Company Rundown: Chewy, Lululemon, Smucker, and More

In this podcast, Motley Fool host Dylan Lewis and analysts Ron Gross and Andy Cross discuss:

• New jobs report numbers.
• Alphabet's latest AI move bringing Gemini into Bard.
• GameStop's curious corporate investing plan update.
• Chewy's status as the No. 1 pet pharmacy in the U.S.
• Lululemon's business-as-usual quarter.
• Smucker Co. showing it has pricing power in peanut butter.

Journalist and author Bethany McLean talks with Motley Fool host Deidre Woollard about her latest book, The Big Fail, and takes a look at the past three years, how people responded to COVID, and the lasting effects on households, businesses, and the economy.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Dec. 08, 2023.

Dylan Lewis: There's a new name in generative AI, and the consummate tastemaker has a flavor to watch for 2024. Motley Fool Money starts now.

It's the Motley Fool Money radio show. I'm Dylan Lewis. Joining me in the studio, Motley Fool Senior Analysts Andy Cross and Ron Gross. Gentlemen, great to have you both here.

Andy Cross: Hey, Dylan.

Ron Gross: How are you doing, Dylan?

Dylan Lewis: We've got the pandemic's enduring impact on households and companies. Some earnings updates from a couple of Fool favorites and, of course, stocks on our radar, but we are kicking off this week with the Big Macro run. First Friday of the month, that means we got a fresh jobs report. What did you see in the numbers?

Ron Gross: The report was a little stronger than expected, meaning more jobs were created, and the unemployment rate actually ticked down to 3.7% from 3.9%. A lot of people are focusing on that number. It's interesting to me. More importantly I think everyone is keeping an eye on wages as a gauge of inflation, and wages were up by 0.4% for the month and 4% from a year ago, so up for the month, but that 4% number is actually not that bad. That is not runaway inflation by any means. That is moderating, which I think people are going to like. I think these numbers actually bode well for a soft landing, and you can quote me, although I very well may be wrong, but I do think these numbers bode well for that. The market was mixed but generally positive on Friday as a result of these numbers, but time will tell.

Dylan Lewis: I cannot wait to revisit it about 12 months [laughs] from now and see exactly where we're checking in. We see some uptick in the arms race for generative AI. Andy, we have this week Google parent, Alphabet, publicly launching Gemini, its AI model inside its chatbot. Bard investors seem very happy to see this development, shares up 5% this week on the news. What did you see?

Andy Cross: The timing of all this is very interesting, considering the open AI drama that we're seeing and continue to see in the boardroom. It's this Game of Thrones contest between all of the great challengers, Google, Microsoft. We heard a lot of talk coming from Andy Jassy at Amazon at AWS. This was really interesting because Google has been investing in AI for years and years, and they've just been outrun by OpenAI and Microsoft over the last year. They tried to come out with some Bard fireworks earlier this year. It really flailed. There's just a lot of questions about it. What is their strategy. Clearly, they've been investing and thinking a lot about this. They have all the leaders on board. Sundar Pichai was all about releasing this and doing a very slick video on the leaders and getting together all the different divisions. So it's nice for shareholders and those of us who are really invested into understanding AI. This is actually a really neat development with this Gemini 1.0 in three different phases, the Ultra, the Pro, and the Nano depending on your needs. Dylan, what I'm really excited about this is how they are going to use this at the Enterprise for their clients as they think about the Cloud buy-in with their clients and supporting their clients who are spending more money in the Google Cloud and how those tools and their AI tools are going to drive that usage and encourage more adoption and usage of these tools for the Google Cloud. Overall, very impressive technology. It was very impressive, and we'll see how it all develops over the next few months.

Dylan Lewis: You mentioned the Enterprise segment there, Andy, and I think one of the things that's so interesting, this is a nascent space. I think we just lapped the one year anniversary or the one year birthday of OpenAI being out there and available. On the generative AI side, I think one of the things that's very fun about the technology is it's visible. It's something you can interact with and play around with. Is there anything that you're watching or people can keep an eye on as they're interacting with some of this stuff, just to see signs of people maybe taking a lead or developing in the space?

Andy Cross: Let's just focus on the Google part to this. They are talking about how, over the next few months, they're going to start to integrate this into more tools like Search. Now the Pro version is their backbone to Bard search, which has been available for a while, and now it's getting even more enhanced, but you'll start to see this across the entire platform of the tools that we use. Even consumers, let alone clients, or let alone enterprises. You'll start to see more of adoption of these tools into the tools that we use everyday. I'm really interested to see what Apple does because got Siri search and Siri usage and their AI tools there on the consumer side leave a lot to be desired, so it'll be very interesting to see how they innovate in that space. But look for more AI tools integrated throughout the tools like Gmail or whatever you might use as a consumer because that will be a litmus test on how fast this is adopting in the consumer side.

Ron Gross: I just got a new iPhone, and it crippled me for a week until I could figure it all out, so I can only imagine what AI has got coming for me.

Dylan Lewis: I don't think anyone's pounding the table on Siri's capabilities. I think Siri does leave a lot to be desired, as you were saying there, Andy. From one era of technology to another, we have a curious development over at GameStop. Ron, this week, the meme stock company announced that company cash can be used to invest in public companies by company leadership, Ryan Cohen. I'm a little curious. This sounds like an odd update. Is this an odd update?

Ron Gross: It's an odd update. It's certainly not common, as one esteemed analyst called it, inane and alarming. GameStop should be focusing on turning its business. If they believe in that business, perhaps they should be buying back stock with their cash rather than making other equity investments, but that turnaround is not going well. Recent sales were down 9%, 25% since the same period in 2019. Losses did narrow, I'll give them that. Aggressive cost cuts, store closing in Europe, that helped, but it's certainly not growing the business. It's shrinking the business which, if necessary, so be it, but I guess they're looking for some other ways to generate value. This is tricky. They got to be careful. They could end up violating the Investment Act if more than 40% of their assets are in investments that are unrelated to their actual business. I'm sure their lawyers have informed them, but take it from me that you should be careful and keep an eye on that number.

Dylan Lewis: One of the other things I saw related to this update was Ryan Cohen will also be able to invest alongside GameStop personally in anything that he's directing the company to own. It seems to me like so much of the GameStop story is a bet on Ryan Cohen, and we've seen a lot of interest in that. To me this only further solidifies that that is the case here.

Ron Gross: I'll remind folks that Ryan and his company is still the largest shareholder of Chewy, largest shareholder of GameStop. He's somewhat famous for the meme craze, trading in and out of GameStop, Bed Bath and Beyond. He's an interesting figure. Disclosure, if he's buying stock along outside a public company, I think everyone needs to know when and how much and why, and if these things are happening behind the scenes, it will not go well.

Dylan Lewis: Coming up after the break, more Chewy. We've got 10 earnings rundown and follow up on last week's Radar Stocks. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Dylan Lewis here in the studio with Andy Cross and Ron Gross. We've got an earnings parade and some updates from a couple of different companies that are heavily followed in the Fool universe. Andy, we're going to kick off with DocuSign. It was our colleague, Jason Moser's Radar stock last week. Now we've got some updated earnings. What did you see in the company's results?

Andy Cross: There wasn't a lot baked into the expectations coming in DocuSign. The stock has really struggled here. Decent results showing healthy growth in revenues and a better margin picture, we'll get to that in a second, but billions continue to be on the lower side, and the forecast of low single-digit growth is not super exciting. New CEO Allan Thygesen continues to try to position DocuSign as the leader in both e-signature and more and more about contract life cycle management. He's invested a lot in that, and he continually wants to grow the business above that 10% range. We'll see how it does. Revenue is up 8.5% to 700 million, billings as I mentioned up 5% to 692 million. They added 36,000 customers. That was up 11%. Direct digital continues to be the largest contributor and the direct consumer growth, so just like through the digital platform and directly with DocuSign was up 15%.

Steady gross margins at 80%, what you're seeing now with DocuSign is a focus on smart investments. They continue to invest a lot in R&D. Research and development was 19% of sales, that's consistent as for the past couple of quarters. Their operating income was up 27%, their operating margin was 27% versus 23%, cash earnings were 79% versus 57, so you're seeing a lot of investment go into managing the business, driving profits, and driving cash flow. The challenge is that the macro environment is not doing a lot for them right now. They are seeing some of their verticals improving and stabilizing from the first half, especially in things like real estate and some of the other verticals, like technology, but overall, it's no longer the 20% gross story that DocuSign used to be dealing. It's much more about that single to high digit grower, and Thygesen and his team really want to get it back above 10% internationally, a big driver of that, so we'll have to watch what we do. You've basically got a value stock churning at 17 times free cash flow. It can grow in the mid single digits. That's a pretty good deal at this price.

Dylan Lewis: It's looking attractive to you, Andy?

Andy Cross: Yeah. I bought a little bit earlier this summer. I'm down a little bit on it, and I think long term you'll do pretty well, and nothing like a fireworks like you may have seen back during the COVID days, of course.

Dylan Lewis: Ron, we also have an update on the state of Phyto. [laughs] Head supplier, Chewy, posted earnings this week. This is a stock that bottomed out a bit in 2023. Are there positive signs in their earnings report?

Ron Gross: I think if you look under the hood, there are some positive signs. The stock initially got whacked, the investors just did not like what they saw, but the stock rebounded as the week progressed. They did miss on both the top and bottom lines, which I think was that caused that knee jerk reaction, but I'll point out some interesting metrics here. Net sales were up 8%, and management noted that Chewy gained market share during the period, pretty good. Net sales per active customer up nearly 14%. That means their average customer is spending more money on the platform than in previous periods, also important. Auto-ship customer sales were up 13% and now represent over 76% of net sales. You have customers spending more per customer and that recurring revenue is occurring because they're mostly all on auto ship. That can be a powerful combination. They ended the third quarter with about 20.3 million active customers, that is down slightly sequentially from the second quarter. Let's keep an eye on that. But margins did widen. Company reported a loss of around $36,000,000, adjusted EBITDA, if that's your cup of tea, Dylan, [laughs] was $82.1 million positive up $11.7 million. You can maybe take away some things there that at least from a cash flow perspective, not taking stock-based compensation into account. Some things are traveling in the right direction. Adjusted EBITDA margin, 3%, so thin, but there should be some leverage in this business as they continue to grow, and there's room for that. 0.7 times sales from a stock perspective, I'm not a sales ratio kind of guy, but that could indicate some cheapness.

Dylan Lewis: Wow, a sales multiple and adjusted earnings numbers, Ron, what's going on over there?

Ron Gross: Anything for our listeners.

Dylan Lewis: [laughs] One of the things that jumped out to me in this report was the company really emphasizing its pharmacy business. I think they said it's about to hit a one billion run rate, and they are the number one pet pharmacy in the United States. This is not a particularly old initiative. This is I think in Year 4 or 5 for them. Ron, are you surprised by that?

Ron Gross: It's taken them a while to get to scale, but that doesn't surprise me. I think it would. Pharmacy should be a higher margin business than their typical hard goods segment, so that could bode well for overall margins, overall profitability, and make the growth story even more powerful.

Dylan Lewis: From pets to people, shares of Lululemon now at an all time high following the company's latest earnings result. Andy, what is pushing the company so high this week?

Andy Cross: Interestingly after the earnings came out, the pre-market and post-market print was not really inspiring. Now we saw it just hit those all time highs as you mentioned. It continues to be the leader when it comes to not just athleisure, but really high-end apparel. The apparel market in general is not doing that well, but Lululemon continues to do well. Revenue is up 18%, the women's business was up 19%, men up 15%, their accessories up 29%, international was a big driver up more than 49%. North America up 12%, so a little bit on the lower side. Of course it's much more saturated. Their comp sales were up 13%, 9% on the store side, 19% on the e-commerce side. They added 63 new stores over the past year. That's about 17% increase in square footage. Their record Thanksgiving Day sales cycle, the US market share continues to grow. It was up about 1.5 percentage points, and you're seeing improvements on the gross profit and the operating profit side too. Dylan, it's a business that continues to speak to their customer, continues to deliver what those customers want, and those customers are continuing to show willingness to pay for it. Now there was some concern a little bit on the guidance, especially, I think on some of the men's side that maybe men are becoming a little bit more particular about what they may spend on and how much they're willing to spend. I think that was a little bit of concern when we look forward to the growth prospects for the fourth quarter which is sales growth of about 13-14%, but overall this is just a winning business. Their strategy continues to win. They have that new deal with Peloton. That is hopefully going to open up more and more of the market for those who are using Peloton, and that's why the stock is really at an all time high and continues to do well.

Dylan Lewis: I don't know if this is a bell weather, but Ron Gross owns two pairs of Lululemon pants and hasn't ever seen a yoga studio. They have golf pants. They've got joggers that don't sleep on the men's side.

Andy Cross: Their inventories were down 4%, so it's not a discounting story, they are continuing to sell very high margin product, and their customers are buying it like Ron Gross.

Dylan Lewis: I believe they're on your shopping list as well, Andy.

Andy Cross: They are on my shopping list. I've been looking for some pants, and it's about time that I stepped up because I've been a little bit more of the discount kind of guy, but I think now Lululemon may be the way to go. My brother uses Lululemon, so he listens to the show there, so Gordon, there you go.

Dylan Lewis: We are opening ourselves up to advertising at some point. We may consider Lululemon as a sponsor. We have some host right experience right there for you. How perfect is that? We are going to wrap up our earnings updates in the grocery aisle. JM Smucker up 7% on strong earnings this week. Ron, moms like you continue to choose Jiff even at higher prices.

Ron Gross: And Uncrustables, it turns out, it was very strong.

Dylan Lewis: This is an interesting story to me and I think it's one investors should maybe take a look at. The stock got whacked back in September on the announcement that they were going to acquire Hostess for $5.6 billion. Perhaps they thought the fit was interesting or they were paying too much, but it created a situation where the stock was perhaps inexpensive. But they've got a great staple of brands, it's folders, and Smuckers, and jiff, and milk bone, it's a family run business. CEO is Fifth Generation Smucker, which is better than Gross. It's an interesting company to me and they're divesting some of their less profitable brands. The quarter, not bad, comp sales up 7%. The Uncrustables was a hot spot there, 22% increase. Sales volume contributed 4%, price contributed 3%, so if you've got both higher volumes and the ability to pass along price increases rather powerful in my opinion. Gross margins widened pretty significantly and profits were strong. They did lower their guidance a little bit of fear about the macro-economy and spending out there. But based on current forward guidance, only 12.5 times forward guidance, they've increased their dividend for 21 consecutive years, 3.8% yield, not too shabby. I do think some risks include, we're moving toward a healthier eating situation. The weight loss drugs are going to be very interesting for companies like Smucker and Hostess, but I do think this is one worth looking at. Andy mentioned earlier that there was a surprisingly good quarter for Lululemon, and we're seeing surprisingly strong results on the grocery aisle as well. Do you feel like the long waited consumer tightening is maybe taking a little bit longer or may or may not materialize, Ron?

Ron Gross: Consumers right now are still in this shying away from big ticket non-discretionary items and focusing on the food items that they need to feed their family. The peanut butters, the jellies, the Uncrustables, and the coffee, which we all desperately can't give that up. That'll be interesting to watch because the consumer, I think, is also taxed. Savings accounts are coming down, credit card balances are going up, this all feeds into this whole big macro thing about is are we going through a recession or a soft landing? But I think stable brands that Smucker owns are going to be good consistently over long periods of time.

Dylan Lewis: Ron Gross, Andy Cross, fellows, we're going to catch you guys a little bit later in the show. Up next we've got to look at the business and economic fragility at the COVID pandemic exposed and now we might fix it. Stay right here, you're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. We're still waiting our way out of the pandemic, but we're now in a position to process and reflect what happened and the response. Journalist and author Bethany McLean has made a career out of sorting through complicated and often calamitous events and her latest book, The Big Fail, takes a look at the last three years, how we responded to COVID, and the lasting effects on households, businesses, and the economy. Motley Fool Money's Deidre Woollard spoke with McLean about her book and the issues she's paying attention to as we head into 2024.

Deidre Woollard: In your writing career, one of the things it feels like to me from the outside, reading your books, is you've focused on uncovering the decisions that lead to big outcomes often not the best outcomes. Here some of this was the urgency I think, around the pandemic led to poor decision making. I think that's a theme I've seen in your other books too. I know why I make stupid decisions based on urgency. But why does it happen so much in business, given that we've got information, you've got preparation, and yet when the moment comes, bad mistakes just keep happening.

Bethany McLean: I think on some level it's completely understandable. Back to the first question you asked, because when what is inconceivable happens, even if it was always a possibility of which we should have been aware, we're all just shocked. I often say that the best lesson anybody can learn is that when we learned in kindergarten, use your imagination because these things that you think in advance, well, that can't happen, that won't happen too often, they do, whether it's the global financial crisis or the pandemic. They do happen. I forgive everybody, some degree of shock when that happens, but I also think the reality of our system, and it's why I find some of the lessons from the pandemic, they're not just about the pandemic, they're about our society and the way business operates. We've just stretched everything to the breaking point in the name of efficiency, in the name of profits. I think we've forgotten that resiliency matters too. When something unexpected happens, it turns out often that there's not a lot of padding in the system to absorb it, and so people panic in part because of the lack of padding. One thing that exacerbated the panic, one concrete example is we couldn't get PPE because we'd outsourced all the manufacturing of PPE to China. We couldn't just turn on a dime and start manufacturing masks and gowns and all the other things gloves and all the other things we needed here. That's an example of just lack of resiliency as a result of having made things very, very fragile in the name of increased efficiency and profits. There's a cost to that, we forget that there's a cost to that.

Deidre Woollard: You have a chapter on the Fed's moves and quantitative easing. There was this line that stuck with me about how the enormity of the Fed's rescue revealed the fragility of our financial system. I think that's a theme throughout the book about the fragility of various systems and just how much the Fed had to prop up everything. I think to the extent that a lot of us are unaware of and you go into detail in the book, but it feels to me, as an observer, the government can't do this indefinitely, but companies assume that it will. Are these short term fixes for long term problems in the financial market as a whole?

Bethany McLean: I think that's so well said and the theme of the book is fragility. Fragility and so many of our systems. But yes, because the Feds stepped in in such a massive way in the spring of 2020, we've all just said, great, the Fed fixed it all, it's not a problem, [laughs] but it really is because every time there's been an issue, whether it's long term capital management, then the global financial crisis, now the pandemic, the Fed has had to step in a bigger and bigger way, really stretching the limits of its power. In some ways, not legally, but in some ways exceeding the bounds of its authority in that the Fed is supposed to be the lender of last resort to the regulated banking system. We all talked a lot about the shadow banking system after the global financial crisis. The shadow banking system got many times bigger, didn't shrink. Most of the Fed's rescue in the spring of 2020 was due to problems in the shadow banking system, which supposedly the reforms after the financial crisis were going to help fix that. The problem is twofold. One is just more of an intellectual issue. Do you want the Fed having to step in, in a bigger and bigger way, in order to fix problems that are supposedly outside the Fed's purview. What does that mean about how fragile our system is? But the more existential question is, what happens if it doesn't work? What happens if the Feds can't, now that everyone expects the Fed can always fix it. What happens if the Fed can't fix it? Then what do we do?

Deidre Woollard: That is a big concern. The other aspect of it too, the paycheck protection program and the PPE, like looking back on that system, certainly we had some of the scandals with large companies, taking money and then giving it back. But do you think large companies, it seems like the funnel of there was broken in terms of being able to get the money to the right places. Is that something that you see has been fixed at all? Or do you think if we end up in a similar situation, again we'll have the same problem of not knowing, it all becomes a black box. We don't know where the money's going.

Bethany McLean: I think it is a big problem in an economy that is so tied to the capital markets. The capital markets are just set up. It's innate in the way it's structured, that anything that benefits the capital markets is going to benefit big companies, not small companies and it's going to benefit the rich and not the poor. That's part of the subtitle of our book, who America helps, and who it leaves behind. Because if you have a massive rescue program like the Fed did, then you're going to make borrowing money really cheap for really big companies. But it doesn't do anything for the local restaurant or the small business down the block. You're going to do a lot to increase asset prices for those who own assets, which are the wealthy in our society, but that doesn't do much. In fact, if anything that's negative as inflation sets in for those at the bottom end of the socioeconomic spectrum. We have to think differently in a society where our means of monetary disbursement has been through the Fed. If that's the way it's going to be, then we have to think differently about how that plays out and what that means.

Deidre Woollard: Let's talk a little bit about the vaccines because, making a vaccine certainly isn't easy, not always profitable. What happened? It's pretty impressive. But looking at it, one of the things that I was really fascinated by was the different companies and how they are now. Because for like a Pfizer or Johnson and Johnson's, these are big companies and then making a big move. But Moderna, you take a company that was still in start up phase, not really having a product out there. They go from being this minor biotech to now this major player, but now they're on the other side of this. I'm watching it from an investment perspective. I'm really watching what's next for them. What did you learn about it covering it from the journalistic side?

Bethany McLean: I thought the vaccines were actually an inspiring part of the story and perhaps the only one. But there was a recognition on the part of at least some government officials that namely Alexazar who was in the Bush administration and then worked at Eli Lily, and then came back to the Trump administration as the Secretary of Health and Human Services, so the private market was not going to produce a vaccine on its own, at least not on any reasonable time frame. I think that's so important because if you're a rapid believer in the free market, you tend to think the free market will fix everything. We need a vaccine. Companies are going to produce one. No, you have to understand the unique dynamics of every market to understand what may need to be done, what incentives may need to be set. What may need to be done differently. In the case of the vaccines Azar looked at and realized that pharmaceutical industries have grown to hate the vaccine business because it's not profitable. It's not highly profitable because governments are the major buyers. Because too many times they've raced to the rescue to develop vaccines, only to find out their vaccines aren't needed. They've taken a hit in the stock market. Investors have been mad, and they don't have the means to do this really quickly without government help.

The government got involved and said, how do we set all the preconditions to make this possible? That was operation warp speed. I think it's a huge testament to how government and the private sector can work together and also to the importance of the rules that govern a market, to really looking at them and understanding, instead of just saying, oh, the free market, we'll take care of it. For Moderna, it's really fascinating. It was a sketchy company and they ran up to the pandemic because they hyped their products a lot or their research a lot, and never produced anything. People were skeptical of them. But then they did come through with a vaccine, obviously. The question is what that means going forward. I've honestly heard both sides of the argument and I'm not sure where I come out. One side of the argument is, mRNA is the future. Now that we've figured out the manufacturing of an mRNA based product, there are so many improvements that can be made and now this opens the door to mRNA as a therapy for all these other diseases. The other argument I've heard is it's not that simple and mRNA is still a trickster. It's going to be more difficult than Moderna is saying. I'm not sure we know the answer to that yet. It's going to be really interesting to see what happens.

Deidre Woollard: I want to ask you a specific business related question, because at the Motley Fool, one of the things that our analysts look at is companies buying back stock. You've got this line in the book about Intel saying that, if Intel could reinvest some of the 130 billion it's spent on buybacks in two decades, it would have had a better shot of reclaiming it's former glory. Right now we're in another situation with a lot of buybacks. Do you feel like companies are making a mistake there?

Bethany McLean: Sally I think it's hard. I'm going to give you a nuanced answer because it's really easy to say yes, how terrible they should be taking that money and investing in buildings. But the problem is they haven't seen anything to invest in and so part of the problem the semiconductor manufacturing is TSMC has a huge advantage they can do it much more cheaply. In a world where bottom line profits were the most important thing, of course, everybody was going to outsource more and more to TSMC and even now with the Chips Act, it's really unclear that semiconductors manufactured in America, things are going to be way more expensive. It's unclear that people are going to pay for them. I think it's not as simple as bad company who took all this money and didn't invest in the US. It's that there's been these fundamental changes in our economy such that investing in the US has not seemed like a viable option. But I think we have to look at that and understand what's going on and try to do something to address it because in the end, a country where everything we need is made somewhere else, is speaking of fragility as a pretty fragile place. But I think the underlying issues are far more complicated than buybacks are bad.

Deidre Woollard: Absolutely. I think the other thing about the Chips Act and building here is just one part of it. The education to make sure that we have the workers who can, [inaudible] that's a whole other category.

Bethany McLean: I remember talking to somebody about TSMC and hearing that in Taiwan basically, the best job you can get is go to work at TSMC. That's just amazing, that's what you aspire to and so that creates this self reinforcing loop where that's what people want to do, that's the best and the brightest. That's the best place to be and how we go back and recreate that in the US I don't know.

Deidre Woollard: Well, last question for you. You've got this book done, I'm sure you have something else that you're working on. What are you focused on now and what big stories are capturing your imagination?

Bethany McLean: I wrote a piece for a business insider about Goldman Tax and some of the turmoil there, which was really interesting, as you mentioned, that's where I started my career, so I have a tie to the place, albeit from decades ago at this point. But I'm continuing to watch all the things that we wrote about in the book, and particularly some of the ongoing ramifications of Federal Reserve Policy and what that means and the disparate regulatory regimes for regulated banks versus private equity firms and hedge funds and how that plays out for our financial system. I think that's a really interesting question going forward. What it means that vast was of the market are now under the control of private equity and private credit. If they control that much, are they really private? I think these things are really interesting questions and then some of the divides in our society, we all got fixated on that Federal Reserve survey that said the media net worth of Americans went up 37% in the pandemic, isn't that great? But that number masks median, [laughs] as any mathematician knows, is a tricky concept and that number masks a lot of problems underneath it. I think we have a lot of fundamental problems and I hope we can tackle some.

Dylan Lewis: Anthony McLean's work, The Big Fail is out now anywhere you find books. Coming up after the break, Ron Gross, Andy Cross, return with a couple of stocks on their radar. 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 in the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Andy Cross and Ron Gross. We're getting all previews of 2024 as 2023 comes to a close. Spice maker, McCormick just dropped their flavor forecast for the upcoming year. According to the company, Tamarind is the flavor to watch in 2024. Ron, will you be using Tamarind grilling in the New Year?

Ron Gross: If you're a fan of the tartaric acid in it, then it's quite a good meat tenderizer, so you could for sure use it as part of your grilling. But it's very versatile sweets, sours, savory dishes. It goes a lot of places. It gives a yellowish color to the food. There's things you can work with.

Dylan Lewis: I think that sounded a little gastronomical there and he was really getting into some serious lingo.

Ron Gross: Team gastronomical so there you go. [laughs] It's a key ingredient for pad thais, so if you like curries and you like some of those Asian dishes of which I do. You're a fan of Tamarind even if you don't know it.

Dylan Lewis: If you're keeping score at home the flavor of the year in 2023 was a Vietnamese and cajun style seasoning. I don't know that I saw that popping up a ton in restaurants and in dishes. But I will say I was seeing a lot of fusion food this year Ron.

Ron Gross: Doesn't have a name this so called last year.

Dylan Lewis: I think it was their own season. I think they were building up their own book a little bit.

Ron Gross: I see Safron.

Andy Cross: Ron's getting the short end [laughs].

Ron Gross: But who is Safron and all of this.

Dylan Lewis: Maybe that's 2025, Ron, you got to wait if you want Safron.

Ron Gross: Give me some old bay.

Dylan Lewis: [laughs] Let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron, you're up first. What are you looking at this week?

Ron Gross: I'm looking at Target TGT it's really interesting to me. As many know, Brian Cornell has been the driving force behind Target past successes, and the current attempt to right size the business. He's been CEO since 2014. He was involved with the acquisition of Shift to boost same day deliveries. Target has definitely been struggling with their inventory mix. They were much too in big ticket items because of COVID. They didn't pivot quickly enough. There was too many discretionary items on the books. They've been working inventory out for quite some quarters now and I think it's looking like they have it somewhat under control. They had a big controversy because of Pride month. A lot of folks boycotted the stores there, I'm hoping that is largely behind them. Shrink does remain a concern as it does with most retailers, theft and other inventory losses. This quarter, a modest revenue beat the operating margins improved dramatically. They've got a 3.3% yield, 52 consecutive years of increases, trading only 14.7 times earnings versus someone like Walmart at 23 times. I think Target, if you're interested in a little bit of a turnaround, is an interesting one to look at.

Dylan Lewis: Dan, a question about Target.

Dan Boyd: Ron, I'm glad you said it was a turnaround play because Target, with all of its shrink problems which were mostly self inflicted and it's just litany of cheap, cheesy crap in its stores doesn't seem like a great investment to me.

Andy Cross: Crap being the technical term for lower price merchandise. [laughs]

Dylan Lewis: I think that was a comment. I don't think that was a question, just to be I clear.

Dan Boyd: Understood.

Dylan Lewis: Andy, what is on your radar?

Andy Cross: Changing away from the turnaround, MongoDB symbol MDB provides Cloud based, unstructured databases to thousands of clients. It has hundreds of developers every month that are joining its platform. It's a leading flexible Cloud based database, structured software out there. Retention rates very high more than 120%, clients with more than 100,000 annual billings is up 28% the last quarter. Their new search tool, Atlas Vector Search, allows developers to search this data and use it for all those large language models that are driving a lot of AI. The growth rates have been over, say, 40% for the past three years. That has now slowed like many tech companies recent growth has slowed and their guidance for the fourth quarter was 19%. Not super inspiring I think the market was hoping for a little bit better. The stock has more than doubled over the past year, so it's done very well. It's sold off in that news because of some of the so called whisper numbers. We're looking for a little bit higher growth in the fourth quarter. They are now starting to generate some free cash flow. There are adjusted margins, if you start backing out some of that stock comp, pesky stock compensation, they're starting to show profit growth there. It's a $28 billion market cap with $700 million in cash into it. The trick here is it still sees at 17 times sales. A year ago it sold at 8 times sales so much different there. Still looking at it as a watch list I don't own it, but I know a lot of Motley Fool members out there do.

Dylan Lewis: Man behind the glass DB a question about MongoDB.

Dan Boyd: When you guys hear MongoDB, do you think about Mongo from Blazing Saddles?

Andy Cross: 100%. Ever since this company came public that's been my thought about this.

Dan Boyd: Does that make you want to invest in it?

Andy Cross: Well, I have not and I wish I had because the stock has done very well over the last few years.

Dylan Lewis: Dan, which one is going on your watch list this week?

Dan Boyd: It's been Mongo, I guess. The turnaround play is interesting as a concept, but every time I go into a Target, it's the same thing comes out of my mouth, which is.

Dylan Lewis: On that note that's going to do it for this week's Motley Fool Money Radio show. The shows mixed by Dan Boyd, I'm Don Lewis. Thanks for listening. We'll see you next time.