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13-05-2025
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Is the Fed on the Right Track?
In this podcast, Motley Fool host Dylan Lewis and analysts Tim Beyers and Bill Mann discuss: The Fed's continued wait-and-see approach to tariff policy, inflation, and interest rate cuts. Ford's warning of tariff impacts. Why MercadoLibre is worth a look amid macro uncertainty. How Uber and DoorDash are both flourishing as they cash in on the delivery market and consumer laziness. Two stocks worth watching: Apple and Ibotta. Motley Fool contributor Jason Hall talks through his time at Berkshire Hathaway's annual meeting in Omaha, Warren Buffett's plan to step down as CEO, and what to expect from Greg Abel. 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 $318,970!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,016!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $598,613!* 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 12, 2025 This podcast was recorded on May 09, 2025 Advertisement... Dylan Lewis: It's the Motley Fool Money Radio Show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool Senior Analyst Tim Beyers and chief investment strategist over at Motley Fool Asset Management, Bill Mann. Fools, great to have you both here. Tim Beyers: Great to be here. Bill Mann: How you doing? Dylan? Dylan Lewis: I'm doing great. This week, we have a showdown in the food delivery market. We're going to be checking in on Warren Buffett's last Berkshire meeting as CEO. Of course, you guys have brought the stocks on your radar this week. We're going to kick things off with Fed Watch 2025. Jerome Powell and his merry band of Fed policymakers got together this week and decided to keep interest rates exactly where they are. Bill, Powell has been signaling, wait and see. Is that the right move here for Fed and Co? Bill Mann: It seems like it. I would suggest that the president thinks that it is not. It came out pretty hot, calling him a fool for not cutting rates. The Fed feels like they're in a pretty comfortable spot. There's still a little bit of inflation that they see. But it really bears remembering that the Federal Reserve, they are not a forward looking entity. They are in a lot of ways backward looking. They tend to respond to the market rather than impact it. Yeah, it seems fine to me that they've left rates where they are. There's an awful lot of confusion, and some of that confusion is being brought about by an administration that really seems to love chaos more than anything else. The end result for that chaos, they're hoping is lower costs for federal debt. Tim Beyers: Yeah, and I'll just add here quickly, Dylan. Fed rate cuts are a pretty blunt instrument, and you want to use them rarely. I'm backing Bill on this one. I like that Jerome Powell is slowing his role. That is exactly what he should be doing. Slow your role. It's a blunt tool, use it sparingly and we'll see what happens. I don't expect us to be having a sudden news announcement about rate cuts sometime in the next couple of months. I very much doubt. Part of the slow roll here is Powell and company really want to see, OK, do tariffs stick around? Does that lead to higher prices? Does that create an inflationary environment where it might affect the Fed policy and what they want to do with rates? We are starting to see some progress and some updates on the trade side of things, Bill, US and UK reaching some early terms on trade and tariffs this week. Headline most goods from the UK coming into the US will face a 10% tariff. There are some carve outs. I have to be honest, even having spent about an hour reading through this, it is very hard for me to parse what will and what will not be affected by this. Bill Mann: Yeah, it really bears remembering. I've said this before that the tariffs really only have one target in mind, and that is China. Whatever you see happening with the UK, it is in some ways, the impact of the US government forcing our allies and even non allies to choose, which horse they're going to back. When you see something like a tariff rate cut between the US and the UK, you have to keep in mind that the biggest game in town is the impact of the US and China tariff war, if you will. Tim Beyers: Yeah, can we just be quick on this, Dylan? I think the word deal in the US UK deal is doing a lot of heavy lifting there, because this isn't really a deal yet. It might be a deal. It could become a deal, but it isn't really a deal here, because let's be clear, the 10% tariff is still there. There are maybe some carve outs for different things. But essentially, Bill's got this right. What we're trying to do is just curry favor. Create allies. There is some wisdom to that. There is a lot of chaos from the Trump administration. But if you are intending to try to bring China to the table and bring better terms for the world and particularly for the United States, you would be wise to have allies in making that argument, making that play. Here's a chance to try to create some allies. Dylan Lewis: Rather than deal, agreement in principle, why don't we go with agreement in principle? Bill Mann: Agreement in principle. Tim Beyers: Are they chips or are they fries? Bill Mann: Yeah, the nomenclature doesn't matter. It's just you've got to keep your eye on what the ultimate goal is here. It's really interesting to see, as we are recording, the president say, hey, maybe 145% wasn't it. Maybe it's 80%, and people are noticeably going to say well he's caving, the overton window is moving on what tariffs should be. Everything that you see has to do with statecraft and what is happening between the United States and China. Dylan Lewis: Throughout earning season, we have been looking at how companies are processing that and forecasting what they're signaling to the market. We had Ford weigh in with their results and also some commentary on the macro, and a lot of attention on the automakers. Bill, when Ford reported, they said, hey, we're expecting a 2.5 billion dollar hit due to tariffs, not as bad as what GM had signaled, but still a sizable effect for this business. Bill Mann: Yeah, and one of the things that is true about autos is that even the ones that are American nameplates, a huge amount of the input will come from other countries. In this case, for Ford, mainly Canada, and obviously, there's been a huge amount of discussion about the appropriateness of us having tariffs with literally our largest trading partner. But this is an outcome of that. You're already seeing some recognition of the damage that is going to come for a company like Ford. The market seems to be responding somewhat calmly, I would say, and I think that has to do with the fact that there is either a recognition or a hope that something will get done there that will take the pressure off of a company like Ford. Dylan Lewis: In addition to the tariff hit, they also noted, hey, we are going to suspend some of our guidance. So far the starting season, we have seen management teams handle the tariff situation differently. Tim, we've had people suspend guidance. We've had teams say, hey, we're going to provide multiple forms of guidance based on different scenarios we can anticipate. Some have made dramatic changes to outlook. For companies in your portfolio, the management team's behind them, what are you looking to hear? Tim Beyers: Well, I'm looking to hear as much honesty and transparency as possible here. An area that I cover where this is happening with regularity is the semiconductor market right now. Both in Nvidia and AMD, you'll remember, Dylan, because I think we talked about this somewhat recently. They had to say, hey, look because of export restrictions, we are not going to be able to sell some chips that were designed to sell into the Chinese market. We thought we were going to have I think in Nvidia's case, it was about 1.5 billion worth of chips that they have essentially just written off. In the case of AMD, it's about 800 million. I just want clarity. I want clarity and transparency as much as humanly possible. You're not going to get it perfect. Just tell us what you're facing and how you intend to deal with it. That is probably the best that these management teams can do, because, again, I'll go back to what Bill said earlier. This is an administration that they are rolling in chaos and loving every second of it. They're like, living their best life, just throwing chaos left and right. But I think to be fair, that is part of what they believe they should do, whether or not that proves to be true, I don't know. But amid that, management teams need to be transparent. With the challenging environment here in the US, investors have been looking for businesses not as reliant, not as exposed to US trade. Tim, we got an update on one of your favorites in that zone this week. This is one of my favorites, too, Mercado Libre, one of my biggest holdings. What's going on with the business? It's just crushing it here. I'll give you some overall top line numbers here, and then I'm going to focus in on one that I think is particularly important. 13.3 billion in overall revenue. If you just go on a pure basis, that's up 17%, if you do foreign exchange neutral because Bill can tell you this currency is crazy throughout South America. It was up 40% on a foreign exchange neutral basis. Total items sold 492.2 million total transaction, total payment volume, 58.3 billion. That's up 72%. But here's the one I want to focus on, Dylan, because it is increasingly true about Mercado Libre that they are becoming a FinTech. They are becoming a provider of credit for consumer markets where they operate, particularly in Brazil and Argentina, but also Mexico, that credit portfolio now is $7.8 billion. They have scaled to become a credit provider in these markets at an astonishing rate. I think that deepens the mote for Mercado Libre. This is a fairly recent rule breakers recommendation. Part of the reason for that, Dylan, is that we think the mote is getting deeper here. It's not just because of the macro. The moat seems to be getting deeper here. As much crazy as happens in South America, with just the chaotic financial markets, currency fluctuations, there's a lot of things you have to remember, at least for me, what I remember as an investor, is that Mercado Libre is good at this. They have handled this for a really long period of time. They know how to deal with the various machinations of the markets that they are in, and they're doing really well here. Great business. Dylan Lewis: We're going to take a quick break. We're going to be back in a minute with Uber and DoorDash duking it out to be your go to delivery app. Stay right here. Motley Fool money. Hey Fools, we're taking a quick break for a word from our sponsor for today's episode. Real estate. It's been the cornerstone of wealth building for generations, but it's also often been a major headache for investors with 3:00 A.M. Maintenance calls, tenant disputes, and property taxes. Enter Fundrises Flagship Fund, a 1.1 billion dollar real estate portfolio with more than 4,000 single family homes in the Sunbelt communities, 3.3 million square feet of in demand industrial facilities, all professionally managed by an experienced team. 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Tim, DoorDash, the pure play here, shares down about 10% after they reported. On the surface, this looked like a pretty good quarter. Tim Beyers: It was a good quarter. I love that they are cashing in on human laziness. That is accurate. Factually correct, Dylan. Here's what I want to focus on. DoorDash has decided to spend 5.1 billion of its 5.8 billion in cash and investment, short term investments on acquisitions, two of them, specifically, Deliveroo provides DoorDash local commerce primarily in the Middle East, so expanding their footprint, I think that deepens the mote a little bit. I find that pretty interesting. That was about 3.9 billion dollar of the 5.1. The other 1.2 was for seven Rooms, which is a New York City based provider of hospitality software for doing things like improving in store sales. Revenue was up, good free cash flow, good business. I like that they are trying to do reasonable acquisitions that can expand their footprint. It might be an opportunity with a stock down like this, Dylan. Dylan Lewis: Bill, looking at a company like DoorDash, digital business, not subject to tariffs in the traditional sense, but still very much subject to the macro environment and input costs. When you look at what they were talking about with the quarter and what they were forecasting out, what are you seeing? Bill Mann: For the life of me, I can't really figure out how DoorDash's shares are up and the business is up when every restaurant that I'm tracking is down. It feels like this is a symbiotic relationship between the two, but maybe it's not. Here's what I wonder about DoorDash. They do give average ticket size information, but I'd love to know what the spread of that is because I actually have this pet theory that people are much more inflation-agnostic than they let on by virtue of the fact that so many people do things like order coffee and use DoorDash and order smoothies and use DoorDash. I would love to know what those sub $6 tickets, how many of them there are. Dylan Lewis: That is the pinnacle of laziness, right there, Bill. Bill Mann: A hundred percent. I guess laziness may be among the most inflation-resistant materials that there are then. Dylan Lewis: I love that. I think we need an indicator for it. I'm looking at Uber and the results there, a little bit more balls to this one because they're also in ride-hailing, and that's a very large part of their business. It seemed to me like a business-as-usual quarter here, Tim. Tim Beyers: It did. But let's stick with the theme here, how about a hand for Uber Eats? That was the category that led for Uber up 22% in constant currency just EBIDA, which I know adjusted terrible. They just out all of the important things, blah, blah, blah, still up 45%. It's a bogus metric, but this business is getting stronger. I have to say, Dylan, they have been on a roll for a while now, and this is a scale business, but they're another one. They are operationalizing laziness in the best possible ways. Dylan Lewis: Putting the results here for these two companies together and zooming in specifically on the food delivery business, DoorDash did 23 billion in orders in the most recent quarter, Uber did 20 billion in delivery bookings. That is specifically their Uber Eats business. A couple of years ago, if you were to ask me, I would have said inevitable that Uber takes over the space. They are a bigger company. They have done this before in ride-hailing. DoorDash is bigger and growing faster. Bill, what are they doing right here? Bill Mann: Well, in some ways, you don't have to do much when you have that level of scale. What we really have now in the US, at least, is a duopoly. I don't know that DoorDash and Uber have necessarily competed out against each other, but they've run every other alternative business out of town. They've done it with their relationships. I think that they've done it with their service, although, again, I'm not someone who has smoothies delivered to me, and I think that they've done it [inaudible] Tim Beyers: Come on, admit it. Dylan Lewis: Doesn't make you a bad person, Bill. Bill Mann: There was that one time, Tim. They've really done it with their relationship, and oddly enough, with their pricing and ubiquity. I think from here, you've got the duopoly in the US. I know in other countries, Tim brought up Deliveroo, but I think that's really what you've seen more than anything else. Tim Beyers: We need to give just some credit to the paradigm shift that's happened here. In some ways, Dylan, this is a testament to what happens when paradigms shift. What I mean by that is habits change. We've been joking about operationalizing laziness, but that is habit change. Habit change has come. I'll confess something that I use DoorDash for. You know what I use it for? About $25 orders to deliver flowers. Great flower delivery, amazing flower delivery. It's just an alternative. It's disruptive, but it's just interesting. Last Mile logistics works when habits change. I think that's a big part of the story, Dylan. Dylan Lewis: Tim, you just gave me the perfect tee-up to remind listeners, Mother's Day is this weekend, so if you're running late, if you haven't gotten it together, you take Tim's advice and DoorDash some flowers. They will save you and make you the son or daughter that you want to be to your mom. Bill Mann: That's right. Dylan Lewis: Bill, wrapping up quick here. We also had an update from Novo Nordisk this week. This is supposed to be one of the great growth opportunities out there in the market with the GLP-1 drugs. Shares down more than 50% from highs. What's going on? Bill Mann: Novo Nordisk is quite literally a one-product company. I know they have got a portfolio, but Semaglutide is their cash cow. You have the Inflation Reduction Act in this country. Pricing in the US is coming down. They are directly in focus. They did meet their earnings. They had an OK report, but I think that people are starting to look at the GLP-1 drugs and beginning to differentiate and it just seems like Lily has a superior application to Novo Nordisk. I think that there's trouble ahead for this company. Dylan Lewis: Bill, Tim, we're going to see you guys a little later in the show. Up next, we've got the scene from Omaha from a Fool that was on the ground for Berkshire Hathaway's annual meeting. Stay right here. You're listening to Motley Fool Money. FEMALE_1: [MUSIC]. Last year, Amazon was the world's largest corporate buyer of renewable energy, meaning that all of our energy comes from wind farms like this one. Guy, what happened to recording API Solar Farm? To learn more [inaudible] Dylan Lewis: Welcome back to Motley Fool Money. I'm Dylan Lewis. Last weekend was Berkshire Hathaway's annual meeting, the Woodstock of Capitalism. Motley Fool contributor Jason Hall was in Omaha to get in on the three days of stocks, snacks, and Buffett. Jason, this was a particularly momentous year. You were on site for Warren Buffett, officially passing the torch to Greg Abel. Spend me some yarn. What was it like? Jason Hall: I was, and the momentous thing was not the two pounds that I've gained since getting home eating See's Candy. I was at the Berkshire meeting that was Charlie Monger's last meeting a couple years ago before he died later that fall. Of cause, after calling this meeting, we're wondering if the board's going to let me show up anymore. I think they probably will. But we decided to go, a few of us went, because a little bit of the expectation that this was a good chance. Buffett turns 95 later this year, that this was probably his last meeting as CEO. We were not expecting him to retire or make any announcement, so much so that we were actually in the exhibit hall when it happened. We stupidly made the decision to try to get ahead of the crowd. We didn't expect anything to happen. Jeff Santoro, one of our colleagues here at the Fool was there with us, was smart enough to have his earbuds in and listening to the live stream on his phone. Then he just stopped and got this look on his face. We're all like, what's going on here? Then he started repeating what Buffett was saying about it being time to let Greg Abel take over. Then I just took a moment and stopped, and I looked around the hall at all the people walking around, the hundreds and hundreds of people in the hall that had no idea that everything had changed. But at the same time, it was a reminder that nothing had really changed. Dylan Lewis: Buffett has long said that he likes businesses that a ham sandwich could run, and I don't think would feel like his ego is too bruised by saying that's what he has intended here with Berkshire, that someone else can take it over. We view it as a very complex business, but I think he would like that to be almost a non-issue, the fact that he is transitioning the leadership over to Greg Abel. Jason Hall: I think that's right. It is complex because there are hundreds of operating businesses, but most of those businesses are actually relatively straightforward and simple. The decentralization of the operators of those businesses, making the decisions, and not having to phone HQ to get instructions for what to do is absolutely built into the business, and that certainly simplifies the process. The other thing, too is, Dylan, this has been in the works for more than a decade. We can go back to when Ted Weschler and Todd Combs came on in 2010 and 2012, they both have taken on a lot of responsibility with running different subsidiaries, having those CEOs of the subsidiaries report to them. On top, they're taking on some of the portfolio. Greg Abel has been the key contact for the Japanese trading companies that Berkshire has significant investments in for multiple years. It's not like he's just handing in the keys at the end of the year and everybody has to figure out the combinations to the safe. Everybody's already doing other things, so I think that that helps simplify things as well. Dylan Lewis: There are a lot of businesses that are certainly brand name-wise at Berkshire Stater that have struggled tremendously when it comes to succession. I'm thinking of Starbucks. I'm thinking of Disney. You talked a little bit about the planning process here, but we watched the market weigh this in real-time on Monday when it opened processing this news. Market was down about 5%, but it was not a huge sell-off for Berkshire shares. I think by and large, people knew that at some point this was coming, and the market seems pretty happy with Greg Abel as the named replacement. What lessons do you think we can draw from the way that Berkshire's handled this? Jason Hall: As a starting point, it's having a plan and to be thinking and looking and acting for things that are going to happen well in excess of your likelihood of being the person making the decision. One of my favorite Buffett quotes is somebody sitting in the shade today because somebody else planted a tree a long time ago. That's one of my favorite quotes. It's a reminder of being able to truly think in the long term, and that's not next year. It's certainly not next quarter. It's thinking in decades and even sometimes in centuries and how ingrained that is in the DNA of the Berkshire that Buffett has built. Dylan Lewis: That is an all-time favorite Buffett quote, and he certainly does not need to add to the anthology of quotes, but he is still going to talk and still going to have his isms here and there. Before we get into the future of Berkshire, any bits of wisdom from this year that you thought were particularly appropriate? Jason Hall: Yeah, he's become the Greg Maddox of quips here. He might not have the fastball, but, man, he can still locate a pitch like nobody you've ever seen. There were two that really stood out to me that were my favorites. My first one was I'm somewhat embarrassed to say that Tim Cook has made Berkshire a lot more money than I've ever made Berkshire. Steve picked Tim out to succeed him, and he made the right decision. Nobody but Tim could have developed it like it has. That was the one that really stood out to me the most that he said. The other quote that really stood out to me was, we are very patient when we are looking at opportunities and we want to act quickly. But while we're being patient, never underestimate the amount of reading and work that is being done to be prepared to act quickly. Because we do know equities in a variety of private companies that when the opportunity presents itself, we are ready to act. We think about a lot of times Berkshire doesn't move quickly on things. They're slow, they're stodgy, but they can move quickly. We've seen them do it, and it's the work that they put in before that matters. Here's the thing that stands out. That was Greg Abel that said that, Dylan. That wasn't Warren. Dylan Lewis: Sneaky there. Good way to tee that one up. What I like about that Apple quote and the focus on Tim Cook is that is probably one of the most successful succession stories of the last 20 years, where you had someone who built a visionary-type approach to product, created incredible consumer products in everyone's homes, and a lot of people were worried about what that would look like in the next chapter, found the perfect operator to efficiently manage that business and move it forward. Is that the story and the expectations that Berkshire investors should have with Greg Abel? Jason Hall: I think so. There's something that Greg has in common with a lot of other operators running a lot of the subsidiaries at Berkshire that a lot of people don't know. Buffett wrote about the founder of Forest River in the annual report this year, Pete Liegl, who just died late last year at 80, who sold the business to Berkshire and continued to run it for the next nearly 20 years after selling the company. There are a lot of those people it was only a couple of years ago that Greg Abel sold his stake in MidAmerican Energy to Berkshire Hathaway. He came to Berkshire in 1999 with MidAmerican Energy, which he had a substantial stake in. There's very much a founder's mentality and owner's mentality across the executive team. I think Greg Abel is just very emblematic of how important that is to the culture of leadership, not just at the corporate office, but going down to the subsidiary levels as well. Dylan Lewis: Let's talk a little bit about the state of Berkshire as a business and what Greg Abel is inheriting here. A lot of operating businesses, about 190 by my account, trillion dollar market cap, which will make getting bigger a little bit tougher. There's a decent amount of cash, maybe understating it, about $350 billion in cash for the business right now. That is a blessing, but it also invites so much speculation as to what is next, because it's seen as this huge opportunity. I'm certainly guilty of wondering what's on the shopping list. Are you thinking about that at all? Jason Hall: A little. I think the thing I'm thinking about more right now, though, is thinking about those operating businesses. More than half of them, their earnings declined from the prior year in 2024. A lot of retail, a lot of manufacturing, a lot of exposure to the economy that I think investors should remember. This isn't a recession proof business. It's very resilient because they're well run and they have that incredible balance sheet. But I'm really thinking about that. But I do think there's one interesting thing about that big pile of money. Call it $350 billion that they could put to work just in cash right now. That's not even include the debt that they could get access to, but just writing a check and the check not bouncing, there are 474 companies in the S&P 500 by market cap are small enough for Berkshire to write a check for today. Dylan Lewis: I mentioned Starbucks and Disney combined market caps smaller than $350 billion. Jason Hall: They could buy both. But here's the thing. I don't think they would want to buy the problems those businesses are having. That's the thing. I think the move that we're going to see is when there are things that the company can buy that are wonderful businesses that will compound and generate wonderful cash flows, and the prices are reasonable. Berkshire hasn't bought any of its own stock, almost and it's been five quarters now. I think that says a lot about where the capital allocators there see value, and they don't see a tremendous amount. They're happy to get their 4% yield and just keep waiting until the bigger fish are biting. Dylan Lewis: Do you think we'll see that dividend? People have been wondering for a long time, has that cash file has gone up. Jason Hall: Look, here's the thing. Buffett is stepping down as CEO at the end of the year. He's not stepping down as chairman. I believe he's going to stay chairman as long as he's alive unless he's incapacitated. I expect they're going to have to wheel him out. I really do. I think once he's just the chairman, that happens, guess who decides about the dividend, the board, not the management. I don't expect that that less cash efficient thing is going to happen as long as they've got the skilled capital allocators there that they do have in Ted and Todd. Abel, we've seen how incredibly patient he is in deploying a lot of capital into the energy business. Go buy another stock if you want to dividend, people. Dylan Lewis: I'm going to put you on the spot here, 350 billion in cash. They could go on one heck of a shopping spree, if you could snap your fingers and either create a large holding for Berkshire in a business that's publicly traded or just put Berkshire in a position where they can own that company outright, what business would it be? Jason Hall: I think an interesting fit that might fit under the purview and circle of confidence of these new larger capital allocators might be something like Adobe or Autodesk. Software, recurring revenue, massive economic motes, very good margins, great operating cash flows, converting lots of free cash flow to feed that capital allocation engine. Let's think a little different, maybe look at some big software companies. Dylan Lewis: Apple was one of the best-performing Berkshire stocks for a long time. Maybe there should be a little bit more tech in the portfolio, Jason. Jason Hall: There you go. Dylan Lewis: Jason Hall, thank you so much for joining me. Please, warn the Berkshire Board if you plan on attending any more annual meetings anytime soon. Jason Hall: I will. Well, to share one last quote here, and this is it because this is something Buffett talks about, and I think the board is thinking about that at the health and safety of their executives. If you're going to have your life progress in the general direction of the people you work with, you admire, and you become friends with, there are people that make you want to be better than you are and that you want to hang out with the people that are better than you are, and that you feel are better than you are because you are going to go in the direction of the people that you are associated with. Dylan Lewis: Jason, you are better than me, and you make me better. Thank you for joining me today. Jason Hall: Thanks, Dylan. Dylan Lewis: Coming up next, a couple other people who are better than me. We've got Tim Beyers and Bill Mann back with the stocks on their radar this week. Stay right here. You'll listening to Motley Fool money.. 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 anything based solely on what you hear. All personal finance content follows Motley Fool editorial standards. It's not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. You're listening to the podcast version of this week's radio show. Check out our show notes. Bill Mann: Dylan, I serve as the chief investment strategist of Motley Fool Asset Management, LLC, affiliate of the Motley Fool. While affiliated, MFAM is a separate and independently regulated entity. None of the investment decisions made at MFAM involve individuals from the Motley Fool's media or business operations. As you know, Dylan, all of Motley Fool Money Management operates independently in this way. Dylan Lewis: Those are our Ps and Qs. I'm Dylan Lewis, joined again by Tim Beyers and Bill Mann. Gentlemen, I talked Berkshire and the annual meeting with Jason Hall in our last segment. He was on the ground at the annual meeting. You guys were following along at home. Buffett news, obviously huge. Bill, any reflections for you on the state of Berkshire? Bill Mann: He was on the ground. Didn't he miss the actual? Dylan Lewis: Yes. This is the own goal we've all been waiting for. Bill Mann: This was the Gray Pumpkin Charlie Brown times a million. Dylan Lewis: Yes. I can tell you a certainty that Jason will never leave a game in the fourth quarter with two minutes left for the rest of his life. But he was there for the vibes. He was there for the atmosphere. Bill Mann: He just wasn't there for the announcement. You can sense it was coming and not just because of the realities of the actuarial table. Warren Buffett is 94 years of age, and we sensed last year that he was slowing down. They did not get into the thing that people wanted to talk about the most, though, as much as I thought, which was the 340-ish billion dollar cash hoard that they have built up. A lot of which coming from their sale of Apple in this last year, I think that he is leaving that discussion to be the first set of decisions that Greg Abel will make when he steps into the chairman's role. It's a huge obligation for him, but Berkshire has always described that cash as a weapon to be deployed during opportune times, and they don't see this time as being opportune for that. I completely respect the fact that they are still leaving that on the table for future times when it's more ideal. Tim Beyers: I think that decision about the cash is going to be over in 30 seconds. That Greg was going to say, we're not paying a dividend, and we're going to wait until we get the right opportunity. There's a bunch of people that are thinking, here we go. Here comes the dividend. I'm like, sorry, that is not happening. That is my reckless prediction for this show. No chance is that happening anytime soon. Dylan Lewis: Tim, you're saying meet the new boss, same as the old boss when it comes to capitalization at Berkshire. Tim Beyers: Hundred percent. Dylan Lewis: Let's get over to stocks on our radar this week. Our man behind the glass, Dan Boyd is going to hit you with a question. Bill, you're up first. What are you looking at this week? Bill Mann: Mine is a little fruit company called Apple. Maybe you've heard of it. It is one of the largest companies in the world. I don't know that people have really focused on the implications of the court finding with Spotify that is taking away potentially a pretty big extremely profitable cash flow stream for Apple. It just doesn't seem like something that people have focused in on. You would love with the App store if you are a shareholder of Apple for that cash flow stream to be as high as possible because it literally comes with minimal effort from Apple. I think that that's something that people are going to want to pay attention to in upcoming months. Dylan Lewis: Dan. Bill is zooming in on the Apple tax, their commission over on the App store. You got a question. You got a comments on Apple this week? Dan Boyd: What can I say about Apple. Their stuff is too expensive. It's just flash. It's no substance. None of that matters. It's Apple. Is anybody selling Apple? I guess Berkshire did, but- Bill Mann: There's that one guy. Tim Beyers: There's that one guy out in Omaha. Dylan Lewis: What might be a radar stocks first, I think Dan just answered his own question right there. Dan Boyd: I don't know. Maybe I should think about it more, but me and thinking, we don't go too far back. Dylan Lewis: Virtually unprecedented. Tim, I don't know what that means for your set up here. I don't know if you have a hard assignment or an easy one here in pitching Dan- Tim Beyers: I assume nothing here. But I do assume, except for one thing, I will assume, Dan, that you like saving money. I think you preferred to have more money rather than less. Dan Boyd: I don't have any Apple products here at home, except for the ones that the Fool has given me, so I think that tracks, yes. Tim Beyers: My radar stock here, Dylan, is Ibotta. It is literally for the statement, I bought a thing, relatively recent IPO about 12 months ago. This is a cash redemptions business. You have an app, scan a receipt, and on that receipt, if there are offers, so say like you have bought some Ritz crackers, and there is $1 redemption on Ritz crackers, you get $1. Now, there's a bunch of companies that do this. Here's why Ibotta is different and better and interesting to me. They have huge distribution deals. Let me give you two. One is more recent than the other. Walmart's a big one from about a year ago. About three months ago, they just got Instacart. What this means is that if anybody is trying to win the Shelf Space War, and the Shelf Space War is digital right now, you were increasingly shopping on apps or shopping on the computer. It's Ibotta that is creating the coupons there. It's good business, and I think it's only going to get better. Dylan Lewis: Dan, a question or a comment about Ibotta? Dan Boyd: Well, unfortunately, Tim stole my joke. I was going to do an Ibotta like, I bought a bunch of stock today. Hey, how you doing? But he stole that from me. I'm just going to point out what Tim did not mention that Ibotta is actually a Denver Colorado company. I'm going to chalk this up, Dylan, to flagrant homeism from Mr. Tim Beyers. Dylan Lewis: Guilty as charged, Tim? Tim Beyers: Guilty as charged. Dylan Lewis: I'll bring us full circle here for a second. Ibotta is an app, and if I'm not mistaken, subject to the Apple tax and the commissions that come in via the App store. As Bill noted, if those go down, I have to think that that is good news for Ibotta shareholders, Tim. Tim Beyers: Hey, from your mouse to God's ears and Ibotta's bank account. Dylan Lewis: Dan, which one's going on your watch list this week? Dan Boyd: You know what? I'm just going to go Ibotta because it's fun to say and really, that's all that matters. Dylan Lewis: Dan, appreciate you weighing in. Bill, Tim, appreciate you guys bringing the radar stocks. That is going to do it for this week's Motley Fool radio show. Shows fixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time. Bill Mann has no position in any of the stocks mentioned. Dan Boyd has positions in Autodesk, Berkshire Hathaway, and Walt Disney. Dylan Lewis has positions in MercadoLibre. Jason Hall has positions in Berkshire Hathaway, MercadoLibre, Nvidia, Starbucks, and Walt Disney and has the following options: short September 2025 $125 calls on Starbucks. Tim Beyers has positions in Apple, Berkshire Hathaway, and Walt Disney. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Apple, Autodesk, Berkshire Hathaway, DoorDash, Ibotta, MercadoLibre, Nvidia, Starbucks, Uber Technologies, and Walt Disney. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy. Is the Fed on the Right Track? was originally published by The Motley Fool
Globe and Mail
16-04-2025
- Business
- Globe and Mail
Tariffs, Trump, and Turmoil
In this podcast, Motley Fool analysts talk about economic uncertainty, airlines, building materials, and assorted spirits. Motley Fool analyst Asit Sharma caught up with Martín de los Santos, the CFO of MercadoLibre, at The Motley Fool's Market Volatility Summit. They talked about how MercadoLibre became resilient, and the long-term opportunities for the company. 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. Should you invest $1,000 in MercadoLibre right now? Before you buy stock in MercadoLibre, 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 MercadoLibre 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 $526,499!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $687,684!* Now, it's worth noting Stock Advisor 's total average return is818% — a market-crushing outperformance compared to156%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 April 14, 2025 This video was recorded on April 11, 2025 Ron Gross: T is for tariffs, Trump and Turmoil. Motley Fool money starts now. From fool Global headquarters. This is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Ron Gross sitting in for Dylan Lewis. Joining me today, our senior analyst, Emily Flippen and Matt Argersinger fools, how you doing? Matt Argersinger: Ron. Emily Flippen: Doing all right. Matt Argersinger: Doing all right. Ron Gross: Glad to hear it. Today, we're going to talk banks and assorted spirits, but we must, once again, begin with the big macro and, oh, boy, what a week it has been following several very rough days in the stock market, on Wednesday, the Trump administration put a 90-day pause on its so-called reciprocal tariff policy, sending the market soaring for its biggest one day gain since 2008. Then, on Thursday, inflation data came in tamer than expected and just for good measure, on Thursday, we saw another sell-off in stocks. Emily, I am truly exhausted. But let's dig in. Where are we now from an economic markets perspective? I know you don't have a crystal ball, but where do you think we're going? Emily Flippen: If financial media has anything to say about it, it's straight to hell on a handbasket here for American consumers and investors. I'm teasing here because I really don't necessarily think that is going to be the case. While we still have a lot of economic data that is not coming out as favorably as I think some investors want, and that's leading to some of that volatility we're seeing in the market, the earlier inflation metrics that we got earlier this week, we're actually very encouraging. It was a sign that some of the concerns that I think we had around stagflation may be coming down a bit. Now, that is the core PPI, the producer price index that excludes food and energy, but it's the Fed's favored inflation metric here. That actually fell nominally month over month. And it wasn't just a matter of, Okay, this is lower than expected, but still rising inflation, but an actual month-over-month decline here. Of course, if we add food and energy, the story changes. But this is a little bit of a silver lining that I think investors need to say, OK, we have a lot of data that's pointing in the wrong direction right now. Here is something that continues to say, it may not be as bad as we expect. But of course, the emphasis is, of course, on this was the case. Inflation metrics are a lagging indicator. We're always forward-looking. Some of the policies that we've seen since this data has come out over the course of the past month, I think, are pretty clearly indicating that inflation is expected to heat up substantially. But I'll take this when for this week. Ron Gross: What about from the markets? Do you think the markets are just nervous, don't like uncertainty? That's what we typically say. Markets hate uncertainty, and there's so much uncertainty around here nowadays. Do you think that's why we're seeing the volatile the big sharp moves? Emily Flippen: I don't think it's just uncertainty. I think there's genuine concern about the business impacts that these tariffs, if they stay in place, will have both on companies that are supplying, manufacturing, as well as consumers looking to make purchases. This has wide-ranging implications for the performance of the broader economy as a whole. It's not just a matter of uncertainty because I think if we came out tomorrow and said, Okay, we are certain, 100% sure. The tariffs, as they are today, are going to stick this way for the next 12 months for certain, for example. That would be certainty. But I'll tell you what, I bet the stock market would sell off. Ron Gross: Oh. Understood. Matt, US consumer sentiment is now worse than during the Great Recession. New data just came out. Anything here for an individual investor to do other than sit back and just watch it unfold? Matt Argersinger: Sitting back is very good advice. Watching it unfold, I don't know. You're better off just turning everything off and maybe going away for a week. But look, we're investors. I know that's impossible. It's definitely impossible for me. But here's what I think if you're an investor, what you can or should pay attention to, and that is interest rates. The Trump administration only really blinked this past week when the 10 yield crossed about 4.5%. But guess where we are today as we tape on Friday, back above 4.5%, Ron. If you go back to April 2nd, which was Liberation Day, as the administration called it, the 10-year was just above 4%. We're up 50 basis points in a week, and that's through all this market dislocation. It usually doesn't work that way. Usually, investors are buying treasuries as a safe haven during times like this. That's just not happening right now and I think that is where the real danger lies, and I think Emily hinted at this. I mean, if countries like China and, Japan UK, various members of the EU stop buying our treasuries, either because they're exporting less as a result of these tariffs, and they don't have as many US dollars to invest anyway, or much worse, guys, they willfully decide to stop buying treasuries in favor of other safe-haven assets or currencies. I mean, just look at the Swiss franc as of the past week. If that happens, it will almost certainly send treasury yields much higher. And I think that would spell huge trouble for the housing market, which we already know is suffering from high mortgage rates. Imagine mortgage rates not at six or 7% as they are now, but 8, 9, 10%. I think it also spells big trouble for small, midsize businesses who don't have as much flexibility with their balance sheets and where they source their products. It's bad for auto manufacturers, bad for commercial real estate and then to consumers to Emily's point. Consumers are sitting on record credit card debt and if interest rates move higher that situation gets a lot worse. I think it really could mean bad news for the economy. If you're going to watch anything at all, sit back and watch this shake out, watch treasury yields. If they keep moving higher, I expect that could trigger a response by the administration. To be less aggressive with these tariffs, maybe come to the table, that'll be the trigger point. Ron Gross: I was going to say one silver lining may be we do have anecdotal evidence that the administration does keep an eye on the bond market, and on interest rates, that could very well be the reason we got the 90 day pause. We don't necessarily have proof of that, but that certainly could be. I would encourage them to keep an eye on the yields, so we don't get into too much trouble, as you outlined. But speaking of interest rates, on Friday, many of the larger banks reported pretty solid results for the first quarter, and Matt, lots of data, plenty of commentary from the CEOs. What's set out to you in these reports? Matt Argersinger: Results you said, Ron, the results were actually really solid. The problem is no one really cares about that right now. It's really all about guidance and how these CEOs are thinking about the environment, post tariffs, post-liberation Day and what they see going forward. Here's what they're saying. If you look at CEO Jamie Diamond, CEO of the largest US bank, JP Morgan, he's been pretty vocal this past week about the dangers of tariffs, even saying he believes that a recession is all but unavoidable now. And then he said this after his bank reported quarter results, "The economy is facing considerable turbulence, potential negatives of tariffs and trade wars," ongoing sticking inflation, high fiscal deficits, and still rather high asset prices and volatilities. What else he said? Wells Fargo 's CEO, Charlie Sharf, "We support the administration's willingness to look at barriers to fair trade to the United States. Though there are certainly risks associated with such significant actions, a timely resolution, which benefits the US, would be good for businesses, consumers, and the markets. We expect continued volatility and uncertainty and are prepared for a slower economic environment in 2025" Then Larry Fink, CEO of Blackrock, which I think is now the world's largest ass manager, "The sweeping tariff announcements went further than I could have imagined in my 49 years in finance." Then in an interview on CNBC, he also said, "I think we're very close if not in a recession now," talking about, of course, the US economy. Ron Gross: Thanks for cheering us up, Matt. Matt Argersinger: Well, there you go. Let me sum it up, too. These tarifs are dangerous. If not resolved quickly, the risks are high, expect continued uncertainty, which we keep talking about, and we may already be in a recession. Remember, these are the banks and financial institutions that have a pulse, I think, in a lot of areas of the economy, which is from housing to credit, consumer spending. Wait until we start hearing from industrial companies or consumer discretionary companies, especially those that make and sell products all around the world. What will be their reactions and guidance when they report in the coming weeks? I think this is just the first Salvo, and it's sobering when you look at it, in terms of what they're seeing. Ron Gross: On Wednesday, Constellation Brands reported fourth-quarter results that beat expectations, but a week full-year earnings outlook that focused on the impact of, yes, tariffs was the focus. Emily, how did the quarter look to you? Is it possible for us to remove tariffs from this conversation and focus on the business, or they are so intertwined, just can't do that. Emily Flippen: I actually think that tariffs are maybe the least interesting thing happening to Constellation Brands business today. I understand why the narrative was around tariffs. It's like you can open up an Internet browser without being slapped across the face with news about tariffs and how they're going to be impacting companies. Certainly, Constellation Brands did say in the quarter that they're expecting a low single-digit increase in their total cost of goods that's associated with the tariffs and sourcing, of course, aluminum cans and other bottling items for the beers and the accessories, I'll say, for the wine and spirits business that they sell. But all of this stuff is happening to Constellation Brands. Meanwhile, Constellation Brands as a business itself, is actually doing a pretty decent job of a turnaround, especially considering the overall beer market. I think it's a disappointment that there's not more discussion around how strong this business has been in an incredibly weak environment for alcohol sales. If you compare their performance against other large beer makers, Boston Beer, with Sam Adams being a great example, which has seen declining depletions, declining shipments, declining profitability and sales, Constellation Brands is growing and growing pretty solidly because the beer brands that it is continuing to focus on just have continued to resonate with a consumer that's a little bit more niche, that is a bit more loyal, and that has led to pretty incredible market share gains really consistently for this company in otherwise weak environment. I love that Constellation Brands has performed so well. I'm disappointed that the narrative is, Oh, no, that small single-digit increase associated with the tariffs. But I actually think fast forwarding five years from now, we're probably looking at a better business than today. Ron Gross: They're selling some of their wine brands, Cooks, Miomi, that a good movie? You like that? Emily Flippen: I do. They're actually almost entirely divesting of their wine and spirits business. And if you look at their performance on earnings per share, non-adjusted basis for the quarter, you'll see the impact of that nearly $3 billion in goodwill write-offs associated with the sale of that business, which has been an underperformer for them for a while. That is obviously a ding on them. Some of the investments this company has made historically just haven't panned out. But they're really focusing on cost energies right now and focusing on what works, which is obviously the Corona, the Medello, the Pacificos. Those have an audience that are way more loyal than not to be offensive to Miomi, which I love their wine is a bit more loyal. Ron Gross: Coming up, we'll talk airlines, building materials, and used cars. You're listening to Motley Fool Money. ... Ron Gross: Welcome back to Motley Fool Money. I'm Ron Gross here with Emily Flippen and Matt Argersinger. On Wednesday, Delta reported that revenue growth stalled a bit in the first quarter and the company did not reaffirm its full year guidance, citing headwinds from the economic uncertainty around global trade. Matt, seems to me it wasn't the quarterly results, but the lack of full year guidance that spooked investors. Shares were up big on Wednesday as Trump paused tariffs, but the stock got smacked on Thursday as investors continued to digest what it all means. As I asked Emily with constellation, I'd love to strip out the economic noise here and talk about the business. Can we do that? Matt Argersinger: Well, let's try, Ron. It was actually a record quarter for Delta in terms of revenue. Pretty surprising, revenue was up 3.3% year over year, 13 billion, and growth was particularly strong in the premium segment of the business. So first class, business class, revenue there was up 7% year over year. International revenue was also pretty strong, and even corporate revenue was higher year over year, and Delta generated 1.3 billion in free cash flow in the quarter, paid down about 500 million in long term debt. All fairly positive and aligned with what CEO Ed Bastian said near the beginning of the year, which was that 2025 was going to be Delta's best financial year in our history. That is not really working out. Ron Gross: Maybe not so much. Matt Argersinger: Because even if you go back a month ago, Delta had actually guided for 6-8% revenue growth this quarter. That's a big comedown from that. According to Bastion, things actually started to slow back in February. Well, before these tariff announcements or any hint of them, the company slashed its first quarter forecast. It did maintain its full year outlook back then, though. As you mentioned, Ron, that has now changed. They're not reaffirming that year outlook anymore. The company has pulled its guidance. It's still expecting to be profitable this year, but a far cry from where the company thought things would be coming into the year. I think you have to worry a lot about the state of the consumer here. What travel demand is going to look like, say, over the next 6-9 months, you mentioned the consumer sentiment numbers at the top of the show. One thing that's got to be helping Delta a little bit, though, over the past week is the fall in energy prices that we've seen. It's a big cost input for every airline including Delta. That will undoubtedly help Delta's margins and probably help the company remain profitable for the year if not growing. Ron Gross: On Thursday, CarMax reported worse than expected fourth quarter results, and while it said it was making progress toward its financial goals, it will remove the timelines associated with them due to the potential impact of broader macro factors. Emily, I know I sound like a broken record here, but the macro environment is hard to escape. Do your best. Tell me how CarMax's business is doing. Emily Flippen: I actually think the business is doing a lot better than people expect, especially, again, given the narrative right now. I understand that the market is in part selling off CarMax for a few different factors. Of course, one aspect of the tariff implication for CarMax and any other business that is operating in the auto parts industry is that the used car parts that it needs in order to fix and resell vehicles on its platform, those are likely to increase, and that's likely to hurt margins at least in that narrow perspective. There's also an element of, Okay, used car prices are likely to increase with the tariffs as well, and that could hurt demand for used cars. That could certainly pride some people out of market, and management was so uncertain of this environment that they did pull that guidance for vehicle sales, which is concerning to investors adding to the uncertainty. You can make the logical argument there for the interim of like, Okay, I understand what's happening here to CarMax. But I actually think that a little bit longer term, taking it one step further, we're likely to see similarly to what we saw during the pandemic that used car prices are likely to go up and that could price some people out of the market. But it's actually a boon for a lot of leaders in this space like CarMax, when the prices of used cars go up, especially in comparison to something like a new vehicle 'cause a new vehicles will also increase making used cars look relatively more attractive for consumers who can make a purchase plus higher cost means higher fees for CarMax. All of that is to say, I actually think they could make up some of the margin here, and the future may not be as negative for CarMax as some investors are pricing in today. Ron Gross: All things considered, does CarMax go on your radar or you still go away? Emily Flippen: If I had a radar stock this month that I thought was an attractive value that I could make a 22nd, 32nd pitch for it, CarMax would certainly be up there. Digging into it this morning and in preparation for our show here, it reminded me this is an incredibly strong, profitable company, market share leader with a lot of tailwinds if you're willing to hold and overlook some of the near term uncertainty. Ron Gross: Sounds good. On Tuesday, RPM International reported fiscal third quarter results that came in weaker than expected, and the maker of Deglo and Rustleum blamed unfavorable weather conditions and said that sales would be flat in the fourth quarter. Matt, RPM does a lot of business overseas, so it's got the trade situation plus the weather to contend with. How the quarter look to you, and does it tell us anything about industrial activity in general? Matt Argersinger: Well, lots of headwinds for RPM and lots of headwinds in general for industrial activity, even coming into this quarter and all the tariff news. Really two big challenges for them. They had record results last year in last year's fiscal third quarter, so comparisons are tough. But weather was a big problem in the quarter. If you don't know RPM, they serve primarily in the construction industry, and in much of the country, you had a fairly lengthy winter and then a lot of unusual storm activity in the south and the West, which really affected them. Slow housing market also continues to have an impact. That's been a story for a few years now. Until that picks up, RPM's consumer business is really going to struggle. Sales were down 3% overall. Pre tax operating profits, this is a business with high operating leverage we're down around 30%. With regard to tariffs, though, the good news for RPM is that they tend to be fairly insulated. For the most part, the company manufactures products in the countries or regions where it sells them. They do small amount of cross border activity. It sounds like a situation for RPM, where sales may be slightly down for the year with lower margins, but here is something, Ron, you and Emily can be excited about. RPM is acquiring the pink stuff. Ron Gross: The pink. Matt Argersinger: Which I'm sure, if you've ever done an industrial cleaning of a bathroom, you've definitely use or at least should use. So the pink stuff joins other cleaning products within RPM's portfolio, including Crud Cutter, Mean Green, and Contobum, if I'm pronouncing that correctly. That guy sounds like the 1927 Yankees when it comes to cleaning portfolio lineup. Ron Gross: I love it. Alright, fools. We'll see you a little bit later in the show. Up next, an interview with Martin de los Santos. He's the CFO of Mercado Libre, E-commerce giant and the largest company in Latin America. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Ron Gross. Molly Fool senior analyst Asit Sharma caught up with Martin de los Santos, the CFO of Mercado Libre, a few weeks ago at our Market Volatility Summit. In this clip, you'll hear how Mercado Libre became resilient in the long term opportunities for Meli. Motley Fool members can access the full interview and replays from the event at Asit Sharma: Martin, I wanted to start. Just looking at this company in general, Mercado Libre has such a history of dealing with formidable challenges from hyperinflation and geopolitical events within Latin America to providing fintech and lending services to populations that often are new to the banking and credit systems. What makes Mercado Libre such a resilient business? Martin de los Santos: Yes, we were founded back in '99, and we turned 25 years in 2024. With those 25 years, as you can imagine, in Latin America, operating in 19 different countries, we've seen it all. Things going sour very rapidly. Maybe Mezuela as an example, hyperinflation in Argentina, then things coming back as we are seeing it today, Brazil, Mexico. I think we went through a lot during those years. I would highlight a couple of things. First, we operate in commerce and Fintech in a region where there's a lot to be done in those two fronts. Production of commerce continues to be very low compared to other places. We are riding a secular trend of people moving online. The same with Fintech, I think the banks have done a really poor job of including financially, most of the population in Latin America, so that generates an opportunity for us. That's one thing. I will also highlight the culture of the company. Our CEO, our chairman continues to be Marcos Galbrin, who was the founder of the company. Not only him, a lot of people were with him at the beginning continues to be with the company. We have a very strong culture of entrepreneurship, willingness to take risks. Many times in the history of our company, we have to reinvent ourselves or take big bets, and that's a big part of our success, a culture of excellence, execution, bringing good talent, teamwork internally while competing because we operating in very competitive markets to the outside. I think I would say that we operate in a region that has tremendous opportunities, both commerce and Fintech, and we also have a culture of executing and operating in Latin America that has helped us to be resilient and to be successful in this. Latin America, we came from being a start-up of five people in the garage 25 years ago to last year we became the most valuable company in Latin America, and we have done that I think by culture and execution and the quality of people that we brought into our team. Asit Sharma: I liked one thing that you mentioned between the culture and the execution, which is the ability to take a risk, to take those big bets. How are things different now that you sit in the chair of a CFO to make sure that the bets have a commensurate payoff for the risk and also maybe in some cases to be the person who's encouraging the company to take those risks? Martin de los Santos: It's not only my role. I think it's the role of the senior management team. We keep on thinking about the trade off between growth and profitability. In fact, we have a name for that within Meli we call it grow fit because we operating many different verticals have tremendous growth opportunities, but at the same time, they require investments. If you look at the history of the past five, six years, we improve significantly the profitability of our business. While at the same time, we continue to deliver very high growth in both in commerce, Fintech, advertising at the different verticals. However, when we look forward, we don't shy away from investing, even if in the short term, that might put some pressure on margins because the main thing for us is to make sure that we do capture those opportunities that we had ahead of us and not necessarily to maximize short term profits. We do have a long term perspective on the business, but that's a trade off that we do it all the time, deciding where to invest and sacrifice a little bit of margins to capture opportunities in the future, and the whole company and the whole senior management team is thinking in those terms. Then it does risk taking, I think it's the nature of our business. You mentioned I used to run the credit business, which we started back in 2017. That's probably the ultimate one that you need to manage and to deal with risk, and we're very cautious in the way we manage that risk. But in other cases in the history of our company, maybe 15 years ago, we took a big bet on adapting our platform to mobile, and that required lot of risk and a mindset of really changing the way we were doing things. If we didn't do that, we wouldn't have a company today. Ten years ago, we started with logistics, which is critical for e-commerce solution. If you think about it ten years ago, we didn't touch one single package. Today, last year, we have 1.8 billion packages delivered through our own fulfillment infrastructure or logistic infrastructure. I think those type of beds that when you need to do when you need to take risk and make sure that you invest behind the long term growth opportunities, that's what differentiates mainly from other companies that might not be willing to take those risks. Asit Sharma: I wanted to ask you about some overall metrics that you use as you look at the business. I used to work for a company where while we had so many drill down metrics, the owner would come in every day, and he said, I just need one number to run this business. Now, that wasn't true. You need more than one number to run a business. But it taught me something that people like yourself often Kean on a few metrics almost on a daily basis. How do you gauge the health of Mercado Libre from day to day? Martin de los Santos: Yeah, we are a very data oriented company. Business reviews that are so deep in terms of analysis and data that is true. It's hard to keep up with all the businesses. It's very complex Mercado Libre today. So it's important to have some, big picture views, and then you can drill down whenever you see something that we want to go into more detail. Many different businesses, 19 different countries. You can imagine that the metrics are hundreds. But I would say that obviously, top line metric GMB on our commerce business is very important. Users, last year, I mentioned we have 100 million users, or 100 million buyers on our commerce platform. In terms of engagement, transactions per user is a metric that we follow very closely. That's on the commerce side. On the Fintech side, obviously number of users, 61 million monthly active users last quarter. TPV for the acquiring business, then credit book, asset and the mansion that has been growing more than 100% year and years, is a metric that is very important to see engagement with our platform and then frequency of use. In Fintech is very important to have principality. We're seeing people who have engaged with more than one product and how often they engage with different products. That's something that we pay a lot of attention. Then the credit business, obviously, the traditional metrics, MPLs, the spreads of our books, the different books, and so on the repayment of our credit card, for instance, which is a product that you need to invest to build a cohort, I would say those. Obviously, financial metrics at the end of the quarter, at the end of each month are very important to see top line growth, as well as profit margins are the two ones, the two metrics that tells us how we are doing in terms of growth feed rate profitability, as well as growth. Asit Sharma: Strategically, where you sit, where are you focusing the organization to create the most value when we look out over a very long time horizon? Is there a specific activity or investment that's going to create the greatest yield as we look beyond, say, the medium term that you like to talk about within the management team and encourage employees to think about? Martin de los Santos: Very important to have an owner's mentality team. We operate. We are fortunate to operate in a platform in a company. That has, as we like to say, has more doors to be open, that has to open them. We have opportunities everywhere we see. In commerce, we're just getting started. Penetration is very low. We continue to grow at a very rapid pace north of 30% year and year, twice the speed of the market, so we're continuing to gain market share. Even after 25 years, we're growing at start-up rates. On Fintech in Mexico, less than half the population have a bank account. Less than 15% have a credit card. The opportunity is immense as well to continue growing. Advertising, we mentioned it before, everywhere you look at mainly there are opportunities. We are fortunate to have a lot of resources to take on those opportunities. 18,000 developers, a very well, very strong balance sheet to invest. We generate lots of cash, even though we are investing in our business as well. I think the big challenge is when you don't have a clear constraint is how to make sure that you are investing in the right things. That represents not only choosing what to invest, but also choosing what not to do, not to get and also to make sure that you are investing on things that really have a good payout, and they actually result in growth going forward. That's something that continuously my team and my colleagues at the sea level are continuously looking at, at the end of the day is maintaining this growth feed mentality that we have been operating. We want to make sure that we hit the growth targets. While, not shying away from investing, even if in the short term, we might put some pressure on margins. We don't mind. We don't run the business on a quarter by quarter basis. We run the business for the next 25 years. Ron Gross: Coming up after the break, Emily Flippen and Matt Argersinger return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. Don't buy r 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. Welcome back to Motley Fool Money Ron Gross here with Emily Flippen and Matt Argersinger Fools, we've got time for two quick stories before we hit stocks on our radar. Let's start with the Walmart news on Wednesday, Walmart withdrew its earnings guidance, citing uncertainty surrounding the Trump administration's newly imposed tariffs specifically on China. Emily, the health of Walmart can tell us a lot about the health of the consumer and, frankly, the economy as a whole. What did you take away from these actions by Walmart management? Emily Flippen: Unfortunately, my takeaway is that things will likely get worse before they get better. The silver lining to this is that Walmart did reaffirm its sales guidance. They actually are perceived to have a little bit more clarity into how consumers are behaving versus what their bottom line may look like, which is obviously heavily impacted by things like tariffs and any negotiations there. Not only does Walmart really act as that bellwether for how consumers are behaving, but it's also really easy to forget that Walmart's a little bit of a bellwether and a leader for other businesses that look to Walmart for guidance. So many companies are likely watching Walmart's decision here to pull back guidance on their bottom line, and they could potentially adopt a very similar wait-and-see approach here as it applies to their own guidance. And that can almost turn into a self-fulfilling prophecy of economic slowing and leading to a market sell-off all because of the cautiousness around things like earnings guidance. Now, I think that could be a dramatic interpretation, of course, and I'll just quickly mention that Walmart does have much more complex supply lines than a lot of other small businesses. Their certainty and clarity there could be more opaque than other companies. But the fact that they are a bellwether for both consumers, which we focus on, as well as other businesses is a bit of a red flag. Ron Gross: The new Superman movie is scheduled to hit theaters this July. As listeners know, I am a Superman fanatic, really looking forward to it. Admittedly, the movies haven't always been so super, but there is a new sneak peek out there. I know you have both seen it, so I'm curious to ask. Do we have a hit on our hands or a dud? Did you have a favorite part of the sneak peek? I'll go to you first Matt. Matt Argersinger: Well, how can you not love Krypto coming in there, Krypto the super dog, coming in to rescue Superman from whatever ails him in that particular scene. But no, look, I think it looks awesome. I think Gunn did a fantastic job with the Guardians of Galaxy movies. I like that he's bringing a lot of interesting characters into the Superman movie, including looks like Hawk Man's in there. Looks like Guy Gardner, the Green Lantern characters in there. I'm excited. I'm going to go see it with my son, for sure. Emily, a hit or a dud? Emily Flippen: Well, let's put it this way. You're barking up the wrong tree, because I am not a superhero movie watcher. But I will say this. I watched the trailer at your bequest, and I didn't know the creepy CGI dog had a name. Nice to know. Matt Argersinger: You don't know Krypto? A creepy CGI dog. Emily Flippen: There's a lot of CGI in that trailer. CGI has come a long way. I don't know what I'm talking about, as it applies to CGI. I will say, it was obviously CGI, though. I do think it's a little bit of a red flag if you're having to bring in other superheroes to attract excitement. What does that say about Superman? Ron Gross: Well, I am hopeful, and my favorite part is when the Fortress of solitude rises out of the snow as Superman gets closer, almost like it could sense where he was. I love that part. Very cool. Alright, Fools, a quick personal note before we hit stocks on our radar. This will be my last Motley Fool Money radio show. It has been the joy of my career to play a small part in the financial journey of as Chris Hill would say, our dozens of listeners. Thank you for letting me share my thoughts with you for 16 wonderful years. Thank you all very much. I really appreciate it. Matt Argersinger: Ron, can I just say? Ron Gross: Yes, Matt. Matt Argersinger: Sixteen years, actually, 17 years with the Motley Fool. You've been a colleague, a mentor, a leader, most of all, a friend. I wish you the very best in retirement, and we will do our very best. It will be a lot harder now, but we will do our very best to keep this show firing on all cylinders. Ron Gross: [laughs] I appreciate that. Thanks, Martin. Very nice. Fools, we have time for a couple of stocks on our radar, so let's close out the show that way, and I will bring in our man Dan Boyd, to ask a question and pick his favorite. Emily, you're up first. What have you got? Emily Flippen: I'm looking at Dexcom this week. It's nice to have a little bit of positive news in a world that is changing around us so rapidly. Some of the excitement here for Dexcom did get drowned out by tariff talk. But Dexcom did see a little bit of a revival this week because they did get FDA approval for their newest continuous glucose monitor that is a Dexcom G7. It could be worn for up to 15 days so that extending the life versus their previous model, it puts them in more direct competition with Abbott, who is one of their competitors, which also has the FreeStyle Libre, which can be worn up to 15 days. Ahead of Metronic. I definitely move in the right direction here for Dexcom. CGM penetration for diabetics worldwide is still so much lower than what it should be, considering the health benefits that it can bring. I will say, though, I always have in the back of my head, just the fear around a couple of things. One is weight loss drugs, leading to a decline in type 2 diabetes that could eat up some of the market here for Dexcom, as well as actually a potential cure for something like diabetes. That's further down the line, but a lot of research and time is being spent into it, considering it is such a deadly and expensive disease. Ron Gross: Dan, you got a question or a comment? Dan Boyd: Dexcom it's one of these companies that the name doesn't really match up with what they do. The name, to me, is, like, something out of Superman, very sinister. But what they do very good for society. I don't know what to do here, Emily. Emily Flippen: That's a good point. I will say Abbott sharing its name with Abbott Elementary. Sounds like the friendlier of the options, but I like Dexcom more, despite the name. Ron Gross: Matt, you're up. What have you got? Matt Argersinger: Ron, I'm looking at RobinHood Markets. Ticker H-O-O-D. This is an unusual one for me. I just want to stress, this is a true radar stock, a company I'm just beginning to take a look at. But I heard a great interview with Robin Hood ' s chief brokerage officer last week. If you look at where young people, I'm talking mainly Emily's age, where they're going to open up brokerage accounts. It's not Fidelity. It's not Charles Schwab. It's certainly not Interactive Brokers where I tend to toil. It's Robin Hood. Nearly 26 million funded customers, many, I think most of which are in their 20s and 30s. When that large cohort of investors matures, starts opening retirement accounts, trust accounts, getting mortgages, doing more sophisticated trading. I think Robin Hood is really growing its offerings to like, a whole range of financial services. They also have the Robin Hood Gold membership, which is approaching three million accounts. It offers members higher levels of market data, greater margin access, could be dangerous, and then higher interest on cash and accounts. I have to say, I'm a shareholder in Schwab and I will probably be a shareholder in Schwab for a long time. But if I'm going to make a long term bet on a brokerage company, I might also want to have exposure to a brokerage company that has the most young people coming to it because it's likely to prosper right alongside that growth over time. Ron Gross: Dan, got a question? Dan Boyd: Yeah, when I hear Robin Hood, I associate it with meme stocks like GameStop and AMC and all that jazz. Is this a company that actually has legs, or is it just something that's going to be a flash in the pan? Matt Argersinger: Dan, I thought the same thing. It's the meme stock brokerage. But the fact that they have 26 million funded customers, and that has continued growing way past the GameStop and AMC stuff that we saw several years ago, that gives you confidence that has long term staying power. Ron Gross: I, too, am a Charles Schwab shareholder, not a Robin Hood one, but I'll take a look. Could be interesting. Dan, you got a favorite fear watch list? Dan Boyd: Well, it really seems like Dexcom is, like, the smart choice, but Robin Hood, I feel like is the more interesting choice. Can I do both on your last day, Ron? Ron Gross: You can do whatever you want, Dan. Both it is. Dan Boyd: That's awesome. Ron Gross: Emily Flippen and Matt Argersinger, thanks for being here, my friends. That's going to do it for this week's Motley Fool Money. Our tremendous engineer is Dan Boyd. I am Ron Gross. Thanks for listening. The Motley Fool Money Radio Show, we'll see you next week. JPMorgan Chase is an advertising partner of Motley Fool Money. Charles Schwab is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Asit Sharma has no position in any of the stocks mentioned. Dan Boyd has no position in any of the stocks mentioned. Emily Flippen, CFA has positions in Constellation Brands and MercadoLibre. Matthew Argersinger has positions in Boston Beer, Charles Schwab, MercadoLibre, and RPM International and has the following options: short May 2025 $45 puts on Delta Air Lines. Ron Gross has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boston Beer, CarMax, Interactive Brokers Group, JPMorgan Chase, MercadoLibre, and Walmart. The Motley Fool recommends Charles Schwab, Constellation Brands, Delta Air Lines, DexCom, and RPM International and recommends the following options: long January 2027 $65 calls on DexCom, short January 2027 $75 calls on DexCom, and short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.
Yahoo
16-04-2025
- Business
- Yahoo
Tariffs, Trump, and Turmoil
In this podcast, Motley Fool analysts talk about economic uncertainty, airlines, building materials, and assorted spirits. Motley Fool analyst Asit Sharma caught up with Martín de los Santos, the CFO of MercadoLibre, at The Motley Fool's Market Volatility Summit. They talked about how MercadoLibre became resilient, and the long-term opportunities for the company. 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 MercadoLibre, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and MercadoLibre 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 $526,499!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $687,684!* Now, it's worth noting Stock Advisor's total average return is 818% — a market-crushing outperformance compared to 156% 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 14, 2025 This video was recorded on April 11, 2025 Ron Gross: T is for tariffs, Trump and Turmoil. Motley Fool money starts now. From fool Global headquarters. This is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Ron Gross sitting in for Dylan Lewis. Joining me today, our senior analyst, Emily Flippen and Matt Argersinger fools, how you doing? Matt Argersinger: Ron. Emily Flippen: Doing all right. Matt Argersinger: Doing all right. Ron Gross: Glad to hear it. Today, we're going to talk banks and assorted spirits, but we must, once again, begin with the big macro and, oh, boy, what a week it has been following several very rough days in the stock market, on Wednesday, the Trump administration put a 90-day pause on its so-called reciprocal tariff policy, sending the market soaring for its biggest one day gain since 2008. Then, on Thursday, inflation data came in tamer than expected and just for good measure, on Thursday, we saw another sell-off in stocks. Emily, I am truly exhausted. But let's dig in. Where are we now from an economic markets perspective? I know you don't have a crystal ball, but where do you think we're going? Emily Flippen: If financial media has anything to say about it, it's straight to hell on a handbasket here for American consumers and investors. I'm teasing here because I really don't necessarily think that is going to be the case. While we still have a lot of economic data that is not coming out as favorably as I think some investors want, and that's leading to some of that volatility we're seeing in the market, the earlier inflation metrics that we got earlier this week, we're actually very encouraging. It was a sign that some of the concerns that I think we had around stagflation may be coming down a bit. Now, that is the core PPI, the producer price index that excludes food and energy, but it's the Fed's favored inflation metric here. That actually fell nominally month over month. And it wasn't just a matter of, Okay, this is lower than expected, but still rising inflation, but an actual month-over-month decline here. Of course, if we add food and energy, the story changes. But this is a little bit of a silver lining that I think investors need to say, OK, we have a lot of data that's pointing in the wrong direction right now. Here is something that continues to say, it may not be as bad as we expect. But of course, the emphasis is, of course, on this was the case. Inflation metrics are a lagging indicator. We're always forward-looking. Some of the policies that we've seen since this data has come out over the course of the past month, I think, are pretty clearly indicating that inflation is expected to heat up substantially. But I'll take this when for this week. Ron Gross: What about from the markets? Do you think the markets are just nervous, don't like uncertainty? That's what we typically say. Markets hate uncertainty, and there's so much uncertainty around here nowadays. Do you think that's why we're seeing the volatile the big sharp moves? Emily Flippen: I don't think it's just uncertainty. I think there's genuine concern about the business impacts that these tariffs, if they stay in place, will have both on companies that are supplying, manufacturing, as well as consumers looking to make purchases. This has wide-ranging implications for the performance of the broader economy as a whole. It's not just a matter of uncertainty because I think if we came out tomorrow and said, Okay, we are certain, 100% sure. The tariffs, as they are today, are going to stick this way for the next 12 months for certain, for example. That would be certainty. But I'll tell you what, I bet the stock market would sell off. Ron Gross: Oh. Understood. Matt, US consumer sentiment is now worse than during the Great Recession. New data just came out. Anything here for an individual investor to do other than sit back and just watch it unfold? Matt Argersinger: Sitting back is very good advice. Watching it unfold, I don't know. You're better off just turning everything off and maybe going away for a week. But look, we're investors. I know that's impossible. It's definitely impossible for me. But here's what I think if you're an investor, what you can or should pay attention to, and that is interest rates. The Trump administration only really blinked this past week when the 10 yield crossed about 4.5%. But guess where we are today as we tape on Friday, back above 4.5%, Ron. If you go back to April 2nd, which was Liberation Day, as the administration called it, the 10-year was just above 4%. We're up 50 basis points in a week, and that's through all this market dislocation. It usually doesn't work that way. Usually, investors are buying treasuries as a safe haven during times like this. That's just not happening right now and I think that is where the real danger lies, and I think Emily hinted at this. I mean, if countries like China and, Japan UK, various members of the EU stop buying our treasuries, either because they're exporting less as a result of these tariffs, and they don't have as many US dollars to invest anyway, or much worse, guys, they willfully decide to stop buying treasuries in favor of other safe-haven assets or currencies. I mean, just look at the Swiss franc as of the past week. If that happens, it will almost certainly send treasury yields much higher. And I think that would spell huge trouble for the housing market, which we already know is suffering from high mortgage rates. Imagine mortgage rates not at six or 7% as they are now, but 8, 9, 10%. I think it also spells big trouble for small, midsize businesses who don't have as much flexibility with their balance sheets and where they source their products. It's bad for auto manufacturers, bad for commercial real estate and then to consumers to Emily's point. Consumers are sitting on record credit card debt and if interest rates move higher that situation gets a lot worse. I think it really could mean bad news for the economy. If you're going to watch anything at all, sit back and watch this shake out, watch treasury yields. If they keep moving higher, I expect that could trigger a response by the administration. To be less aggressive with these tariffs, maybe come to the table, that'll be the trigger point. Ron Gross: I was going to say one silver lining may be we do have anecdotal evidence that the administration does keep an eye on the bond market, and on interest rates, that could very well be the reason we got the 90 day pause. We don't necessarily have proof of that, but that certainly could be. I would encourage them to keep an eye on the yields, so we don't get into too much trouble, as you outlined. But speaking of interest rates, on Friday, many of the larger banks reported pretty solid results for the first quarter, and Matt, lots of data, plenty of commentary from the CEOs. What's set out to you in these reports? Matt Argersinger: Results you said, Ron, the results were actually really solid. The problem is no one really cares about that right now. It's really all about guidance and how these CEOs are thinking about the environment, post tariffs, post-liberation Day and what they see going forward. Here's what they're saying. If you look at CEO Jamie Diamond, CEO of the largest US bank, JP Morgan, he's been pretty vocal this past week about the dangers of tariffs, even saying he believes that a recession is all but unavoidable now. And then he said this after his bank reported quarter results, "The economy is facing considerable turbulence, potential negatives of tariffs and trade wars," ongoing sticking inflation, high fiscal deficits, and still rather high asset prices and volatilities. What else he said? Wells Fargo's CEO, Charlie Sharf, "We support the administration's willingness to look at barriers to fair trade to the United States. Though there are certainly risks associated with such significant actions, a timely resolution, which benefits the US, would be good for businesses, consumers, and the markets. We expect continued volatility and uncertainty and are prepared for a slower economic environment in 2025" Then Larry Fink, CEO of Blackrock, which I think is now the world's largest ass manager, "The sweeping tariff announcements went further than I could have imagined in my 49 years in finance." Then in an interview on CNBC, he also said, "I think we're very close if not in a recession now," talking about, of course, the US economy. Ron Gross: Thanks for cheering us up, Matt. Matt Argersinger: Well, there you go. Let me sum it up, too. These tarifs are dangerous. If not resolved quickly, the risks are high, expect continued uncertainty, which we keep talking about, and we may already be in a recession. Remember, these are the banks and financial institutions that have a pulse, I think, in a lot of areas of the economy, which is from housing to credit, consumer spending. Wait until we start hearing from industrial companies or consumer discretionary companies, especially those that make and sell products all around the world. What will be their reactions and guidance when they report in the coming weeks? I think this is just the first Salvo, and it's sobering when you look at it, in terms of what they're seeing. Ron Gross: On Wednesday, Constellation Brands reported fourth-quarter results that beat expectations, but a week full-year earnings outlook that focused on the impact of, yes, tariffs was the focus. Emily, how did the quarter look to you? Is it possible for us to remove tariffs from this conversation and focus on the business, or they are so intertwined, just can't do that. Emily Flippen: I actually think that tariffs are maybe the least interesting thing happening to Constellation Brands business today. I understand why the narrative was around tariffs. It's like you can open up an Internet browser without being slapped across the face with news about tariffs and how they're going to be impacting companies. Certainly, Constellation Brands did say in the quarter that they're expecting a low single-digit increase in their total cost of goods that's associated with the tariffs and sourcing, of course, aluminum cans and other bottling items for the beers and the accessories, I'll say, for the wine and spirits business that they sell. But all of this stuff is happening to Constellation Brands. Meanwhile, Constellation Brands as a business itself, is actually doing a pretty decent job of a turnaround, especially considering the overall beer market. I think it's a disappointment that there's not more discussion around how strong this business has been in an incredibly weak environment for alcohol sales. If you compare their performance against other large beer makers, Boston Beer, with Sam Adams being a great example, which has seen declining depletions, declining shipments, declining profitability and sales, Constellation Brands is growing and growing pretty solidly because the beer brands that it is continuing to focus on just have continued to resonate with a consumer that's a little bit more niche, that is a bit more loyal, and that has led to pretty incredible market share gains really consistently for this company in otherwise weak environment. I love that Constellation Brands has performed so well. I'm disappointed that the narrative is, Oh, no, that small single-digit increase associated with the tariffs. But I actually think fast forwarding five years from now, we're probably looking at a better business than today. Ron Gross: They're selling some of their wine brands, Cooks, Miomi, that a good movie? You like that? Emily Flippen: I do. They're actually almost entirely divesting of their wine and spirits business. And if you look at their performance on earnings per share, non-adjusted basis for the quarter, you'll see the impact of that nearly $3 billion in goodwill write-offs associated with the sale of that business, which has been an underperformer for them for a while. That is obviously a ding on them. Some of the investments this company has made historically just haven't panned out. But they're really focusing on cost energies right now and focusing on what works, which is obviously the Corona, the Medello, the Pacificos. Those have an audience that are way more loyal than not to be offensive to Miomi, which I love their wine is a bit more loyal. Ron Gross: Coming up, we'll talk airlines, building materials, and used cars. You're listening to Motley Fool Money. ... Ron Gross: Welcome back to Motley Fool Money. I'm Ron Gross here with Emily Flippen and Matt Argersinger. On Wednesday, Delta reported that revenue growth stalled a bit in the first quarter and the company did not reaffirm its full year guidance, citing headwinds from the economic uncertainty around global trade. Matt, seems to me it wasn't the quarterly results, but the lack of full year guidance that spooked investors. Shares were up big on Wednesday as Trump paused tariffs, but the stock got smacked on Thursday as investors continued to digest what it all means. As I asked Emily with constellation, I'd love to strip out the economic noise here and talk about the business. Can we do that? Matt Argersinger: Well, let's try, Ron. It was actually a record quarter for Delta in terms of revenue. Pretty surprising, revenue was up 3.3% year over year, 13 billion, and growth was particularly strong in the premium segment of the business. So first class, business class, revenue there was up 7% year over year. International revenue was also pretty strong, and even corporate revenue was higher year over year, and Delta generated 1.3 billion in free cash flow in the quarter, paid down about 500 million in long term debt. All fairly positive and aligned with what CEO Ed Bastian said near the beginning of the year, which was that 2025 was going to be Delta's best financial year in our history. That is not really working out. Ron Gross: Maybe not so much. Matt Argersinger: Because even if you go back a month ago, Delta had actually guided for 6-8% revenue growth this quarter. That's a big comedown from that. According to Bastion, things actually started to slow back in February. Well, before these tariff announcements or any hint of them, the company slashed its first quarter forecast. It did maintain its full year outlook back then, though. As you mentioned, Ron, that has now changed. They're not reaffirming that year outlook anymore. The company has pulled its guidance. It's still expecting to be profitable this year, but a far cry from where the company thought things would be coming into the year. I think you have to worry a lot about the state of the consumer here. What travel demand is going to look like, say, over the next 6-9 months, you mentioned the consumer sentiment numbers at the top of the show. One thing that's got to be helping Delta a little bit, though, over the past week is the fall in energy prices that we've seen. It's a big cost input for every airline including Delta. That will undoubtedly help Delta's margins and probably help the company remain profitable for the year if not growing. Ron Gross: On Thursday, CarMax reported worse than expected fourth quarter results, and while it said it was making progress toward its financial goals, it will remove the timelines associated with them due to the potential impact of broader macro factors. Emily, I know I sound like a broken record here, but the macro environment is hard to escape. Do your best. Tell me how CarMax's business is doing. Emily Flippen: I actually think the business is doing a lot better than people expect, especially, again, given the narrative right now. I understand that the market is in part selling off CarMax for a few different factors. Of course, one aspect of the tariff implication for CarMax and any other business that is operating in the auto parts industry is that the used car parts that it needs in order to fix and resell vehicles on its platform, those are likely to increase, and that's likely to hurt margins at least in that narrow perspective. There's also an element of, Okay, used car prices are likely to increase with the tariffs as well, and that could hurt demand for used cars. That could certainly pride some people out of market, and management was so uncertain of this environment that they did pull that guidance for vehicle sales, which is concerning to investors adding to the uncertainty. You can make the logical argument there for the interim of like, Okay, I understand what's happening here to CarMax. But I actually think that a little bit longer term, taking it one step further, we're likely to see similarly to what we saw during the pandemic that used car prices are likely to go up and that could price some people out of the market. But it's actually a boon for a lot of leaders in this space like CarMax, when the prices of used cars go up, especially in comparison to something like a new vehicle 'cause a new vehicles will also increase making used cars look relatively more attractive for consumers who can make a purchase plus higher cost means higher fees for CarMax. All of that is to say, I actually think they could make up some of the margin here, and the future may not be as negative for CarMax as some investors are pricing in today. Ron Gross: All things considered, does CarMax go on your radar or you still go away? Emily Flippen: If I had a radar stock this month that I thought was an attractive value that I could make a 22nd, 32nd pitch for it, CarMax would certainly be up there. Digging into it this morning and in preparation for our show here, it reminded me this is an incredibly strong, profitable company, market share leader with a lot of tailwinds if you're willing to hold and overlook some of the near term uncertainty. Ron Gross: Sounds good. On Tuesday, RPM International reported fiscal third quarter results that came in weaker than expected, and the maker of Deglo and Rustleum blamed unfavorable weather conditions and said that sales would be flat in the fourth quarter. Matt, RPM does a lot of business overseas, so it's got the trade situation plus the weather to contend with. How the quarter look to you, and does it tell us anything about industrial activity in general? Matt Argersinger: Well, lots of headwinds for RPM and lots of headwinds in general for industrial activity, even coming into this quarter and all the tariff news. Really two big challenges for them. They had record results last year in last year's fiscal third quarter, so comparisons are tough. But weather was a big problem in the quarter. If you don't know RPM, they serve primarily in the construction industry, and in much of the country, you had a fairly lengthy winter and then a lot of unusual storm activity in the south and the West, which really affected them. Slow housing market also continues to have an impact. That's been a story for a few years now. Until that picks up, RPM's consumer business is really going to struggle. Sales were down 3% overall. Pre tax operating profits, this is a business with high operating leverage we're down around 30%. With regard to tariffs, though, the good news for RPM is that they tend to be fairly insulated. For the most part, the company manufactures products in the countries or regions where it sells them. They do small amount of cross border activity. It sounds like a situation for RPM, where sales may be slightly down for the year with lower margins, but here is something, Ron, you and Emily can be excited about. RPM is acquiring the pink stuff. Ron Gross: The pink. Matt Argersinger: Which I'm sure, if you've ever done an industrial cleaning of a bathroom, you've definitely use or at least should use. So the pink stuff joins other cleaning products within RPM's portfolio, including Crud Cutter, Mean Green, and Contobum, if I'm pronouncing that correctly. That guy sounds like the 1927 Yankees when it comes to cleaning portfolio lineup. Ron Gross: I love it. Alright, fools. We'll see you a little bit later in the show. Up next, an interview with Martin de los Santos. He's the CFO of Mercado Libre, E-commerce giant and the largest company in Latin America. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Ron Gross. Molly Fool senior analyst Asit Sharma caught up with Martin de los Santos, the CFO of Mercado Libre, a few weeks ago at our Market Volatility Summit. In this clip, you'll hear how Mercado Libre became resilient in the long term opportunities for Meli. Motley Fool members can access the full interview and replays from the event at Asit Sharma: Martin, I wanted to start. Just looking at this company in general, Mercado Libre has such a history of dealing with formidable challenges from hyperinflation and geopolitical events within Latin America to providing fintech and lending services to populations that often are new to the banking and credit systems. What makes Mercado Libre such a resilient business? Martin de los Santos: Yes, we were founded back in '99, and we turned 25 years in 2024. With those 25 years, as you can imagine, in Latin America, operating in 19 different countries, we've seen it all. Things going sour very rapidly. Maybe Mezuela as an example, hyperinflation in Argentina, then things coming back as we are seeing it today, Brazil, Mexico. I think we went through a lot during those years. I would highlight a couple of things. First, we operate in commerce and Fintech in a region where there's a lot to be done in those two fronts. Production of commerce continues to be very low compared to other places. We are riding a secular trend of people moving online. The same with Fintech, I think the banks have done a really poor job of including financially, most of the population in Latin America, so that generates an opportunity for us. That's one thing. I will also highlight the culture of the company. Our CEO, our chairman continues to be Marcos Galbrin, who was the founder of the company. Not only him, a lot of people were with him at the beginning continues to be with the company. We have a very strong culture of entrepreneurship, willingness to take risks. Many times in the history of our company, we have to reinvent ourselves or take big bets, and that's a big part of our success, a culture of excellence, execution, bringing good talent, teamwork internally while competing because we operating in very competitive markets to the outside. I think I would say that we operate in a region that has tremendous opportunities, both commerce and Fintech, and we also have a culture of executing and operating in Latin America that has helped us to be resilient and to be successful in this. Latin America, we came from being a start-up of five people in the garage 25 years ago to last year we became the most valuable company in Latin America, and we have done that I think by culture and execution and the quality of people that we brought into our team. Asit Sharma: I liked one thing that you mentioned between the culture and the execution, which is the ability to take a risk, to take those big bets. How are things different now that you sit in the chair of a CFO to make sure that the bets have a commensurate payoff for the risk and also maybe in some cases to be the person who's encouraging the company to take those risks? Martin de los Santos: It's not only my role. I think it's the role of the senior management team. We keep on thinking about the trade off between growth and profitability. In fact, we have a name for that within Meli we call it grow fit because we operating many different verticals have tremendous growth opportunities, but at the same time, they require investments. If you look at the history of the past five, six years, we improve significantly the profitability of our business. While at the same time, we continue to deliver very high growth in both in commerce, Fintech, advertising at the different verticals. However, when we look forward, we don't shy away from investing, even if in the short term, that might put some pressure on margins because the main thing for us is to make sure that we do capture those opportunities that we had ahead of us and not necessarily to maximize short term profits. We do have a long term perspective on the business, but that's a trade off that we do it all the time, deciding where to invest and sacrifice a little bit of margins to capture opportunities in the future, and the whole company and the whole senior management team is thinking in those terms. Then it does risk taking, I think it's the nature of our business. You mentioned I used to run the credit business, which we started back in 2017. That's probably the ultimate one that you need to manage and to deal with risk, and we're very cautious in the way we manage that risk. But in other cases in the history of our company, maybe 15 years ago, we took a big bet on adapting our platform to mobile, and that required lot of risk and a mindset of really changing the way we were doing things. If we didn't do that, we wouldn't have a company today. Ten years ago, we started with logistics, which is critical for e-commerce solution. If you think about it ten years ago, we didn't touch one single package. Today, last year, we have 1.8 billion packages delivered through our own fulfillment infrastructure or logistic infrastructure. I think those type of beds that when you need to do when you need to take risk and make sure that you invest behind the long term growth opportunities, that's what differentiates mainly from other companies that might not be willing to take those risks. Asit Sharma: I wanted to ask you about some overall metrics that you use as you look at the business. I used to work for a company where while we had so many drill down metrics, the owner would come in every day, and he said, I just need one number to run this business. Now, that wasn't true. You need more than one number to run a business. But it taught me something that people like yourself often Kean on a few metrics almost on a daily basis. How do you gauge the health of Mercado Libre from day to day? Martin de los Santos: Yeah, we are a very data oriented company. Business reviews that are so deep in terms of analysis and data that is true. It's hard to keep up with all the businesses. It's very complex Mercado Libre today. So it's important to have some, big picture views, and then you can drill down whenever you see something that we want to go into more detail. Many different businesses, 19 different countries. You can imagine that the metrics are hundreds. But I would say that obviously, top line metric GMB on our commerce business is very important. Users, last year, I mentioned we have 100 million users, or 100 million buyers on our commerce platform. In terms of engagement, transactions per user is a metric that we follow very closely. That's on the commerce side. On the Fintech side, obviously number of users, 61 million monthly active users last quarter. TPV for the acquiring business, then credit book, asset and the mansion that has been growing more than 100% year and years, is a metric that is very important to see engagement with our platform and then frequency of use. In Fintech is very important to have principality. We're seeing people who have engaged with more than one product and how often they engage with different products. That's something that we pay a lot of attention. Then the credit business, obviously, the traditional metrics, MPLs, the spreads of our books, the different books, and so on the repayment of our credit card, for instance, which is a product that you need to invest to build a cohort, I would say those. Obviously, financial metrics at the end of the quarter, at the end of each month are very important to see top line growth, as well as profit margins are the two ones, the two metrics that tells us how we are doing in terms of growth feed rate profitability, as well as growth. Asit Sharma: Strategically, where you sit, where are you focusing the organization to create the most value when we look out over a very long time horizon? Is there a specific activity or investment that's going to create the greatest yield as we look beyond, say, the medium term that you like to talk about within the management team and encourage employees to think about? Martin de los Santos: Very important to have an owner's mentality team. We operate. We are fortunate to operate in a platform in a company. That has, as we like to say, has more doors to be open, that has to open them. We have opportunities everywhere we see. In commerce, we're just getting started. Penetration is very low. We continue to grow at a very rapid pace north of 30% year and year, twice the speed of the market, so we're continuing to gain market share. Even after 25 years, we're growing at start-up rates. On Fintech in Mexico, less than half the population have a bank account. Less than 15% have a credit card. The opportunity is immense as well to continue growing. Advertising, we mentioned it before, everywhere you look at mainly there are opportunities. We are fortunate to have a lot of resources to take on those opportunities. 18,000 developers, a very well, very strong balance sheet to invest. We generate lots of cash, even though we are investing in our business as well. I think the big challenge is when you don't have a clear constraint is how to make sure that you are investing in the right things. That represents not only choosing what to invest, but also choosing what not to do, not to get and also to make sure that you are investing on things that really have a good payout, and they actually result in growth going forward. That's something that continuously my team and my colleagues at the sea level are continuously looking at, at the end of the day is maintaining this growth feed mentality that we have been operating. We want to make sure that we hit the growth targets. While, not shying away from investing, even if in the short term, we might put some pressure on margins. We don't mind. We don't run the business on a quarter by quarter basis. We run the business for the next 25 years. Ron Gross: Coming up after the break, Emily Flippen and Matt Argersinger return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. Don't buy r 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. Welcome back to Motley Fool Money Ron Gross here with Emily Flippen and Matt Argersinger Fools, we've got time for two quick stories before we hit stocks on our radar. Let's start with the Walmart news on Wednesday, Walmart withdrew its earnings guidance, citing uncertainty surrounding the Trump administration's newly imposed tariffs specifically on China. Emily, the health of Walmart can tell us a lot about the health of the consumer and, frankly, the economy as a whole. What did you take away from these actions by Walmart management? Emily Flippen: Unfortunately, my takeaway is that things will likely get worse before they get better. The silver lining to this is that Walmart did reaffirm its sales guidance. They actually are perceived to have a little bit more clarity into how consumers are behaving versus what their bottom line may look like, which is obviously heavily impacted by things like tariffs and any negotiations there. Not only does Walmart really act as that bellwether for how consumers are behaving, but it's also really easy to forget that Walmart's a little bit of a bellwether and a leader for other businesses that look to Walmart for guidance. So many companies are likely watching Walmart's decision here to pull back guidance on their bottom line, and they could potentially adopt a very similar wait-and-see approach here as it applies to their own guidance. And that can almost turn into a self-fulfilling prophecy of economic slowing and leading to a market sell-off all because of the cautiousness around things like earnings guidance. Now, I think that could be a dramatic interpretation, of course, and I'll just quickly mention that Walmart does have much more complex supply lines than a lot of other small businesses. Their certainty and clarity there could be more opaque than other companies. But the fact that they are a bellwether for both consumers, which we focus on, as well as other businesses is a bit of a red flag. Ron Gross: The new Superman movie is scheduled to hit theaters this July. As listeners know, I am a Superman fanatic, really looking forward to it. Admittedly, the movies haven't always been so super, but there is a new sneak peek out there. I know you have both seen it, so I'm curious to ask. Do we have a hit on our hands or a dud? Did you have a favorite part of the sneak peek? I'll go to you first Matt. Matt Argersinger: Well, how can you not love Krypto coming in there, Krypto the super dog, coming in to rescue Superman from whatever ails him in that particular scene. But no, look, I think it looks awesome. I think Gunn did a fantastic job with the Guardians of Galaxy movies. I like that he's bringing a lot of interesting characters into the Superman movie, including looks like Hawk Man's in there. Looks like Guy Gardner, the Green Lantern characters in there. I'm excited. I'm going to go see it with my son, for sure. Emily, a hit or a dud? Emily Flippen: Well, let's put it this way. You're barking up the wrong tree, because I am not a superhero movie watcher. But I will say this. I watched the trailer at your bequest, and I didn't know the creepy CGI dog had a name. Nice to know. Matt Argersinger: You don't know Krypto? A creepy CGI dog. Emily Flippen: There's a lot of CGI in that trailer. CGI has come a long way. I don't know what I'm talking about, as it applies to CGI. I will say, it was obviously CGI, though. I do think it's a little bit of a red flag if you're having to bring in other superheroes to attract excitement. What does that say about Superman? Ron Gross: Well, I am hopeful, and my favorite part is when the Fortress of solitude rises out of the snow as Superman gets closer, almost like it could sense where he was. I love that part. Very cool. Alright, Fools, a quick personal note before we hit stocks on our radar. This will be my last Motley Fool Money radio show. It has been the joy of my career to play a small part in the financial journey of as Chris Hill would say, our dozens of listeners. Thank you for letting me share my thoughts with you for 16 wonderful years. Thank you all very much. I really appreciate it. Matt Argersinger: Ron, can I just say? Ron Gross: Yes, Matt. Matt Argersinger: Sixteen years, actually, 17 years with the Motley Fool. You've been a colleague, a mentor, a leader, most of all, a friend. I wish you the very best in retirement, and we will do our very best. It will be a lot harder now, but we will do our very best to keep this show firing on all cylinders. Ron Gross: [laughs] I appreciate that. Thanks, Martin. Very nice. Fools, we have time for a couple of stocks on our radar, so let's close out the show that way, and I will bring in our man Dan Boyd, to ask a question and pick his favorite. Emily, you're up first. What have you got? Emily Flippen: I'm looking at Dexcom this week. It's nice to have a little bit of positive news in a world that is changing around us so rapidly. Some of the excitement here for Dexcom did get drowned out by tariff talk. But Dexcom did see a little bit of a revival this week because they did get FDA approval for their newest continuous glucose monitor that is a Dexcom G7. It could be worn for up to 15 days so that extending the life versus their previous model, it puts them in more direct competition with Abbott, who is one of their competitors, which also has the FreeStyle Libre, which can be worn up to 15 days. Ahead of Metronic. I definitely move in the right direction here for Dexcom. CGM penetration for diabetics worldwide is still so much lower than what it should be, considering the health benefits that it can bring. I will say, though, I always have in the back of my head, just the fear around a couple of things. One is weight loss drugs, leading to a decline in type 2 diabetes that could eat up some of the market here for Dexcom, as well as actually a potential cure for something like diabetes. That's further down the line, but a lot of research and time is being spent into it, considering it is such a deadly and expensive disease. Ron Gross: Dan, you got a question or a comment? Dan Boyd: Dexcom it's one of these companies that the name doesn't really match up with what they do. The name, to me, is, like, something out of Superman, very sinister. But what they do very good for society. I don't know what to do here, Emily. Emily Flippen: That's a good point. I will say Abbott sharing its name with Abbott Elementary. Sounds like the friendlier of the options, but I like Dexcom more, despite the name. Ron Gross: Matt, you're up. What have you got? Matt Argersinger: Ron, I'm looking at RobinHood Markets. Ticker H-O-O-D. This is an unusual one for me. I just want to stress, this is a true radar stock, a company I'm just beginning to take a look at. But I heard a great interview with Robin Hood's chief brokerage officer last week. If you look at where young people, I'm talking mainly Emily's age, where they're going to open up brokerage accounts. It's not Fidelity. It's not Charles Schwab. It's certainly not Interactive Brokers where I tend to toil. It's Robin Hood. Nearly 26 million funded customers, many, I think most of which are in their 20s and 30s. When that large cohort of investors matures, starts opening retirement accounts, trust accounts, getting mortgages, doing more sophisticated trading. I think Robin Hood is really growing its offerings to like, a whole range of financial services. They also have the Robin Hood Gold membership, which is approaching three million accounts. It offers members higher levels of market data, greater margin access, could be dangerous, and then higher interest on cash and accounts. I have to say, I'm a shareholder in Schwab and I will probably be a shareholder in Schwab for a long time. But if I'm going to make a long term bet on a brokerage company, I might also want to have exposure to a brokerage company that has the most young people coming to it because it's likely to prosper right alongside that growth over time. Ron Gross: Dan, got a question? Dan Boyd: Yeah, when I hear Robin Hood, I associate it with meme stocks like GameStop and AMC and all that jazz. Is this a company that actually has legs, or is it just something that's going to be a flash in the pan? Matt Argersinger: Dan, I thought the same thing. It's the meme stock brokerage. But the fact that they have 26 million funded customers, and that has continued growing way past the GameStop and AMC stuff that we saw several years ago, that gives you confidence that has long term staying power. Ron Gross: I, too, am a Charles Schwab shareholder, not a Robin Hood one, but I'll take a look. Could be interesting. Dan, you got a favorite fear watch list? Dan Boyd: Well, it really seems like Dexcom is, like, the smart choice, but Robin Hood, I feel like is the more interesting choice. Can I do both on your last day, Ron? Ron Gross: You can do whatever you want, Dan. Both it is. Dan Boyd: That's awesome. Ron Gross: Emily Flippen and Matt Argersinger, thanks for being here, my friends. That's going to do it for this week's Motley Fool Money. Our tremendous engineer is Dan Boyd. I am Ron Gross. Thanks for listening. The Motley Fool Money Radio Show, we'll see you next week. JPMorgan Chase is an advertising partner of Motley Fool Money. Charles Schwab is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Asit Sharma has no position in any of the stocks mentioned. Dan Boyd has no position in any of the stocks mentioned. Emily Flippen, CFA has positions in Constellation Brands and MercadoLibre. Matthew Argersinger has positions in Boston Beer, Charles Schwab, MercadoLibre, and RPM International and has the following options: short May 2025 $45 puts on Delta Air Lines. Ron Gross has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boston Beer, CarMax, Interactive Brokers Group, JPMorgan Chase, MercadoLibre, and Walmart. The Motley Fool recommends Charles Schwab, Constellation Brands, Delta Air Lines, DexCom, and RPM International and recommends the following options: long January 2027 $65 calls on DexCom, short January 2027 $75 calls on DexCom, and short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy. Tariffs, Trump, and Turmoil was originally published by The Motley Fool
Yahoo
09-04-2025
- Business
- Yahoo
Earnings, Acquisitions, Partnerships, Tariffs... A Lot for Investors to Think About
In this podcast, Motley Fool analysts Ron Gross, Asit Sharma, and Jason Moser discuss earnings, acquisitions, partnerships, and tariffs. And Motley Fool Chief Investment Officer Andy Cross talks to Schwab Chief Investment Strategist Liz Ann Sonders. 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 $249,730!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $32,689!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $469,399!* 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 April 5, 2025 This video was recorded on April 04, 2025 Ron Gross: Did someone say tariffs? Motley Fool Money starts now. From Fool global headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Ron Gross sitting in for Dylan Lewis. Joining me today are senior analysts Jason Moser and Asit Sharma. Fools, how you doing? Jason Moser: Ron, how are you doing? Asit Sharma: Doing all right. Ron, how are you doing? Ron Gross: I'm well, guys. Today, we're going to talk earnings, acquisitions, and partnerships, but we must begin with the big macro, and it's a doozy. On Wednesday afternoon, the Trump administration revealed the details around what it is calling reciprocal tariffs, which, by the way, they are not sending the stock market down sharply on Thursday and Friday. Jason, let's unpack this. What did the administration actually announce, and what are they actually trying to achieve? Jason Moser: A very hectic couple of days, very understandable for investors to be on edge here. I think we go back to the beginning here and ask, why is this happening? Do you remember this all started really with Canada, Mexico, and China. Tariffs were worth brought to the table as a way to help control border issues, concerns of fentanyl crossing the border and whatnot, but now it's obviously gone virtually global with about 180 countries in play here. I think there's maybe 195 countries in the world, so that's a lot. To me, I think trade deficits are part of this. I think there's a lot that has to do with this. It's not just one thing. It can be confusing, but trade deficits are one piece of the puzzle, I think, here. That's where we as an economy, we import more than we export. We'd like to see more of a balance there, but right now, we're just importing more than we're exporting, and that ultimately can lead to things like shrinking production domestically, job losses, higher deficit spending. One thing to note here, too, in regard to that, while we've heard the word reciprocal a lot in regard to these tariffs, they don't really seem like they're necessarily reciprocal. I mean, you got this 10% number that applies to everyone, but then you got a lot of other countries they deem as bad actors, where these numbers are all over the place. It seems that many of these tariffs are adhering to a calculation based on these very trade deficits. So that's one way to look at it. Another, and this is just something to keep in mind, there are those who believe that he may, at least in part, be doing this to ultimately try to bring interest rates down. During recessionary times, that tends to be the case. They want to free up spending, make life a little easier for consumers. It would allow to refinance much of the higher cost national debt. We have, I think, about $1 trillion in interest payments on the federal debt alone this year in 2025. I'm not saying that's what he's doing. I'm saying that line of thinking exists, and ultimately, I think what that leads me to is there are a lot of reasons why this is going on, and there's all speculation out there. I think it's worth investors pulling back a little bit and saying, you know what? There's a lot going on. I want to make sure I acknowledge there's a lot of stuff that I don't know here. If you peruse social media, there are a lot of experts out there these days, Ron. Ron Gross: Stay away from social media. Jason Moser: We want to try to be a little bit humble about this. Remember, there are a lot of things that we just don't know. This is just a very complex process and I suspect it will get worse before it gets better. But, I mean, I think it's interesting to know we already saw where Vietnam is out there saying, hey, we want to negotiate and bring these tariffs down to zero, and lo and behold, right now, you see companies like Nike and Wayfair and even Under Armour in the green today on what is otherwise a very red day. Ron Gross: Asit, stocks are obviously getting slammed, not all of them, but most of them. What do you think the short and midterm consequences are for US companies? And then I'll ask you, what should an individual investor do, if anything? Asit Sharma: The short term consequences are going to be a hit to earnings for many companies because the tariffs are effective. This morning, we heard that China is going to have retaliatory tariffs of 34%, which is the effective rate that they've been slapped with, and there's no easy way in the short term to navigate these waters. So we can just expect that the landscape of earnings is going to be pitted with mea culpas. Those mea culpas really won't be about, we didn't conduct our business correctly. It's going to be about, we just didn't see this risk. It came out of the blue. We expected some tariffs, not this much. For individual investors, what's going to be the impact is we're going to see lots of security valuations near term, across the board, get whacked because it's very confusing right now. As details emerge, as negotiations happen, then we'll start to see some companies bouncing back and some that now are going to have longer term effects, they'll still be relatively underwater. My caution here to investors is not to just jump out of the market out of fear unless you really need that money or have to make that personal decision to get out. Let this take its course and study it as we go along. We'll be doing that here at The Motley Fool. There may also be some opportunities going forward. Ron Gross: I'll remind investors that 100% of the time, stocks have come back, rebounded and moved higher through wars, depressions, pandemics. I don't see any reason why this would be any different. And if it is, we've got more to worry about than stock prices. I think there's some optimism you can take based on history. Let's move on to some earnings. On Wednesday, RH reported fourth quarter earnings that were worse than expected, and CEO Gary Friedman actually used the S word on a call with analysts when he saw that his stock was down 40%. Asit, the stock got smacked on the tariff news, but how did the quarter actually look to you and how bad will the tariffs hurt RH? Asit Sharma: The quarter looked fine, Ron. The top line, we saw an increase of about 10%, so RH booked about 812 million bucks on that revenue line. But earnings per share of $3.92 was about 25% below the consensus estimate. So more in costs than investors were expecting, bottom line didn't look as healthy, and the stock would have been for a bad day, but this was being released and talked about in the conference call the same time that President Trump was rolling out his tariff structure in the Rose Garden. As you just alluded to, CEO Gary Friedman asked his colleagues to pull up the screen while he was talking to analysts so he could see the stock price. And he said, Oh, chisels. Well, we can abbreviate that. Ron Gross: Fascinating. Asit Sharma: Put a few asterisk by that, "Oh Blank, I just looked at the screen." The reason that the stock was getting hammered as he pointed out, hey, we've been transparent in our sourcing. Seventy two percent of the goods that RH brings into the US come from Asia. I will point out 35% from Vietnam, 23% from China. As Jason pointed out, when Vietnam came out today and said, we want to negotiate, suddenly, RH, which that stock was down considerably again today, shot up a bit. I'm not sure it's quite green yet. But I wanted to point out a few things really quickly. First of all, Gary Friedman is such a colorful character. He also quoted Pablo Picasso and Teddy Roosevelt in that same conference call. But the company is a little stretched in my eyes. They've taken on about $2.6 billion in debt over the last few years to buy back shares. They only have $400 million in working capital. They've got negative free cash flow because they're spending a lot to build out these great flagship stores. So the company's a little stretched right now. You may be tempted to maybe buy on the dip here, but with those headwinds from tariffs and with the company's balance sheet, I'd be a little cautious here. Ron Gross: Sounds good. On Tuesday, mortgage giant Rocket Companies moved one step closer to becoming a one stop shop for home owners when they announced it would acquire Mr. Cooper Group, the country's largest mortgage servicer for $9.4 billion. Jason, investors must have liked this deal because Rocket shares were actually up on the news. Not something we typically see from the perspective of the acquirer. Do you agree? Is this a good deal for Rocket? Jason Moser: I think at least it makes sense when you consider what Rocket is ultimately trying to build. There's an important quote from the call, CEO Varun Krishna said, "Home search, brokerage, financing, title, closing and servicing should be seamless, but today, they're not." I think we could all probably agree they're as homeowners. But but then he went on to say, "If we truly want to fix that, we have to own the client experience from beginning to its true end." That's what this deal is really all about, I think, in my eyes. Now, the combined company would service about one in every six mortgages here in the US, and that would ultimately equate to about $2.1 trillion in loan volume. Then one final point, the housing market activity has dried up since 2021, it's lowest level since 1995. There's a catalyst on the horizon here when housing starts to improve. Not if, Ron, when. We just don't know when that's going to be, but when it does, that could serve as a nice catalyst for this combined entity and really make more sense of a deal. Ron Gross: Sounds good. Coming up, we'll talk gaming, fintech and a bit of a stumble for Tesla. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Ron Gross here with Jason Moser and Asit Sharma. On Tuesday, Roblox launched a new format of video advertising on its gaming platform and announced a partnership with Google to help boost the growth of its developing ad business. Gamers can choose to watch video advertisements up to 30 seconds long in exchange for boosts, lifelines, or resources in a particular game through rewarded videos. Asit, I know next to nothing about this space, but it seems to actually make good sense to me. What's your take? Asit Sharma: Yeah, fellow old timer, makes good sense to me, too. I mean, we came up in an age where you put a quarter into a machine to play a video game, and there was, for the longest time, no way to extend your lives. After a while, they figured out you could put another quarter in, and that was a way ticket to get more lives. But yeah, I think this makes sense from a business perspective. I mean, the demographic they're trying to target here is Gen Z, which is all into this thing called immersive experiences, where you take on a persona and you play with other people in your persona. So this is the immersive ad space. Now, that's paradoxical because if you're immersed in your persona, are you going to step out of that persona and remove the veil of illusion to watch an ad and then continue playing? Ron Gross: Perhaps. Asit Sharma: But I can tell you what, the teenage mind is really good at this, going from fantasy to reality, back to fantasy. So I get that. I also get the stats that Roblox released in the test they've done of these 32nd full screen video ads run a completion rate of over 80% with some experiences seeing a 90% completion rate, which means the kids are sticking through. This is a really great way to tap into that programmatic style advertising space and really get into that gear that Roblox has, for a long time, been predicting it could hit. Ron Gross: On Tuesday, fintech company nCino's shares got absolutely smacked after reported weak fourth quarter results and issued guidance for the current year that fell short of Wall Street's expectations. Jason, the shares were down more than 30%. Was it really that bad of a quarter? Jason Moser: No. I mean, it was a heavy reaction for sure, but I thought these were pretty encouraging results. The company hit their targets on everything, save one item, which was non GAAP earnings per share. That was just essentially due to currency impacts, but as always, investing is about the future, and the market wanted more than the guidance and leadership provided for the coming year. As a reminder, nCino is a SAS company that provides cloud based software to financial institutions in the US and internationally. I'm talking to customers like Bank of America, Barclay, Santander, TD Bank. But revenue for the quarter up 14% from a year ago, subscription revenue up 16% from a year ago, and I thought these metrics were really impressive; these customer metrics. They ended fiscal 2025 with 549 customers that contributed greater than $100,000 to subscription revenues for the year. That was up 10% from a year ago. Of those, 105 contributed more than $1 million. That was up 22% from a year ago, and 14 contributed more than $5 million to subscription revenues. That was up 27% from a year ago. So these guys are growing. Again, it was just about the guidance. It's not profitable on a GAAP basis. While they're technically cash flow positive, if you account for stock based compensation, it's not. So expect volatility with this one, but it does seem like a good business that's doing a lot of good things. Ron Gross: I haven't looked at valuation, but I'm guessing it was priced somewhat to perfection, and that's why people head for the hills when they didn't get the future guidance that they needed. Jason Moser: I think that's safe to say, yeah. Ron Gross: On Monday, OpenAI announced that it had raised up to $40 billion in new funding from investors led by Softbank Group, valuing the ChatGPT maker at $300 billion. Asit, OpenAI is not getting all of this money up front. It's got some work to do, yeah? Asit Sharma: Yeah. So they're going to receive $10 billion upfront from Softbank and its syndicate partners. But look, OpenAI, if you want this next $30 billion, you got to get out of this non profit business, not for profit business. What this means is OpenAI has been saying for a while that it's going to convert to for profit status. So basically, the deal is, look, go ahead and complete that by the end of the year, and you'll get the rest of your money because who wants to throw tens of billions around for a nonprofit to keep growing and making money? Ron Gross: Am I right that Elon Musk has been very vocal about that he does not want that to happen in terms of turning into a for profit? Asit Sharma: Yeah. So there's some back history here. Elon Musk was an original investor in OpenAI and famously parted ways with Sam Altman. So he's been doing everything he can to detract from their success, not just with his words, but, of course, he's invested tens of billions of dollars of money he's raised into his own AI platform, the now well known Grok feature. ChatGPT keeps on just trudging along and honestly, some days are really great versus some days that are bad. A really great day, I'll just quickly say here was just a few days ago with a release of this viral feature that let users on the free version make, like, studio Ghibli type images. They added as many users in an hour as they did in their first several weeks, if you remember when they went viral in 2023. Another day at the office in some ways for Sam Altman. Ron Gross: Just yesterday, ChatGPT helped me relandscape in my backyard. I now know more about blue star junipers than I ever thought I would know, but it was actually fantastic. Jason Moser: Well, we use these tools all the time on the team, and what I'm finding is there's a lot of parody there. They all work pretty well. Ron, what's your AI interface of choice? Are you chat GPT guy? Are you a Gemini guy or Grok? Ron Gross: I have Gemini on my phone where you can keep it on live and have conversations back and forth with it. If I'm on my computer and I'm typing, then I'm a ChatGPT guy. Jason Moser: What about you, Asit? Asit Sharma: Claude's my friend. Jason Moser: Claude. Asit Sharma: I use a few of them, but I think Claude is my favorite. Ron Gross: Sounds good. On Wednesday, Tesla reported that its first quarter sales fell 13% to the weakest in nearly three years, hurt by a backlash against CEO Elon Musk's politics, increasing global competition, and people waiting for a refresh to its highest selling electric vehicle model Y. Jason, Tesla's stock price has basically been cut in half since the end of 2024, and one analyst actually called this a fork in the road moment for Tesla. Where do you think Tesla goes from here? Jason Moser: I think that depends on exactly where Musk goes from here, but those numbers were not encouraging. I mean, investors were expecting Tesla to report deliveries around 365,000 at the midpoint, coming in at 336,681, and certainly questions about the competitive landscape going forward. Now, there were some partial factory shutdowns as the company upgrades its production lines to get that new model Y going, so that will take a little time. But I think there's this news that Musk may be moving away from DOGE here soon and focusing more on his companies again. Honestly, I think that's the right call. The question is, is it too late? His big political presence has made his bed, so to speak, and he's laid his cards on the table there. The question is, is that a permanent loss of capital, so to speak? I don't know. Time will tell there. It's clearly become a far more competitive market, so that's one question. But the other, I think, is just in regard to the reputational risk and what impact that'll ultimately have. I think they can get by it, but we may need a pack a lunch because I think it's going to take a little while. Asit Sharma: Musk has been very vocal that the attention that he's been putting toward government work has hurt the company, has hurt the stock, and I think investors would most likely agree with that. Ron Gross: No question. Ron Gross: Fools, we'll see you a little bit later in the show. Up next, a conversation with Charles Schwab's chief investment strategist Liz Ann Sonders on some lessons from past market corrections that can help investors with this one. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Ron Gross. Liz Ann Sonders is the chief investment strategist at Charles Schwab. The Motley Fool's chief investment officer, Andy Cross, caught up with Liz Ann for the Fool's market volatility summit. They break down why markets were surprised by the Liberation Day tariff announcements and how she is guiding clients right now. Motley Fool members can access the full interview and replays from the event at Andy Cross: Liz Ann, we're so fortunate to have you today. Thank you for being here. I know you've been all over the place talking about these, and it's just a real pleasure to have you. We got to start with what you're seeing today in the markets as a reaction to the scope of that tariff policy. How are you interpreting what we saw, and what guidance are you giving to investors who are trying to navigate all this news in the market when they look out the next few years? Liz Ann Sonders: Well, there were a lot of scenarios that were laid out in advance of yesterday's announcement, usually characterized as base case, best case, worst case. I would say the base case was something more along the lines of some blanket tariff at maybe some percent. It was still lofty but could be navigated around. The worst case scenario was some sort of reciprocal tariff structure, plus maybe against bats. What was announced is well beyond any worst case scenario that I saw laid out, especially given what has caused a lot of consternation over the last less than 24 hours, which is the math behind the numbers, the percentages that were declared, and that being just an import-export relationship, not about trade barriers, not about tariffs. Now everybody is doing the digestion of, OK, this is massive. What is the hit to the US economy? What is the hit to the global economy in a backdrop where we were already seeing pre-Liberation Day weakness showing up, not just in the soft economic data, but the hard economic data. Recession probabilities have gone up. Then the other, I think, takeaway is even though you saw a big jump in probabilities that the Fed might have the ammunition to move back to easing mode, maybe as soon as the May meeting, it begs the question, well, how does that type of stimulus actually help under these tariff set of circumstances? I'm not sure anybody has a good answer for that. There's a lot that's going on into the market action today, but clearly it's ugly. Andy Cross: On a scale of 1-100, one being, we were completely shocked and surprised by what came out yesterday from the White House, and 100 like, no, we added 100%. We got everything right. Where do you think the investing analysts in the investing world is? How surprised were we with what came out yesterday? Liz Ann Sonders: I got to think maximum of 10 out of 100. I think it was a huge surprise. I didn't see any prognosticator lay out this scenario. Andy Cross: Do you do you think is there something that the market is missing? How right do you think the market has this right now when you think about the stocks today? Liz Ann Sonders: I don't know that the market is missing anything. When you think about corrections that have happened throughout the course of history, and we clearly already had a correction, and now we're making that more significant courtesy of the action today. You look at those historical corrections that have bottomed out within that correction territory and then recovered versus corrections that morph into bear markets. Every cycle is different. Every correction is different in terms of its drivers and what might be the differentiator. But if there's one clear differentiator of corrections that stay just that or corrections that morph into bear markets, it's recession. As a result of a pretty big acceleration in recession probabilities, that develops a weakness in the market and elevates concern rightly so for this morphing into a bear market, not just a correction. I think that the correction as it stood, probably did have priced in what might be deemed the best base case scenario that existed prior to four o'clock yesterday. I think even at this point we're not quite at it's discounting most of the negative implications of what was announced. Now we're just dealing with digesting the actual announcement. The hard work now comes in figuring out just how much damage this is going to do to the US economy and or the global economy. Andy Cross: Liz Ann, how do you think about guiding and talking to clients today or to our listeners or viewers of this? As we're thinking we're long term investors at the Fool, we're trying to look out three, five years plus, and now we're digesting this news of the stock prices today and trying to figure out, how do we take this information into it to make decisions? Liz Ann Sonders: Well, when you're thinking right in the moment on a day like today, what do I do right now, maybe the best piece of advice is a reminder that panic is not an investing strategy. I think maybe the type of advice that we always give and certainly have been giving over the past year or so, things like don't have all your eggs in one basket, whether that was all US equity exposure versus not having any international exposure or letting your Magnificent Seven exposure get to a point where you had as big a concentration problem as the S&P 500 did, or just staying all in on tech and tech adjacent. It's our perpetual reminders. This is not me saying, hey, we were telling you that this was going to happen. It's just those tried and true disciplines, including rebalancing and trimming when you have profits, and when asset classes get outsized as a weight in your portfolio, driven by excessive outperformance relative to other components of the asset classes. It's those types of moves that help investors ride through a difficult period. What specifically we have been saying, particularly as we came into this year, anticipating that we were going to see an increase in volatility, that we had policy related risk ahead of us was to not only continue to stay factor focused, as you know, Andy, we've been very factor focused, so invest based on characteristics. But we didn't shift our attention away from a quality wrapper around factors, strength of balance sheet and stability and profit margins and high interest coverage, those traditional quality-based factors. But really you may want to consider adding factors like low volatility. In a backdrop that we anticipated would likely be a bit more volatile. That's the way we have suggested investors navigate within the swirl of the US equity asset class, but also reminding investors why it is beneficial to have diversification outside of just US equities. I often say, sometimes we learn the hard way that there's a peril to not going through those disciplines, especially around rebalancing, is rebalancing forces us to do a version of what we know we're supposed to do, which is not so much buy low sell high. That sometimes sends a message of get in, get out, which is not an investing strategy, but add low trim high. It just makes the ride a bit smoother. But we sometimes forget about those disciplines when we're riding high on certain asset classes or segments of the market that are doing well. Andy Cross: We need to have some of our spinach to go along with that chocolate mousse that we've all enjoyed. As you mentioned, international exposure, too, because International has really lagged the US over the last I don't know how many years. Liz Ann Sonders: Quite a few years, but you do tend to go in multiyear cycles of either US outperformance or international outperformance. They have secular cycles. We were saying last year, be mindful of not keeping all your eggs in the US basket. There were signs that we could see a shift underway. My colleague, Jeff Kleintop talks about that because that's his bailiwick, the international side of things. We don't know for sure whether this is truly the beginning of a secular cycle in favor of non-US, but it certainly was a support for a reminder of the benefits of international diversification. Andy Cross: Liz Ann, just one more question on the tariffs, then we'll get to some more general topics. But when you look at the tariffs and you think about all the factors that are going into that, do you have any key questions that you're asking yourself or thinking about the markets today that we can all learn from? Liz Ann Sonders: Yes. I guess, there's been a lot of focus on the math behind what was announced yesterday, not all of it in a positive way given that we're not really talking about reciprocal tariffs here. The math was basically comparing what the United States exports with a country to what the United States imports from that country. Here's an example. I think the highest tariff rate as it was defined on that table was against Cambodia. Goods being imported from Cambodia to the United States. I think their biggest export is something in the textiles and garment area. Well, Cambodia is a pretty poor country. They have about $7,000 per capita GDP compared to, I think, $85,000 for the US. Part of the reason why they export more to us in dollar terms than we export to them is because they're an incredibly poor country. They can't afford what we have to export, services, innovation, technology, but their ability to build an export market in things like textiles has helped their economy and given something for their workers to have in terms of the ability to earn wages. The real question associated with that is not so much why do you want to punish a country like that. But the question is more when you talk about what concessions the United States might want from these countries on which there's been a high tariff applied to their exports, is how do you negotiate there? What is a concession that a Cambodia or a Sri Lanka or a Madagascar or a Bangladesh or even a Vietnam can offer in order to bring those tariffs down? That's where I think the question should start to get geared toward, but so far, you're only seeing that on the periphery. Andy Cross: When you think about all of the experiences you've had as the chief investment strategist at Schwab for almost 25 years and many more years in the industry, too, you've been through certainly bear markets and pullbacks before. What is driving this one is different than all the rest, but there are things that might rhyme with it or learnings that individual investors can take away. What are you hearkening back to from your experiences? Liz Ann Sonders: Andy you're right. Every bear market, every recession, every crisis has different characteristics associated with it. What we're at least not facing right now is some financial system crisis or certainly not a policy era of the monetary variety, which can often be a precursor to problems, and sometimes they're related in terms of when you get a crisis within the financial system. This is a policy choice that has significant economic dislocations. I think what makes this a unique environment is that given the increased probability of recession happing sooner rather than later, that would generally mean you unleash looser monetary policy on the part of the Fed. They probably will do that if the deterioration in the economy, particularly the labor market is significant enough, but that also means they would be potentially fighting against the other part of their dual mandate, which is the inflation side, which this tariff policy has implications for that. It does put the Fed in a somewhat unique position in trying to battle stagflationary type backdrop with traditional monetary policy tools. I also think that there are maybe some memories of the 2000, 2001, 2002 period that should be thought about in the context of what we're experiencing today because in 2000 at the peak in the market, at that time, households exposure to equities was at an all time high. The 2001 recession that ultimately happened, I think, wouldn't have happened were it not for the bear market and stocks. We didn't have a lot of economic dislocations. We didn't have a financial system crisis. We had a serious wealth effect crisis by virtue of the bear market and stocks, and I think that needs to be considered today, too, because we have an even higher share of exposure to equities by households, an all time record high. At every income level over the last several years, you've seen an increase in exposure to equities, whether it's through direct holdings or 401Ks or pension plans, whatever that exposure looks like. I think the tentacle from market performance to economic performance is a bit tighter than we've seen in the past, save for maybe that 2000-2001 period. Ron Gross: Coming up after the break, Jason Moser and Asit Sharma return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest 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. Welcome back to Motley Fool Money, Ron Gross here with Jason Moser and Asit Sharma. Fools, we've got time for one quick story before we hit stocks on our radar. Subway is adding nachos to its menu, but with an unusual twist. The chain is partnering with Doritos to sell foot long nachos for five dollars. The new dish is freshly prepared using nacho cheese flavored Doritos, cheddar cheese, jalapeno slices, diced tomatoes, red onions, drizzled with chipotle sauce. You can get a scoop of chicken or steak for no extra charge or a scoop of avocado for an additional cost. Jason, are you in? Jason Moser: Ron, I absolutely tip my cap to Subway for experimenting and trying new things. That's what this is all about, and I love the fact that they're leveraging materials that they've already get there. A million bags of Doritos in those stores anywhere you go. I have one little hold up here, something I've got to nitpick about. How in the world are you using cheddar cheese on these things? That just sounds absurd. It just sounds like you don't know what you're doing. It just doesn't melt good. It's queso or bust in my eyes. Ron Gross: Asit? Asit Sharma: Kids, I know times are hard, and this comfort food looks good, but look, buy yourself a party bag size of Doritos. Take it home, [LAUGHTER] get you some cheese whiz if we're going to go cheddar here, get a generous handful, throw it in a bowl. Do all this stuff at home. You'll save a lot of money and, frankly, a lot of time. Ron Gross: Dan, can I entice you into trying this? Dan Boyd: No, Subway is terrible. I will not go. Ron Gross: Well, there you have it. Time for stocks on our radar. With a couple minutes left, I'll bring in our man, Dan Boyd, to ask a question and pick his favorite. Asit, you're up first. What have you got? Asit Sharma: Speaking of food, let's talk about DoorDash, symbol D-A-S-H. This company may seem like not a great stock to have on your radar as consumers start pulling back on those discretionary spins, but hear me out, this is a free cash flow monster. Generated two billion dollars of free cash flow in the last 12 months. It has a stellar balance sheet with about three billion dollars of working capital, no long term debt. Better yet, DoorDash is proving itself out. I think Uber Eats has been losing a little bit of ground, and so with this expansion into retail deliveries, DoorDash is looking good. Lastly, just inked a deal with Domino's of all chains to bring pizzas to your door. Ron Gross: Dan, you got a question about DoorDash? Dan Boyd: No, but I do have a comment. All I want to say is never underestimate the laziness of the American consumer. [LAUGHTER] Ron Gross: I love that. Jason, what are you looking at? Jason Moser: Sure. Taking a look at Pure Storage. Ticker is P-S-T-G. Pure Storage might fly under the radar of many investors, but I'm actually very excited about its data storage opportunity because that's what they do, Ron. They're in data storage. The value proposition is pretty simple. Data centers consume a lot power. But Pure Storage has an all-flash alternative to the traditional data storage methods and like the hard disk drives and whatnot, that ultimately helps lower data centers power consumption. Therefore, the total cost of ownership, not to mention positive environmental impacts. It's profitable. It's cash flow positive. They've got a healthy balance sheet. Ron, the stock just hit. Surprise, surprise. It's 52-week low this week. It's starting to get on my radar there. It's one that several of our analysts here at the Fool like a lot. It's one that I'm continuing to keep an eye on. Then, question or comment. Dan Boyd: Not going to lie. I thought when you brought this to the radar here, Jason, I thought it was going to be a physical storage company. Like you see on the side of the road and everything, and I got excited because I understand that business. But then I read a little bit more, and it's Data Centers, and I'm like, what? Ron Gross: Jason count me as one of the fans of this business. Jason Moser: Data matters, Dan. Data Matters. Ron Gross: Dan, what are you going to put on your watch list? We got Pure Storage and DoorDash. Dan Boyd: I'm not putting DoorDash on because I have integrity. I do not use DoorDash, so we're going to go Pure Storage. Ron Gross: Thanks, Fools for being here. That's going to do it for this week's Motley Fool Money. Our engineer is Dan Boyd. I am Ron Gross. Thanks for listening. Charles Schwab is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Andy Cross has positions in Charles Schwab, Roblox, and Tesla. Asit Sharma has positions in Roblox. Dan Boyd has no position in any of the stocks mentioned. Jason Moser has positions in Nike, Under Armour, and Wayfair. Ron Gross has positions in Charles Schwab and Nike. The Motley Fool has positions in and recommends Bank of America, DoorDash, Nike, Pure Storage, Roblox, Tesla, and nCino. The Motley Fool recommends Barclays Plc, Charles Schwab, RH, Under Armour, and Wayfair and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy. Earnings, Acquisitions, Partnerships, Tariffs... A Lot for Investors to Think About was originally published by The Motley Fool
Yahoo
25-03-2025
- Business
- Yahoo
Market Movers: Jerome Powell and Jensen Huang
In this podcast, Motley Fool host Dylan Lewis and analysts Asit Sharma and Jason Moser discuss: Fed Chair Jerome Powell's rate outlook. What Nvidia CEO Jensen Huang sees coming down the pike for Nvidia chips and quantum computing. What Tesla investors need to know about the headlines around recent accounting concerns. Earnings updates and market reactions for FedEx, Nike, and Accenture. Two stocks worth watching: BYD and Williams Sonoma. Joe Cutillo, CEO of Sterling Infrastructure, talks Motley Fool CEO Tom Gardner through his company's work on infrastructure projects, how the tariff picture figures into its outlook, and how to invest like a CEO. 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 Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $744,133!* Now, it's worth noting Stock Advisor's total average return is 859% — a market-crushing outperformance compared to 167% 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 March 24, 2025 This video was recorded on March 21, 2025 Dylan Lewis: We're parsing the words of Jerome Powell and Jensen Huang. This week's Motley Fool Money radio show starts now. From Fool Global headquarters. This is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool senior analysts Jason Moser and Asit Sharma. Fools, wonderful to have you both here. Jason Moser: Howdy. Asit Sharma: Hey, Dylan. Dylan Lewis: We've got the latest and greatest in AI from Nvidia, how a company focused on infrastructure projects is thinking about the tariff impact and, of course, the stocks on your radar this week. We're going to pick up Talking Fed, though. Jerome Powell and company got together to take a look at the economy that gave us thoughts on rates, economic outlook, inflation. Jason. Where were you paying attention? Jason Moser: It's only March, but it sure feels like we've gotten a year's worth of volatility in the markets already. Certainly could be worse, S&P down around 3% so far this year, and that really is impressive. But you consider all of the magnificent seven stocks, save one are underperforming the market to date here. I just think that's an interesting perspective there on the markets, which leads us to then exactly how the fed is viewing things and they didn't exactly paint the rosiest picture. There are concerns of slowing growth and unemployment and stubborn prices, those concerns remain. Hear that the word stagflation being bandied about a little bit. But it is a very headline driven market. Things are seemingly changing by the hour. I think it was noteworthy I saw an interview with the Chicago Federal Reserve President, Austan Goolsbee, who said that he still sees interest rate cuts coming, but there are rising risks to that. In the market right now, we've been hearing the Feds laying out this plan of two rate cuts this year. Now, there are other thoughts out there that we might see even more, three, perhaps. But generally speaking, the idea is that in the next 12-18 months, we should see rates coming down from where they are today. It just all depends on how all of this tariff stuff plays out ultimately and how things impact the economy. But there's no doubt there is a lot of uncertainty out there, a lot of trepidation. Businesses they're cutting back spending. They're holding off on big decisions, and that is having some ripple effects. Dylan Lewis: It seems like there's a bit of wait and see all around. Consumers, businesses, the fed saying we are going to hold steady this round. We aren't going to make any changes. One thing that did jump out to me, Asit, I want to get your take on Jerome Powell saying, "We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet. The economy seems to be pretty healthy. What do you think of that? Asit Sharma: I think it's a tough place for Jerome Powell and the Fed to be in because they still see an economy which is growing. They've clipped their internal estimates, I think, to around 1.7%. That's down from, if you heard two percentage points of growth or more. The economy is slowing. They see that, but it's not like it's coming to a standstill and this is where you get into a hard spot if you're making the decision because inflation is still persistent, so you have to be careful, which brings into question. What Jason is pointing out here, if the fed is going to have three quarters of a percentage point of cuts this year, they better get busy. Because the fed likes to do quarter percentage increments, if they can. That means the next three quarters, they have to deliver what we might see as Jason was alluding to something in between where, maybe it's three quarters of a percentage point, or it's just half a percentage point because they're in this limbo. My bets are on the last two quarters of the year. We see a quarter percentage point cut each. But I'm glad that I have this day job and not Jerome Powell. Dylan Lewis: I think we're all happy that we're doing what we're doing, and we're not sitting in that fed chair seat. Folks love to micro analyze the comments from Fed Chair Powell. Same goes for Nvidia CEO Jensen Huang. He is like the fed chair of AI, [LAUGHTER] if I may. He took the stage this week at Nvidia's GTC conference to talk about the company's chip offerings, what's coming up on their roadmap. Jason also gave a little bit of a Mea Culpa on some quantum computing comments that he made earlier this year. Jason Moser: It seems like the Nvidia events are supplanting Apple. Now it's all about the Nvidia event and they used to do this once every two years. Now I think they're going to be going just on an annual cadence, which I think that makes a lot of sense. Nvidia is turning into this iPhone cycle, only a little bit more accelerated, isn't it? We're waiting each quarter and each year for them to reveal their next iteration in their GPUs and AI technology. This event really brought a lot to the table. Some was expected. I think there were some new things we learned, which was interesting. Robotics was a key theme of the event there. They had demonstrations and announcements related to their AI powered robotics platforms that ultimately is just working to bring AI, ultimately, into the physical world more. I thought really, we knew about Blackwell Ultra. That wasn't terribly new news. But there was some interesting information they gave us on what's to be released here in the back half of 2026. It's the Vera Rubin system. This ultimately has two main components. It's a CPU called Vera, and then a new GPU design called Rubin. In fun fact here, it's named after American astronomer Vera Rubin. But this is Nvidia's first custom CPU design. It's based on a core design they've named Olympus. Ultimately, this is going to be something the Vera design is going to be twice as fast as the CPU that was used in last year's Blackwell chips. Like I said, they expect to start shipping these in the second half of 2026. It's going to be fun to continue following Nvidia because they do have to keep that hamster wheel of innovation going. They always have to come out with something new, and that's impressive because it seems like they can do it. The risk is, with these types of companies, what happens if that innovation stalls or what happens when we hit peak AI, and we're getting the most value out of it, and we have to wait for the next revolution there. But for now, it sure seems like Nvidia is continuing to bring the goods. Dylan Lewis: Asit, what caught your attention from the event? Asit Sharma: I think this cadence that Jason mentioned was fun to look at. That is one thing everyone was expecting to see the next generations announced. I'll just point out in addition to what Jason said that Vera Rubin and its successor, the Vera and Rubin and Ultra, both are taking a step up in the type of complex memory that's used. They're going from what's called an HBM3 standard to an HBM4 standard. Which means that you can have much more computation on those chip GPU complexes. That was interesting. They talked about expanding the communication between GPUs. This is called NVLink scaling, how that is ramping up. It's going to double from the previous generation of Blackwell to this new Vera Rubin generation. Getting us out of the technical details, though for a second, I think the quantum stuff was interesting, as you point out, Dylan you asked about, I am very interested in the quantum space. The Mea Culpa was nice to see because Jensen Huang's company in Nvidia stands to make money if they can marry up artificial intelligence compute with quantum. There's some problems in this whole quantum race that will probably be solved or better solved using AI. Of course, Nvidia wants to be there. Now he has to talk it up and pull the timescale back a bit from his previous comments that it would be 15-20 years away. We got to see a fun quantum day type symposium on Thursday. Looking forward to more quantum focused efforts from Nvidia in the future because they got to take that revenue when it's available. Dylan Lewis: Another week, another Tesla headline. The Financial Times out with a piece this week detailing some accounting curiosities with Tesla's books noting that $1.4 billion seems to be missing. Asit, you are our resident CPA. Can you dust off your accounting books and wade through this one? There are no shortage of risks and maybe things weighing on Tesla's shareholders' minds. Where does this one rank for you? Asit Sharma: I think for me, this is just one of different risk items that you want to look at if you're a Tesla shareholder. It's not necessarily a huge deal. I know it sounds salacious out there in the press, and I've had some fun as an armchair quarterback, trying to figure out what might be going on. The basic issue is that Tesla had some capital expenditures, but the corresponding amount isn't showing up as new fixed assets on its books. I've thought through some scenarios where look, this could be just a misclassification of how they're accounting for stuff can be fixed. When you look at the big picture for Tesla, I think that's much more the concern here for most shareholders, which has to do with the resale value of Tesla's plummeting. We're hearing stories of panels falling off of cyber trucks. Of course, all the issues that are associated with Elon Musk's association with government policy, how that might be affecting the company and his statements. Now, I will say, look, the counter to that is last night, Elon had town hall with the troops and said, The future is still bright. From my perspective, we're going forward with the robotaxis with autonomous driving, so hang in there. If you're Tessa shareholder and you believe that long term thesis, that probably was reassuring to you. Dylan Lewis: Coming up after the break, we've got fresh results from Nike, FedEx and Accenture. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money I'm Dylan Lewis. Here on air with Asit Sharma and Jason Moser, and we're back on the earnings beat. Shares of FedEx down almost 10% following their earnings release this week. Asit feels like some of the tariff news swirling into a little bit of a rough outlook for this company. Asit Sharma: I think that's exactly what it is, Dylan. FedEx reported earnings that were OK on the surface. Revenue was flattish at 22 billion. Operating income looked a lot like the previous year quarter at about $1.3 billion, and operating margin was a little bit lower by about a percentage point versus the prior year. Just looking at their headline numbers and their press release, nothing too much shifted there, but the outlook is uncertain, and it disappointed at Wall Street. Revenue is going to be flat to slightly down this year. Diluted earnings per share of around 15.15 or 15 bucks and 15 cents to a top of the range of close to 16 bucks. That was disappointing to Wall Street. I think overarching this is just the fear that between tariffs, as you alluded to, which could really hurt FedEx, the potential that we could go into recession, which is never good for FedEx volumes and some uncertainty around this de minimis exemption, which could go away. I'm referring, of course, to the ability for shippers like Chan and Temu in China to export stuff to the US and not have to pay import duties if those shipments go directly to consumers and are under 800 bucks. Those small shipments, if those go away without the exemption, that could be a further hit on this business. I think FedEx is getting a trifecta of uncertainty from investors, and honestly, it probably deserves a little bit of multiple rerating. That is, maybe we pay a little bit less for future earnings because of all this uncertainty. Dylan Lewis: In addition to the earnings release, there was also an analyst downgrade out this week. There was a note out from Loop Capital Analyst, Rick Patterson, and he summed all that up by saying,"It is a really bad recession stock." Asit. lain and simple. When shipment volumes go down, when economic outlook and fewer packages are going out there, it is just going to bite FedEx. It's inevitable. Asit Sharma: Let me put it this way. It's a really good recession stock if you don't own it. If you go into a recession, that might be the time to buy and hang on for a few years. He's not overly wrong there. Dylan Lewis: Maybe a similar story with Nike. Shares also in the red this week down about 6% after the company reported another period of sales decline. We have been wondering, Jason, when is Nike going to turn it around? It seems like the answer is not quite yet. Jason Moser: I was just going to say, let the turnaround begin, Dylan, that's what we're hoping for here. The numbers certainly were not impressive. I will say they are better than the leadership guided for a quarter ago. That's always nice to see. It makes you wonder if this isn't a leadership team that maybe kind of sandbags. I guess we'll have to wait and see. But revenue of $11.3 billion, it was down 9% from a year ago, earnings per share of 54 cents down from 77 cents from a year ago. Gross margin fell 330 basis points. That was within the range that leadership guided for 300-350 basis points there. Wholesale revenues a big point of friction for the company. Those were down 9%. If you look at just the important segments, geographically speaking, North America was down 4%, China was down 15%. They did certainly talk to the concerns of tariffs and items goods that they have to import from places like Mexico and China. I think the market probably is a little bit more down on the guidance. They did guide for this Quarter 4 revenue to be down in the mid teens range. Again, we go back to maybe this is a sandbagging leadership. I don't know, but we will find out the next quarter when they announce, but I think that we will see margins continue to be challenged, 400-500 basis point dip they're talking about this coming quarter. Again, the tariff concerns will continue. I think look, Elliott Hill, who is the new CEO here for this company, he has his work cut out for him and investors are going to need to give him some time to execute. I'm an IQ shareholder. I'm perfectly happy to give him the time to do that. Shares, still I feel like there's a pretty attractive valuation here for such a powerful global brand. Somewhere in that neighborhood of 20-21 times earnings right now for a company that has historically garnered a more premium multiple and you get a nice dividend to sit there and be patient, I don't have a problem with hanging in there and seeing how Elliott does. Dylan Lewis: Management's playing an interesting expectations game here because for the results being what they were, they also sign posted for this upcoming quarter. Their fiscal fourth quarter, is going to reflect the largest impact from a lot of their actions. They are basically saying, there are going to be headwinds that are out of our control. There's a lot of stuff that we still need to do just to get ourselves right with inventory that's going to flow through and affect our business for a while. For people that are interested, Jason, is this one where maybe it makes sense to build out a position over time. There might be a little bit of pain ahead, but working into that position, dollar-cost averaging a bit. Jason Moser: I think that's always a very reasonable way to look at it. I think with Nike, probably because it's such a big, large, established company and brand, you may not necessarily see these big moves one way or the other. Ultimately, the shares are down about 5% on this earnings report, which, again, wasn't that great. But building out a position in a company like this absolutely is a good way to go because you're. They've got boots on the ground, and they're working to re establish these wholesale relationships, but that's going to take some time, as well. We may see some more pain ahead. I think this next quarter is going to be very telling. Dylan Lewis: I didn't intend for this earnings rundown to be all red, all downers, [LAUGHTER] but here we are wrapping us up Accenture joining Nike and FedEx down today. Company reported results, markets seem to zoom in on their government business. Asit, they're one of the first companies that we've been able to get a glimpse at the government efficiency efforts and how that might flow through to private companies. Asit Sharma: This is the hold my beer for the other two earnings stories, Dylan, you think tariffs are bad? We have a company here which actually has such great depth in consulting. It is the world's largest consulting concern, and so surprising that for all the uncertainty we've heard about, the effects not being quantifiable yet for tariffs, on the other side, this government cost cutting initiative, it's quick and it's quantifiable for Accenture. They had a very decent quarter net bookings. That's a decrease in US dollar terms, but flattish, if you take out currency fluctuations. Their generative AI business. They had new bookings of 1.4 billion. That's small in comparison to revenues, which were almost 17 billion this quarter, but it shows the growth of that business. On the other side, CEO Julie Sweet used the word government like eight times in the transcript, which is not typical and said they said, Look, about 8% of our global revenue and 16% of our America's revenue, in this fiscal year is represented by Accenture Federal Services. When you think about numbers that hit that level of between high single digits and teens, that can be consequential to trim your growth on the margins and that's what we're seeing with this outlook from Accenture. Which is despite the positive parts of their business, if they start getting crimped on what's a very stable and core part of the business, that flattish outlook then starts to look like it could be in jeopardy, and maybe we're faced with a company that for the next several quarters, could be looking at slight declines in revenue and bookings. Dylan Lewis: I have to imagine we'll see echoes of this when we see reports from some of the other consulting businesses that have government contracts. Anywhere else with that government story that you're paying attention to? Any other industries? Asit Sharma: It's funny because if you look at where a lot of the opportunity for cybersecurity companies, the best of the breed lies, it's with something called FedRAMP, which is getting your authorizations to do a lot of business with the federal government because your stuff is so secure. I think we might see some headwinds there. Dylan Lewis: Asit, Jason, fellas, we're going to see you guys a little bit later in the show. Up next, our investing team talks tariff impacts with a company that specializes in the prep and buildout for major infrastructure projects. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. We like to dig into the weeds here at TMF. Getting into the details and the major themes affecting the companies that we follow. Last week, Motley Fool CEO Tom Gardner and CIO Andy Cross chatted with Joe Cutillo. He's the CEO of Sterling Infrastructure, and they're a firm focused on the preparation for major infrastructure projects. Together, they talk through the business, how the macro picture factors into the company's outlook and the idea of investing like the CEO of a company. Andy Cross: Tom Gardner: The opening question is, how would you describe the business to a newcomer, somebody who's never heard of Sterling Infrastructure before. Obviously, a lot of our viewers today are shareholders, but there are certainly some people in the audience that have never heard of the company before, and now they get an opportunity to hear it from you. Joe Cutillo: We're an infrastructure service provider that focuses in three different segments. Our Eva structure segment is our largest. In that segment, what we do is site selection, site development for mission critical type applications, predominantly, which could be data centers, onshoring and manufacturing. We've done a lot of battery plants, solar plants. You name it if it's big and needs a lot of dirt moved and infrastructure put in. We do that particular type of project. That market is growing tremendously for us. We see a very strong multi year trend ahead of us, not only with the backlog that we have in place, but the projects we see on the drawing boards and what our customers are telling us. The second segment that we have is around transportation solutions. This is where the company started back when I joined in 2015. About 95% of our business was in low bid, heavy highway work. That's a very difficult business, very high risk, very low reward. But as you talk about the transformation, today, less than 10% of our business is in low bid heavy highway work. That's why you've seen the margin migration up significantly over the history of that time. We focus set business more on value added type projects in the transportation space, whether that's design build or alternative delivery projects, where instead of just being low cost, we have a value proposition to the end customer at the end of the day that we can design and build the project better and faster in a lot of cases, not necessarily cheaper for the end customer. Also, we've migrated toward aviation and rail. We'll do runways, taxiways, those activities. Then on the rail side, we have what we call a rapid bridge replacement and some technologies and uses that we can pre-build products, and instead of taking months to replace a damaged bridge or a defunct bridge, we can do that in weeks. As you can imagine, if you're a railroad, they know exactly what an hour of downtime is or a day of downtime that has a high-value proposition for them. Our last segment is in building solutions, and we're in the three fastest-growing, largest markets in the US, which is Dallas, Fort Worth, Houston, and Phoenix. There it's a little different business from the rest in that we do concrete slabs and plumbing for the major builders. Pulte, Lennar, Horton, are three of our largest customers. We've seen very nice growth in that market over time. If you put that all together, we've built a portfolio of these three segments over the last six or seven years. That's really the beginning point of where we're going in the future. Everybody asks us, you've done such a great job of transforming the business and going from low single digit margins to we have the best margins, the best cash flow, the best returns of anybody in the specialty infrastructure space to where do you go now? This is just the beginning, and that's what's really exciting, what we cannot only add to the three segments that we have today, but we're looking for that fourth leg of the school that has 10-20 years of growth attached to it, as well. Tom Gardner: One of the pieces of guidance I give to our members in investing is try to align your time arises as investor with the time rise and to the CEO of that company. There are a lot of rapid turnover companies. There are low quality companies everywhere. There are promotional things, and people take companies public after 18 months, just taking advantage of and getting pushed into public markets by VC or private equity. There are a lot of bad and mediocre scenarios. But if you find a great company, and you should attach your time horizon to the time horizon to that CEO. If you're going to find a great company, that CEO is going to have been at Sterling Infrastructure since 2015, and is going to be talking about, what are the next 10 or 20 years for and thinking about the company in that way, the similar things you'd hear from Jim Sinegal at Costco. Jeff Bezos basically planning 10 years forward at Amazon to the point where they felt that they knew what the earnings report was going to be three years in advance of it at Amazon. I'd love it if you'd speak to our members about going through a period here, short term, where the stock goes 200-120. What you think about, like, obviously, one point on the continuum is, I don't even pay attention. Another is, no, I pay attention, this and that, I get these signals. I'm learning it. But it certainly isn't for a long term CEO a tough moment as to whether or not to stay employed at the business or to continue to stock that you have. Joe Cutillo: Yeah, it's funny. When we took the big dip, I'll tell you, a lot of friends call and say, Are you, going to jump off a bridge or what's going on, man? Like, for the first couple days, I didn't even watch it. My answer to people is this, I'm not looking at $200 a share. My expectations are much higher than $200 a share. When people ask, Are you worried about getting back to two, I say, No, I'm not worried about getting back to two. I'm worried about getting back to where I want to be or getting to where I want to be. Two isn't in my sights. We'll get there. The market will correct. People will realize we continue to deliver the results. I feel we're going to deliver and the markets are going to do what I believe they're going to do based on what we've seen. We'll get back through that. This is a temporary setback. I bought it's public knowledge. I bought $1 million of stock last week, I think it was. If it stays down, I'll probably buy some more at some point in time. We're confident in what we know where the company's going, what the markets are giving us right now. I can just tell you, my sites are much higher than $200 a share. Tom Gardner: What are the impacts now of changing dynamics and regulation, new administration? What are any pluses or minuses for Sterling infrastructure in what seems like a pretty dramatic shift, and, obviously, the tariffs and negotiation and a lot of uncertainty around it. What's the impact on you at least an intermediate-term basis? Joe Cutillo: Well, I think the perception is there's going to be a lot of impacts. The reality is, and I just talked to some of my friends that are CEOs and similar businesses and other spaces. We've also said the same thing. We just went through COVID, where we were seeing 30% increases in inflation on a monthly, quarterly basis something we have never seen before. If you look at the prices that we were paying for materials and COVID and you look at them now today, if the prices went up 10, 15, 20% because of tariffs, we're still nowhere near what we were fighting from the peak of these material costs. This is like kindergarten compared to what we went through. It's not to say we won't see it. It's not to say you can't see a couple months of pain as you get your contracts updated or you get to the new projects. But we managed our way through that pretty well. As a matter of fact, much better than I would have thought the world would have managed through it. The reality is, if our material costs go up, we're going to pass it on in pricing. You have that interim of time in some of these contracts before the next phase starts or the next Peace starts, so you might get caught in it. But a lot of our materials first in our transportation, our steel has to be made in America anyways. It's been made in America has to be made in America, all that stuff. People talk about rebar. Well, we do get it from China, but we can get it from Turkey. There's other places we can get it from. It may not go up 25%. It may go up 3% or 4%. What I always worry more about is availability. We can manage inflation and prices. If you don't have products, that becomes very challenging to get stuff built. We'll get through that. We're all caught a little bit in the tailspin of there's so many things going on, whether it's tariffs or everything else. The market doesn't like uncertainty, and they're trying to figure it out, and sometimes they overthink it, sometimes they underthink it. I just think there's a lot of balls up in the air. We've spent very little time internally worrying about or having to even come up with any planning around the tariff impact on us. Tom Gardner: It's really interesting thinking this in the context of the concept I really love from the writer Nassim Taleb who wrote a book entitled Antifragile. Essentially the concept of Antifragile not to spoil the whole book. It's a wonderful book is at one end of the continuum, you're fragile. You're a vase that holds flowers. If you're dropped on the ground, you break. You have really only one use. It's a limited function, and it's a fragile. It's risky in its environment. You think the opposite of that is resilient, but resilient isn't the opposite of fragile. Resilient would mean you drop it, and it's fine. It bounces back. It's fine. Antifragile is you thrive on volatility. Each time a business goes through the complexity of the pandemic, I also think of the writer Peter Drucker, who said, I basically love to find companies that have gone through some hell because they know once that scare me got born into a beautiful environment, everything was rosy for them, flourishing, and then they get hit for the first time. It's quite interesting to hear your context on this because it's obvious hearing you express it, it's obvious that the pandemic was a much greater challenge than the levels of uncertainty right now. Joe Cutillo: That's what we believe. We actually believe that that if this continues we think there's huge upside for us. All of the whether it's a car manufacturers or pharmaceutical, everything's that's all work for us. We don't care if we're paying $2 a gallon for diesel or $10. The work's still going to get done. Unfortunately, the cost of that project may go up 10%. But we're more worried about that work coming. That's good for us. We're less concerned about the cost of that particular material. Dylan Lewis: Listeners, this interview came from our Daily Fool 24 Livestream. Motley Fool members can access it by going to and you can access it for free daily on YouTube. We'll drop a link down in the show notes for everyone listening to this week's radio show in podcast Feeds. Up next, Jason Moser and Asit Sharma are back with me to talk about the stocks on their radar this week. Stay right here. You're listening to Motley Fool Money. As always, people in the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. All personal finance content follows Motley Fool editorial standards. It's not approved by advertisers. Motley Fool only picks products. It'd personally recommend friends like you. I'm Dylan Lewis, joined again by Asit Sharma and Jason Moser. Jason as we tape, the first round of March Madness is underway. Jason, unfortunately, your beloved Wofford Terriers were in the dance, got bounced by Tennessee in the first round. Did that bust your bracket? Jason Moser: No, it didn't. Listen, it was a 15 versus a two seed. The odds are telling you something there. Look, Wofford 1,800 plus students. It's a tiny little school. Even when I went there in 95, graduated in 95, it's always been basically that size. Going up against Tennessee is like 40,000 students there. It is a really difficult monumental task to be able to pull that one off. But I tell you, I was really proud watching that game, watching the fight in those guys. They had a difficult year with some injuries and some folks that left. They were able to get it to the Southern Conference Tournament, and then they just got on a heater. The best part about this still little secret here. My wife went to Furman. You can imagine the back and forth in this household after that game. We always have fun ribbing each other because Furman is a very good team as well. But I was very proud to see that. Just getting to the tournament was a real success, and it reminded me of how grateful I was to be able to watch them beat Seton Hall in the first round. I think it was six years ago. These are just occasions that don't come around all that often. You got to relish them when you get them. Only one team gets to win their last game of the season. That's exactly right. Just being there's fun. Dylan Lewis: Opposite UNC is up later this afternoon after we tape today. How are you feeling about your tar heels? Asit Sharma: I'm feeling great win or lose. I really like the way this team has come together with a lineup tweak over the last 10 or 11 games. It's a different team on the ground. I love what happened this past week, Dylan. For those of you who don't know, UNC had a very poor record against so called quad 1 teams, which is one of the criteria that feeds up into the selection committees doling out of bids, and we were the last team into the tournament. It was fun to go from a team which, of course, among Blue Bloods, has its detractors, but to go from that, which is generally beloved team on the college landscape to a revival team, the most revival team in the nation. Was refreshing to pick. It sharpened my tribal instincts. I'm like, these are my people. Blame the committee. Don't blame us. Jason Moser: The Gaelic really justified that pick, though, as it. They justified that pick with that playing game. Asit Sharma: Totally, they played a really great play in game. I think Old Miss is a very formidable team, and we have our work cut out for us. I think we're going to squeak by, but I'm happy with whatever happens. You got to finish strong in life. Dylan Lewis: It sounds, Asit like you and UNC both have a little bit of a chip on your shoulder heading into this tournament. Asit Sharma: A man. I wake up in the morning I need a reason to compete. I look at my slacks and I see Jamoi has turned out some great research, and I'm like, I'm on it. I'm on my game this morning. Dylan Lewis: Yeah, competitiveness. It's a core value. Here the Motley Fool. Before we get over to Radar 6, Jason, any investing lessons for people as they're watching the games this weekend? Jason Moser: Well, I referred back to the size of these two schools, 1,800 versus like 40,000, and it just always takes me back to small caps. Small Caps can be really powerful. You just got to be patient with them. Every once in a while, they'll show up for you and they'll really the world on fire. That's what I associate with this one. Wofford small, but, man, they've got a lot of fight, a lot of strength in them, and I see a lot of growth in their future. Dylan Lewis: I can hear one shining moment, just playing in the background there. Asit, what about you? Asit Sharma: Hubert Davis, the coach of UNC, has a great metaphor he uses with his players, which is the blinders that you put on a horse when you're leading it to the race. You take the blinders off. Before the race, right before the race so the horse can just be focused and not be distracted by the outside environment. Sometimes in investing, it really feels like the distractions loom large. The market is down. People are talking down your favorite businesses, and you want to just give up. But those are the great times to just keep the blinders on. What I mean by that is focus on the businesses, not all the noise of the market and share price today. Stay focused on what got you into those businesses in the first place. Their fundamentals and play the game and just be in it for the long term as great teams are. Wofford is a formidable team every year. They have a long term focus, and so does UNC. Dylan Lewis: Very on theme for Asit to say, Ignore the haters. Do what you got to do. [LAUGHTER] Let's get over to stocks on our Radar. Our man behind the glass, Dan Boyd is going to hit you with a question. Asit, you're up first. What are you looking at this week? Asit Sharma: I have BYD and this is an electrical vehicle company started in China. My and Jason's great colleague, Emily Flippen had put this in front of my notice. BYD as many people know as a competitor to Tesla and lots of other great EV companies, they are ingenious in their engineering, and they've learned to build a scale up very cheap car. We don't see it here in the US because of import restrictions. But the company's doing really well financially, and it just came out with the announcement that it can charge an electrical vehicle in five minutes, which could be a possible game changer. I'm looking to learn more about this company, and I think anyone who's interested in the EV landscape, this deserves your attention. Take a look. Dylan Lewis: Dan, a question about BYD, which trades over the counter as BY DDY. Dan Boyd: We talked about how competitiveness is a core value here at The Motley Fool, and is the competitive atmosphere brought to the table by BYD going to sharpen Tesla, or are they just going to continue to eat Tesla's lunch? Asit Sharma: I think it's going to sharpen Tesla's focus, and I think sometimes you need a competitor to pull management back into what they set out to do. If you are a shareholder in Tesla and see Elon must be distracted by other things. This is the recipe for your shares to gain to bring him back into sharp focus on his business as BYD continues to succeed. Dylan Lewis: Jason, what's on your Radar this week? Jason Moser: There pots and pans every night, Dylan on Williams Sonoma, Ticker WSM remember, this is a retailer with a number of popular brands under its umbrella. It's namesake as well with Pottery Barn, West Elm, and others. A longtime Stock Advisor recommendation has done very well for members. If you look at the five year chart on this thing. It's crazy. Total return almost 900%. Just reported a relatively decent quarter. Comps are up 3.1% gross margin of 130 basis points, operating margin expansion as well. Boosted the quarterly dividend 16% to $0.66 per share. The stock sold off on the report, I think, mostly related to guidance. They just see flat sales and again, some tariff concerns potentially hitting margins here in the coming year. Dylan Lewis: Dan, a question about William Sonoma. Ticker, WSM. Dan Boyd: Do you ever buy any of their snacks or candies or anything, Jason, or are you just a pots and pans guy? Jason Moser: Just a pots and pans guy, Dan, pots and pans. Dylan Lewis: Dan, pots and pans or EVs? Which way you going this week? Dan Boyd: I like BYD, but I don't know how to buy them, so I guess by default, it's going to be Williams Sonoma. Jason Moser: I'll take what I can get. Dylan Lewis: That feels like a shallow victory. I don't know about that one. Dan, appreciate you weighing in on the Radar 6 this week. Asit, Jason, appreciate you bringing them to us. That's going to do it for this week's Motley Fool Money Radio show. Shows mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Asit Sharma has positions in Amazon, Nvidia, and Williams-Sonoma. Dan Boyd has positions in Amazon. Dylan Lewis has no position in any of the stocks mentioned. Jason Moser has positions in Amazon, Apple, and Nike. Tom Gardner has positions in Tesla. The Motley Fool has positions in and recommends Accenture Plc, Amazon, Apple, D.R. Horton, FedEx, Lennar, Nike, Nvidia, Sterling Infrastructure, Tesla, and Williams-Sonoma. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy. Market Movers: Jerome Powell and Jensen Huang was originally published by The Motley Fool
