Upstart Impresses, and Banks Get Creative Giving Credit

Lending-technology disruptor Upstart Holdings (UPST -1.97%) recently reported earnings that were extremely impressive, but will the company be able to replicate its success in the high-potential auto lending industry? Also, we recently learned that JPMorgan Chase (JPM 2.51%) and other major banks will start issuing credit cards to consumers without FICO scores.

Finally, in this episode of Industry Focus: Financials, Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss the wave of share buybacks so far in 2021, and discuss two stocks on their radar now.

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 May 17, 2021.

Jason Moser: It's Monday, May 17. I'm your host Jason Moser, and on this week's financials show we're going to dig into Upstart's most recent quarterly results. We'll talk a little bit more about what's going on in the line of consumer credit that investors will want to be aware of. Apparently, companies are flush with cash and ready to buy back some shares. We'll tackle a listener's question. We'll also have one to watch for you this week -- so we've got a very, very full agenda. And when we have a really full agenda, there's only one man with the ability to take on such a Fool agenda: It's Certified Financial Planner, Mr. Matt Frankel. Matt, how's everything going?

Matt Frankel: To be fair, I think there are others who could fill in, and they have. [laughs] But I'm always happy to be here.

Moser: No one reaches that level that you've set for us. You set the high bar here, Matt. [laughs] We're always very proud of that.

Frankel: I'm still surprised every week when I'm asked to come back.

Moser: I'm grateful that you say yes. [laughs] Matt, we'll still open at the show here this week and talk a little bit about another earnings report that just came out recently, a company that we talked about a little bit on the show here and one that you follow, Upstart. Tell us what stood out to you in their most recent quarter.

Frankel: Well, this is a stock that investors have pretty high hopes on. I mean, it's doubled in the past few months, even before earnings. We did a Deep Dive into Upstart on the show. They're primarily a personal lender. They use kind of proprietary technology. They focus on the subprime area of the market, trying to do a better job of underwriting loans for borrowers with lower traditional credit scores than most others do, and it's been -- the results have been pretty good so far. They're just getting into the auto lending space now, so that's their most promising area going forward.

But just [to] kinda recap this quarter, which was still primarily personal lending: Revenue was up 90% year over year -- 90%. That's during a pandemic with decreased loan demand that most banks are reporting. Remember, that was a big theme at our bank-earnings episode, was that loan demand has kind of shrunk. People had more cash and there's less need to borrow, they're doing less these days. The personal lending space has declined overall. That's what makes it even more impressive. That was about $5 million above expectations.

Origination by Upstart's lending partners -- it partners with banks who make loans using its platform -- more than doubled year over year to 170,000 loans on the platform, a total of about $1.7 billion borrowed.

Some really impressive stats from a long-term perspective here: Conversions on rate request, that means if you go to Upstart's platform -- you know, it's as if you could check your rate without your credit score, things like that -- conversions on those, the people who request a rate and actually become a customer and get a loan, have increased from 14% of the rate requests to 22% over the past year. That's a big increase in conversion. That's really impressive from a long-term perspective. Margins are better; adjusted EPS not only were positive, which -- in the fintech world, just saying they're profitable is usually enough qualifier. [laughs]

Moser: I was going to say, I was looking through their financials here and I did a double take; I was like, wait a minute, they're actually profitable. It just seems like so many of these newfangled businesses haven't quite gotten there yet. But it seems to me, Upstart, it seems they're there and probably don't have to worry about that going forward, I guess, right?

Frankel: They're worrying about how to grow their profits, not just get a path to profitability.

Moser: That's nice. [laughs]

Frankel: It is. In the second quarter, they're expecting 28% growth. Not year over year -- they're expecting 28% quarterly growth, so compared to what they did in the first quarter. They increased their full-year guidance from $500 million in revenue to $600 million. That's a big jump.

Moser: That is a big jump.

Frankel: Remember, this was primarily based on just personal lending. This does not really show that potential in their auto lending business. They've proven their concept, that they can do a better job than the traditional bank models of underwriting personal loans to the subprime borrowers.

Now they're going to try to replicate that in the auto market, which -- subprime auto loans are a big consumer issue these days. Last Week Tonight with John Oliver did a whole episode on it. [laughs] If you have a chance, go back, it's worth a watch. There are people who are paying 20% to 25% for auto loans, because they can't qualify through traditional bank lenders. This is a big addressable market that is really overpaying, being abused by lenders, quite frankly, that Upstart is trying to go after and just do a better job and give them competitive loan rates.

Now, someone in the subprime realm is going to pay more than someone with an 800 credit score; that's a given. Does it need to be 20%, 25% if they've never defaulted on a loan before? No. So that's something that Upstart really is trying to do better, and they're doing a really good job of it so far.

Moser: It's an interesting point you make on the subprime auto loans, and I wonder, because we're in this period of time where the used-car market is really strong. With semiconductor shortage[s], there are automakers around the world who are witnessing supply-chain crunches. And that is translating into, ultimately, supply-chain crunches for the very cars that they produce, and that is ultimately reflected in a stronger used-car market.

Do you feel like that's part of the calculus here? Is that part of what's going on, or as you have folks going out there looking to buy used cars, it's such a tight market, they are having to pay more to get those cars? And on top of that, then you feel like lenders out there feel like they can even just take a little bit more advantage of a situation -- where Upstart perhaps sees that as an opportunity to do a little bit more right by the customer?

Frankel: Let me apologize from the start for whoever's listening that's a used-car dealer. [laughs] It's tough to imagine the used-car industry being worse to subprime borrowers than they have been for the past 10, 20 years. In the Last Week Tonight show that I just mentioned, there was an example of the same car that had been sold and repossessed to three different subprime borrowers. [laughs]

Moser: Wow.

Frankel: The same car. They're giving them these big loans that have, like I said, 20%, sometimes up to 30% interest rates. So people are paying the same debt that a regular borrower would on a $50,000 car to have these used lower-end cars. It's killing them financially, and it just leads to the cycle of repossessions and bad credit. There's a lot of room to do it, but it's really tough to overstate how bad that market is.

We've talked about markets that have a lot of consumer pain points; life insurance is one that we've talked about on the show. The subprime auto lending market is one that just really needs a complete overhaul for the good of consumers, whatever company. Some have tried, there have been subprime lenders before that have tried to do a better job. No one has been able to succeed yet. If Upstart can -- they have in the personal lending space -- so if they can translate that to the auto lending space, I mean, subprime auto lending is a several-hundred-billion-dollar market. It is a big market we're talking about.

Moser: It seems like basically a two-pronged strategy that could really help them succeed. No. 1, making sure that their AI [artificial intelligence] is providing them with the best data to help them make the best-informed decisions. Then also, it's just having the desire to just do right by the customer, do a little bit better than perhaps what you're seeing as the norm. Because I mean, for a lot of folks, they have limited resources, and then they're going out to try to get a car; they just don't have a lot of choices. When you don't have a lot of choices, you become a desperate buyer, and you know how that goes.

Frankel: Right. To be fair, a lot of it's not the lenders' fault. There's just no good way to underwrite that subset of the population, so they're taking on risk they don't have to. The idea with Upstart is if they can take the people with the sub-650 credit scores and narrow it down to the subset that isn't going to default, then their customers -- the banks they partner with -- can make three, four times as many loans without increasing their loss rate. And meanwhile, pass that savings onto the customer by not charging them insane interest rates. It's a win-win for the banks, it's a win-win for Upstart, and the customers. So, it's an industry that just really needs an overhaul. There's just no good way to do it yet.

Moser: Well, speaking of overhauls in the credit industry, there's another interesting headline that came out here recently. Some of the biggest banks out there, JPMorgan Chase, Wells Fargo, U.S. Bancorp, [and] more are looking at new ways to get consumers credit even though those consumers may not necessarily have a credit score to help guide that decision, and to guide limits and rates. These banks are looking at using other financial data to do that.

Now, I think this is something we talked about on the show a number of months back, when we saw that FICO was going to be revamping the way they calculate their scores. We're looking at new ways credit is going to be offered. But this really does seem like these banks are very interested in leveraging a lot of the data that they already have in order to be able to make well-informed decisions.

Honestly, to me, this makes a lot of sense. I mean, if you're going on data that you already have, if you're going on history, in theory, these banks should have a lot of relevant data that should help them make well-informed decisions. I mean, I don't know. I think this is one more way at least to help get people started that didn't exist before.

I remember a time ago when I worked at the bank, I remember folks coming in and the only way they could even remotely have a chance at establishing a credit score was to get something like a secured credit card. Like, you'd have to put down a $250 or $500 deposit to get your credit card, essentially a secured loan. Folks like that, I mean, you didn't have $250 or $500 just to drop at a whim; I don't know. To me, this does seem like it has a lot of promise if it's executed.

Frankel: For sure. The one you are referring to is called the UltraFICO Score.

Moser: Yeah.

Frankel: To be fair, that was kind of a flop. We learned that not only did very few lenders ever pick that up, no banks have embraced the UltraFICO model. It didn't really work out the way the FICO people had planned it.

Having said that, a lot of Americans think that every adult in the U.S. has a credit score. I mean, I think I thought that until I became a financial planner. To get a credit score, you have to have at least one reporting account within the past six months to your credit file. You know how many people don't have that?

Moser: I mean, I don't know the number, but I would venture to say it's probably a good half the population [laughs].

Frankel: Fifty-three million adults.

Moser: Well, that's not far off.

Frankel: That's a lot. That 53 million disproportionately includes minorities. That's a big part of why the government is really backing this plan, to try to level the playing field a little bit.

As you mentioned, a bunch of banks have signed onto this plan, JPMorgan, Wells Fargo, etc. You want to reach consumers that don't have traditional borrowing opportunities based on credit scoring, because if you don't have a credit history, a lot of lenders won't talk to you, unfortunately. Right now, it's considering things like consumers' savings accounts and balance history and overdraft history, a record of responsible behavior. This could eventually include things like rent payments, utilities. They're trying to partner with a lot of different sources to come up with an alternate credit model, kind of what FICO was trying to do a few years ago but really wasn't able to get traction on. If they could do that -- I mean, you have to walk a tight line between that really effectively becoming a credit score and excluding people. Because in most cases, you need credit to get an apartment to have a rental history, for example. I needed to have my credit run when we established electric service here; I'm sure you guys did too.

You want to be able to get as much data to really give an accurate picture as possible without the unintended consequence of excluding even more people because they don't have those things. But this is obviously a good thing. Democratizing the financial system is what we've been talking about with all these fintech disruptors on here. You want to bring inclusivity into the financial system. Anything that does that, I'm all in favor of.

Moser: I'm right there with you. I mean, to me, this feels like another avenue. What's more, it feels like another avenue that's actually pretty well-thought-out, because a lot of these big banks have a ton of data at their disposal. I mean, all relevant real-time, real-life data of bills paid and money going in and out. I feel like there's a lot of potential with something like this.

To your point, with that large a percentage of the adult population here not even having that one asset, and I'll call that an asset because I've taught our girls, my daughters, I've said: "Listen. One thing that's going to come up as you get older, you're going to get a credit score and you need to protect that thing with your life, because it opens up a lot of doors. It gives you a lot of opportunities that you might not have otherwise." And it can be a little bit difficult to get started because as you said, in order to have a credit score, you have to have some history to go on. But you've got to get that history started and oftentimes, to get that history started, you need a credit score.

But this, to me, it does seem like it's something right in line with the evolution of the finance space, the banking space, how money is moving from point A to point B. So hopefully, yeah, to your point, it's a little bit more well-received than the, what was it, UltraFICO.

Frankel: Yeah. I mean, there's a clear problem here. Have you ever gone to apply for a job and they said, "You need experience before we'll hire you" -- but how do you get experience if you don't get a job? It's kind of like that. It's an unsolvable problem for a lot of people. I want to apply for a credit card: "Okay, but you don't have any credit." Well, that's why I want a credit card, to get credit.

Moser: [laughs] Well, we're sorry. We can't help you.

Frankel: Right. It is just like, how do you get out of that loop?

Moser: Yeah, messed up.

Frankel: I mean, there's secured credit cards, but even that is --

Moser: It's a difficult hurdle.

Frankel: They're good products if you can get one, and have the money to put up for one, but it's not really democratizing the financial system; it's creating an extra hurdle for a group of people. I used a secured credit card to establish credit years ago, and they're great products. But I would have preferred if people would just take a look at my bank information and my rent history and see that I'm a pretty responsible individual.

Moser: It seems very logical, so hopefully, we'll see some progress on this front, because I do believe that could open up a lot of doors for a lot of people who are deserving. Yeah, definitely something to pay attention to.

Another thing to pay attention to, and something that is really starting to gain some steam here after a year of playing defense: It does feel like a lot of these companies are seeing a little bit more light at the end of the tunnel, feeling like we've really turned a corner here.

As such, a lot of these companies are starting to spend more on dividends. And especially they're really starting to buy back more of their stock than they have been over the last year or so. It feels like stock buybacks are neither right nor wrong, they just are, and we can just discuss whether you like them or hate them until the end of time. But what do you think when you see news like this? I don't know. I mean, there's one part of me that wishes companies would take this money that they're using for buybacks and figure out new ways to invest that cash. But by the same token, those investment opportunities aren't always so obvious. They don't grow on trees.

Frankel: Yeah, I mean, theoretically, a buyback should be a great use of a company's cash if they're doing right by their shareholders. The idea is, you want to buy your shares back at a value that's less than the intrinsic value of the business; this is what Warren Buffett always says. If they could do that, that's great. I don't want to get into a giant philosophical debate over whether buybacks are good or bad. [laughs] Because they can be good or bad.

If your only purpose with buybacks is to boost your share price, or to boost your earnings over time -- which in a lot of cases, that's what happens -- then they're bad. If you're making a real effort to buy back more shares when your stock's cheap and less when it's expensive and really create shareholder value with it, from an investor's point of view, it's good. We are seeing a lot lately: Over half a trillion dollars in buybacks were authorized already in 2021.

Moser: Wow.

Frankel: That's the most in 22 years.

Moser: Holy cow.

Frankel: A lot of it was Apple. Apple authorized a $90 billion increase to its buyback already this year. That was almost a fifth of it. A lot of companies are sitting on a lot of cash. And it's not that they've been hoarding cash for a bad reason; a lot of them pumped the brakes on buybacks during COVID, a lot of them stopped acquiring new businesses, a lot of them stopped capital spending, and things like that.

[It's] the same thing that's happening with American consumers, if you remember from our bank earnings, that savings rates are through the roof as well. Same thing that consumers are doing. It was a responsible behavior at the time last year, given the uncertainty. But now, uncertainty, as we rambled on about at the beginning of the show with the face-mask things going away, uncertainty is declining. There's really no way to dispute that.

Now companies are saying, "Hey, we don't need these giant cash stockpiles, we can get back to business as usual and maintain a reasonable amount of cash to have a cushion. But we can put the rest of it to work, and shareholders want dividends, shareholders want buybacks. Of course, if there are better opportunities on the table, acquisitions can be a great way to spend money. But if not, shareholders want a lot of that capital returned. You see activist fights over lack of a dividend policy. [laughs] It's not rare that big shareholders will step in and say, "Wait, you got to pay us now."

Moser: To your point, dividends are lovely, because they're cash in the pocket. That always seems to come at a little bit of a price. I look at two glaring examples -- you and I were talking back and forth on Twitter earlier today about this. You look at companies like AT&T and Verizon over the last five years, two companies that are very well known for high and consistent dividend yields, right? They have that opportunity to be able to provide that high yield because they've been your utilities, essentially. They have a reliability in the business model that allows them to continue to pay those dividends, but that doesn't necessarily translate into stellar returns for investors.

You look at, over the last five years between the S&P [500] and AT&T and Verizon -- I mean, AT&T and Verizon, you've made money off of those investments. But the total return prices, so that incorporates dividends and everything, the total return price: Those two companies are well trailing the S&P, by a lot. The dividends are great, but you still probably would've been better off just being invested in the S&P.

And then conversely, when it comes to share repurchases, obviously, you want to make sure that those repurchases are actually bringing that share count down. I think in today's day and age, with a lot of these new companies coming public, a lot of tech-based companies, they give out some of those shares as compensation early on because it's a way to afford that work: Those repurchases don't really have that impact on that share count.

You look at Apple, the example that you brought up earlier: Apple, with all of the repurchases that they've been making over the last several years, since 2016, their share count's down better than 20%. That's having a real impact on that outstanding share account, which would make everyone's share a little bit more valuable at the end of the day. Just a couple of things to keep in mind there, in regard to share repurchases and dividends. Like you said, we could probably sit here and have a philosophical debate about it for an hour, and at the end of the day, never really come to [laughs] a firm conclusion, could we?

Frankel: Well, I'm glad you brought up AT&T for a second there.

Moser: [laughs] Okay.

Frankel: As you know, it's one of my biggest stock holdings. I would go so far as to say buybacks have not been the problem. If they had taken the money they spent on DIRECTV and WarnerMedia, and had used that to buy back shares, I'd be in a much better position right now.

Moser: A little bit of a different situation now.

Frankel: With them, it's been a capital spending problem, and not a buyback or dividend problem. Their buybacks and dividends have been great moves. I would've rather [had] them taking the $85 billion they spent on WarnerMedia, and giving it back to shareholders instead.

Moser: If it's any help, I think in hindsight, they're wishing that too, Matt. [laughs] Based on the news today, they're going to be --

Frankel: Remember when the Trump administration was trying to block that merger?

Moser: Yes.

Frankel: They should have said thanks, and just walked away.

Moser: Yeah, that's right. That one didn't work out so well, but I guess we'll see how that new combination fares. Ultimately, I do think, for you as an AT&T shareholder, hopefully, better days are yet to come. I think this gives them a chance to really get focused on what they know how to do well, and that is connect: connect people, and really more and more connect things.

Frankel: They certainly don't need to be spending time on making acquisitions, I'll tell you that.

Moser: Agreed.

Well, Matt, from time to time, we like to take listener questions, and we always get some really fun ones to discuss. We got a good question here on Twitter the other day. This comes from Preston, @10BaggerVance. Preston asks, "How do you measure valuation of a SPAC stock once the merger has been announced and it's in the de-SPACing process?" As an example, he says, "I'm looking at IPOE [Social Capital Hedosophia Holdings Corp. V] with SoFi specifically." Matt, we talked about SoFi here on the show. That's a company now that you're following. What do you think here about Preston's question? How do you look? What's your perspective on the valuation of SPACs once that merger has been announced?

Frankel: What SoFi does better than its competition -- think of who its competition is: You have Robinhood on the investing side, you have the legacy lenders on the loan side, so what do they do better? With Robinhood, we've discussed many times that SoFi just does a better job of prioritizing, investing, and educating the consumer. They make the lending process a lot easier than their competitors on the loan side. They do the best job of any financial company I know of, creating a sense of community, of creating customer loyalty, if you will. That's one of the big things I look at.

I look at the total market opportunity, which -- investing is clearly a giant market opportunity, but they're getting into some forms of lending, like auto lending. I've mentioned it's an $800 billion market. Personal lending is about a $200 billion market at last count. There's a bunch of big market opportunities there. I think they do things better than the competition. The current revenue -- which is actual numbers, not their projections -- the current revenue looks impressive, and their current growth numbers look impressive.

Another example, 23andMe, is one I've talked about on the show. They just do what they do better than the competition. They have a bigger collection of consumer genetic information than anyone else. They are partnering with one of the biggest names in the business that develop[s] therapeutics based on information -- big competitive advantages like that. It's like the Buffett model: When Warren Buffett describes why he likes a stock, he doesn't go into a bunch of numbers; he describes the moat, the competitive advantages.

Moser: Yeah, why he likes the business.

Frankel: Right. That's really what I look at when I'm valuating some of these SPACs, is what gives them the moat, and what will give them the moat, and what will be able to build a durable market share. Because a lot of them are small with very little revenue yet.

Moser: Yeah. You're right.

Frankel: Hopefully, that was a decent answer.

Moser: Well, I think it was a decent answer. I think it's about as fair as you can be, because it really is more art than science. We would say valuation is in many cases is as much art as it is science, and that's when you're dealing with something like Apple or Coca-Cola, right, something a little bit easier to grasp, because the numbers are there and you can make some reasonable projections.

But so many of these SPACs, I mean, these are businesses that are coming public far earlier than they ever did before, or they ever could have before. And that just makes it inherently more difficult to value, to be able to plug a number into a model with confidence. I think that just, to your point, it becomes really even that much more important to be able to get a grip on the business, to get a grasp on what they're trying to do, what type of business this is, what are the advantages, is there a moat, what gives them that long-term opportunity at sustainability and growth. I think that was a good way to look at it.

Frankel: Yeah, and most of them are very speculative. I also look at them as things I'm going to put a tiny bit into now and see how it goes. I'm never going to really go all in on a SPAC before we really get to look at the numbers and how it's doing as an actual public company.

Moser: Yeah. Did you see, real quickly, before we wrap up with ones to watch, did you see the news today? It sounds like Redbox is going to be going public via SPAC.

Frankel: Really?

Moser: Redbox, the DVD company, like a CVS or a Walgreens. Yeah. [laughs] apparently they're going to go public.

Frankel: Is Blockbuster going public too? [laughs]

Moser: I'm not sure. I have to look that up after we get done taping.

Frankel: Sorry to any Redbox fans. [laughs] I mean, I like Redbox as a product. I would never want to invest in it. I wouldn't buy one if it was like a franchise or anything.

Moser: I don't think I would either. It just caught my attention this morning [laughs].

Frankel: I'd probably buy WeWork before Redbox.

Moser: Oh, man, have you seen that WeWork documentary on Hulu [Ed. note: Hulu is majority-owned and controlled by Walt Disney]?

Frankel: No, I haven't.

Moser: Cannot recommend it highly enough. [laughs] It was so, so, so good. That goes for all listeners out there: If you have an investing bone in your body, then you will enjoy watching that documentary on Hulu. The WeWork documentary is just amazing, the stuff that went on there. What's even more amazing is that they still have an opportunity to go public again, albeit under different leadership. But it was a very eye-opening documentary. I highly recommend it.

Matt, speaking of recommendations, well, we're not going to make any formal recommendations here as far as stocks go. We do like to shine light on a couple of stocks we're watching this week. What is your one to watch for this coming week?

Frankel: Well, if you remember, all of these mortgage companies that have gone public in the past year or so, and I've really had a skeptical tone about them. Everyone's refinancing, of course, the numbers look great, things like that. Now, there's one that just announced they're going public through SPAC, of course, because it's 2021, so that's how you go public these days [laughs]. It's called Better. It used to just be called Better Mortgage, now it's just called Better. They're going public through a merger with a company called Aurora Acquisition, ticker symbol is AURC.

Moser: Sounds cool.

Frankel: I used Better to refinance my home and couldn't have had a better experience. That's not why I am interested. Not because I'm a customer: They really deliver on their claims. They aim to take the whole mortgage process online. They close their average loan in 21 days; the industry average is 42. That's pretty impressive. They close loans in as little as two weeks; they do everything online. I guess you can't really put too much stock into their growth. Their loan volume grew 490% last year -- that's because everybody was refinancing, and they specialize in refinancing. I think I remember you said you refinanced, I refinanced, everybody refinanced.

Moser: Yeah, absolutely.

Frankel: They also provide services like title insurance, homeowners insurance. They aim to take everything into a one-stop portal. The word is really getting out on them. They do, as the name implies, they just do a better job. I did everything online; the only time I think I interacted with a person was when the closing attorney showed up at my house. It was such a smooth process. In my lifetime, including investment properties, I have obtained about a dozen mortgages. This was the smoothest process by far.

So, I'm watching them. They're backed by SoftBank. They have some pretty impressive backing. The deal values them at $7.7 billion, which is toward the high end of mortgage originators, but not...I mean Rocket Mortgage is just a bigger company than they are. I think they have a big opportunity. Not just the online aspect that's great for customers, it also means higher margins potentially. Same reason that online banks produce higher margins than a Wells Fargo or JPMorgan.

Recent SPAC IPO, they didn't really pop that much after the announcement, probably on valuation concerns, if anything. But that's one that I'm keeping an eye on, just because out of all the mortgage lenders that we talked about that have gone public, there has been Rocket, there has been United Wholesale, there's been a bunch of them: This is by far the most disruptive of them. So that's why I'm keeping an eye on it.

Moser: All right. Good deal. What's the ticker for that again?

Frankel: It is AURC, Aurora Acquisition.

Moser: There you go. Okay.

Well, housing-related, I'm going to keep an eye on something that is housing-related, but a little bit differently. I'm going to be watching Home Depot, ticker HD; earnings are out tomorrow morning, Tuesday, May 18, they'll be out. You look at Home Depot, it's had a really good year-to-date thus far. I'm going to be very curious to hear their language on the call, though, regarding things like inflation, their take on the housing market, the state of the consumer. And honestly, lumber has really got my attention these days for a number of different reasons. We've seen this real pivot in lumber. They were noting, even management's noting, in their third-quarter call, as they exited the third quarter, that lumber prices were falling sharply off historic highs.

But then in the fourth quarter, that pricing really reversed course, and then set new near-term highs. It does seem like that pressure has remained. Like, lumber prices right now are just through the roof. While that's not something that's going to be fatal for Home Depot, obviously, they sell a ton of stuff, and lumber is a big part of it, but it is worth noting. You were talking there earlier about margins. I mean, with Home Depot, that mixed pressure from lumber can impact their margins, and their near term a little bit, at least just something we're keeping an eye on -- if for some reason there were some margin concerns, that then impacted forecasting or estimates or whatnot.

I mean, maybe you see an opportunity to pick up shares of what is obviously a well-run business for a little bit cheaper, but it looks like less than 30 times earnings today, nice 2% dividend yield: It's got a lot of different ways that it can win, I think. Seems to do well in good weather and bad, because they help us deal [laughs] with both good weather and bad. Looking forward to that report in the morning.

But Matt, I think that is going to do it for us this week. I appreciate you taking the time to jump on here and as always, be such a valuable part of the show for us.

Frankel: Always happy to be here.

Moser: Well, remember, folks, you can always reach out to us on Twitter, @MFindustryfocus, or you can drop us an email at [email protected].

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 yourselves stock based solely on what you hear. Thanks as always to Tim Sparks for putting the show together for us. For Matt Frankel, I'm Jason Moser. Thanks for listening and we'll see you next week.