On this episode of Motley Fool Money, host Chris Hill and Motley Fool analysts Andy Cross, Jason Moser, and Ron Gross hit on this week's biggest market news. Wayfair (W +0.37%) popped a whopping 30% on a good earnings report, but was it really that good? Stamps.com (STMP +0.00%) nosedived 55% overnight after announcing massive and very risky changes. Zillow (Z +1.91%) (ZG +1.49%) shook up its C-Suite and long-term strategy. Kraft (KHC 2.22%) tanked on a bad report that speaks to a very rough industry environment. Boston Beer (SAM 0.72%) is up some 15% on promising trends and innovations. And, as always, the guys share some stocks on their radar this week. Plus, Chris talks with the Fool's retirement guru, Robert Brokamp, about the current state of U.S. retirement savings, alarmingly high levels of consumer debt, tax changes, and more.
A full transcript follows the video.
Check out the latest earnings call transcripts for companies we cover.
This video was recorded on Feb. 22, 2019.
Chris Hill: It's the Motley Fool Money radio show! I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you as always, gentlemen! We've got the latest headlines from Wall Street; our guest Robert Brokamp is going to help you Rule Your Retirement; and as always, we'll give you an inside look at the stocks on our radar.
But we begin with a big brand getting smaller. Kraft Heinz announced a $15 billion charge, which would be bad enough on its own, but the company also announced it has been subpoenaed by the SEC for its accounting practices. Shares of Kraft Heinz falling more than 25% on Friday, Andy.
Andy Cross: Tough day for Kraft shareholders, of which I am one! I have a couple of shares! Tough one. On top of that, Chris, they also cut the dividend by a third from $0.625 to $0.40. A triple whammy. A large consumer products goods company that has really been suffering. When they look at the next quarter for this year, they're expecting their operating profits to fall by double digits, high teens percentage levels. Overall, the story at Kraft has not been good since the merger they announced between Kraft and Heinz in 2015. They had a couple of years of better times, and now it's been a struggle as CBG businesses are really suffering with pricing pressure and low sales growth.
Ron Gross: I wonder, if you're 3G and/ or Buffett, do you turn into an activist here and say, "We've got to make some very big moves because this is not working in this current environment"?
Cross: Berkshire owns 26% of the stock and 3G owns 22% of the stock.
Hill: And if you're a Berkshire shareholder, the headlines are, "Wow, this is a $4 billion drop!" That's less than 1%. Berkshire Hathaway is going to be fine.
Jason Moser: I feel like... I've been feeling this way for a while, guys, I'm going to get this out in the open.
Gross: Please! This is a safe space.
Moser: I feel like we live in a non-GAAP world now. Companies can release these impairments and typically get by with it OK, saying, "Yeah, we have this GAAP number, but adjusted, our earnings were such and such." Adjusted earnings a little bit down from a year ago. But to your point, Andy, it was a triple whammy, essentially, of not only the impairment, but there's an investigation now under way, and they're cutting the dividend. Really, let's go for the quadruple whammy here. I don't know that their brands are as valuable perhaps as they were when we were growing up.
Gross: Hence the writedown.
Moser: When's the last time you got Kraft macaroni and cheese? Or went and bought Oscar Meyer hot dogs? It's just a different world with a lot more choice out there.
Hill: It's going to be interesting to see how this plays out. One of the possibilities here, Andy, is they go the route that Procter & Gamble went about 10 years ago, where they basically looked at their brand portfolio and said, "We have too many brands. Let's start selling some of them off." I think if you're Unilever, or frankly, any other private equity group, you have to be looking at the Kraft Heinz portfolio and thinking, "Hey, if we offer a decent price, we could get some of these."
Cross: A couple of years ago, they tried to arrange the merger with Unilever. Didn't work out. They've already talked about selling some of the assets, some of the brands. They're going to have to do that to try to cut costs and pay down some debt. But really, the financial engineering to try aggressively cut costs, and after a merger like this, added a ton of goodwill and intangibles to the balance sheet. I think in the consumer goods market, that's really difficult to do because, to Jason's point, the customers are so fickle.
Hill: Shares of Wayfair up more than 30% on Friday. Fourth quarter results for the online furniture retailer were better than expected. You tell me, Jason, was the quarter that good? Or with the expectation that low?
Moser: I think it was a pretty good quarter. The first number I looked to in the release every quarter is the percentage of orders that were placed by repeat customers. That really is the crux of the thesis, believe it or not. This past quarter, repeat customers placed 66.4% of total orders vs. 62.4% a year ago. The reason why that's important is because it basically represents customers that they don't have to acquire in the future, and it costs a lot of money for a business like this to acquire those customers. When you combine that metric along with all of these other metrics that tell us that people are going to Wayfair and they keep buying more stuff -- top line is up, orders per person is up, it's all headed in the right direction. I think as long as those numbers keep going in that direction, the market's seeing a light at the end of the tunnel that a business like this can reach some sort of level of profitability in the future.
Now, I think that's the key here really. If they don't keep those numbers headed in that direction -- if we even see a slight crack in the facade here, there's going to be a big problem, and I think the market will change its mind and maybe not assign that multiple it's giving it today, It's worth noting, they're still not profitable. It's not like they're looking to become meaningfully profitable anytime soon. But, they're pursuing a very big market in home furnishings and home goods. They really have built out a great business around a lot of different brands that people are using, it seems like every day.
Hill: Are they working on Wayfair Web Services? That would also help.
Moser: [laughs] That would be a nice little addition, a nice tailwind.
Hill: Sticking with retailers that start with the letter W, Walmart's (WMT 1.30%) fourth quarter profits came in higher than expected. Ron, the online sales numbers continue to climb.
Gross: Very strong. Up 43%. I like this report. Comp sales up 4.2%. 18 quarters of U.S. comparable sales growth. If we look back five or six years ago, we remember U.S. was really struggling and we said if they don't turn this around, they're in trouble. Kudos to them for getting that done.
The one weak area is international now. Nothing can ever be 100% good at the same time. International was a bit weak. They're trying to make some moves there. They sold off their retail stores in Brazil. They're merging their U.K. division with a rival, which may actually have some antitrust issues there. We're going to have to keep an eye on that.
But overall, I love what they're doing. Grocery continues to be a big part of this business, 56% of revenue at this juncture. They expanded their online grocery pickup services to over 2,100 Walmarts. I like what I see what their average shopper ticket in stores, which grew 3.3%.
Hill: Yeah, if you just look at the way that Walmart is marketing itself these days, they really are pushing the online and the delivery pickup.
Gross: Yeah. They had to out of necessity. Amazon was going to really eat their lunch, speaking of groceries. They needed to step it up. They've done so. Now, these things have costs associated with them. They're not free and they take a whack at margins, at least in the near term. Hopefully in the longer term, things catch up from a revenue perspective. But they had to fight the fight, and so far, so good.
Hill: However bad your week was in the market, it probably was not as bad as that of the shareholders of stamps.com. The company announced it will no longer be doing business with the U.S. Postal Service and shares of stamps.com fell more than 55% on Friday. Andy, I've seen a lot of things in my investing life, I don't recall ever seeing a $3 billion company become a $1.5 billion company overnight.
Cross: Literally overnight. As the CEO said, this move will represent some short-term pain over the next few years --
Gross: You think? [laughs]
Cross: -- obviously, some short-term pain for shareholders today. The U.S. Postal Service was the main carrier of stamps.com and provided a commission to Stamps, and that revenue is just going to vanish now as they rearrange the deal with the USPS and try to broaden out to use FedEx and UPS here in the U.S.
This is a game-changing, thesis-changing situation for stamps.com. Shareholders have to really consider this business now. Their earnings per share this year will be cut in half, even though revenues will be down just slightly. Really, the profitability picture for Stamps is not what it used to be going forward this year.
Hill: This seems like such a game-changer that I'm wondering if a potential outcome here is this backfires completely, and in a couple of years, this business is sold off for parts.
Moser: It certainly could. The bet that they're making is that USPS is going to become less relevant in the shipping environment as time goes on. That may very well be the case. We may be looking back at this five years now and saying, "They had to rip the band-aid off at some point, and it worked out for them." Now, I think you'd better pack a lunch because it's going to take a while.
But I tell you what, I was digging through this earlier and what really took me back here is looking at -- we talk a lot about management teams getting share repurchases wrong. These guys are in a league of their own. 2017 and 2018, they repurchased over $270 million worth of stock. If you look at the stock chart over those two years, they were repurchasing those shares at extremely high prices, and it was very heavily weighted toward the fourth quarter of 2018. I don't begrudge management teams for buying back stock, but I want them to be able to do it opportunistically. When I look at what they did here, I can't help but think there's some kind of criminal negligence here. They must have known this type of material change was coming. It had to be even discussed before they announced it. To be repurchasing stock like that, knowing something like that was coming down the pike... I mean, you're telling me you didn't have anything better to do with that money other than repurchase your overly valued shares? It's hard to stomach.
Cross: They bought $89 million back just last quarter, of the $137 million they bought back last year. It was very heavily weighted toward the end of the year.
Gross: Yeah, makes no sense to me. Class action suits will definitely be coming. If you have material information like that, you should be kind of blocked out from buying back stock. Somebody screwed up here, and somebody's getting in trouble. [laughs]
Moser: And I'm not saying they did have it, but if you just look at it on its surface, it doesn't seem like that big of a leap to assume they did have that information. Certainly, it had to be discussed at some point over the fourth quarter, if not way earlier, and they were still repurchasing those shares. It's just confounding.
Hill: You're saying the idea to completely cut ties with the U.S. Postal Service probably didn't come up in the last six weeks?
Gross: [laughs] Anything's possible.
Cross: At that point, Amazon was mentioned 49 times on the conference call. USPS was mentioned 90 times. Clearly, the Amazon effect is having a big deal on stamps.com.
Hill: Shares of Texas Roadhouse (TXRH +0.03%) falling a bit this week despite good results in the fourth quarter. Ron, same-store sales for Texas Roadhouse came in north of 5%. That's good for a restaurant these days.
Gross: Very strong report from a top line perspective. As you said, 5.6% comp sales. 4.8% comp sales from their franchised restaurants. Really strong. 36th straight quarter of positive comps. This company is clearly executing.
Now, the negatives here are largely due to late labor costs, which restaurants and lots of folks are seeing across the board. Operating income actually fell 11% despite the strong top line. Now, thanks to lower taxes, they did manage to eke out a profit increase of about 6%. Bottom line did go up. But we have some costs putting pressure on here. They still raised the dividend 20%. Sixth straight year of increasing the dividend by double digits. Company has plenty of room for expansion. I have never been to a Bubba's. I don't know if you guys have. Road trip?
Hill: I was going to say, there's a Bubba's 33, their sports bar concept, maybe 40 miles north of here. We could road trip out there.
Gross: We could road trip.
Hill: Zillow has a new ZEO! Spencer Rascoff off is stepping down, effective immediately. Zillow co-founder Rich Barton is moving into the corner office. Jason, I guess investors like the move because shares of Zillow popped 20% on Friday.
Moser: It's a combination of the fact that they turned in a decent top line quarter, they offered some pretty good top guidance going forward. But really, to your point, the installation of Rich Barton as a new CEO is the big deal here. This is turning into a much different business than we've known over the past seven or so years, and I just don't think Spencer Rascoff has the skill-set to be able to execute on what they're trying to do.
Essentially, what they're trying to do is to become more a part of the housing transaction. They're moving away from this ad model. They're trying to become more and more partners with their premiere agents. That's going to take a little bit of work. They've been dealing with some headwinds in the premiere agent model for the past several quarters. They do feel like those headwinds will abate in this coming year in. They used this term on the call which I have to say I kind of liked. They talked about this new Uber-ized consumer who expects magic to happen with the push of a button. Now, I'll push back on that a little bit. It's one thing to push a button and get a ride somewhere. It's another to push a button and buy a house. There's a little bit more involved, right? But it does sound like they're trying to use all of that data that they have to be able to streamline this and make it a better experience for buyers and sellers.
It's going to come with a lot of risk. They're extending their balance sheet out considerably. They've got a credit facility now extend to a billion dollars. The goal ultimately, the signs of success in five years, they'll be buying 5,000 homes per month, they'll be originating 3,000 mortgages per month. They really want to become what Redfin is, that go-to spot to look for and buy a house.
I don't know how this all works out for them, but I do have to believe that if we find ourselves in a recession or a very nasty housing market, this really, really ups the risk scale for them. Investors ought to be aware of that. This is definitely thesis-changing. This is a different company.
Cross: Totally!
Hill: Shares of Boston Beer Company up 15% this week. The parent company Samuel Adams posted good fourth quarter profits. Andy, guidance for 2019 was stronger than I think a lot of people were expecting.
Cross: It was a good quarter. Shipments were up 6.3%. Depletions, which is the wholesaler to the retailers, were up 11%. Those are the kinds of numbers we saw from Boston Beer three, four, five years ago. That's actually really positive. The big winners are brands like Truly Hard Seltzer, Twisted Tea, Angry Orchard. The traditional Sam Adams, not doing quite as well. Some struggles there. Jim Koch, who owns more than 20% of the stock, had talked about that.
Some fun innovations they're trying to do to tap into new markets. The 26.2 brew a gose beer made with sea salt to target after the running crew. Ron?
Gross: Oh my goodness, come on!
Cross: Wild Leaf Hard Tea, an alcoholic tea that has lower calories and sugar. They're trying to innovate to continue to grow. The stock has rebounded nicely because of it.
Hill: What kind of pricing power do you think Boston Beer Company has? They touched on that as part of their guidance. Not just, "We think we're going to ship more beer this year," but, "we're going to charge more for it."
Cross: It's been a struggle for them, especially in the beer, as the craft beer market tends to soften a little bit and has had some struggles over the last couple of years. That'll continue. They've had some pricing struggles. On the non-beer brands, they have a little bit more power than they do on the beer brands these days.
Hill: Surprising miss this week from Domino's Pizza (DPZ 2.02%). Same-store sales in the fourth quarter came in lower than expected and shares of Domino's falling 10% this week. Ron, we were talking before the show, this is not a missed by a penny. This is a solid miss.
Gross: Yes, and a rare one, so everyone, relax. Just calm yourself down over there.
Moser: Take it easy!
Gross: Everything seems to be pretty good. Same-store sales up 5.6%. Now, international comps only up 2.4%. That's a little weak. But we have 100 consecutive quarters of international same-store sales growth and 31 consecutive quarters of U.S. same-store sales growth. Revenue up 21%. Diluted earnings per share up 25%. The company's doing just fine.
Now, as we were talking about before the show, there are more places to get your food delivered nowadays than ever before, whether it's Uber Eats or DoorDash or Grubhub. It's not just, "We want food delivered, it's going to always be a pizza." Now, you can pretty much get anything you want delivered. There's some competitive issues there that they'll need to deal with. But they're doing a great job with technology, a great job with mobile and online. I think they're going to be just fine.
Hill: Yeah, but when you're getting food delivered to your house, doesn't it boil down to, it's either pizza or it's not pizza? That's how I think of it.
Gross: [laughs] That's fair!
Hill: It's not, "Oh, here are all these choices I have." It starts with, "Do I want pizza?"
Gross: That, I think, is fair. At my house, it's pizza or burgers usually. Five Guys, those kinds of places. My son is more than happy to pick up the phone or his app and have food delivered right to him.
Hill: We're going to bring in our man behind the glass, Steve Broido, in just a second here. Really quick, around the table, what's your go-to topping on pizza?
Gross: Pepperoni, for sure.
Moser: I have to go with Italian sausage.
Hill: Nice!
Cross: Pineapple. Big fan in --
Hill: Wait, pineapple by itself?
Cross: Yeah, just pineapple. No ham in the family. It's good.
Gross: What about you, Chris?
Hill: I'm stunned! I'm blown away by Andy's answer.
Cross: Try it!
Hill: Pepperoni. Can't go wrong!
Gross: Delicious!
Hill: Steve Broido, our man behind the glass, what do you go to when it comes to pizza?
Steve Broido: Pepperoni, big time!
Hill: I think we have a clear winner!
Moser: Meatballs certainly merits an honorable mention.
Hill: Underrated.
Cross: My heart --
Hill: Perpetually underrated.
Gross: And bacon goes with everything.
Moser: It does, you're right.
Hill: Alright, Ron Gross, Jason Moser, Andy Cross, guys, we'll see you later in the show. Time to check in with retirement expert Robert Brokamp.
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Hill: Robert Brokamp is a certified financial planner and The Motley Fool's resident expert on retirement. He joins me in studio now. Thanks for being here!
Robert Brokamp: It's always a pleasure, Chris!
Hill: It's tax season.
Brokamp: It is.
Hill: A lot of taxpayers got a tax cut over the past year. What advice do you have for those folks?
Brokamp: A couple of weeks ago, the headlines were all about how people were getting smaller refunds this year compared to last year. The amount of people getting a refund was down about 20% and the size of the refund was down about 8%. So, people were freaking out a little bit about that, especially since we're all supposed to pay less in taxes thanks to the new tax law that was passed at the end of 2017.
Now, as of data as of this morning, it turns out that was little preliminary. It turns out that refunds are about on pace. But what is definitely true is there are going to be some surprises. The tax law does not affect everyone the same way. Some people are going to lose some valuable deductions. Plus, the tax law changed the withholding tables that employers use to calculate how much should be withheld, so a lot of people did not have as much withheld as they should have. An Associated Press story told the story of a couple in Oregon who usually get a small refund, and this year found out that they owe $10,000 in taxes.
Hill: That's kind of a difference.
Brokamp: It is. It's not because their taxes went up, it's just that they didn't have enough withheld because withholdings tables were changed.
My advice for people is, do your taxes now. If you're getting a refund, file those taxes, you'll get the money back sooner. If you find out that you owe taxes, don't file yet. You can still wait until April 15th to file, and it gives you some time to build up that money. But also, that will let you know whether you got your withholdings right. And now is the time here to get it right for 2019 so you don't have a surprise when you do your taxes in April of 2020.
Hill: Let's move on to retirement. Fidelity just published a report on the state of retirement savings. I saw the report but I must confess, I didn't actually read it. How are things going?
Brokamp: Some good news, some bad news. Let's start with the headline news, which is sort of neutral, I would say. As of the end of 2018, the average 401(k) balance was $95,600. That's down 8% from the end of 2017. On the one hand, you would expect a decline because in 2018, the S&P 500 was down about 5%. That's an index of large stocks. Other types of stocks, like small-caps and international stocks were down even more, 10-15%. So you would expect balances to go down. On the other hand, with a 401(k), people are putting in thousands of dollars a year, so I would have thought the contributions would have offset the declines a little more than they did. Regardless, that balance of $95,000 is up from the average balance at the end of 2008 of $49,000. Overall, people do have more, and that's good news.
A couple of other things in the good news category. Participation rates have gone up. About 72% of people at a company participate in the 401(k). The savings rate is up, the contribution rate. That's at 13.1%. That's a combination of what the employee is putting in, as well as the employer. That's good. Also, they found out that at the end of 2018, we had a bit of a decline in the market. Declined just about 20%.
Hill: I think we talked about that.
Brokamp: Fortunately, very few people panicked. Only point 3% got totally out of stocks. That's good news.
Some of the bad news. I said a 13.1% savings rate is good. That's good because it is up, but it's probably still not enough for most people. I recommend that most people starting out in their 20s to 30s should be saving 15%. If you don't start saving until your 40s, you probably have to save even more than that.
A couple of other interesting things. Something like 20.3% if people have a loan out against their 401(k). That's the lowest number since 2009. One in five people are borrowing money from their 401(k). The No. 1 reason is to pay off credit card debt. That's pretty surprising to me. A 401(k) loan can be a smart thing to do, especially if it's just a short-term loan, but to borrow from your 401(k) to pay off credit card debt, man, that's pretty scary.
The other scary stat was, more than 30% of people, when they leave their job, they cash out their 401(k). They don't leave it in the plan or transfer it to another retirement account, they just cash it out, which A, that'll cost you in taxes and penalties. It also shortchanges your retirement. It's generally not a good thing to do.
Hill: If you could wave a magic wand, would you make it mandatory for people when they start a job that they have to start contributing to your 401(k)? Or, I guess probably the better way to put it is, you start a job and the employer says, "We're already going to allocate. You have to actively opt out of the 401(k) plan. We want you saving right off the bat."
Brokamp: That's very interesting. I'm on the 401(k) Committee here at The Motley Fool. What you're referring to is something known as auto-enrollment. As soon as you start at The Motley Fool, we have you automatically contributing to the 401(k). You have to opt out of it. It was pretty significant debate, actually, in the 401(k) Committee, about whether we should do this. I started out saying like, "We're all adults here. People can do what they want with their money." But I ended up being like, "You know what, people need to be nudged toward this behavior." The stats are clear that people who are auto-enrolled in a 401(k), as well as auto-escalated, which means they contribute a little bit more year after year, have much higher balances.
Hill: We were talking about headlines before we started taping. Maybe it's just me, but I'm starting to see more headlines about consumer spending, consumer debt, that have me a little bit nervous. There was the stat about seven million Americans are now 90 days behind on their car payments. It seems every other week, there's another story about the mountain of student loan debt out there. I have two questions. One is, how worried are you about these types of stories, just in terms of what they could mean to the macroeconomic environment in America and a potential recession? Two, which is more concerning to you of those two? The student loan debt seems like it's been going on for a while; for some reason, people being behind on their car payments to that degree, that actually hits me more on a gut level.
Brokamp: On a macroeconomic level, debt is always a concern. When you look back at historical recessions, many of them are caused by too much debt somewhere in the system. The fact of the matter is, when you have debt, you're bringing consumption forward. That means you cannot consume in the future. When you have an economy that is 70% driven by consumption, anytime you move tomorrow's consumption to today, I think that's a problem.
I would say, for sure, that I'm concerned on an individual level about debt. Really concerned. The Wall Street Journal did a report last year about basically the readiness of Americans near retirement age. It turns out, this generation of folks who are near retirement are less prepared for retirement than any generation since the Truman administration. A lot of it is because of wages being stagnant, higher healthcare costs, student loan debt, which we'll get into. But a lot of it is just general debt overall. It's kind of surprising because the economy has been going very well. This is a time when you're supposed to be paying off your debt. But that's not what people are doing. Some of the stats that the Wall Street Journal had was that in 1992, about 50% of the 50-and-older crowd had debt. Now, it's almost 70%.
What's really surprising about the student loan debt is, people think of student loans as a problem for people in their 20s. That's becoming a bigger and bigger problem for the 60-and-older crowd. In fact, that's the age group that has the most amount of increasing debt. For example, the 60-and-older crowd has $86 billion in student loans, either loans they took out themselves to go back to school and improve their education, or they're taking out loans for their kids or their grandkids. But they're struggling. In 2015, something like 40,000 Social Security recipients had their Social Security garnished to pay off student loans. That's up over 300% from a decade ago.
Hill: That's crazy!
Brokamp: [laughs] It is crazy. Total debt owned by the 60-and-older crowd, including credit cards, auto loans, and other types, is up 84% since 2010. I'm not sure exactly why that's happening, but I do know this -- it's very difficult to retire when you owe other people so much money.
Hill: You, among other things -- because you wear many hats here at The Motley Fool -- you run our Rule Your Retirement service. In doing so, you look at all manner of retirement investment vehicles, one of which is target retirement funds. For people who are looking to manage their debt, take care of themselves in retirement, when you look at target retirement funds, do you think these are generally a good vehicle for people?
Brokamp: I think, actually, they're one of the best inventions to come out of Wall Street in recent history. For those who don't know, a target retirement fund is basically a mutual fund that owns other mutual funds, but it has a prudent allocation based on your target retirement date. Let's say you plan to retire in 2050. That's a far-off retirement date. It's going to allocate your assets mostly in stocks, U.S. stocks, international stocks, small-caps, large-caps, some cash and bonds, but it will do all that for you, it will rebalance for you. As you get closer and closer to that retirement date, it's going to get gradually more conservative. I think it's a great solution for the typical person who does not want to be a hands-on investor, may not know anything about asset allocation, they just want a one-stop-shop for their retirement savings. I think it's a great idea.
Now, for people who want to be a little bit more hands-on, they do have some drawbacks in that they tend to be a little bit more conservative than certainly the typical Motley Fool listener and reader. Even if you're 30 years from retirement, it's going to have some money in cash and bonds. I think those with a more aggressive risk tolerance know that over historical 20-year periods, stocks have made money. If you have a time period of 30 years, you're probably OK being 100% stocks.
Hill: I wanted to have you on the show this week, in part because I always enjoy talking to you --
Brokamp: Well, thank you!
Hill: -- and I always end up being smarter as a result of talking to you. But also, this is the 10th anniversary of the start of Motley Fool Money, and you were on the first episode.
Brokamp: [laughs] I was! I'd totally forgotten about that!
Hill: I went back and listened to the very first episode. February 22nd, 2009. You were here in the studio. It was a very different picture. The Dow was at a six-year low. It was certainly a different environment.
Brokamp: It was a scary, scary time! At that point, we were still three or four weeks away from the market hitting bottom. Of course, when the market hits the bottom, you don't know it until many months later. Just for context, on the day we taped that episode, the S&P 500 was at $770. Now, as of this discussion, it's almost $2,800. Over the last 10 years, you factor in dividends and dividend reinvestment, the S&P 500 has returned 16% a year. If you would have told us on that day [laughs] whether we could expect 16% a year from the S&P 500, I'm not sure we would have believed that.
Hill: And I'm not saying that the start of Motley Fool Money kicked off -- I'm going to leave that for other, smarter people, to decide whether or not that's true, that one started the other. For those unfamiliar, we have other podcasts here at The Motley Fool, including the weekly show that you do with Alison Southwick, Motley Fool Answers, which people can check out wherever they get their podcasts. Give me a sneak preview of next week's episode.
Brokamp: The next episode will be the last episode of the month, and that's always our listener mailbag. That's foundation of Answers. It's part of why we started it, just to give people answers to questions. We usually choose about 10 to 12 questions from listeners. Answers almost always have a guest on helping us out with that.
Then, we started a series where the second episode of every month is going to feature one of our financial planners from Motley Fool Wealth Management [a sister company of The Motley Fool], where they talk about various life events. We did one on marriage, we're going to have one on having a kid, divorce, death in the family. They're personal experience, but also financial planning experience about the best ways to handle those life events.
Hill: Robert Brokamp, always a pleasure!
Brokamp: My pleasure!
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Hill: Next week, we're going to be in Austin, Texas. When I say we, I mean everyone but you, Ron. Sorry about that!
Gross: Somebody's got to be here to hold down the fort!
Hill: Exactly!
Cross: Thank goodness it's you!
Hill: You're the designated survivor. If anything happens to us on the trip back --
Gross: It's mine? The whole company? [laughs]
Hill: -- you're going to be hosting this show for the next 10 years. We're doing a listener meetup in Austin, Texas. If you're in the area and want to join us, drop us an email, [email protected], we will send you all of the details.
As I touched on in my conversation with Brokamp, this is it, guys. 10 years ago this week, we started Motley Fool Money. I just want to say a quick thanks starting with you guys and all of the analysts who come in here. As I say every year to our listeners, they're not paid to be here. They're just doing it because I have incriminating evidence on them --
Gross: [laughs] We like to hang out with you, Chris!
Hill: And they like to hang out with me. I want to thank all of the program directors of our radio station affiliates. If you listen to talk radio on the weekend, you run into a lot of infomercials. I don't take it for granted that there are program directors who say, "No, I actually want to put a legitimate program on my station." Thank you to them!
Thank you to Mac Greer, our producer, and Steve Broido, our man behind the glass! It was a little over 10 years ago that the three of us got together and said, "Hey, let's just try this for a month. Let's just see if this works for a month. We'll try it for a month." And it did. And then we said, "Let's do it for a second month!" And we went from there.
And last but not least, thank you to the dozens of listeners throughout the years! Here's to another 10 years, guys!
Moser: Yes, sir!
Cross: Thank you, too!
Gross: And thank you to you, sir, for a great time every week!
Hill: Thank you! Let's get to the stocks on our radar. In keeping with the 10-year theme, a special stocks on our radar -- stocks for 2029. Think in terms of a stock that you could feel comfortable buying a couple of shares and not looking at it until we have our 20-year anniversary show. Ron Gross, you're up first.
Gross: I went the other way. Rather than the safe stock that you don't have to look at, I went with a stock I think you need to hold for 10 years, CRISPR Therapeutics, CRSP. Biotech. Stick with me, Steve! Switzerland-based gene therapy company focused on CRISPR/ Cas9 gene editing platform. You may also want to buy competitors Editas and Intellia to diversify. They're focused on cystic fibrosis, sickle cell anemia, blood disorders. Early stage, so it's going to be volatile. Put it in your portfolio, look at it in 10 years.
Hill: And the ticker for CRISPR?
Gross: That's CRSP.
Hill: Steve question about CRISPR?
Broido: My question is, with a company is it like 50/50 that this is going to work out great and perfect and you're going to do terrific, and a 50% chance this is going to go away?
Gross: I don't have specific data for you. I think it's potentially less than 50%, which is why I advocate for a basket of these types of stocks.
Hill: Jason Moser, what are you holding until 2029?
Moser: We did a YouTube Live video earlier this week, and we were asked this question on a 20-year timeline. Chris, I like logic. I tend to try to follow it, so I'm going to use logic here. If I'm going to hold it for 20 years, I have to hold it for 10 years, so I'm going to go with PayPal. Generally, I think that money is going to be very difficult to disrupt, but we're finding ourselves spending our money in a bit of a different way now, obviously. Less cash, more electronic transfers, mobile wallets, contactless payments and whatnot. PayPal plays into that space nicely. A few different properties there in PayPal, and Venmo and Xoom and whatever else they might bring into their universe there. In 2018, they recorded close to $600 billion in total payment volume. It's a network that's used by a lot of people that's funneling a lot of money from point A to point B, and I think that'll still be the case in 2029.
Hill: Steve, question about PayPal?
Broido: Does PayPal have a shot in the, I have my phone, I go up and basically put it down on the little reader and it zings my PayPal account? Right now, it seems to do that with my credit card. Am I missing something?
Moser: No. They do, definitely. What we're going to see as time goes on is more partnerships between PayPal, banks, and card issuers. That appears to be a big opportunity for all those that are playing in the space today
Hill: Andy Cross?
Cross: Time means everything! My stock today is up 30%! The Trade Desk, TTD, Steve, is the leader in what's called programmatic advertising. As you're surfing around the internet and you see ads popping up, except on Facebook and Alphabet, which are walled gardens, Trade Desk is helping advertising clients place ads into those feeds. $2.3 billion worth of spend went across their technology. They really specialize in matching user demographics, websites, advertising clients to make sure advertising clients are getting the most from their spend. It's only an $8 billion company and growing at north of 50% per year. That's going to slow down a little bit this year. But I look at that market over time as a $700 billion market, and Trade Desk is getting more of it.
Hill: And the ticker?
Cross: TTD.
Hill: Steve?
Broido: Andy, who's the biggest competitor in the space?
Cross: Google and Facebook are the biggest advertisers online, but Amazon's really coming up. They're a strong No. 3. We have to watch out for them.
Hill: Three stocks, Steve. You have one you want to add your watch list?
Broido: I think I'm going to go with PayPal.
Hill: Alright. Jason Moser, Ron Gross, Andy Cross, guys, thanks for being here! That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!
