In this podcast, Motley Fool host Dylan Lewis and analysts Ron Gross and Bill Mann discuss:
- The jobs report, and why they're paying attention to mortgage rates, credit card delinquencies, and inventory levels this earnings season.
- Meta's plans to offer a monthly subscription to users in the E.U.
- Cyberattacks hitting Clorox, MGM, and Caesar's.
- China's BYD heating up the race in electric vehicles (EVs).
- Two stocks worth watching: Chevron and Burford Capital.
Elon Musk biographer Walter Isaacson explains Musk's fascination with X and how his fixation on mission fuels his innovative and entrepreneurial spirit.
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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This video was recorded on Oct. 06, 2023.
Dylan Lewis: We've got the inside scoop on Elon Musk and the story of an electric vehicle company vying for Tesla's Crown. Motley Fool Money starts now.
It's the Motley Fool Money radio show. I'm Dylan Lewis. Joining me in studio, Motley Fool Senior Analysts Bill Mann and Ron Gross. Gentlemen, great to have you both here.
Ron Gross: How are you doing, Dylan?
Dylan Lewis: So great to see you guys. It's awesome. We've got the stories of Elon Musk and AI. The real price of Facebook and stocks on our radar, but we are kicking off this week looking at the big picture. Ron, we have a fresh jobs report in our hands as of Friday morning. What is the headline?
Ron Gross: The headline is that I'm a geek because I love the fresh jobs report. It's so sad. But this is an interesting one. Jobs are up 336,000 for the month. Way better than the consensus of 170,000. The labor market, very strong. Interestingly, average hourly wages rose 0.2%. Now that's a little bit less than expected. That's going to be important if you stick with me. Unemployment rate, 3.8% compared to 3.7% prior. Let's call that flat. Leisure and hospitality led the growth as it has been on occasion over the last couple of years post-COVID. I think the Fed likes this report. Even though the stock market was a little mixed on Friday, even a little confused on Friday, we have the job market remaining strong, which bodes well for the economy. But it's counterintuitive to the thought that the Fed really needs the labor market to break if it's going to bring inflation down to its goal. But we do see that wage inflation number being lower than expected. So wage inflation is coming down is a positive indicator. That's what I think the Fed probably likes to see. We do have 10-year treasury yields at 16-year highs. But I'm guessing we get one more rate hike and then we'll have to see what we see.
Dylan Lewis: Bill, I saw you nodding your head there as he was talking about the Fed liking what they saw in this report, what stood out to you?
Bill Mann: It's so funny, because we have spent about 12 years now during the zero interest rate environment as far as the Fed has gone with rates. Because I think that we all like rates to be lower rather than higher.
Dylan Lewis: Generally, yes.
Bill Mann: That feels good. But bad news has been good news and good news has been bad news. But I think that we've come to the end of that period of time. I mean, it's really funny how expensive an 8% mortgage feels right now.
Dylan Lewis: Yes.
Bill Mann: It just has to do with the path, and it's because of the fact that we're accustomed to being able to borrow really, really cheap money. But 3% rates, I mean, that has never happened before in history before 2009. Societies do really well when things are stable and they struggle when they are. I think that we are in a period right now where the economy is doing really well. I think that's the bottom line and rates are coming up because of that. I think we need to get used to the fact that higher rates are actually good news.
Dylan Lewis: I want to take the jobs report, and actually something you just mentioned there, that 8% rate number, specifically looking at mortgages and get a bigger sense of the macro picture, putting all this stuff into perspective. I'm looking at all of this, just a couple of headlines that I saw over the last couple of weeks. Mortgage demand hits a 27-year low because of near 8% mortgages, bond yields hitting 16% highs, or 16-year highs, I should say. Credit card delinquencies jumping past pre-pandemic levels. Ron, which one of those three do you want to zoom in on here? Help you make sense of it?
Ron Gross: Well, Dylan, as the husband of a realtor, I'm going to say the mortgage story certainly hits close to home. But it obviously impacts lots of folks. Those who have homes with adjustable mortgages, and most importantly, probably those looking to buy a home. As you said, we're approaching 8% for mortgage rates, which is around the same rate when I first entered the housing market. But gosh, as Bill just said, I got used to 3% for a while.
Bill Mann: Back in the 20th century.
Ron Gross: It seems pretty severe, literally.
Dylan Lewis: Bill can say that, I'm not allowed to.
Bill Mann: In the late 1900s?
Ron Gross: Don't go that far. The added cost of financing a mortgage, along with rising home prices, due to the fact that there is no inventory out there for homes, has made affordability for homes, the lowest we've seen in decades. They're 20% behind last year in terms of a sales pace, and people are struggling in terms of what to do if I want to get into this housing market, and people are holding onto their houses longer than they have in the past, especially if you have 3% locked in for 30 years, that's good money right there, as Bill said. The weak real estate market, the higher rates, are they going to jeopardize this soft landing the Fed is trying to engineer, or as we said earlier, with the labor market remaining strong, the economy remaining strong, are we actually OK? This could turn out well. It's not an easy thing for the Fed to engineer, but I'm thinking we're close. We're plus or minus a little bit to getting that done.
Dylan Lewis: In our planning meeting for the show, Bill, you are taking a different angle on the rate story. Looking a little bit more at the debt side of it and what we're seeing with delinquencies.
Bill Mann: Yes. Ron is taking the center of the curve which he absolutely should take but at the left tail I think you're seeing a lot of distress for people. A lot of it has to do with the fact that one of the things that you were encouraged to do, why rates were so low for so long, is they were trying to encourage spending. I mean, maybe they don't mention it that way, maybe they don't phrase it that way, but we have come accustomed to taking more and more credit as a percentage of our income because credit was so cheap and so there is a lot of distress that's going on at certain levels. You see car payments under a multiyear high in delinquencies. Credit cards are at a multiyear high for delinquencies. So we should not forget when we're talking about, hey, the economy is going great, that these types of changes add a huge amount of distress to the most vulnerable among us.
Dylan Lewis: One of the things I'm curious about with this adjustment in rate environment is, we've gotten very used to, not only lower rates, but also a very quick intervention to get rates lower when things need to be propped up a little bit.
Bill Mann: Yes.
Dylan Lewis: Do you expect the Fed will adjust and maybe be a little bit less sensitive to something like that going forward?
Bill Mann: Well, they've only told us for the last 18 months that they're not going to do that anymore.
Ron Gross: Higher for longer.
Dylan Lewis: Higher for longer.
Ron Gross: Yes. If they're telling you, we should believe them.
Dylan Lewis: Yes. Looking forward, we also have the earning season ramp up next week. I'm curious, do any of these macro factors, Bill, play into what you are looking at for companies or are you looking at other things as companies begin to report?
Bill Mann: I think one of the biggest things, and for some reason I think this has gone underappreciated. But you remember back in 2022 when we were hearing stories about people ordering new refrigerators and because of supply chain issues, people were saying, well, you're delivery window is sometime between nine months from now and never. Companies did the very logical thing in that type of environment of taking on as much inventory as soon as they could just to make sure that they never had a sale that got missed because they didn't have inventory in, because they didn't plan. There is a backside to that, and that is, if you take on a huge amount of inventory, that means that you've tied up a lot of capital, and if that inventory suddenly doesn't get used, that can create financial distress. Companies went out, and a lot of times they bought with cash, but they also financed a lot of that inventory. It has created a little bit of a macro bubble, if you will. It's something that I'm really interested in and I think that we should obviously always remember that there's individual incompetence everywhere, but systemically that was a problem.
Dylan Lewis: Ron, he's looking at the balance sheet. Where are you zooming in?
Ron Gross: Earnings are, if you exclude the energy sector, earnings for the third quarter are expected to be up around 3% and it's supposed to be up pretty significantly in the fourth quarter. I'll believe that when I see it. Wait and see. I'm going to be looking at the retailers for many different reasons. Among them, I want some signals on the strength of the consumer, as Bill said. Savings accounts are coming down, credit card balances are going up. I want to see how does the consumer look in both the essential and the discretionary categories. I want to see if the retailers are inventoried properly, do they have the right mix, what has been their ability to raise prices in this inflationary environment. That does still persist. How are they positioned for the holiday season? I think the retail sector will inform me in a lot of different ways on what I can expect for the next six months.
Dylan Lewis: Coming up after the break, we've got a new name about to take the lead in electric vehicles. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis joined in studio by Bill Mann and Ron Gross. Guys, social media users in Europe may finally face the decision, their data or their dollars. Bill, Meta is reportedly planning to offer users in EU the option to pay $14 a month for Facebook or users will have to opt into letting the company use their personal data for ad targeting. Is this incentive or disincentive here by Facebook?
Bill Mann: It does seem like a very super specific number if this is just a rumor.
Dylan Lewis: Yeah. [laughs] They seem pretty far away while planning for this one.
Bill Mann: That's right. I feel like The Wall Street Journal got good information on this and they're reporting basically that it's a choice based upon European regulations regarding personalized ads. So you as a consumer may not want to be tracked and have targeted ads sent to you, in which case they're giving you the choice to pay. Simple enough. I don't know about you. I have no illusions about my privacy and you as far as I'm concerned, I find it much more annoying when I get super untargeted ads than when I get targeted ones. But I actually like the fact that there may be a choice out there, like, yeah, you can just pay and the illusion that this is all free is no longer going to be the case.
Dylan Lewis: You mentioned the specificity of that number and I looked at the recent calls for Facebook parent Meta and if you look at Facebook's average revenue per user in Europe last quarter, $17.88 Now I'm not a mathematician, but 3*14 is more than $17.88. Ron, does this become something that's actually interesting as a moneymaker for Facebook?
Ron Gross: I think everyone is going to find out how much they can tolerate ads in a world where they're asked to shell out 15 to $20. All of a sudden, targeted ads aren't going to seem so intrusive or creepy. If Facebook knows that I love pizza, I'm OK with that.
Bill Mann: My point exactly.
Dylan Lewis: You heard it here first. Target Ron Gross with pizza ads. Outside of the economics of this Bill, I think one of the things that's interesting is we've consistently seen EU lead the way with regulation, especially regulation toward big tech and this looks like the space to watch, to see where this industry is going.
Bill Mann: I think it's really important to recognize the fact that in the United States when it comes to regulating big tech, there is like a plus and a minus because we are talking about a bunch of massive American companies. So if you mess with their economic model too much, there actually might be a downside in terms of market losses or things of that nature and I mean, stock market losses. The EU doesn't have that upside of not going in and being pretty sharp with these tech companies. Can you name the largest European pure technology company?
Ron Gross: I could, but we don't have time.
Dylan Lewis: Well handled there Ron.
Bill Mann: That's my point. It is far down the list. They have different interests in Europe. They are much less worried about the impact on consumers and they're much more worried about competition. That's how they regulate. But in this case, I think it really has to do with the fact that there's no bad news when it comes to Europe in terms of regulating big tech.
Dylan Lewis: Sticking with tech, Clorox is one of the latest companies to disclose details of a cyber attack. Ron, in a filing, the consumer goods company said it will be spending $25 million on digital forensics and legal work related to the hack, but it may pale in comparison to what they feel in terms of the business impact due to disruptions.
Ron Gross: Yeah. It's a little scary out there right now. This is just one in a long list of cyber attacks. In this case, sales will be down 23-28% for the quarter. As a result, they're going to end up with a loss for the quarter instead of $150 million in profit. It caused them to take some system offline that led to product outages, processing delays. They've had to do some of it manually while they get their systems back up and running. It looks like the group called Scattered Spider is likely behind this as well as those from MGM and Caesars. If you recall, Caesar's paid the ransom. I believe MGM chose not to. It's a difficult decision based on how impacted your business is. Whether you want to give into those demands, the more we give into the demands, the more likely they will continue. But this is like I said, a long list. Johnson Controls, Dole, Campbell Soup, Brunswick and many, many more have been hit by cyber attacks. The Securities and Exchange Commission has come in with more stringent regulations of late which says you must tell the public if you're hit with something significant so they don't just sweep these under the rug.
Dylan Lewis: That seems like a good baseline provision. I think we'd all be happy about that.
Bill Mann: Two votes.
Dylan Lewis: Bill, as someone who is looking at companies, owns companies in their portfolio, I feel like it's hard to look at a pattern of this and say, oh, I might be a little bit more subject to one of my companies being targeted. Also, probably pretty hard to kick the tires and understand the cybersecurity measures that a company has in place. What is the investor angle on something like this?
Bill Mann: Well, let me ask you this. If you were to look at your portfolio and let's just pretend this is your portfolio. If Clorox was in it, would you think that that was one of the more susceptible or less susceptible companies?
Dylan Lewis: Naturally, I would think less.
Bill Mann: I would as well. I think you're going to start hearing about something over the next couple of years called code debt. Basically, what code debt is, is when you think about what a company's entire code infrastructure looks like, a lot of companies have code that's written on top of machine language in Pascal and they have millions and millions of lines of code that probably do the work of 300,000 lines of code today. When we think of cyber attacks, we think of maybe someone coming in through the front door. But basically, if you think about a code stack, every single line is a potential front door. So I think that you're going to start to see a lot more investment in lowering that code debt. For me, I would be very comfortable holding a basket of the cybersecurity companies because I don't think that there is going to be one winner and I also don't think that we are going to be more secure with a single winner.
Ron Gross: Yeah. They don't look cheap to me, those companies, but the growth probably will support the valuation to some extent; the CrowdStrike,Okta, Zscaler, Fastly, Fortinet. Those types of companies, at least some of them, would be probably wise to hold in your portfolio.
Dylan Lewis: We're going to round out the news updates with a look at electric vehicles. Don't look now, but there's a new car maker coming on Tesla's heels. China's BYD is reportedly on pace to sell 1.8 million EVs by the end of 2023. Bill, that would bring it even with leader Tesla.
Bill Mann: It sounds unbelievable, doesn't it? Because there are functionally zero BYD EVs on the roads in the United States.
Dylan Lewis: I was going to say I've never seen one.
Bill Mann: Yeah. So it's a company that is owned 6% by Berkshire Hathaway. They bought it in 2008 for $225 million. Their stake is now worth six billion.
Dylan Lewis: Charlie Munger mostly.
Bill Mann: Yeah, exactly. So once again, those guys. I don't know if you've heard about them. I think Berkshire's going to be big someday.
Dylan Lewis: But an unusable investment for them.
Bill Mann: It's an extremely unusual investment for them. It was far more speculative than they tend to, but they thought that the CEO was really, really remarkable. He's a guy who still flies coach to this day. You would not go into their office and see any of the corporate trappings that you see anywhere else. Now for the cars themselves, there is something very specific to keep in mind, they are exporting primarily to Europe. The Chinese EV market is a bit of a mess at the moment. They're making in a surplus of 10 million cars, so they have to go somewhere. The EU as we talked about earlier, is actually investigating the Chinese EV industry for anti competitive practices. But the bottom line at the end of the day is that EVs coming into the United States, the Chinese EVs pay a 27% tariff and they don't get the tax credit. So it is something to watch. Although here in the United States you can't necessarily see it.
Dylan Lewis: Yeah. That's fascinating. It's a different approach to the EV market than we saw from Tesla. They famously started at the high end, brought things down to the low end over time to make a more budget-friendly vehicle. We're going to get a little bit more on Tesla later in the show, but we're going to say goodbye to you guys briefly. Thanks for hopping in the news updates. Up next, we've got Elon Musk's biographer Walter Isaacson and the inside scoop on Musk's Holy Grail for AI and how it could wind up in cars.
Welcome back to Motley Fool Money. I'm Dylan Lewis. One author is consistently the go to for profiles on most innovative, brilliant, and complicated minds, and that's Walter Isaacson. His latest work is a biography on Elon Musk, built on countless hours spent with Musk and his friends, family, and colleagues. Motley Fool Money's Ricky Mulvey read the book and this week spoke with Isaacson about Musk's fascination with the letter X and how his fixation on mission fuels his innovative and entrepreneurial spirit.
Ricky Mulvey: One thing I didn't realize, and it is apparent throughout the way he names his kids, the way he names his company is the letter X and just how important that letter is to Elon Musk. Walter, you are a man of letters, but I would doubt you have that type of preference for exactly one letter, why is this letter so darn important to Elon Musk?
Walter Isaacson: Even as a kid, whether it be the X-Men comics or the mathematical concept of the unknown, the mystery that you have to hunt for in an algebra problem. For example, it made him love X. It sounded as if it was risk taking, it's hardcore. There's an adventuresome quality to it. Throughout his life, whether it was his eldest surviving child was named after his favorite comic book character in the X-Men Comics Xavier, or his first company was called X.com which morphed into Paypal, but he fought to keep the name X. You see it over and over again with space X or turning Twitter now into X. Thinking he feels little tweets with blue birds and little blue check bark etc, anointed to members of the elite is both and he needs a hardcore, somewhat more mysterious type of thing and then XAI. Of course, his three-year-old kid who's with him at all times has a name that sounds like an auto-generated druid password, but he calls them X.
Ricky Mulvey: A lot of the arguments when Musk started with the founders of Paypal where he was pushing for X. His arguments seems to be getting the same ones now. X.com sounds a little seedy, people don't know what it is, but he pushed through it similar to what he's pushing through now. Maybe Twitter really is the culmination of that dream in the 90s of what X.com could be.
Walter Isaacson: You got it right Ricky. Nobody else seems to have captured that, but it's part of the narrative which is feeling burned, that Peter Thiel and others ousted him from the company that he had called x.com 20 years some odd years ago. Then they named it Paypal. He thought Paypal was a sweet little name like a friendly person who helps you get paid. Of course, it does have a more friendly feel to it, just as Little Bluebirds and Twitter has a sweet and friendly feel, but nobody uses the phrase sweet and friendly to describe Elon Musk. He's hardcore. He's all in. He's a risk taker for better or for worse. When he was first buying up stock in Twitter, we were at the Gigafactory in Texas even before it opened, and he told me he was going to go try to control Twitter. He said it will be the booster rocket, the accelerant to make a payment system connected to a social network, connected to a place where things like the Motley Fool podcast can be posted and make money. People can do content and make money. He said, this will fulfill my dream of the original X.com.
Ricky Mulvey: I'm looking at my time and I know I have to focus on Tesla a bit. One of the things you've written about Tesla, and I think this is foundational to the business. Quote, Musk focus on the importance of the mission rather than the potential of the business, end quote. For a lot of short term stock traders that might not be the best course of outcome, but a lot of long term investors have benefited well from that mentality. How does that drive Tesla's model? What do you think would have changed at Tesla if that were reversed? If the potential of the business was more important than the importance of the mission.
Walter Isaacson: If he were driven mainly by money, you won't start a rocket company and you wouldn't start an electric vehicle company. He always has a mission in mind and then backfills with a business plan. To take space X first, his mission is getting to Mars, and then he realizes I can launch communication satellite. In fact, I'm the only person who can send up rockets, land them upright, and reuse them, so I will launch my own internet in low Earth orbit with Starlink. Now you ask about Tesla. He decided by doing high end vehicles like the Roadster, he could fund a factory because he thought it was ridiculous that America was outsourcing its manufacturing and that would make it so we didn't have a feel for innovation if we just design things and let it be manufactured somewhere else. He spent more time focusing on not just the product, but what he called the machine that makes the machine, the assembly line, each station on the assembly line. By insourcing everything, is not the best short-term business model. If you're going to go for short-term profit, obviously your labor costs are better if you're having it manufactured in other places. But he said we have to look at the longer term. It was a period in which, I think more than 70% of the intellectual property that automakers produce in America, they were sending offshore to get produced. He more and more decided to in-source it. But it did finally mean that he has the two most productive factories around in Fremont, California and Austin, Texas and now he turned out already this year a million Teslas and he's worth more than the next eight or nine car companies combined. One of the things I sat in on a meeting, it wasn't public, but put it in the book. He's now building the new assembly line that's going to create not just robot taxis, but a pretty cheap $25,000 car. Something to go up against a Corolla. Because he's willing to price it cheaply, but then make up for it with huge manufacturing that will take Tesla to the next level, along with autopilot when he finally gets full self driving done.
Ricky Mulvey: The last question I want to ask is about AI. He has a new company called X.AI. A lot of this seems to be driven from a conversation that he had with Google co-founder, Larry Page, where Musk is talking about the dangers of AI, and Larry Page essentially accuses him of being what is a speciesist. Which is that if these computers can think and feel, don't they matter as much as we are? Your book describes times where Elon Musk has stretched stories, thinking in retrospect, forgetting what people say. Has anyone followed up with Larry Page about this to dive into his thoughts about what it means to be a speciesist?
Walter Isaacson: Larry doesn't talk about it much because he used to be one of Elon's best friends. Elon Musk is the world's richest couch surfer. He didn't have a house in Silicon Valley, so he would stay at Larry Page's house and they spent nights and nights talking about the risk of artificial intelligence turning rogue on us and leaving humans behind, the Asimov issue. As you said, Larry Page thought that was nuts and like no, and by the way if we could get computers that could have consciousness, why isn't that just as good as human consciousness? Musk says yeah, I'm a species, I actually believe in the human species. I think it's a cool species, I'm more in favor of it. I talked to even one of those arguments at a birthday party. Reid Hoffman is there, many other people are there. Sam Altman of course.
These conversations happen over the years including with Demis Hassabis who is the founder of DeepMind and he's trying to throw himself in front of the train when Demis is selling DeepMind to Larry Page. Musk is gathering people to try to stop that. This isn't just one conversation, this is about two years of him opposing Larry Page on this notion that we need more guard rails on AI. Now he's still that way, he believes that Sam Altman took OpenAI which Musk had co-founded with Sam Altman from being a non-profit, open-source thing to now being a closed source in which it has a for profit arm that has sold a large percentage to Microsoft. It's Elon Musk's nightmare in terms of AI, at least that Microsoft and Google without guard rails, are going to create AI. In some ways one of the culminations of the book, besides a first launch of Starship is Musk deciding that he has to get into AI himself rather than having trusted OpenAI and other things. Near the end of the book, there's a whole scene. It's where we meet Shivon Zilis, their children for the first time. I had spent a week or so with Musk and was just back here in New Orleans, rested, recuperating, and maybe starting to write. He said, no, you got to come back, it's something we can't talk about on the phone. We sat in the backyard of Shivon's house in Austin by the swimming pool with their two twins sitting on their lap. He said, I'm going to have to start an AI company, XAI.
The interesting thing is it's not just about doing a chatbot, it's not just about large language model generative predictive transformer-based language intelligence or chatbots like ChatGPT. He feels that the Holy Grail is real-world artificial intelligence. Real-world artificial intelligence that doesn't just process language and search the billion documents on the Internet, so you can ask, what are the five best Popes or something, but something that can process video data, like the 8 billion frames a week from Tesla cars and the cameras in a Tesla car all being processed, not just by Nvidia GPUs, but by Dojo, this chip that he's doing that maximizes the ability to do video, and oral things, and for that matter, Twitter feeds. Eventually, he wants to create cars that can drive themselves and robots that can walk around a factory floor or walk around burning man or walk around your house and have planning and have intentionality and be able to do things. That is going to be his next big thing is real-world AI. I'll leave with this which is having watched Sam Altman and Google and all doing machine learning based on processing of millions and millions of documents and words and everything else and being able to predict things, he makes a pivot at the end of the book, from the full self-driving technology he has been using, which is a rules based algorithm where FSD 11, for example, has hundreds of thousands of lines of code coded by real engineers and humans that have simple things like when you see a red light stop or when you see a double yellow line, don't cross it, or when you see a bike lane and you're taking a left turn, here's what to do. They show him that instead of doing a rules based algorithm, you could do what ChatGPT does with language and do it with navigating the real world, which is to look how millions and millions of drivers handle different situations. The machine learns what to do based on human imitation. It is almost like ChatGPT for self driving.
Ricky Mulvey: Walter Isaacson's biography on Elon Musk is in bookstores and online. If you want more of his insights on what motivates Musk and the unbelievable story of a knife thrower at a child's birthday, check out our full interview with Isaacson in Motley Fool Money's podcast feed. The whole conversation will post this Saturday. Coming up after the break, Bill Mann and Ron Gross return with a couple of stocks on their radar. Stay right here, you're listening to Motley Fool Money.
As always, people on the program may have interests in the stocks they talk about and the Motley Fool may have formal recommendations for or against don't buy or sell anything based solely on what you hear. I'm Dylan Lewis joined again by Bill Mann and Ron Gross. We've got stocks on our radar coming up in a minute, but first, we talked earlier about the arms race and electric vehicles. We're going to check in on an equally competitive space. Popeyes has officially taken over KFC to become the second-largest chicken chain in the United States. Ron, it is a sad day for the Colonel.
Ron Gross: You know what? Both of those are fine, but they're not great. They pale in comparison to our favorite Chick-fil-A. The nation's favorite chicken, you get the number 1, the original chicken sandwich with a combo fries and a drink, it's delicious.
Dylan Lewis: It's No. 1 for a reason.
Ron Gross: It has been taking market share from number 2 and number 3. Not only is it cementing its number 1 spot, but Bill Chick-fil-A continues to take away market share from the others.
Bill Mann: I do want to talk about Popeyes and put a little respect on their name for a little bit. Because Popeyes was a distant, distant trailing competitor for a bunch of years until CEO came in named Cheryl Batchelder and she completely revolutionized and rehabilitated the company. I don't know if you remember going into Popeyes in the 1990s, but you couldn't leave and not feel bad about yourself [laughs].
Ron Gross: She's very good at pretending to invent the chicken sandwich.
Dylan Lewis: That's exactly right. That was a wonderful PR and marketing campaign a couple years ago. I think we all bought into the taste test fever.
Bill Mann: I think one of my favorite Cheryl Batchelder moments is when someone was asking her about healthy options and she said, nobody's coming into Popeyes for a sack. [laughs]
Dylan Lewis: It's knowing your customer and it's incredibly, incredibly important.
Bill Mann: Absolutely right. But it is a tale of customer service and that is what Chick-fil-A excels in, and it is also what Popeyes has gotten much, much better at.
Dylan Lewis: Let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron, you're up first. What are you looking at this week?
Ron Gross: This one comes from our very own Matt Argus Singer over at Devin investor. It's Kenvue, K-V-U-E, the former consumer health products business of Johnson and Johnson. Well-known products, band aid, Tylenol, Listerine, motor, Neutrogena names we all know. J&J completed a spin off an IPO of Kenvue earlier this year, J&J still owns about 9% but it's mostly now been released to shareholders. It's the largest pure play consumer health company stocks down about 10% from the IPO. From a PE ratio perspective, an earnings ratio perspective, it's cheaper than competitors like Colgate and Procter and Gamble. 4% dividend yield for those who are interested in income, probably well supported by the cash flow that this company will generate. I don't know if the stock's going to knock the cover off the ball, but you get 4% and you get probably some upside as well.
Dylan Lewis: Dan, a question about Kenvue and any interest in that 4% dividend yield?
Dan Boyd: That's pretty juicy, I'm not going to lie, but this company, Ron, I can't imagine it's going to be growing fast at all, it already has every big brand under the sun. They're the leader and they will continue to grow at the rates of the economy may be a little bit better than that and that's what we should expect. If you can buy it at a discount, you might get some additional upside from that 4% yield.
Dylan Lewis: Bill, what's on your radar this week?
Bill Mann: We're going to talk about a company called here we go, Grupo Aeroportuario del Sureste, also known as ASUR, which is a conglomeration of Mexican airports in the southeastern part of the country. That includes Casamel, Cancun, Merida, and a number of other places. Tough news for them. Earlier in the week when the Mexican regulator came in and said they were going to change, and they haven't said how, but you can assume that it's bad news, how these operators of the airports are compensated on landings. They make a huge amount of money, upwards of $30 per ticket for any person to land at the airport. Changes are coming, but Cancun Airport is massive. You don't just build another airport next door and compete with it. You're talking about a company that has an absolutely dominant position in a part of the market where there's more and more travel going to. It is a story of what happens when you have a single customer, and the single customer is pretty powerful and in this case it's the Mexican government. But it was cheap beforehand and now it's even cheaper.
Dylan Lewis: Dan, I took French and high school, so I'm going to stick with the ticker on this one. A question about ASR. Bill, can we trust the Mexican regulators not to regulate this company out of existence?
Bill Mann: No. [laughs] Back to you, Dan. I think it's true with every company that has generally government contracts that the governments have the right to close out the contracts, absolute. But in this case, the Mexican Stock Exchange went down 3% yesterday as a result of this action and that matters to the Mexican government as well.
Dylan Lewis: Dan, which one is going on your watch list this week?
Dan Boyd: I'm taking Kenvue, they got band-aids.
Dylan Lewis: Bill Mann, Ron Gross, thank you guys for being here and bringing your radar stocks. Dan Boyd, appreciate you weighing in. That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Bill Mann has positions in Alphabet and Berkshire Hathaway. Dan Boyd has positions in Berkshire Hathaway. Dylan Lewis has no position in any of the stocks mentioned. Ricky Mulvey has positions in Burford Capital, Meta Platforms, PayPal, and Procter & Gamble. Ron Gross has positions in Berkshire Hathaway, Burford Capital, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, BYD, Berkshire Hathaway, CrowdStrike, Fastly, Fortinet, Grupo Aeroportuario del Sureste, Meta Platforms, Microsoft, Nvidia, Okta, PayPal, Tesla, and Zscaler. The Motley Fool recommends Brunswick, Burford Capital, Chevron, Johnson & Johnson, and Kenvue and recommends the following options: short December 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.
