Inflation is a hot topic. In this podcast, Motley Fool analysts Emily Flippen and Maria Gallagher also analyze Walmart's (WMT -1.35%) aggressive push to hire more full-time truckers, as well as:
- Meta Platforms (META -0.70%) working on a currency for the metaverse.
- Elon Musk's stake in Twitter (TWTR)
- Berkshire Hathaway's (BRK.A -1.04%) (BRK.B -1.08%) new stake in HP (HPQ 0.68%).
- Rite Aid's (RAD 0.24%) tenuous future.
- Coca-Cola's (KO 0.14%) latest flavor innovations.
John Ourand from Sports Business Journal discusses Tiger Woods' impact on The Masters' ratings, Apple (AAPL 0.53%) and Amazon (AMZN 0.60%) striking deals with Major League Baseball, and why ESPN has one of the best TV deals for live sports.
Maria and Emily recommend three books (The Ascent of Money by Niall Ferguson, The Art of Statistics: How to Learn from Data by David Spiegelhalter, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail by Ray Dalio) and share two stocks on their radar: Airbnb (ABNB 6.63%) and Etsy (ETSY 7.47%).
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.
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Chris Hill: The business of sports is changing and so is America's labor force. We'll take a closer look at both and a lot more. Motley Fool Money starts now.
MALE_1: Everybody needs money. That's why they call it money.
MALE_2: From Fool Global headquarters, this is Motley Fool Money.
Chris Hill: It's the Motley Fool Money Radio Show. I'm Chris Hill and I'm joined by Motley Fool Senior Analysts, Emily Flippen and Maria Gallagher. Good to see you both.
Emily Flippen: Nice to see you, Chris.
Maria Gallagher: Hey too.
Chris Hill: We got the latest headlines from Wall Street, John Ourand from the sports business journalists, our guest, and as always, we got a couple of stocks on our radar. But we begin with inflation. So much in the media or conversation around inflation has centered on the Federal Reserve's response, but this week, investors got a glimpse into how America's largest private employer is responding. Walmart is increasing hourly pay for part-time and full-time employees at some of their stores and nationally, Walmart will pay truck drivers a starting annual salary of between $95,000 and $110,000. That is up to 26 percent higher than the previous average salary. Emily, let's start here. How should investors feel about Walmart's labor costs going up?
Emily Flippen: Well, not all costs are made equal, and I think this is an example of a business investing in the right place right now. I think investors should feel good about this move. Now, admittedly, you could argue that this is reactive. We see in unionization at other large American employers and with the challenges of supply chains, freight costs, labor shortages, Walmart may have just been forced into action. But still, there are employers out there who, despite facing these similar headwinds, are opting to do nothing, and in this type of environment, I don't think that shapes up well for the long term. With Walmart specifically, I think this is giving up some margin for them, but it's able to ensure a more productive and efficient business for the long term, so I do applaud that move. But as you mentioned, Chris, on the side of the Federal Reserve, there's been a lot of conversation around how the Fed has just really failed to manage inflation, and it's a bit of a natural life cycle I see happening between the Fed and Walmart here. Inflation is high because the economy has been relatively strong, we have years of COVID-induced quantitative easing, but the supply hasn't managed to keep up, and as such, employers are forced to raise prices, forced to raise wages, which keeps their stock prices down. It decreases household wealth and theoretically decreases demand back to the level where it matches supply. That's all economic theory, and you know how much I hate economic theory. [laughs] But it is all to say that this is a shorter-term decrease in Walmart's stock price due to investing in labor. It's not a bad thing for Walmart. It's not a bad thing for workers, investors, or the economy.
Chris Hill: In terms of prices going up, Maria, shares of Costco hit a new high this week. They had strong sales for the month of March. Costs are going up, but consumers are still spending.
Maria Gallagher: Absolutely. We saw comparable sales up 19.1 percent in the US, 15.7 percent in Canada, 8.4 percent in other places internationally. Overall, we had those comp sales up about 17.2 percent last month. If you look at things like Bank of America's credit card spending reports, retail is actually doing well, which is defying that pessimism people have been warning about with retail spending, especially as we're heading into tax refund season where we're already seeing higher tax refunds than we did a year or two ago. I think that it's really good news for an environment where people have been pretty stressed about consumer spending habits.
Chris Hill: Emily, let's go back to Walmart for a second because you think about CEO Doug McMillon and his team. They have to have run the numbers on these pay increases and when you think about supply chain challenges that Walmart as much as anyone is dealing with, it seems like they are making the right investments, whether they feel forced to or not. Again, this is the largest employer in America for private business. It's certainly the largest retail employer. Do you think this sets the tone for other major retailers like Amazon and Target, and we'll throw Costco in there as well, to look at what they're doing with their employee base and look to secure employees so that they are dealing with less turnover?
Emily Flippen: If those businesses haven't already gotten the message, I think this is a sign from Walmart that they probably should catch up with the times, and it's easy to point at a salary of more than $100,000, twice the national average coming from a blue-collar job, and say, that's ridiculous and that's what the headlines today want you to believe. But when push comes to shove, we're talking about massive challenges and freight right now. A lot of people not willing to work in trucking, an extremely challenging job, and Walmart's saying, we need these, these are essential employees for our business and we're going to pay them what they're worth.
Chris Hill: Three years ago, Meta platforms tried to launch a cryptocurrency that ultimately failed. Now, The Financial Times is reporting the company formerly known as Facebook, is working on a new virtual currency that would be used in the metaverse. The staff is reportedly referring to the currency as Zuck Bucks after CEO Mark Zuckerberg. Maria, people can make whatever jokes they want. I'm sure they will. But this does seem like a necessary building block for the metaverse if this company is going to make it work.
Maria Gallagher: Exactly. What we're watching really in real-time is Meta trying to remain this dominant player, innovate where they think the world is going to be in the next five years, pivoting away from just social media into that metaverse. Like you said, this digital token, which is being called Zuck Bucks, it's not going to be crypto the way we saw them with Libra, which was turned to Diem, which just turned to nothing. This is going to be more like digital cash you see in video games such as Roblox, Fortnite, really leaning into that metaverse style. They are trying to build out that ecosystem with their VR and their AR capabilities. They're talking about making this environment something you're entering and spending time, and so really making it all-encompassing. But what's important to note that it's actually also really in development. Shares of Facebook are still down about 30 percent since spending for these new innovations caused profits to fall last quarter. They have weaker revenue expectations for the rest of this year and this quarter due to increased competition with TikTok. You can see they are trying to pivot away from social media. They're not directly competing in the way that they once were. They have enough money and resources to do these types of experiments, but they're really betting on this being what the next 5, 10 years looks like and they're really trying to lean into that.
Chris Hill: One of the things we've seen with Apple and Google and their app stores is those companies pushing the envelope in a way in terms of the cut that they take and regulators looking into that, and the push and pull that goes between developers and those mega tech companies. Do you think part of the conversation at Meta platforms is, hey, how do we do this virtual currency in such a way that we can control it, it's profitable, but we're not ruffling so many feathers that regulators are giving us a hard time about this?
Maria Gallagher: I would bet that that's a big conversation. What's pretty interesting is in 2009, they had in-app purchases and games like FarmVille, and so they actually shut down that service about four years after that because of the growth in international made it really unwieldy from conversion rates. I think that's an interesting challenge and they probably learned from the last time so they're trying to probably do it again, do it in, like you said, a more profitable way. Now they have all of these other elements of their ecosystem. I don't know what that's going to look like with Instagram, what it's going to look like with all of their other elements, but I'm sure that they are trying to build it out so it can be scaled profitably, but like you pointed out, not really poking anybody, making anybody upset, getting the Federal Reserve involved.
Chris Hill: Shares of Twitter rose nearly 20 percent this week on the news that Elon Musk has taken a nine percent stake in the company and will join the board of directors. Musk said that he is looking forward to making significant improvements to Twitter in the coming months. Emily, as a long time Twitter user myself, I look forward to improvements on the platform. What stands out to you about this story? Lost in all this is that he is running Tesla, but is spending a lot of time presumably with Twitter. What stands out to you?
Emily Flippen: Well, if I was a Tesla shareholder, I'm not sure if I'd say that I was very excited by this news. But if I was a Twitter shareholder, I'd be intrigued. Which is to say there are really two parts to this story. There's a conversation around Elon Musk, and there's the conversation around Twitter. Let's start with the Twitter part first because I actually think that's the most interesting and the most relevant part of this story. Part of the reason I think shareholders for Twitter were excited to hear this news is because shareholders have been pushing for change for a while. There is this belief that Twitter was going to reinvent its platform into something that engaged consumers more readily, monetize them more effectively, and they've been an under-monetized and underutilized platform, with the exceptions of yourself, Chris, of course. [laughs] But still, they've had these new ventures that they've pushed into that have really just fallen flat on their face. Meanwhile, other social media platforms have been gaining steam and gaining traction. There's a belief that any type of change is good change for this business. On the second part of that equation, there's Musk, and this is really where it gets controversial. I think there's a belief that Musk can bring about needed change. I think as long as he doesn't introduce Musk Bucks, it's probably going to be a good thing. But I will say this, regardless of where you feel about Musk, don't underestimate the attention that will be brought to the business by retail investors and by fans of Elon Musk. I think it's silly to underestimate the power that that has, whether it's logical or not.
Chris Hill: Warren Buffett made a new investment that's virtually unprecedented, and Coca-Cola has a new flavor that's just virtual. Details after the break. You're listening to Motley Fool Money. Back to Motley Fool Money. Chris Hill here with Maria Gallagher and Emily Flippen. In 1998, Warren Buffett said he would never own a computer stock like HP. This week we learned that Buffett's definition of the word never only extends to a period of 24 years, because Berkshire Hathaway revealed in a filing it bought 121 million shares of HP. Maria, I guess it's nice to see that Buffett is not stuck in his ways at his age.
Maria Gallagher: Yeah, I think it's interesting. I think there are two different things to talk about. The first is just the strength of Warren Buffett after this was announced shares of HP were up 15 percent. HP is now the second biggest tech holding after Apple in this Berkshire portfolio. It's a little bit more along the lines of what they've done in the past. I know not technically a computer company is what he is known for, but slower-growing legacy play. Some other companies that Berkshire owns or has taken that you might not know about is Fruit of the Loom, Brooks Running, Business Wire, Benjamin Moore. I just think it's important to underscore how prolific and powerful Buffett still is in this investing landscape and how it just makes sense that he's going to expand. I do think it's good that he's changed his mind and is going back into computers. The second interesting thing for me from an investing standpoint is it's just saying about this market. HP last quarter had revenue up 8.7 percent, showed key growth in gaming and peripherals, things like headsets. I think it just shows the connected electronic environment we're operating in and even moving more toward when we have this hybrid work environment. You want your computer to work at home. You want it to connect to your homework screen, to your work, work screen, to your laptop, to your phone, all of these interconnectedness and so that's going to increase the type of consistent repurchasing activity since we're wearing things out faster because we're using them all the time. I think it's a smart call from Buffett. I think it's an interesting choice of HP. I think it'll be fascinating to see how these habits in electronics continue to evolve.
Chris Hill: How big do you think the ripple effects are from something like this? Because Corie Barry, who is the CEO at Best Buy, took this as an opportunity. Took this news as an opportunity to say, Buffett is thinking supports her view that people are going to want to upgrade their technology. She runs an electronics and tech retail business, so I don't blame her for talking her own book, but do you think she is right?
Maria Gallagher: I think so, yeah because I think you see these upgrade cycle shortening for consumers in these areas like computing, home theater, everyone has the next thing. I think there's the social pressure to always have the next big thing, the built-in obsolescence you see with phones, they get worse and worse overtime. That time period is getting shorter. You see all this increased competition. I think that we're all going to continue to upgrade our technology at a faster pace because we're just using it all the time, so it's just wearing out faster and faster. I think it's a good bet to think that trend is going to continue.
Chris Hill: In the consumer drugstore industry, Rite Aid has struggled against competitors like CVS and Walgreens. But things got even worse this week when an analyst from Deutsche Bank downgraded the company and gave shares of Rite Aid a price target of $1. Emily, I'm not saying it's incorrect to think that Rite Aid might go wonder but a $1 price target, I mean that's just mean.
Emily Flippen: Somebody woke up this morning at that they take a couple of punches at the underdog while the underdog is not only out, but lying bloody on the floor outside the ring. Poor Rite Aid by this point. However, I will say this may be a bit justified. Rite Aid has just struggled and executive turnover in particular has been a hard spot for this business. They actually got rid of the Chief Operating Officer role entirely after losing their Chief Operating Officer. They're really just treading water by this point, but I think it's worth pointing out is the financial position of this business, $1 price target sounds like you are essentially valuing the company close to nothing. But that's really not the case. That $1 price target is more than $18 over the tangible book value per share of this business. it can't go lower than $1. Back price target wanted to be $0. It could've been. This is a business that has more than $6 billion in debt. If their financial position continues. If the COVID tailwinds continue, they will be able to make their debt payments if there's a massive fall-off from vaccinations, from revenue, from other COVID-related streams. There could be a situation in which they're not able to make those debt payments and they're put into a tough spot.
Chris Hill: It's pretty staggering to think that they have billions of dollars in debt when the market cap for this business is about $400 million. This is a business that is one-tenth the size it was five years ago. Do you think Rite Aid is still a stand-alone company in two years? Does someone buy them for the real estate or are they just left to fend for themselves?
Emily Flippen: Nearly three billion dollars of that six billion dollars in debt are leases on top of that. This is a business that I think is struggling now, they do report earnings on the 14th. So I think we will have more clarity in a few days about what that financial situation looks like. But to answer your question, Chris, I would be surprised if this company will still stand alone company in two years time.
Chris Hill: We love when consumer food and beverage companies introduce limited edition products. But Coca-Cola is starting to push the envelope for what actually makes sense. Last month, it was the introduction of Coca-Cola Starlight, a red version of the soda that the company says was "inspired by space." This week, the new offering is Coca-Cola Zero Sugar Byte, and byte is spelled, B-Y-T-E. Coca-Cola Zero Sugar Byte, a new flavor. But the company says is supposed to taste like pixels. Said one executive, "Coca-Cola Zero Sugar Byte mix the intangible taste of the pixel tangible." Maria, I have no idea what that means and yet, I think I might want to try this.
Maria Gallagher: You are not alone so I love a good marketing campaign. I think Coke has proven time and again, the third good at it. I think we all remember the June 2010 Share a Coke campaign in Australia. They estimated it raise Coke share of the category by four percent. It increased consumption by young-adult seven percent from that campaign alone. So this new addition, I think is they're trying to, like you said, make the intangible taste tangible. Another description that I saw was the bright elements upfront with refreshing finish. Again, I don't really know what that means, but I am excited, I am intrigued. What they're doing is they are trying to appeal to gamer. It appeared first on an Island in Fortnite called Pixel Point, where players could play many games there, including a game that takes place in a mini glass coke bottle. They're trying to really appeal to the gamers and they're not the only ones who are doing that Red Bull, Monster, Pepsi. They're all really appealing to this gaming environment. I think it's really interesting. I think it's fun. I think it really just get people talking, gets people intrigued. The flavor is actually only going to be available in a two pack in the US which will cost $15 plus shipping. They are marking it up, they're building intrigue and I respect them and I might try it.
Chris Hill: Emily, do you think that was part of the pitch from the department head, we're going to do this flavor and whether it works or not, we're going to charge so much. It's going to be profitable.
Emily Flippen: It's the only way this makes sense because I'll tell you what Coke, you're not a beer or you don't get a nice light, refreshing finish. You're not Oreo, you don't get fun flavors. So if you want to try to make a quick 15 bucks off of somebody who likes to play games with Fortnite, go ahead. But this not going to be a lasting impression.
Chris Hill: Emily Flippen and Maria Gallagher. We'll see you later in the show. Up next the latest in Sports Business with John Ourand, stay right here. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. I'm Chris Hill. Major League Baseball is underway and so it's golf's most prestigious event, The Masters. Here to talk through the business angles related to the sports world is John Ourand. He covers media for the SportsBusiness Journal and he joins me now from Washington DC. John, thanks for being here.
John Ourand: Anytime, Chris.
Chris Hill: Before we get to either of those, I'm curious about the NCAA basketball tournament that just wrapped up. The ratings for the semi-final game between Duke and USC and for the championship game between UNC and Kansas. Both seem to indicate this was a successful tournament for Turner Sports and its parent company, AT&T.
John Ourand: For CBS too because it's a partnership and the games were across CBS, Turner, TNT, and TruTV. From a business sense, it already was a successful tournament even before the first tip because the ad sales had sold out. So everybody is waiting to see what's going to happen on the court. If you're a television executive and you can script a tournament, you would have scripted this tournament. You had a lot of upsets in the first couple of rounds. You had St. Peters, which was a wonderful story, going through into the late round. In the end for the final four, you had four Blue Bloods schools. With the final four, you don't want necessarily one of the upstarts in there because even though it's a good story line, it doesn't generate good ratings or big ratings. If you have four really well-known brands, which is what those teams are now because there are so many one undone players, then that's what they want, that's what they got. Even though the games, the final four and the championship were on cable, it still brought in most viewers in many years.
Chris Hill: Let's shift to golf. There was a time when Tiger Woods being on the leaderboard in a golf tournament, meant an automatic boost in TV ratings on Saturday and Sunday. You and I are talking on Thursday afternoon where Tiger Woods is in the midst of his around. I apologize for pulling you away from that. In terms of golf, he's had an advanced age of 46 years old, but is he still the number one draw that moves the needle for television ratings?
John Ourand: Chris, if I start twitching, it's only because I got to get my Tiger habit going. Tiger Woods is still and forever will be the number one draw for television by far. If he is playing this weekend and is on the leaderboard, CBS, which is going to carry it this weekend. ESPN has it on Thursday and Friday is going to see a huge increase in ratings. I've been writing this story for probably two decades. What is a tour going to do when Tiger leaves? Everybody is waiting for Tiger Woods to leave, and what the tour has been trying to do and what CBS and NBC and ESPN, which are the networks that own the golf rights have been trying to do is really built up a younger group of golfers that are taking over. I think that they might have it. There are no longer young, there are middle age by golf standards, but Jordan Speith, Dustin Johnson, Bryson DeChambeau has turned into a player that personally, I have to watch every single shot that he makes. It's almost like the perfect villain. So many people either love him or hate him out there. They're trying to do that. I think the golf is set OK, but certainly it's going to come down from Tiger. That's just once in a generation talent in terms of media and television.
Chris Hill: When we talked back in January, you said on this show, you were skeptical that Major League Baseball owners and players would reach an agreement to start the season on time. I was right there with you because there is so much historic animosity between these two groups, and yet here we're in early April. Before we get into some of the streaming services that are involved now, let's start with the fact that the season is happening basically on time. How surprised are you that this happened and was there just too much TV money on the table for these two sides to walk away?
John Ourand: I'm not sure if it's TV money. I think there was just so much revenue on the table for either side to walk away. I couldn't be more surprised because I think what we correctly saw was, it's not even a level of animosity because in these types of disputes, you always have a certain level of animosity. The management wants one thing and the players want another thing. What I saw here was a level of distrust and that's the harder to get through. Beginning of last season, we're right in the middle of COVID, nobody knew exactly whether it was going to be a full season or how to do it. The owners came to the players with the plan. You play less and we'll pay you the same amount. The players didn't trust the owners. They were like no, we're going to play the same amount of games. We're not going to have a shortened season at the same amount of money. If they couldn't even agree on that, I didn't think they'd be able to agree on the sky being blue. The fact that they did come to an agreement shows that there was a lot of money there and neither one of those two sides really wanted to play chicken.
Chris Hill: Apple Plus has its first live sports deal. Apple Plus is going to be streaming baseball games on Friday nights. Major League Baseball is reportedly getting more than $100 million in revenue from deals that they've struck with Apple and with Peacock, I believe. What is this do for the landscape? Because among other things, Major League Baseball, it is a national pastime and yet from a viewing standpoint, it is very much a local and regional sports, which means that if Apple Plus is streaming these games exclusively on Friday nights, they're going to be some local fans upset that the only way they can watch their team is if they get Apple Plus and not everybody does.
John Ourand: I live in the DC market where the Nationals are getting ready to start the season against the Mets on Thursday, but it's raining outside and it looks like that game is going to be canceled. Opening day game for the Mets and New York and for the Nationals and DC is going to be on Apple TV Plus. They're going to be a lot of really upset, confused people trying to figure out what to do. I applaud baseball actually. I know this isn't a fan friendly deal by any means, but one of the biggest complaints you always hear about baseball is just how old it is. The average age of the fan is the type of fan that has a cable TV subscription, he's going to sit in front of the RSN and watch it. They want to get fans like my son, who is a recent college graduate and will never subscribe the cable, but he will possibly stream a couple of Apple TV games for a couple of months and then go to another streaming service. This is really designed to get younger fans what they call cord nevers in the business, they will never going to subscribe the cable, or cord cutters, who have decided the cable cost too much and they just want to stream different games. What they're trying to do is trying to widen the pots. They have deals with Apple TV Plus, deals with Peacock like you mentioned. The viewership is going to be down considerably. They're going to be minuscule, but they're just trying to widen the pie and bring more people under the tent.
Chris Hill: I get that not everybody is a sports fan. Not everybody is a baseball fan, football, whatever. But there are people who are just aren't interested in sports. But from a business standpoint, nothing moves the needle like live sports. Overwhelmingly, the safest bet in television ratings is that the most popular thing in a given year is going to be the Super Bowl.
John Ourand: Right. We just came out with a list of the top 50 television shows through the first three months of the year, 47 of them were live events, live sports and what I think is interesting about what you said is that applies to television, and there is a big question about whether it applies to streaming. Does an Apple TV subscriber really want to watch live sports, or do they just like this video-on-demand library, where they can come in and they can binge-watch any show. That to me is still an open question, and what you're seeing Apple do, and what you are seeing Amazon do as well, is really test to see whether or not live sports can do for their streaming services, what they did for cable and broadcast television.
Chris Hill: I'm glad you mentioned Amazon because Amazon Prime Video is going to be the home on Friday nights of New York Yankees baseball games. When you talk about fans getting upset, I think every fan-base likes to think they are the most passionate. But we're going to find out pretty quickly what Amazon Prime Video's customer service is dealing with in terms of angry New York Yankees fans, [laughs] who don't have Amazon Prime Video.
John Ourand: Chris, I've been covering this for Sports Business Journal, so this is right in my alley, and what I tell baseball fans is welcome to the club. If you have any soccer fans in your life, they've been complaining about this forever because they have to subscribe to Paramount, Plus, Peacock, ESPN Plus cable broadcast, there are a dozen different streaming services out there if they want to see all of their games. If you're a tennis fan and you wanted to see all the Australian Open, you had to go and subscribe to ESPN Plus or the tennis channel had a streaming service. Hockey fans are dealing with that right now. They have to subscribe to cable to get ESPN and Turner. They have to subscribe to ESPN Plus, they have subscribe to Bleacher Report, and now it's baseball's fans turns and so that customer service rep from Amazon, they're already used to hearing these complaints.
Chris Hill: Last thing and then I'll let you go.
John Ourand: Thanks because Tiger is about the finish. [laughs]
Chris Hill: A lot of times when we talk about deals for whether it's major league baseball, the NFL, we're talking about enormous piles of money. You said recently, one of the best TV deals when it came to the rights of live sports is ESPN's deal with the NCAA. As a Disney shareholder, I feel like I should have a better grasp of what is this deal that they have and what makes it such a good deal for ESPN?
John Ourand: We started talking about the NCAA men's basketball tournament. ESPN carried the NCAA women's basketball tournament as well, and that set viewership records that ESPN hasn't seen in two decades. ESPN is overseeing this wild growth of women's college basketball, and what ESPN did is, about a decade ago, it bought a package from the NCAA that included women's basketball, it included the college world series and the softball as well. But it also included swimming and diving and included certain sports that certainly have a passionate fan base, but don't bring in big television ratings and so that big bucket of sports, ESPN is paying less than $40 million, which is something I think you and I might be able to afford. It is in terms of sports media deals. It is one of the cheapest ones out there, especially given the ratings that we just saw in the women's tournament. This deal for ESPN runs another two years. In two years, you can bet a pretty good amount of money. They are going to carve out the women's tournament and put that out to market to create a bidding war, and then try to sell those other 22 NCAA sports like lacrosse and hockey and everything in between.
Chris Hill: You can read them in the Sports Business Journal and you can hear them every week on the sports media podcast with Andrew Marchand of the New York Post. John Ourand, thanks for being here. Go enjoy the the golf.
John Ourand: Hey, thanks, Chris. Anytime man.
Chris Hill: Coming up after the break, Emily Flippen and Maria Gallagher return. They got a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. [MUSIC] As always, people on 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 stocks based solely on what your hear.
Welcome back to Motley Fool Money. Chris Hill here once again with Maria Gallagher and Emily Flippen. We love getting questions from you, our dozens of listeners. You send them in email, you include them when you post reviews on Apple and Spotify, and we love that. But we wanted to let you know there's now another way you can hit us with a questions by calling us. You can call the Motley Fool Money hot-line at 703-254-14-45 leave us a question about a stock, industry, or trend, and we may use your voice in an upcoming episode. That number again, 703-254-14-45. Give us a call. April is financial literacy month. Before we get to the stocks on our radar, Maria, what is a book you would recommend for folks who want to increase their business or investing acumen?
Maria Gallagher: I have two books. They're the two of my favorite elements of being an analyst. That first is I think it's really important to understand history and the context of the world we live in. The first I would recommend is The Ascent of Money by Niall Ferguson. It's this in-depth history of how money existed from ancient times in Mesopotamia and math and it's really interesting and really fun, and then the second I think that I've love about being an analyst I think is really important, is understanding numbers and a way to think about numbers critically, and so that book I have a recommendation is called The Art of Statistics: How to Learn from Data by David Spiegelhalter. It's a statistics and probability textbook, but it's super fun, it's really interesting, and I think it really made me start questioning numbers in a really fascinating way that I think really helps when you're trying to look at companies.
Chris Hill: A fun book about statistics?
Maria Gallagher: It exists, I promise.
Chris Hill: Emily Flippen, what about you?
Emily Flippen: I'm looking at The Principles for Dealing with the Changing World Order by Ray Dalio, and part of the reason why I'm calling out this book in particular, is because there's also, I think it's a 45-50-minute long video on YouTube from Dalio, which basically summarizes the book in a way that I think is very approachable and is very agreeable for investors like myself who much prefer to consume content in media form. But there's also a book obviously out there. Essentially, what Dalio is doing is looking back through the history of financial markets and in particular how countries have handled them and as one rises, and what causes the eventual fall and how that repeats throughout time. In particular, talking about some of the dynamics that are leading the US to presumably fall off in terms of leading the world order, that rise of China. I really hate economics, I think I've said on this podcast every time I've been on it, but it's very approachable, very simple and more enjoyable for a person to understand, an investor to understand to incorporate some elements of, I guess, macro-based thoughts into their business-focused investing process.
Chris Hill: We will include those titles in the show notes of this episode. Let's get to the stocks on our radar, our man behind the glass, Steve Broido is going to hit you with a question. Maria, you are up first, what are you looking at this week?
Maria Gallagher: The stock on my radar this week is Airbnb, ticker symbol ABNB. It had strong 2021, their gross booking value was up 96 percent, up to nearly 50 billion. It's above pre-COVID levels. What's really interesting is at the end of January this year, they saw 25 percent more summer bookings were already in place than in 2019. They are seeing a growth in long-term stays, non-urban bookings. I'm really just looking to dive into it a little bit more as people start thinking about their summer vacations in the next couple of years. I'm excited about that company.
Chris Hill: Steve, question about Airbnb?
Steve Broido: Does Airbnb need to consolidate the total amount of money it costs to book an Airbnb into one number? Because right now you go online and you're like, "This cabin looks great it's $120 a night." Then you're like, "Eighty dollar cleaning fee, $200 booking fee, reservation fee, this is going to be $800." [laughs] Do they just need to make it, it's $800 a night, take it or leave it?
Maria Gallagher: In my opinion, yes. I think that's the worst thing is when you think it's going to be one thing and it turns out at something else, but I think they're trying to get you with the low price and then by the time you realize how expensive it is, you're already committed.
Steve Broido: Well, it's not working for me.
Maria Gallagher: I would like it. I'd like with just one number.
Chris Hill: Emily Flippen, what are you looking at this week?
Emily Flippen: I'm looking at one that nobody has ever heard about before. It's Etsy the ticker is ETSY, and I'm looking at Etsy because it's down nearly 50 percent just over the course of this year alone, they're in the process of rising their fees from five percent to six-and-a-half percent and it's interesting to me from a valuation perspective now, because it's trading at less than 25 times forward earnings, the cheapest Etsy spend in a very long time for a very high-quality, fast-growing business. But at the same time we're seeing this push-back from sellers about the fee hike and next week they're headed into a week long strike. It's on my radar because I like it from a valuation perspective. I'm interested in it to see how the seller strike will impact the business.
Chris Hill: Steve, question about Etsy?
Steve Broido: When I think about Etsy, I think about custom-made items. Does Etsy sell things that just any other store would sell like paper towels or Clorox soap?
Emily Flippen: [laughs] Clorox soap, no. But you will find what some sellers argue are mass produce goods on the platform [MUSIC] and the business has tried to crack down on getting rid of those, but not to the satisfaction of many consumers and sellers
Chris Hill: What do you want to add to your watch list, Steve?
Steve Broido: I'm not really down with Airbnb fee thing so I think I'm going to have to go with Etsy. [laughs]
Chris Hill: Emily Flippen, Maria Gallagher, thanks so much for being here.
Maria Gallagher: Thanks, Chris.
Emily Flippen: Thanks for having us.
Chris Hill: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Steve Broido. I'm Chris Hill. Thanks for listening. Give us a call, 703-254-1445. We'll see you next time.