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- [00:02]
A
Ipos are hot again. Welcome to motley fool hidden gems investing. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoyam, joined today by Jason Moser and Lou Whiteman. And guys, there is a lot going on in the market. We are through earnings season, so we don't have quite as many numbers to talk about. But we've gotten inflation data. We've got the market going absolutely crazy. So, Lou, I wanted to start with you. When you look at where we are in this market, there's so many pieces that seem to kind of be pulling in different directions. Inflation data was really high this week. We saw interest rates jump. That seems bad. But at the same time, earnings are relatively strong. We have this AI trade that is going absolutely crazy. So where are you seeing opportunities and threats and just kind of what, what's your pulse of the market right now?
- [00:57]
B
So it's amazing for all the time we spend talking about so many different things like inflation, like jobs, numbers, all of this gdp, the market has blinders. And the market really only cares about earnings. Right. And earnings has done very well despite all of IT. S&P 500 earnings were up 28% year over year on average. That's the sixth consecutive quarter of double digit profit growth. That's margin growth. It's partially AI efficiency. But the real story here is that pricing power that we first, that companies first started exploring during the pandemic has been sticky and companies had a lot more pricing power than they might have realized. That is what the market is focused on. All of this other stuff could come into play at some point. We have to watch it. But look, even among the non tech, the other 493, we are seeing just really strong results. And as long as we see earnings grow, you're always going to be amazed at the market's ability to kind of just look past everything else going on.
- [01:58]
A
Yeah, Jason, it does seem like the numbers have been really good, at least in segments of the market. We're going to talk about some of those areas of weakness, you know, companies in shoes and apparel and restaurants. But are you seeing that same strength and then some of these data points, you know, like we're seeing with some weak consumer spending with inflation, you know, gas prices are starting to really hit people's pocketbooks. Is that something that, well, maybe that will impact the second quarter, the third quarter, the fourth quarter, but we're not seeing that yet. Or is it just kind of noise in the system?
- [02:29]
C
Well, I think it's, I guess the easiest answer is a little Bit of both. Right. I think we're seeing prices generally right now. Inflation is being driven by energy. So there is certainly the potential where this energy situation becomes resolved sooner rather than later. Let's hope so. I mean I think to lose point, even look at the other 493, I mean all, all told, I mean this, this quarter, quarter one of this year was really a blowout earnings wise. And yet basically 85% of the S&P 500 has beaten earnings per share estimates. That's the highest rate since the second quarter of 2021. And we're seeing that companies reporting earnings better than 18% above estimates, which is well above the five year average of 7.3%. So yeah, we're having these conversations about these headwinds, whether it's inflation or whether it's interest rates or energy or what have you. But by the same token, I mean in Lou referenced the AI trade that just keeps sending things to ever higher levels. There's just still a lot of enthusiasm and I think a lot of that is because these companies really are bringing it down to the bottom line.
- [03:39]
A
Lou, that bottom line improvement is undeniable when you look at the numbers and some of the AI trends also undeniable. What I keep wondering is what is sustainable? I like to look at The S&P 500 heat map and just look at, you know, where, where are stocks going this year? And you look at hardware related to chips, you know, memory stocks, anything energy related is up dramatically. A lot of that is downstream of these massive spending numbers around AI that we've talked about. You know, I think we're at about $700 billion that's going to be spent this year on capex from just the biggest handful of companies in technology that can drive earnings long term or at least short term. But eventually that money and they're spending their cash flow and they're starting to take out debt. That growth in that spending that's driving a lot of these companies in the S&P 500 that can't go up anymore, at least in theory. It has, it has so far. Does that worry you about the future or are we at some sort of local maximum where everything is just going so crazy and everything is so compute constrained that, that it's okay, I will pay whatever it takes for energy, I will pay whatever it takes for chips or memory. It doesn't seem like that's where we'll be forever eventually.
- [05:01]
B
It's doing a lot of heavy lifting in that though, right? Because yes, you are right. Nothing can go up forever and this will not sustain forever. But the devil is in figuring out when it ends and if just taking the companies at their word. I was actually curious this earnings season, guys, I was wrong. I was expecting some sort of a like telegraphed flinch, like, you know, from some of these big hyperscalers. Like just some sort of preview of like, hey, maybe we don't want to spend everything we said just because it is so much and we did not get it. We got all in. So no, it can't last forever.
- [05:36]
A
Well, isn't that partly. Microsoft did that, I think for one quarter and they were just punished for it. Yeah, yeah.
- [05:43]
B
Oh yeah. It's one of these. It's a standoff right now. I still sort of think that every CFO at every one of these hyperscalers would love to collectively like talk it down. But if it's only going to be one, the implication is our stuff isn't as good and everybody else's is. So. Yeah, no, I mean, I think it's going to take more.
- [06:02]
C
Can it continue?
- [06:03]
B
It can. We still have all of the spending going on. We still have a critical mass of consumers who are spending. But look, yeah, household purchasing power is flat, Energy's up. We're trading at more than 20 times forward earnings. I am definitely on guard for the fact that it's may not that at some point it will end and it could be sooner than we think. But for now all we can look is the actual data and the actual data does not suggest we are driving towards a cliff.
- [06:31]
C
Well, and I think it's going to be really interesting too to pay attention over these next few quarters and start looking for the guidance from these big hyperscalers and how they intend to spend in 2027. Because it sounds like they're not ready to take their foot off the gas anytime soon. Right. And I mean from Nvidia to Amazon, you know, Microsoft to Alphabet, I mean Min meta, I mean these companies are spending money hand over fist. And if that remains the case, and I think that can go on longer than maybe we assume because these are such successful businesses with so many resources at their disposal. If that narrative continues well, I mean that spending goes somewhere and we're likely to see this enthusiasm continue.
- [07:17]
B
That's the thing. It doesn't really even have to go up.
- [07:19]
C
Right.
- [07:20]
B
It doesn't have to keep growing at the level it is. If they just sustain at these levels, that's pretty good for the economy, you know. So, yeah, at some point, and I think we have seen that sort of, with some of the reactions from say Nvidia's quarter and things like that, as the market is maybe pricing in, okay, maybe it won't continue to grow at the rate it is, but just if we can just plateau at this level for a long time, that is a lot of spending going into the economy.
- [07:44]
C
It is.
- [07:45]
A
I will say that the word plateau always makes me think of the spending that went into the fiber build out during the late 90s and 2000s. What we talk about as the bursting of the dot com bubble or the telecom build out bubble actually happened. When that spending plateaued, it didn't really go down, it just flatlined. So these companies went from growth to no growth and then the cost structure didn't quite work.
- [08:09]
B
Well, Travis, that's. That's your word eventually again.
- [08:12]
A
Yes. You know, doing a lot of work. A lot of work.
- [08:14]
D
Yeah.
- [08:14]
A
I wanted to get to the IPO market. You know, Jason, this week we saw Cerebras ipo. I would say it was, in the words of the market, a successful ipo. It's weird how we talk about this. The stock jumped for people who were able to get on in the ipo, but it was actually down during trading yesterday. Yeah, we're hearing about, you know, SpaceX is likely coming next month. I think we could get OpenAI. It's possible. We get anthropic. When you see these kinds of huge IPOs, I think Cerebrus is trading for 200 times sales at at least one point. How do you think about that? Because if I go back to 20, 20, 2021, that was kind of a sign of the top of the market, a frothy point in the market. We could go back to the 90s and it was kind of the same thing. But is there something to be concerned about? Is there something, is this something to just watch? How do you think about IPOs in today's market?
- [09:06]
C
I mean it was a. For the company, I mean obviously able to raise a healthy amount of money. Bad IPO for retail investors who bought shares at $385. They're now sitting underwater. So it always is. It's perspective there. But I think the key is because there's obviously a lot of enthusiasm in that IPO and you're talking about some of these IPOs that likely will be coming up soon with just these massive valuations. That's one of those things that kind of makes me wonder how over the top is the enthusiasm. Right. When insiders and VCs who know their companies Better than anyone really, when they're choosing to sell to the public at these stretch valuations. I mean, that historically is a pretty darn reliable bubble indicator and so it's just going to be worth it.
- [09:58]
A
And we're at a point where they don't have to raise money from the public the way that they used to. If you go back to the 90s, there was no 10 billion million round that Amazon could have raised. That money didn't exist. You had to go public.
- [10:10]
C
Yep. And that you're exactly right. They don't need to do it. So the fact that they are doing it, I think is just something to, to keep in mind.
- [10:17]
B
Definitely agree. It has to be noted. But the other thing, the other side of it is, is that the FOMO is strong, right?
- [10:23]
A
Yeah.
- [10:23]
B
If you look at the eagerness to get in, the market still thinks that AI is a thing and we've, you know, all valuations are up, so you got to get in whenever you can when something new is coming. I hate to come back to it, but eventually that will likely come back to bias. I just, I just don't know if it's going to be anytime soon. Like I said, I just don't want this to be a market timing call because those tend to be really, really hard to get right.
- [10:51]
A
Eventually seems to be the word of the day. When we come back, we're going to talk about what's going on at restaurants and shoe and apparel companies. You're listening to Motley Fool. Hidden gems invested
- [11:02]
D
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- [11:53]
A
Welcome back to Motley Pool. Hidden Gems Investing one of the interesting spaces. We talked about some areas of strength in the market around AI trade technology, but one of the interesting areas has been restaurants, because that's something where you're seeing where Consumers spending their money. It flows down to. A lot of people work at restaurants. Lou. There was a period after the pandemic where these were really recovering really rapidly, and now that seems like that has all evaporated. And almost every restaurant stock has really struggled with over the past year. There have been negative comps at companies that I didn't think we'd see negative comps for a very long time. What's going on here is this. The WOVI effect is this, you know, population numbers are maybe down in certain areas. What is going on? Because there's also higher prices, so they're having margin pressure. It just seems like a lot of headwinds facing the restaurant industry today. Yeah.
- [12:46]
B
So I think there's a lot of factors, and probably what I want to talk about isn't the most important one, but I have a pet theory on this that, like, look, when we were growing up, or when I was growing up, Travis, you're young, but fast casual did not exist. You either went out to the steakhouse for a big family event, sit down, or you grabbed McDonald's on your way to practice, and there was no in between. Entrepreneurs realized that there was a huge, huge hole in this market for like fast casual, something that's a little nicer, maybe a little more expensive, but you don't have to sit down. They ran into that market. We have now overbuilt that market, and we have too much. I mean, that market wasn't going to take 100% of restaurant spending. We've reached a critical mass here where we have just so many choices and they're all suffering because of it. This is kind of just how economics works, and it will even out over time. But this is my little pet theory on a lot of these names that we love to watch is there's nothing really wrong with them, but there's all of these macro factors, plus the fact that you just have a ton of choices. And I don't know about you guys, but I only eat so many meals a day, and I think it's just coming out to bite, coming back to bite them a little.
- [14:01]
A
Does that make sense, Jason?
- [14:02]
C
I think. I think that's right. I mean, I think Lou's correct, and it is a lot of things kind of all at once. I mean, it does feel like a market that is over saturated with options, and that certainly can hurt all of them at once. It probably is some wegovy effect, as you mentioned there. I think it's just interesting data there that today about 1 in every 8 US adults is currently taking a GLP1 drug. Now JP Morgan estimates that by 2030 more than 30 million Americans could be on a GLP drug, up from roughly 10 million today. Now the interesting thing is Bloomberg Intelligence survey found that 54% of those on those drugs said they dined out significantly less or less frequently since starting the medication. So I mean that there is an impact there. I think policy and immigration, that's definitely something that is playing out as well. I think if you look back in 2025, we had a National Guard deployment here in Washington D.C. open table data showed a 24% drop in reservations in just a single week in August 2025 with reservations remaining mostly negative for the rest of the year. And then you add to that food prices are up 37% since 2020. I mean it's a lot of things at once and it's not helping their cause.
- [15:23]
A
Yeah it's, it seems like that has to have an effect when you have such success for, with Eli Lilly and Novo Nordisk in particular with these, with these prescriptions. And then you have red a true tide which is coming next that has been talked about as a potentially a trillion dollar drug. Seems like it's, it's got to be at least part of the equation. But a lot of factors going into restaurants. The other thing I think was interesting from earning season. Jason, you brought up the fact that you know, Nike is struggling and I just wanted to pull some of the numbers here. Nike sales about flat year over year in the quarter. Under armour negative about 4%. Lululemon over the past year is only up about 5%. So that's no longer a big growth stock. What's going on with these shoe and apparel companies because that would be another indicator of what consumers are spending their money on. If they're not going out to eat as much, they're also not spending that money on shoes and clothing.
- [16:17]
C
Yeah, I mean in regard to China, like you know that, that article that reading about Nike and China, I mean that competition I think is the main, is the main factor there. Like there is just more competition there in that, in that market that is certainly going to play out on the business in the near term. Now I do, I do like Nike's brand power. I mean that's not really a competitive moat or anything like that. But I do think there's some brand equity there that, that ultimately serves, serves it well. But yeah, I mean when you look at it across the board, I mean over the last year on holding is down 36% Nike's down 30%, Under Armour's down 17%. I, I mean none of these companies is having a really good stretch here. It is partly due to competition. Certainly the China market is a very important one, especially for Nike. But I think you're also seeing the consumer has to be a little bit more thoughtful these days about where they spend their dollars and it's just impacting all of these businesses.
- [17:17]
B
I do think, yeah, the consumer, that the consumer has to be saying something here or this has to be telling us something about the consumer. But look, there's a lot of different going on here. On holdings. Yeah, they're down, but they're still what a double, I think since the beginning of 2023.
- [17:31]
A
Well, their comps are a little bit different than these other companies were that are negative. Yeah.
- [17:35]
B
And, and with Lulu too. I mean the problem with retail and the problem with being a hot brand is it is really, really hard to sustain the hot part and then you have to deal with it. The other thing too here is, and I do again, I think, you know, love the company, not the stock. If you think back again, I'm, I'm just like with restaurants, I'm going to talk about my age when you, when Nike had to spend a couple million dollars and Sonny Vacario had to go gym to gym to kind of build a brand. Today you can do that on Instagram with one good influencer.
- [18:09]
A
Yeah.
- [18:09]
B
And I think just the barriers of entry and the economics of the business has changed to the point where I don't think anyone is going to dominate or have the massive success that you did years ago. I think that it's great for on holdings and the next on holdings or whoever that is. But just, I think we have to stop thinking about Nike as the nike of the 80s. Their goal now should be to carve out their own niche and just be a profitable company. But I don't think they're ever going to be the dominant company that they were just because the barriers of entry are so low now.
- [18:44]
A
So maybe we should be looking at these as free cash flow stocks, as value stocks. Is that the right way to think about it?
- [18:49]
C
I think that's fair. I mean, I own Nike, but I own it primarily for the dividend. Right. I'm not, I didn't think there's like any, any major capital appreciation. I think the share, probably share price probably recovers from, from these lows eventually. But I mean I own it primarily for the dividend because I mean that's, that's going to be, I think, reliable for the foreseeable future.
- [19:07]
B
Makes sense to me.
- [19:08]
A
When we come back, we're going to get to which one of these are their favorite stocks. You're listening to Motley Fool, Hidden Gems Investing. It was a beautiful I had the
- [19:21]
C
radio one I was driving.
- [19:26]
D
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- [19:52]
A
Welcome back to Motley Fool Hidden Gems Investing. We talked about some of the stocks that have been beaten up recently in the last segment, but I want to get an idea of where there's actually value in the market. So we're going to call this what are the best of the rest? Let's start with restaurants. Lou, I know you are at least doing your two, three meals a day. So when you're looking at restaurants, when you're looking at restaurant stocks, what ones look attractive? I'm going to throw out five ideas for each of these that potentially could be long term values. Darden, Texas Roadhouse, Bloomin, Cheesecake Factory and Denny's. We haven't talked about Denny's. I feel like that's an overlooked company.
- [20:34]
B
Maybe I will continue to overlook it though.
- [20:37]
C
You don't let yourself a good Moons over Miami.
- [20:40]
B
Well, I don't know. I don't know if I've ever been in.
- [20:42]
C
Okay.
- [20:43]
B
But you know, look, I little behind the scenes for everyone at home that JMO actually did his homework here and I didn't. So I know what jamo's gonna say and it's what I agree with. So I am gonna go off script and go Cava instead of any of those five not being.
- [20:59]
A
So you think the growth story is gonna continue for Cava?
- [21:02]
B
So here's the big thing. If you look at Cava's restaurants, they are mostly on the two coasts and there is kind of the stereotypical like does Mediterranean play in flyover country? Right. I think it does. And I think there's a lot of opportunity to grow. I think at the end of the day Wall street pays for growth. So I do think and part of this is for some of these companies, saturation. So I'm going to lean into something that I'm biased. It's the only one of these that I personally like to eat at. So I'm probably totally biased on that, but I do think that it's a better growth story than some of these better saturated ones. Otherwise, on the list, I'll just let JMO take over because I think I agree with him on which of these five.
- [21:43]
A
I just think it's funny that Lou made a compelling argument that this entire, you know, fast, casual space is just completely oversaturated. And then the stock he's picking, right, is. Is the company that's trying to grow into.
- [21:55]
B
Because, Travis, it's my favorite of them. And I'm just blinded, like every other person to what you like.
- [22:02]
A
All right, Jamo, what do you think?
- [22:03]
C
I do. I get it, Lou. I mean, I'm. I'm a kava fan as well, so it's hard to argue against that.
- [22:08]
A
I've still never had it. Maybe I need to do a research trip and come visit Flyover.
- [22:12]
C
It's tasty. It's tasty. You know what the other thing though is? It's fairly replicable. In other words, I make a lot of kava at home. Like, once you learn the ingredients that you like, you can make your own kind of kava bowl, really, whenever you want. And you usually do it for a little bit less money. But it's just, you know, you wonder how much competition is going to get out there to try to replicate that concept. I'm sure there's already some Denny's. Listen, I mean, the moon's over Miami. I've had more than once. It's good, it's nostalgia. But I think for me, I've got to look at Darden as probably the one that I like the most. And I think primarily it's just because of the breadth of his portfolio. I mean, we're talking about restaurants that include Olive Garden, Longhorn Steakhouse, Cheddar Scratch Kitchen, Chewy's. You ever been to Chewy's Chews? Good stuff. I like it. No Yard House, Ruth's, Chris, the Capital Grill, Seasons 52, Eddie V's, Prime Seafood, Bahama Breeze, the Capital Burger. I mean, that's a lot of restaurants and a lot of ways for them to win and a lot of. A lot of value points for the consumer as well. Right? I mean, they're not all just one price, right? You get some higher end, something like Eddie V's, whereas you going to get a more affordable meal if you go to something like a Chewy. So I just like the breadth of their portfolio and think that it probably sets it up for success over, over, over the longer Haul.
- [23:33]
A
It does seem like there's got to be some sort of opportunities here. Restaurants, even if people are taking GLP1s, even if the economy is a little weak, it's kind of the one central place that you can go out and hang out with people, whether it's friends or family. And maybe Lou's right that we're oversupplied in certain segments of the market, but it just seems like there's got to be some sort of opportunity over the long term. All right, the next one gets to something we talked about earlier with Nike shoes and apparel companies. I got a few numbers here that I want to add in because as I was looking at these, some of the priced earnings multiples just seem crazy to me. Nike, pretty normal price earnings multiple on a forward basis. These will all be forward basis. 23 times Under Armour, 5.4 times. You gotta buy a company that has negative sales growth, but 5.4 times Lululemon, 9.6 deckers, 14 times forward earnings and on holding 22. Time is forward earning. So you look at that list or you can add your own. Lou, where's your head go at for the best of those shoe and apparel companies?
- [24:39]
B
So I'm going to just be controversial here and I know especially some of my colleagues will yell at me for this, but Under Armour and yes, Lululemon, I'm just not convinced they can ever get the mojo back. I mean, I. The Lululemon, as soon as they complain that Costco has a too good of a competitor for them, I think that's. That that's a really.
- [24:59]
A
It's like complaining about weather in your earnings.
- [25:01]
B
Well, it's a Streisand effect. It's like, hey everyone, the Costco pants are very, very good. I don't know, like some of these brands are just, you know, you catch the magic, you catch the genie in the bottle and it's really hard to get that back once it's gone. I like Nike here for some of the reasons that JMO talked about just as a dividend play. But if anything, I'll probably take deckers because they have a combination of brands. I know like HOKA is beloved by people who seriously run. I just think that they have shown nimbleness before and an ability to kind of reinvent. So maybe there's more of a chance there versus asking Under Armour to reinvent or come up with something new or even Lululemon. So I'd probably lean here, but if I'm honest with you, I'm probably avoiding this whole category as an investor, Jason.
- [25:49]
C
Yeah, maybe the easiest answer is just to own Amazon and you get your stake in Zappos. Right? I mean, like, you own Zappos by owning Amazon. It's kind of like owning Google or Alphabet. You have a nice little stake in SpaceX as it goes. But ye. I think, you know, Under Armour is a funny one. I've owned Under Armour forever now. I sold a ton of it back in the day and actually did well with the investment and it maintained just a small position just as a core sort of. I just thought, you know, maybe one day they would kind of get their mojo back. And I think really what we've seen there is just a failure on the part of leadership. Right. Kevin Plank, I think, is really just. He has really struggled in.
- [26:31]
A
He seems like one of those. We typically want to buy companies that are run by founders, but he seems like one of those founders that had a brilliant idea, built it into a really big business, and then should have handed it off to somebody else. And it's just so interesting. GoPro is another example. They're looking for strategic alternatives this week. You know, another example of a company where the founder got it to this really, really impressive point and then just kind of went, I can't do the next thing.
- [26:57]
C
Yeah, well, I think you're right. There were some bad acquisitions that he made back when they were trying to kind of get into like, E Fitness and whatnot with those apps.
- [27:05]
A
Yeah.
- [27:06]
C
And so I think, you know, it was a combination of things that really has hurt the company. And by. By most accounts, he doesn't sound like he's really that great of a leader. At the end of the day, it's kind of his way or the highway, and he doesn't seem to be open to constructive criticism and other viewpoints. And I think the company's just certainly suffered from that. It's weird because I think Under Armour makes good stuff. I mean, I do like their gear. I, you know, wear their pants every day. They're terrific. The shorts are great. I mean, it's golf equipment. I mean, good stuff for the, you know, on the golf course for. For a guy like me. But, yeah, I don't know that I see them figuring it out. I think ultimately this is probably a situation where he's got to figure out a way just to sell this company off. I mean, something's going to happen there. But, yeah, I guess I go back to Nike. I just think. I think they're a competition notwithstanding, and I think we're not seeing something Necessarily just fundamental with Nike. I think the space is really difficult right now. You mentioned the Ford earnings multiple there, which I don't think that doesn't make it a no brainer. That's not like screaming value play. It's also not screaming value trap. Again, I own shares for the dividend primarily and I've thought perhaps about adding a little bit to it on this week is I think it was very interesting to see some relatively meaningful insider purchases from CEO Elliot Hill and even board member Tim Cook. That speaks something to me and should to investors. It's a relevant business. I think it'll see better days.
- [28:40]
A
I got to make the case for on holding apparently because this was not only is it the fastest growing out of these companies that we've talked about, they are leaning into pricing power they had. They made a long term goal of getting to a 60 gross margin which is far higher than any of these other companies. They're at almost 65%. So the consumer is weak and they're saying, you know what, we're raising prices. So I just think here's in another idea would be I think when you mentioned just sort of either avoiding it or play a different way to play it like Amazon Dick's Sporting Goods trading for about 15 times forward earnings. So that's a. The their stores have gotten more impressive over the years as well. All right, let's get to. I want to get your ideas on some of these medical companies. This is an area where I think there's innovation growth. You have more tailwinds than some of the restaurant and shoe and apparel spaces. Jason, Intuitive Surgical Transmedics, by the way, all these stocks are down pretty significantly this year. So this is, this is why they're kind of on my radar. Abbott Labs, Boston Scientific and GE Healthcare, you got to pick one of those. Where does your head go?
- [29:42]
C
Well, I picked Intuitive surgical back in 2019. I recommended it at our immersive technology service and its shares have done well. I mean they're up about 150% now. It also is an underperformer at this point and that really kind of is thanks to the recent pullback in shares. But I still, at the end of the day, this is just a very innovative business. They've done so well with the da Vinci system to this point and now this ion bronchoscopy machine which I think is just offers them another avenue of growth here. I mean it clearly is a very competitive business. I mean they're not the only ones focused on robotic surgery. You have A lot of big companies out there that are investing lots into this space as well. Medtronic for example, and more. But I do love the innovative nature of the business. It is just this massive install base already with DaVinci and Ion is certainly gaining some traction as well. So I think I'm going to go with the intuitive.
- [30:40]
A
Luke.
- [30:41]
B
I think that makes sense and I agree. I think what's going with them is more just. It's a bad time for hospital budgeting. So they're only getting the razor blades, not the razors right now. But that'll. That, that, that won't last. Look, I feel pretty good about all of these. Maybe Transmedic is the wild card just because I really want them to succeed.
- [31:00]
A
But incredibly volatile stock. Yeah, it's. It's been on my radar for a long time, but I can't get my
- [31:05]
B
head around what they do is really, really hard and what they want to do is really, really hard. And then you throw in the logistics side of it, which is just a ton of expense. I don't believe they would have taken that on unless they felt they had to. So I, yeah, just for. I want them to succeed, but they're the ones. Maybe I'd question, if not intuitive, maybe GE Healthcare would be the one I'd look at here just because I think, look, they are a little more commoditized than what intuitive does. But the advanced medical devices, intelligent diagnostic tools, this is sor. I think the future of medicine more than just AI replacing your doctor. So I think, look, maybe it's not going to be an amazing 5x30x but I just have no doubt that there will be demand for their products well into the future.
- [31:53]
A
Hopefully it gives you some ideas of where there might be some values in because it looks like many segments of the market are getting pretty frothy, but these ones may be a little bit more opportunistic for investors. When we come back, I want to get Jason and Lou's thoughts about the state of inflation and also we'll touch on the stocks on our radar. You're listening to Motley Fool. Hidden Gems. Investing.
- [32:20]
B
Climbed a mountain and I turned around
- [32:24]
A
and I saw my reflection in snow
- [32:29]
B
covered hills Till the landslide brought me down
- [32:36]
D
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- [33:43]
A
As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show Notes Jason One other topic that we we touched on briefly early on, but I think deserves a little bit more attention, and that's the inflation data that came out this week. We got a CPI reading the Consumer price index was up 3.8% from a year ago, PPI producer price index. So this is going to be what, you know, manufacturers and companies like that are paying up 6% from a year ago. So energy is a big piece of the story. But the other context I want to bring in is interest rates are going up because of this and this was a precursor in 2021 to the big market downturn and the rapid rise in interest rates. So how do you wrap your head around what we're hearing about inflation today?
- [34:41]
C
Yeah, I think we've talked before. I mean this is primarily driven by energy prices, but that's not all of it. The tariff impacts have absolutely played a part in this as well with we're going through like this refund stage now. But like we think about the just the chaos of the last year, every day it was a new headline on tariffs are going to be this much. Now they're going to be that much. And companies had no idea what to do. So they're we're seeing, you know, those costs play out as well. And ultimately I think the interesting thing to keep in mind is just what this does for interest rates. Right? The argument for cutting rates was that, well, inflation is back in check or getting there. And so we could afford to do that. Well, that obviously isn't the case and we have a new Fed chair coming in. And while the White House is certainly going to turn up the pressure to cut rates, it's going to be very, very like, you know, the Fed chair doesn't make that decision. They still vote. And my suspicion is that they're going to look at this and say, you know what, just logically speaking, it doesn't make sense to cut rates in the face of a RIS inflation numbers. So, you know, it's, it's going to be, it's going to be, it's going to be an interesting rest of the year. I mean we're seeing all the big banks now. I mean Goldman Sachs now expects the new, the next two Fed cuts to come in December 2026 and March 2027. JP Morgan.
- [36:09]
A
And guessing that far out is, is right. I mean that's just almost always inaccurate.
- [36:13]
C
Right? That's they're just projecting. But I mean it's just, it's interesting to think. We were talking early on in the year and late last year the cuts were coming and now I don't think that's going to be the case.
- [36:25]
B
The interesting thing here is what does it mean for the market? Because at the end of the day, we're investors. This investing show, right? And warning, I'm going to go a little dark here guys, but I do think just kind of to look at it, US wealth inequality is at a 100 year high going back to the roaring twenties. Okay, the top 50% of US households hold 97% of household wealth. Why does this matter? That tells me that consumer spending can sustain because there is a critical mass of people who can still afford to spend. Now there are all sorts of issues here too. And we can remember the roaring twenties ended up with the 1930s, so we need to be very, very careful. But for now, does all of these headwinds, all of this inflation, will that sink stocks? I don't know if I think it will. Again, not to dismiss it, but it's a weird time right now.
- [37:18]
C
Yeah, it's that K shaped recovery we talk about, right? I mean there are plenty of people out there that yes, costs are higher, but many of us can still deal with the burden of that. But lower earners are finding it more and more difficult. I think that's going to be something to keep an eye on.
- [37:35]
A
All right, let's get to the stock center radar and bring in Dan Boyd from behind the glass. Jason, what do you got this week?
- [37:40]
C
I'M sure have all heard of Starbucks ticker sbux. It's a company that I've owned for, for a number of years. You know, the good news, right, is that Brian Nickel took over in September of 2024, September 9th I think it was. The stock has returned 20% since then. So not a bad start. The bad news guys, is that the market is up 40% over that same stretch. So it is an underperformer. And we just saw news today that they announced another round of layoffs. This is the third round of layoffs since Nickel took over. And if you look back to February 2025, they were cutting 1100 jobs and not, not filling several hundred, several hundred other open positions. And then seven months later, another 900 jobs cut as part of a $1 billion restructuring plan. So keep in mind, I mean these are mostly corporate jobs, right? And keep in mind, Starbucks employs 381,000 people globally. It takes a lot to run those stores. But it definitely makes sense for the company to want to be as efficient as possible. The thing is, the stock is still over 40 times full year estimates today, which I just think is really optimistic. So yeah, I'm keeping my shares, but I don't know that I think it's a tremendous buying opportunity today.
- [38:53]
A
Dana, Starbucks, where you get your coffee? No, it is. Well, okay, yes and no. If my wife wants coffee, then yes,
- [39:00]
C
we'll go to Starbucks.
- [39:01]
A
But me, no. So the answer is yes.
- [39:02]
B
I don't think you have a vote in this.
- [39:04]
A
It's hard to argue with coffee and it's hard to argue with my wife. Lou, what's on your radar this week?
- [39:09]
B
So nothing as interesting as coffee, unfortunately. But Dan, I am watching Chrobinson ticker C H R W so Robinson is an asset light shipping broker. Basically they are the middleman that connects companies that need to move something to the trucks that can do it. The stock was down this week after the Supreme Court ruled that brokers can be held liable for doing business with unsafe trucking companies. It was previously assumed that brokers wouldn't be held at fault. So this kind of hit the stocks. This will raise insurance costs, it will raise other costs for brokers like Robinson, but I think it will also benefit well capitalized, best of breed companies. And that's what C.H. robinson is. I think it could actually help them gain share because they are all ready to kind of fill this need. Stock has been on a roll until this ruling. I think any pullback could be a huge buying opportunity. I'm watching this one closely.
- [40:00]
A
Dan, what do you think about logistics? I love logistics, pal. Stuff's got to get places, right? All right, Dan, which stock is going on your watch list this week? I mean, they're both pretty good, right? Like, it's hard to. To argue with coffee. And again, stuff's got to get places. But I think C.H. robinson has, you know, a little, little less expensive for what it is. So I'm going to go C.H. robinson this time around. That's all the time we have on M. Fool Money. Thanks for listening. Thanks for listening to Mle. Fool Hidden Gems Investing. We'll see you here next time.