walt Disney. The Motley Fool recommends Kontoor Brands. The Motley Fool has a disclosure policy. Looking Back on Berkshire Hathaway's Outperformance was originally published by The Motley Fool Sign in to access your portfolio
Globe and Mail
03-03-2025
- Business
- Globe and Mail
An Investor's Look at Palantir and MicroStrategy (Strategy)
In this podcast, Motley Fool analyst Jim Gillies and host Ricky Mulvey discuss: The recent declines for Palantir and MicroStrategy. If Home Depot 's cash flow story is intact. Celsius ' $1.8 billion acquisition of Alani Nu. Then, Motley Fool host Alison Southwick and personal finance expert Robert Brokamp discuss Warren Buffett's estate plan, and the lessons for regular folks. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript follows the video. Don't miss this second chance at a potentially lucrative opportunity Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $323,920!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $45,851!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $528,808!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon. *Stock Advisor returns as of March 3, 2025 This video was recorded on Feb. 25, 2025 Ricky Mulvey: Turbulence, it's coming back. You're listening to Motley Fool Money. I'm Ricky Mulvey. Joined today by Jim Gillies, we will see how we can bait Jim Gillies into some spicy takes, but these stories, Jim, how you doing? Jim Gillies: I am doing just fine, Ricky, and I'm pretty sure you've scheduled the stories to try to bring out the old man shouting at Cloud. Ricky Mulvey: Well, we got a lot of clouds to shout at. The first of which is that we got some turbulence. The turbulence is back in the market, especially for those high-flying names. I'm going to give you a couple of your favorites. Palantir it's down about 30% over the past week. Bitcoin holding for MicroStrategy, down about 26% over the past week. Tesla is not doing too well either, and the broad QQQ is down 5% over the past week. I mentioned some of those frothy names that are down, and just wanted to see. Take your temperature. What do you make of this sell off? Is this just some froth getting taken off our sweet mocha of the market? Jim Gillies: I largely think it is, but I think there's a good side of idiocy at play here, let's start with Palantir. Look, this is a company that basically trundled alongside the S&P for the first six or seven months of 2024. Then it went stupid in the back half of the year. Speculators showed up not calling them investors. Speculators decided that, Hey, given the way the political leadership and outcome of the US election, we looked like it was leaning. This is a company that's going to do spectacularly well because something favorable, government conditions, something. That's an interesting growth strategy, but, it didn't really matter. A few folks could even articulate what it is that Palantir actually does. It just went up because people knew stuff and because it was going up. At one point, it was up 400% in the second half of 2024. It achieved a valuation level of over 100 times sales. Boy, you'd better be growing to the moon and be doing something that the world desperately needs to even try to justify a 100 times sales level. Bluntly, that's idiocy. That's dumb. That is in nothing teaches like fire territory. That is, you're about to learn a lesson you can learn no other way territory. That's now started. You're down 30% and look, if we go back to the 25 times sales that it was getting last summer, which is still elevated valuation, Ricky. The stock price falls two thirds from here. This isn't investing. This is speculation. It's based on political thesis and theater. It's silly, frankly. MicroStrategy or I guess they're calling themselves Strategy now. Look, this isn't a real business anymore. There is a real, and I will argue inconsequential software business underlying things here. But the success of the stock prices, maybe the software business is worth 3 billion $4 billion, is what it was before. The Bitcoin strategy took play. Look, you can have whatever opinions you want on Bitcoin as an investment. This is not actually me ranting about Bitcoin at all. It's just simply, look, MicroStrategy or Strategy. Their business is basically now buying and holding Bitcoin. Calls itself the world's first and largest Bitcoin treasury company. Fine, fair enough. Is that something we needed? I am struck. I went to their investor relations website this morning. First thing you see is advertisements from new Merch. I had the thought, this is not a serious company run by serious people. But here's where the rubber hits the road. At the end, when they did their Q4 investor presentation, Bitcoin was just shy of $98,000. At that time, you had an enterprise value for MicroStrategy, which is market cap plus net debt. You an enterprise value of $96 billion. You had Bitcoin net asset value of $46 billion. You're basically paying 2X what Bitcoin is worth to essentially own Bitcoin on a look through basis. Look, if you want to own Bitcoin, there's cheaper ways to do it. Go own it directly, go buy it via any number of the ETFs or what have you that have sprung up that are not trading at 2X NAV. Owning Bitcoin via MicroStrategy is to my mind, silly, which seems to be the operative word going on today. Then it's sillier when you realize that they leverage the entire company to Bitcoin appreciating in price for ever Amen. It's they have no ability to control, the price of Bitcoin. It's completely outside of their ken. But we're going to leverage the company to it. Then, so right now, I think it's fallen. MicroStrategy has fallen over 50% from its November high. Largely Bitcoin $86,000 today, so it's dropped from the 1998 at the time of the our qter earnings report. What happens if, say, God forbid, Bitcoin falls to $50,000. Don't tell me that can't happen. Why does the next 50% move have to be up rather than down? Bluntly, this is a true believer stock. It's turned into a true believer stock. Again, there is a software business here underneath that might be worth something, and Bitcoin is worth something because we all agree it's worth something, or at least markets agree it's worth. But to have levered your entire company to Bitcoin only going up seems it's going to work really well when Bitcoin is going up. It's wonderful. When it's not, when it goes down, when it gets more less trust in the process. I think Bitcoin will survive longer than MicroStrategy will. For me, that's where I drop off. Then, unfortunately, they also added MicroStrategy to the NASDAQ 100 as well. Again, I'm going to call that silly, but at least fine. The QQQ, the NASDAQ is down 5% in the past week. At least if you want to participate that way, if you own NASDAQ index funds, I do. Participation index will at least protect you from some of the damage in the event of a meltdown. Look, I'm going to give you this one because I always try to work it in. Canadians at least have an understanding of what can go wrong when an index blows up because we had Nortel, which was one third of our index, and it went to zero. Thankfully, MicroStrategy is nowhere near one third of the NASDAQ index. If it were to go to zero, not saying it's going to, but again, things can happen. It should at least minimize the damage to there, but there's a lot of other high growth stocks that are frankly, getting chopped down. Ricky Mulvey: I just got back from getting a cup of coffee, so I hope I didn't too much. Jim Gillies: You didn't miss nothing of consequence. Ricky Mulvey: For those keeping track, I do believe that the under eight minutes for the Nortel reference did hit on the Gillies rant about where we're at. Jim Gillies: I hope the payout worked for everybody. Ricky Mulvey: How about Little Chaser? We've just had this froth to get you all fired up, and there's nothing. Honestly, if you're having trouble sleeping at night, maybe you need a little bit of, you want to relax. You listen to some Home Depot earnings. There is something that happened that's somewhat, I think, significant for the company, and that's that comparable sales turned positive for the first time in eight quarters. I don't know. That seems like a big deal, right Jim. Jim Gillies: It does. Sounds pretty good to me. It's good. Ricky Mulvey: You really mix it up, man. You just did a seven minute answer to one question. Then I set you up with an earnings question. You're like, keep moving. Jim Gillies: I can talk Home Depot earnings, if you want. No problem. Ricky Mulvey: Well, how about the cash flow story with this company? Because when I'm looking at the earnings, and I'm a Home Depot shareholder, and you've told the story on this show before. What a magnificent cash flow story, because even though they're not growing sales like kooky, they're cutting their share count, they're boosting their dividend, and that's going to reward the long term shareholders. But now when we're looking back on the past year, it seems like maybe that's not happening in the future. Home Depot reduced its share count, it was by 1% over the past year. Dividends up 2.2%. If you're holding onto the stock, you get about a little over 2% dividend payout. The longer chart, if you look at how they've increased their earnings per share, that's rosier. That's good for the long term shareholders. But when I look at what's going on this year, I don't know, Jim. It seems like that thesis might not be what it was. Jim Gillies: It's very possible. The story might be fraying. I think it's intact for now, and I think there's a very good reason why 2024 is a step back from really the cash cow policy they seem to have had since emerging from the global financial crisis. From about February or March of 2009, so we're past the global financial crisis. They have aggressively bought back shares. They've aggressively increased their dividend. Dividends gone from $0.90 a year to $9.20 a year. It's up 15.6% annualized since 2009. New store openings are way down. That has been the cash flow story. It's been a really great cash flow story. If you were a buyer in March of 2009, you're getting your cost basis back now at this point, every two years, just from the dividend loan. In the share account, the share price has gone from 20 bucks to almost 400 bucks. It's been a fantastic story, but you are correct. Last year, it looks like the cash flow story got a little bit derailed. That can be almost chalked up to one thing, and that is the acquisition of SRS back in March of 2024. SRS is a residential specialty trade distribution company serving guys like roofers, landscapers, pool contractors, among others. That acquisition cost about 17.6 billion dollar of cash plus a minor amount of stock, which is why the stock this year as standing only went down by about 1% last year because they added a bit more for this. That basically took all of the free cash flow from last year went to this acquisition. I think that's why they really cut back on their share buybacks. They really cut back, you already mentioned, the dividend has only been hiked by 2% this year, just over two. If we see them course correct this year, they flip back to, we made that acquisition. We're now going to take our cash flow, maybe pay down the debt that was associated with that acquisition, or as I like to say, all the cash flow they generated made the acquisition happen. The dividend last year got funded by debt. Let's pay that debt off, shall we? Or at least, of course, correct a little bit. If they go back to that and this back to what they were doing from 2009 through 2023, I'm going to say the cash cow story is intact. However, if we start seeing them make other acquisitions and going for other growth that's non traditional, not new stores and maybe diversifying a little bit to steal from Peter Lynch. At that point, maybe it makes more sense to own Home Depot as part of a diversified index strategy rather than owning it individually. I will agree with you. The cash cow story looks like it hits pause. I want to see them hit the unpause button for 2025 going forward. Ricky Mulvey: Fair enough. When I look at a company like Home Depot, which I already mentioned I own that's one where you better really be doing something special for me to pay attention to that versus the SCHD Schwab dividend fund, where I don't have to do any work, and I can collect a healthy dividend, and I don't have to listen to an earnings call about how they are growing their Pro wallet share through a unique system of capabilities, building new stores, and creating the best interconnected shopping experience Jim. Let's go to Celsius as we wrap up. This is one that the stock chart speaking of wacky stock charts, let's see if you're on the Celsius bandwagon. Last week, the company reported, and the surface level results not so good. The Guarana seed extract rush, not a sugar rush, sugar free, seems to be stalling out. Sales are up just 3% over the past year. This is a stock that traded for 36 times sales at one point. You can't do that and maintain that multiple. But the shareholders got a glimmer of hope. As Alani knew this acquisition came down, a female focused energy drink brand, which Celsius bought up for $1.8 billion. Hey, maybe that's enough to restart growth. Today, the stock is getting sold off again. Definitely this has fallen from COVID high as I wanted to check in on it with you. Let's talk about the purchase first. Should I be excited as a Celsius shareholder about this Alani Nu acquisition? Jim Gillies: Probably not. Ricky Mulvey: Cool. Jim Gillies: I'm not sure what a female focused energy drink brand is. I've never really gendered my beverages, but maybe I should start. Ricky Mulvey: Marketing, Monster is for boys. They do Motocross and UFC. Jim Gillies: Sure. Look, I've never seen Alani Nu product, but if it tastes good, I'll drink it. My first inclination when I saw this deal last week, even though the dock did react very happily to it, it's given it all back now. This is what buying growth looks like. That can work out. There's lots of companies that do roll up strategies and overtime prudent roll ups can work out very well. I'm not sure this one qualifies, though, and I was wondering like they're claiming they're paying 2.8 times revenue for Alani Nu and 12 times on expected adjusted EBITA with all of the synergies just assumed to have rolled in, which I find optimistic. I wish them well, but I do find it optimistic. They did pay some of the purchase price in new equity. The sellers of Alani Nu are getting roughly the same percentage of ownership that Pepsi did when they invested signing a distribution deal with Celsius in 2022. That's when Celsius really caught fire because everyone said, look, Pepsi, and I think correctly speculated that Pepsi, at one point down the line will probably be an owner of Celsius. But I think they'll only be that owner of Celsius at a price that makes sense, and distribution definitely hit a wall last year inventory wise. I think Pepsi may have overestimated demand. I know that didn't used to see a lot of Celsius in my neck of the woods. Let's be careful. That's more necdata than anything else, but didn't use to see a lot of Celsius, frankly, at all. I now see it everywhere. My kids who probably drink more energy drinks than I would approve of, but I don't know about it officially. They have what limited Celsius consumption they have is now, it's yesterday's drink, I'll put it that way, at least to them. Again, it's only a couple of teenagers or early 20 something, so maybe don't a lot of the fanic business. Jim Gillies: I'm just looking at it, but look Celsius has no acquisition history to speak of. Acquisition and intelligent integration. Doesn't mean they can't do it. Means they don't have any experience doing it. Again, I'm having trouble shaking the notion that this was buying growth in the wake of a rapid slowdown in the growth of their core business. Now, I will fully admit I have a bit of a side hobby, and I like to find COVID-era fallen angels, stocks that have real products, which Celsius does. That have gotten just waffled because they were at ridiculous valuations during the COVID era. Ricky Mulvey: Can I give you two scenarios now? Jim Gillies: Sure. Ricky Mulvey: The two scenarios, you mentioned the Fallen Angel status. Going forward, I see there's multiple scenarios. These are two that I think are both honestly seem likely. We'll see which one you're buying for your COVID Fallen Angel hobby. Number 1 is that we have a category that's intensely difficult and also maybe declining a little bit in energy drinks. You're not health-conscious consumers are not just all running to energy drinks, and Celsius just overpaid for an acquisition, but that won't restart its growth story. That's scenario one. Then scenario two, which also, I think, is somewhat reasonable, is that here's an energy drink company that had some hiccups with distribution and inventory as it got integrated into PepsiCo, but now it's much closer to a Coca-Cola earnings multiple, which is very mature, very little growth ahead. Investors are far too pessimistic about its category-leading products, which it now has in the sugar-free space. Back to your COVID Fallen Angel hobby? Jim Gillies: I think it's probably closer to the second one, which I think is actually what you probably want. I think Celsius is. I don't think their products are going away. I think they have value. I think there's real value there. It just might be real value that's lower than the current market cap or enterprise value. That's the problem is that you want to assess. I like my stocks with a lot of pessimism built in. If I can come in when just everyone else has just sold them off, I'm happy, and maybe slightly pathological that way. But if you can turn something that everyone else has lost faith in, you can get a multi-bagger before other people notice, like a two and three-fold. I'll give you a couple of examples. If I told you Peloton has tripled off of its bottom since which I think was last summer. A lot of people go, have a Peloton, still garbage, but I wasn't buying at 160. I was buying in the five and six range and bottom to three. There's a company that's now been taken out called Nouve, which was a Canadian payment's processor. It was traded in both US and Canada. I think it topped out at 160, and it just got taken out at 45, I believe, 44. Now, if you were a buyer at 160, that really sucks for you. If you were a buyer like Hidden Gems Canada members at 23, it's less sucky for you. I'm looking at a bunch of fallen Angels from the COVID era, Celsius included, as to whether once all the excitement has been drained away, is there a real business here with real cash flows that create real value for shareholders, and can we buy it on the cheap? I'm watching Celsius. I'm just not yet ready to declare it time to jump into that particular. Ricky Mulvey: On the watch list, not quite on the buying list. Jim Gillies. Appreciate you being her. Thank you for your time, your insight. Jim Gillies: Thank you, Ricky. Ricky Mulvey: Schwab trading is now powered by Ameritrade to give you a new elevated trading experience Taylor made for trader Minds. Go deeper with think or swim, the powerful award-winning trading platforms now at Schwab. Unlock support from the trade desk, our team of passionate traders who live and breathe trading like you do, and sharpen your skills with an expanding library of online education crafted for traders. All designed to help you trade brilliantly. Learn more at Up next, Alison Southwick and Robert Brokamp offer up some estate planning lessons from Warren Buffett that you can take with you, even if you're not a multi-billionaire. Alison Southwick: Warren Buffett took control of Berkshire Hathaway stock in 1965 and has since become one of the wealthiest people in the world and enriched millions of shareholders along the way, but you didn't need to be an owner of the stock at any time between then and now to benefit from Buffett's avuncular wisdom. Fun fact, looked it up ahead of time, and the feminine version of avuncular is Murtural. Am I saying it wrong? I'm sure you'll let me know. Over the decades, through his letters to shareholders and in interviews, Buffett has shared countless financial and life lessons. This includes how he wants his enormous fortune to be dispersed after his life comes to an end. Robert Brokamp: A letter published last November, Buffett, who is 94 years old, wrote about continuing a practice that he began in 2006, and that is donating some of his Berkshire shares to charitable foundations operated by his children. Those donations, as well as annual share transfers to the Gates Foundation, have reduced the number of shares he owns by 57%. Yet Buffett is still worth approximately $150 billion, and he regularly explains what will happen to all those billions when he passes away. Alison Southwick: Unfortunately, you don't have to be a billionaire to take some tips from Buffett's estate plan. Here are several to consider. Starting with everyone buckle up now because this one's going to blow you away. Actually, have an estate plan. Sounds so simple, but it's so hard. Robert Brokamp: It is. In his November letter, Buffett wrote, "Father Time always wins. To date, I've been very lucky, but before long, he will get around to me." Indeed, he's going to get around to all of us, but despite the fact that we're all going to die, sorry to let you know about that. Most Americans actually haven't done any estate planning. That's according to the 2025 Wills and estate planning study from Only 24% of Americans have a will, according to the study, which is actually down from 33% in 2022. For most people, a will isn't enough. You should have a much more comprehensive estate plan, and that should include updated beneficiary designations on things like your retirement accounts, insurance policies, powers of attorney, advanced healthcare directives, maybe a trust, and a letter that explains where to find all your important documents, accounts, and assets if something happens to you. Alison Southwick: Once you've done the thing that apparently everyone hates to do, you're going to actually need to revisit it and regularly update your estate plan. Robert Brokamp: Buffett revises his plan every few years. For example, he's written that he and his first wife, Susie, assumed that actually he would die first, which would then leave Susie to watch over the distribution of his estate, but then after Susie died in 2004, Buffett had to change his plans, leading to his decision to donate shares every year, beginning in 2006. That was also the year he married his second wife, Astrid. Another notable change in Buffett's estate plan was that in a 2006 letter, Buffett indicated that the Gates Foundation would receive a bequest of more Berkshire shares when he passed away, but he stepped down as a trustee of the foundation in 2021, and interview last June told the Wall Street Journal that donations to the Gates Foundation will cease upon his death. Life happens; people move into and out of your life due to birth, death, marriage, divorce, estrangement. People move to different states, which could invalidate parts of an estate plan, especially advanced healthcare directives, what you own and how much will also change. Be like Buffett, update your estate plan every few years to account for any changes in your assets, your address, your family, or your assessment of who should get what. Alison Southwick: The next way you can be like Buffett is. Because you're listening to this podcast, I assume you probably own some amount of stock. The good news is you can donate and bequeath appreciated stock, just like Buffett. Robert Brokamp: That's right. By donating Berkshire Hathaway stock, Warren Buffett avoids having to pay capital gains on those shares. Also, if he itemizes deductions on his tax return, which I assume he does, Buffett can deduct the fair market value of the donation up to a limit. On top of that, any shares of stock that his kids or other heirs will inherit it's going to get a stepped up cost basis to the value of the stock as of the date of Buffett's death. And they're not going to have to pay taxes on the huge capital gains embedded in those shares. Alison Southwick: The next thing you're going to want to do is consider your heir's ability to manage an inheritance. Let's be honest, some of your kids are better with money than others. Robert Brokamp: Or they just might not be old enough so in a 2023 letter announcing that year's donations of Berkshire stock, Buffett wrote, "My three children are the executors of my current will, as well as the name trustees of the Charitable Trust that will receive 99% plus of my wealth, pursuant to the provisions of the will. They were not fully prepared for this awesome responsibility in 2006, but they are now" the lesson here is, if your heirs will not be capable of responsibly managing the money or responsibilities they will inherit, they could be due to age, maybe sub optimal financial habits, or maybe they're in a problematic marriage and you're worried about the poor judgment of your kid in law, then it makes sense to put others in charge until your beneficiaries are ready. Alison Southwick: Babies are so dumb with money. Maybe you might want to be like Buffett and use trust to have a say in how your bequests are handled. Robert Brokamp: One way to maintain control of your money from beyond the grave is through trust. The money is going to be managed and disbursed according to the terms you write into the trust, and it's going to be managed by whomever you name as the trustee. If you have an heir or a few who are not particularly savvy about investments, you can dictate how the assets are allocated, and it actually doesn't have to be very complicated. In his 2013 annual letter, Buffett wrote, one bequest provides that cash will be delivered to a trustee for my wife's benefit. My advice to the trustee could not be more simple. But 10% of the cash in short term government bonds and 90% in a very low cost S&P 500 index fund. I suggest vanguards. I believe that the trusts long term results from this policy will be superior to those attained by most investors, whether pension funds, institutions, or individuals who employ high fee managers. Also, if you have heirs who are prone to overspending, the trust can dictate how much money is dispersed at regular intervals and even what the money can be spent on. Alison Southwick: Now, the next one here, man, it's delivered in such a creepy but such a great way. The lesson is to give with a warm hand, not a cold one. That's your cold hand we're talking about here. Robert Brokamp: Yes. If you like Buffett, know that you will not need all the money you've accumulated over your lifetime, why wait until you've passed away to help family members and charities? Yes, it's definitely important to ensure that your money is going to last as long as you do and that you account for the possibility or really actually likelihood that you'll need to pay for long term care when you get older, but if it's certain that your beneficiaries will receive an inheritance, it might be more useful to them now. When they're perhaps trying to raise a family, maybe trying to buy a home, paying for their kid's college degrees than many years from now. Plus, you'll be around to bask in their appreciation. Alison Southwick: Once you've done all these things to be more like Buffett with your planning, well, you need to probably talk to your heirs about it. Review the plan with them. Robert Brokamp: This one might be somewhat controversial, but I think it makes a lot of sense. So in last November's letter, Buffett wrote, "I have one further suggestion for all parents, whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it. Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death. If any, have questions or suggestions, listen carefully and adopt those found sensible. You don't want your children asking why in respect to testamentary decisions when you are no longer able to respond. Testamentary basically means things that happen upon your death. Over the years, Charlie, and of course, he's talked about Charlie Bunker, the late vice chairman of Berkshire, and I saw many families driven apart after the posthumous dictates of the will left beneficiaries confused and sometimes angry. This discussion with your family is particularly important. I would say, if you won't be leaving equal amounts to your kids. You want to explain your reasoning why you can and take into consideration the responses you receive. The main takeaway, of course, is that a lack of clarity now could lead to legal fights over your estate when you pass away, which could be costly, time-consuming, and really cause permanent riffs among your family members, which I'm sure you don't want. Also, you might want to ask your heirs about preferences for inheriting items that might have more sentimental value than financial value. We're talking about things like family heirlooms, collectibles, even, like, furniture, and knick-knacks, and you want to resolve situations where more than one person wants something. All that said, I will point out that in his letter, Buffett emphasized that this is a recommendation for when your children are mature. It might be better to withhold information from one or more children if the knowledge of your estate plan will lead to them doing things like not working enough or not saving enough or basically just pestering you for advance on the inheritance. If you plan to leave unequal amounts to heirs and you don't want them to know about it, work with an attorney to create trusts that have more privacy. Just know that these types of family secrets often have a way of eventually coming to light." Alison Southwick: The last way you can be like Buffett in your estate planning is to leave the world a better place than how you found it. Robert Brokamp: In the interview with the Wall Street Journal from last June, Buffett said that his wealth, "should be used to help people that haven't been as lucky as we have been." There's eight billion people in the world, and me and my kids, we've been in the luckiest 100th of 1% or something. There's lots of ways to help people. You don't have to be a billionaire like Buffett to appreciate how fortunate it is to be born in the US or really any developed country with enough excess cash to invest and not really have to worry about paying for the necessities. Yes, charity begins at home, so you definitely want to make sure that your family will be set, but then maybe consider charities to help others achieve financial stability. If I may make a suggestion, one example is Together We Bate, which is an organization that provides job training to women facing barriers to employment. I admire the organization so much I joined the board of directors. If you're looking for a good cause to support, visit to make a donation or maybe order some delicious grid lo or cookies. If you want to be like Buffett and create a charitable fund that exists beyond your death and it is distributed by your children, look into a donor advised fund. These are offered by financial services firms like Fidelity, Schwab Vanguard, as well as some organizations like the National Philanthropic Trust. A donor advised fund could be funded during your life or at your death. The sponsoring organization manages all the money, but you or your heirs determine which charities will receive the distributions and when." Alison Southwick: Bro, how about you give us your parting advice that our listeners can quite literally take to their grave? Robert Brokamp: Well, we had to Fool our fans of Dot Yourself investing, assuming you have the requisite time and knowledge, of course, but we're not really fans of Dot Yourself estate planning. Find a qualified, experienced estate planning attorney in your area. It's not going to be cheap, but it's going to be money well spent. Make sure you follow through on all the recommendations, such as changing the beneficiary designations or retitling assets in the name of the trust. A lot of good estate plans fail because not all the Is were dotted or the Ts were crossed. Then, tell your relatives that you've updated your estate plan and encourage them to do the same because you're going to be the person who pays the price if your parents or other relatives don't have an updated plan. Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.
