← Motley Fool Hidden Gems Investing
Motley Fool Hidden Gems Investing
Dunkin', Kendrick on Offense at Super Bowl
00:28:32
The big game didn’t live up to the big billing, but there was plenty to take in during commercial breaks and halftime.
Loading summary
Transcript58 lines
- [00:05]
Dylan Lewis
We're digesting ads from the big game and fresh results from McDonald's. Motley Fool Money starts now. I'm Dylan Lewis and I'm joined over the airwaves by Motley fool analyst David Meyer. David, thanks for joining me. Did you enjoy your Super Bowl Sunday?
- [00:21]
David Meyer
First of all, thanks for having me. And yes, actually I did it.
- [00:26]
Dylan Lewis
I'm glad to hear that because I have to say, it felt like a lackluster super bowl to me. I wasn't as psyched up as I probably should have been. I'm a big fan of the NFL, but it was hard to get up for this one. And then we got to the on field product and it became a snooze fest pretty quickly.
- [00:42]
David Meyer
It depends on your point of view, right? I guess that's true. So I have to say this is not meant to be too pejorative against Kansas City, but I did not want anybody to three peat. I was like, that's an enormous record. Right. So I was kind of rooting for Philly. Not a Philly fan. My team is the San Francisco 49ers. I'm a native Californian. That's been my team forever. So I really didn't have necessarily a dog in this hunt. But I was like, yeah, it'd be awesome, right, for Philadelphia to break the streak, the Mahomes streak, the Kansas City streak. But I was shocked, absolutely shocked at the result on field. As someone who does enjoy, you know, good high level, high level football, Philadelphia's defense was just absolutely amazing.
- [01:31]
Dylan Lewis
Yeah, I feel like this was the dis. Super Bowl. The Eagles came out and absolutely embarrassed the Chiefs. Kendrick Lamar came out and put an emphatic finish on the rap battle that we've been seeing with him and Drake. There's just a lot of, a lot of hate, a lot of spite in the game in the broadcast yesterday.
- [01:47]
David Meyer
That's actually so well put.
- [01:50]
Dylan Lewis
I will say I need to give our colleague Nick Seiple props because on last week's radio show, he and our colleague Ricky Mulvey did a sports betting preview and rundown and he said the Tush push touchdown was one of the most interesting prop bets out there for the game. It took all of about 10 minutes for that to happen, David.
- [02:09]
David Meyer
That's right. Yeah, that one is always fun to watch. I was going back to the previous game with Philadelphia versus Washington. Washington actually stopped them a couple of times on the Tush push, so I'm surprised Kansas City didn't learn anything there.
- [02:25]
Dylan Lewis
So while the game was not particularly interesting did the ads do anything to save the night for you this year?
- [02:30]
David Meyer
So for me, overall, and then I didn't see all the ads live, but I have seen most of them after the fact. I was a little disappointed. Maybe I'm just getting older, maybe. Maybe, you know, maybe I'm missing something in the. In the pop culture. But I will say I didn't understand a lot of them, and a lot of them were just, frankly, too quick for. For me to sometimes digest. I'm like, wait, was there a joke in there? Wait, what did you say? Wait, was that a setup? Wait, I'm lost. I'm lost. That being said, that there were a few that stood out. And I think there's also some interesting things that we can talk about from a. From a business standpoint, as they're related to the ads as well.
- [03:14]
Dylan Lewis
Yeah, I think there are some years where there is a clear theme that is dominant in the ads. And, you know, as we got. We saw maybe two or three years ago, crypto was a very big theme. A lot of crypto advertisers hopping in. And. And this year, I. I don't know that there was a clear theme to me other than what we see in the commercials. Very similar to what we're seeing in entertainment right now in movies, where it's like, hey, we are going to put a ton of famous people in something and people will be interested and enjoy it. And I think to your point, the script writing is important. We need some connective tissue there for things to make sense.
- [03:49]
David Meyer
Totally agree. Regardless of how you feel about celebrities and things like that, there has to be a narrative. Call it a hook, call it whatever you want, but there has to be something that brings it all together and makes it memorable. Just putting up somebody's image who's famous. And don't get me wrong, I like seeing all the actors and actresses up there doing their thing, but I want a hook. I want something that's memorable, something that makes me laugh, something that makes me think. Didn't quite get it again, as a whole, I didn't quite get what I was expecting.
- [04:22]
Dylan Lewis
One that did land for me was the uber eats Matthew McConaughey ads. This has been the extension of what they were running during the regular season. The conspiracy that the NFL is about, getting people to order food, they really brought it home and kind of sent Matthew McConaughey through the ages with football. Paul touch points. I enjoyed it a lot, and I think for me, seeing that strategy playing out. Ubereats has plenty of competition in food delivery, we have Instacart, we have Door Dash. That are really trying to eat into some of that business that they have. They're trying to maintain as much mind share as they possibly can.
- [04:57]
David Meyer
Yeah. And for that one in particular, yes, that was interesting. The hook was, this has all been a conspiracy. Right. And you have a doubter come in. Honestly, I can't remember the young lady's name, but she, like, really, you think this is what it was all about? And then they just, again, they hit you with funny stuff to say, you know, the pigskin. Everybody likes bacon. Of course, everybody likes bacon. But, yes, watching him come through the ages, we also have a little funny reference to the six degrees of separation of Kevin Bacon, who makes an appearance at the beginning. So, again, you know, that one was a little thoughtful, and I hate to say it again, that was more at my pace. I could actually figure out what they were talking about.
- [05:38]
Dylan Lewis
I loved it. I thought it was a good nostalgia Tour, seeing Matthew McConaughey suiting up in a Broncos uniform to be Peyton Manning calling out Omaha on the play switch. I thought that was fantastic.
- [05:47]
David Meyer
Or him playing Mike Ditka.
- [05:49]
Dylan Lewis
Yes.
- [05:50]
David Meyer
Walking down the tunnel with Refrigerator Perry. That was funny as well.
- [05:56]
Dylan Lewis
One of the advertisers I wasn't expecting to be talking about on today's show is hims. They are a brand that I think has really skyrocketed over the last year or two and become much more a part of the public consciousness. And they had a. A pretty bombastic super bowl ad. They came out with this. It was almost an advocacy ad in a way, but it was this ad talking about the issues with obesity in the United States and also with the health and weight management systems that we have here. The poll line for me on this one, David, was the system was built to keep us sick and stuck. And then they talk about how they are a cheaper, more affordable provider in the world of weight loss.
- [06:37]
David Meyer
Yes. What was the other line that we saw in the article, I believe is this. It's designed for profits, not for people. Look, that's actually a great tagline. Right. I mean, again, if we're talking narratives, if we're talking memorable, if we're talking things that you can walk away from and generate a feeling. Yes, that's, you know, that is one of the knocks on the healthcare system is that it's, you know, it's basically a recurring revenue business as opposed to how can we help people get better. So. So, yeah, that was. That one was definitely more in your face. There's also a little bit of self serving there as well. Because right now. So if you don't know hims and hers is one of their business lines is compounding, so they can actually make compounds, pharmaceutical compounds, and sell it to people. Because. And I might make, I believe this is correct from what I have read and studied, because there is a shortage of the semi glitude injections. They are actually allowed to make the compound and sell it. But if manufacturing of those come back from Novo Nordisk, come back from Eli Lilly, then they will not be allowed to sell it. So what they're trying to do is say, hey, here's a problem, we are a solution. We are more empathetic. Right. We're about you. We're not necessarily about profit, which is not exactly true. Okay.
- [08:00]
Dylan Lewis
They're not doing this out of the goodness of their hearts, Right?
- [08:02]
David Meyer
Correct. Now they will offer lower prices, but it's like, hey, if you want this, it's available through us, It's a little bit cheaper and we want to help you. So again, it was a lot of good messages, both from their branding, from their, hey, there may be a shortage or, you know, some scarcity value. So come, come with us and we'll help you. And then, you know, you take shots at the system. Right. That's a good way to get, you know, some consumers to make a decision and buy their product and help from a weight loss standpoint. So I actually thought, you know, I may not necessarily agree with everything, but that was a pretty effective ad.
- [08:42]
Dylan Lewis
There was a great Wall Street Journal piece about that ad and kind of the positioning for hims because as you noted, they have a special exemption right now to be able to create this stuff. The FDA has decided that some of those drugs are no longer in shortage territory. There are still a few that are. And it seems to me like the playbook here for, for Hims and Hers is we need to get as much awareness as possible around the fact that we offer this thing so that we can one, seize this huge customer acquisition opportunity and two, maybe turn the public perception here so that the average voter pushes a little bit on lawmakers and the FDA to make these more affordable.
- [09:21]
David Meyer
Very good point. And I will also say there's a third thing, and that is this isn't just, you know, hims and hers doesn't just offer one thing. Maybe you don't know about all the things that hims and hers does. Right. So we have, not only do we have weight loss, but we have a whole laundry list of other products and services that we offer as well. So get them into the system, get them looking around, learning more about their business. You have a good association with the brand to start off with. Right? Again, people over profits is sort of the message they want to send. So, yes, all. All around. Like I would say, if I was quickly doing some back of the napkin math on a return on advertising spend hims is probably going to be up in the top five for sure.
- [10:11]
Dylan Lewis
One of the other advertisers that made quite a splash was Dunkin Donuts.
- [10:15]
David Meyer
They.
- [10:16]
Dylan Lewis
They brought back their who's who of Massachusetts with their ad this year. They had Ben Affleck, Casey Affleck, Bill Belichick, Jeremy Strong popping out of a coffee vat in full method acting mode. It was a. It was a fun ad. And when I saw that one, I mean, what I was really struck by is they are kind of continuing to position themselves as it's just coffee, come and get it, and it's here for you. And positioning the Starbucks angle to things as this just overly complicated, overly expensive experience for coffee.
- [10:50]
David Meyer
So, okay. It only wasn't until after the fact until I finally digested everything, and I may have rewound a couple of times to figure out what was going on, but that was the. In one sense, that's the irony of the message, right? This was a complicated commercial. This one went very quickly for a message that was, we brew simple, good coffee. Like, it took a lot of mental effort for me to get to that point. That's not what you want to do. You want to get to the point right away and then hammer it home with funny things that support the point. So again, I'm not saying, you know, Duncan is free to do whatever they want with their creatives, but I was like, I'm lost. And I was sitting next to a friend and my wife was over on the other side of the couch. And I'm just like, I have no idea what I'm supposed to take from this on the first pass through. And then again, I watched it a couple of times and figured it out. But, you know, contrast that. Well, let's go with a simpler one, which was the Sketchers ad with Andy Reid. Right. Andy Reid pokes fun at himself. Right. He's not doing the manual labor. He's not getting in there. So he's a hand model. Okay, that's kind of funny. And as a hand model, I don't want to disturb my hands. Look, I have comfortable slip in shoes. And what's the demographic, quite frankly, it's the, you know, the older guys watching the super bowl ads for me. So just for. I'll be 55 this year. I play golf. And one story that I keep telling about Skechers is I see more and more of their golf shoes out on the golf course in men and women in, you know, in my demographic. Why? Because they're, they, they work and they're comfortable. If you're walking, you know, five miles on the golf course, you don't want your feet to hurt at the end of the day. So again, it's. It's an interesting contrast between those two.
- [12:45]
Dylan Lewis
Yeah. I think at the end of the day, we have to remind ourselves for as much entertainment as these super bowl ads are intended to provide, you want to do something that drives people to interact with the brand at some point. And I will tip my cap to Starbucks here because they were the butt of the joke when it came to Dunkin's ads. But they came out today and said, hey, this is Starbucks Monday. We know that you guys might have been up late, you might have had a couple drinks last night. We're offering rewards members, free talk coffee to help you get through the day. Day. And connecting the. The messaging of the night before with actual action and trying to get people back to the stores, which is a major priority for Brian Nichol right now. And that team that just seemed absolutely brilliant to me.
- [13:30]
David Meyer
I think you're spot on again. And it's interesting before where I said, get to the point. Their point was actually at the very end, it was the last phrase, hello again. Right? And I'm like, oh, my gosh, that's great, right? One, it's memorable. Two, it fits what they are going through perfectly. Right? The knock on them recently is that, hey, we need to revitalize. We need to make this part of the community. We need to make this a place where you want to go, you want to interact with people, you want to interact with the baristas. Right? And so that the whole mantra of we begin your day, we energize your day, come, come to Starbucks. We have all sorts of things that you may want. You can get whatever you want. And then the hello again. Brought it all together. So I agree. I thought the. I wish I would have seen that one live. I did see it after the fact, but I thought that was a very good ad considering the. Where Starbucks CEO wants to take the brand from this point forward.
- [14:30]
Dylan Lewis
One of the surprises for me was for the big brands, McDonald's didn't have a particularly splashy super bowl treatment. If you were watching the broadcast and didn't realize they had an ad, you'd be forgiven because it was a pretty forgettable one. It was almost a slideshow. And it was leaning into this. This model that they've approached recently of taking famous people and showing what they eat at McDonald's.
- [14:52]
David Meyer
Yes.
- [14:52]
Dylan Lewis
Which can work, but it just kind of felt a little empty to me.
- [14:56]
David Meyer
I agree. And again, I realize that thing you talked about earlier of, you know, let's get as many celebrities in front of the camera as possible. They probably went through 10 to 12 players, maybe five or six on each side. Each side of the ball. Right. In terms of the Chiefs and Eagles, but I couldn't read them fast enough. I wanted to see who they were. I couldn't discern exactly what their meal was because it cut so quickly. I was trying to listen to see how they were describing the meal, and I'm like, I don't even know what to come away with this. The only thing I come away with is somebody on the Eagles goes to McDonald's to get a blueberry muffin and an orange juice. That's the only thing I walk away from this with. That's wrong. McDonald's used to be so good at their advertising. Right. Like where I think they dropped the ball. This is definitely a fumble. This is definitely a fumble.
- [15:51]
Dylan Lewis
Love it. Yeah. And color me skeptical on that. I think that it's more likely that whoever that player is is getting a McDouble or is getting an egg McMuffin or one of the more staple, you know what you really want type items.
- [16:03]
David Meyer
Yes, I, you know, as, you know, as somebody who has frequented McDonald's in the past, and we were talking about this, you know, a little bit before we got on the air, an Egg McMuffin breakfast sandwich like that does hit the spot at the very beginning of the day. I'm not going to McDonald's to get a blueberry muffin. I have a local bakery that makes a hell of a blueberry muffin. That's where I'm going for that. But again, you know, I would imagine there is the truth in advertising. Right. I won't completely write it off, but it does seem a little odd.
- [16:33]
Dylan Lewis
All right, so maybe their super bowl ad didn't hit, but they did wind up dropping earnings today as well. So we have plenty to talk about there. And it seems like the quick line here is earnings in line with expectations, revenue down a little bit. The market seems pretty happy, even though the customer is visiting more and Spending less.
- [16:53]
David Meyer
Yes. Which is kind of odd. There are a couple of numbers I will say stood out. The first one is 130 billion and that is the, what they call the system wide sales. So if you don't know, McDonald's uses a franchise model. So they actually take from their franchisees, they take a percentage of the top line revenue, which is this system wide level revenue, $130 billion. Like it's, it's, it's just sometimes it's hard to think on a global basis just how big McDonald's is. In the United States, the comp store sales were down 1.4% in the quarter. They were actually up 0.2% for the year. For the quarter, the international developmental licensed market sales, which I'm pretty sure was mainly Japan, increased 4.1%. So, so international sales carried the day in terms of the quarter. And from a global standpoint, looks like it was about a wash in terms of what they did relative to the last fiscal year. But McDonald's, I mean, it's good at what it does. Like the opportunities to grow are difficult because it's so big, but it just generates so much cash flow. If I go down to the cash flow statement and look, this is all about returning cash to shareholders. So cash and share repurchases, $3 billion, dividends about $5 billion. So pretty much any cash that's not going into incremental growth, which we'll talk about in a sec, is just being returned to shareholders. And shareholders are happy about that. Especially when your dividend yield is just under two and a half percent.
- [18:32]
Dylan Lewis
Yeah. Speaking of growth, I mean one of the ways they are trying to re engage is to focus on that more value oriented customer. And they've, they've rolled out a $5 deal. I've bought that $5 deal many times. I've gotten that craving, as it sounds like you have at times, David. And they've been able, I think, to successfully get people into the stores. They've talked about how the average check on that $5 meal is more than $10 in a lot of cases. So the hope is that people are creating add ons as well with those orders. It seems like that's happening a little bit. What's interesting is McDonald's approach to traffic declines has been to discount and try to work their way out of it that way. We talked about Starbucks earlier. Brian Niccol recently has said we went way too far in the discounting direction to try to get people back into the store. And that's not something that we are going to be continuing to do. We're going to put that promotional spend somewhere else. It's kind of odd to see two staple companies in their industries approach the same problem very differently.
- [19:32]
David Meyer
But I think if we step back a little bit or, you know, move out to 10,000ft, McDonald's does have a little bit more of a value oriented brand and Starbucks is definitely more of a premium brand. So you could argue both are actually taking steps in the direction of their brand, which is what you want to do, right? You don't want to go, you know, be incongruent with the brand message that you're trying to get out there. The other thing to your point is if shoppers and I've noticed this, I will say at the beginning of 2024, if I would go get a breakfast sandwich, I was paying on the order of 450, sometimes almost $5. And then about the August, September time frame, I noticed, hey, I can actually get off the value meal. I can get two sandwiches for $4, right? So they made they McDonald's made a conscious shift. And anecdotally, at least, you know, in the one around me, it does seem like there's more traffic moving through the drive thru line. So yes, they McDonald's can afford, especially because of their model, to use that pricing as more of a lever to generate traffic. And then to your point, if you get you and someone else in your family and maybe you know, someone else in your if you're all going to the value meal instead of just a $5 ticket, then it becomes 15 and then somebody orders one extra thing and it becomes 17 and one more thing becomes 20 and it's those incremental dollars added to the check that start to add up.
- [21:04]
Dylan Lewis
David Meyer, to borrow a football metaphor, thanks for going through the game tape with me on Monday morning. Appreciate it. Thanks for joining me.
- [21:11]
David Meyer
Thank you very much for having.
- [21:19]
Dylan Lewis
Coming up on the show, you're getting answers. Early this week, Robert Brokamp and Allison Southwick continue their conversation on 401ks and how you can get yours in better shape.
- [21:35]
Allison Southwick
Last time we were all together, bro delivered a few ways to make the most of your defined contribution account, by which we mean your retirement accounts like a 401k, 403, 3b and thrift savings Plan. And we're back with even more tips for making the most of these types of accounts. All right, are you ready, bro? Here we go.
- [21:52]
Robert Brokamp
I'm ready, Allison.
- [21:53]
Allison Southwick
All right, the first piece of advice is don't crack your account. I have no idea where you're going to go here.
- [21:59]
Robert Brokamp
Well, it's important to know that withdrawals from a 401k before age 59 and a half may be partially or fully taxed, depending on the mix of pre tax, Roth, after tax money, things like that, and penalize 10%, though there are some exceptions. So the bottom line here is it's best to leave the money alone until you retire in your 60s. Unfortunately, many people raid their retirement accounts long before retirement. More than one in three workers cash out their 401s when they change jobs, rather than rolling it over to an IRA or the 401 at their new job. This costs them thousands of dollars, maybe tens of thousands of dollars in taxes, penalties and foregone growth on what they could have had if they had just moved it into another retirement account. So when you change jobs, make sure that you move the money to another account, another IRA, another 401k. If your old 401k sends you a check, which might happen if you had a low balance, don't put in your bank account. Instead, again, get into an IRA or 401 ASAP, or it will eventually be considered distribution, possibly subject to taxes and penalties.
- [23:02]
Allison Southwick
All right, next piece of advice is to choose the best investments. Oh, that sounds so easy, bro.
- [23:07]
Robert Brokamp
It does sound easy. Unfortunately, in many cases you just don't have a choice. Right, because the investment choices within your account are limited to a collection of maybe 20 to 25, maybe 30 mutual funds. I will say the situation has gotten better over the last 20 years or so. Costs have come down and now more plans have index funds target date funds. But most plans still include at least some underperforming actively managed funds or just have higher costs because the costs of the plan are embedded in all of the funds. So make sure you evaluate the funds in your 401, perhaps using a site like Morningstar.com to make sure that you're choosing a fund that is outperforming most of the other funds in its category over the past several years. If you'd prefer to invest in individual stocks, you may not be out of luck. Approximately 1 in 4 401ks offer a side brokerage account and that allows you to buy stocks, bonds, ETFs, choice of literally thousands of other mutual funds. The option is not always well publicized within companies, so check with your HR team or the plan provider to see if you have the ability to open up a side brokerage account in your 401k.
- [24:17]
Allison Southwick
All right, after you've done that you'll also want to make sure you're going to coordinate your 401 allocation with your other accounts.
- [24:23]
Robert Brokamp
Yeah, and the principle here is you want to be looking at the asset allocation of your portfolio across all your accounts, not just one account. Ideally, you have at least a couple of good fund options within your 401. In fact, they may be funds that you wouldn't be able to get outside of the plan because they're only open to institutional accounts like a 401. So these may be funds that are closed to regular retail investors or maybe funds with lower expense ratios than what you'd be charged if you had to buy it on your own. You can choose the really good Funds in your 401k to play their sort of respective roles in your asset allocation. And then you just round out your portfolio with your other accounts, like, you know, your taxable brokerage account, your IRAs, maybe even your spouse's accounts, because you should really be thinking of asset allocation across the whole household. So, for example, let's say your 401k has a particularly good small cap fund, an international stock fund, and is often the case a higher yielding cash like option. You could overweight those types of assets in your 401k. And then you focus on other asset classes in your other accounts. Many Motley fool listeners and readers, and even employees, myself included, like a mix of index funds and individual stocks. And since almost all 401 s offer index funds these days, many fools use their employer plans primarily for the index portion of their portfolios and then invest in stocks or other funds in their other accounts.
- [25:45]
Allison Southwick
All right, once you've got your allocation dialed in, you'll also want to take advantage of the features offered by the provider because there might be other stuff there.
- [25:53]
Robert Brokamp
Yeah, many of the financial services firms that operate 401 s also offer additional benefits. And they can include things like online tools, retirement calculators, maybe educational articles or live webinars. And even some provide access to financial professionals who you can call and discuss your 401 asset allocation or maybe even other aspects of your personal finances. Some will also offer wealth management services that they'll manage your 401k for you. But that's usually for an additional fee of maybe 0.3 or 0.5%. So poke around your 401k's website and the documents to see if there are any side perks there that might be intriguing to you.
- [26:30]
Allison Southwick
We've been talking a lot about if your plan offers this. If your plan has a number of Good options to choose from, but what can you do if they don't? Well, maybe you can move your money.
- [26:41]
Robert Brokamp
Yeah, if you have a less than excellent 401, you want to roll over the money to an IRA. You can do this anytime you switch jobs and when you retire. In some cases, you might be able to move the money while still working for your current employer. This is known as an in service distribution. It's very common to provide it, but it's also most commonly available to employees who are age 59 and a half or older, but not always. So check with your plan provider to see if you can do an in service distribution and at what age.
- [27:09]
Allison Southwick
And another option for if your plan maybe isn't so great is to advocate for a better one.
- [27:15]
Robert Brokamp
If you think about it, everyone at your company, you, your boss, the HR department is in the same 401 boat, right? And if the plan has high costs, subpar investment choices, limited flexibility, right? No side brokerage account, no in service distributions, no after tax contributions, then everyone's retirement prospects will suffer. So do some research, gather some data, and then recruit allies that can help persuade your employer to improve your company's 401k. Over the years, I've heard from many readers and listeners who have successfully convinced their employers to at least add features to their 401s, if not change the plans altogether. Really, there's no harm in asking. And if you're successful, your future retired self and those of your colleagues will thank you.
- [28:04]
Dylan Lewis
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 buy or sell anything based solely on what you hear. All personal finance content follows Motley fool editorial standards. It is not approved by advertisers. Motley fool only picks products it'd personally recommend to friends like you. Signing off, I'm Dylan Lewis. Thanks for listening. We'll be back tomorrow.