C (4:43)

Yeah, we're seeing spikes, and it's being felt really across a range of sectors, which has been something that I think consumers are feeling very close to home.

B (4:53)

Yeah, I had to fill up two vehicles yesterday, and it was not as fun as a month ago. But this is so interesting. As I think about this, I don't really follow the oil industry very closely. Personally, I don't think either of you do very much. Maybe more than some, but not as much as others. Out there who really focus on this space. So I'm just thinking about this big picture. Rachel, you're talking about the things that it impacts. Matt is talking about it as well. And as I zoom out, I think about how we invest as fools. We're holders, we hold stocks, generally speaking for at least five years and we hold through market volatility. These are big values that we have as an investing community. But Matt, you just mentioned that this being the biggest supply chain shock in history, to me it almost feels our listeners out there might feel like it's naive to apply foolish holding principles to this situation when it's kind of historic. So I gu. I guess I'm saying why are we not just waving our hands here at the situation? Why are we still holders? Why is it still a good idea to hold our stocks through the market volatility when it is something unprecedented?

A (6:04)

I don't mean this as a shot at anybody who's an oil bull, but this is one of the reasons I don't own any oil stocks. It's one of the sectors that they're really prone to volatility that is completely outside of their control. You can run your company great, but you're at the mercy of things like this. The great operators will continue to be great operators. There's no need to panic and sell. Chevron for example. In fact, when I checked right before we recorded this, Exxon and Chevron are two of the only stocks that are up on my watch list today. I'm more worried about the secondary effects. I don't think we're going to get a full on market crash because of this. But stocks that rely on discretionary spending in particular could start to come under pressure if all those economic fears and price increases really start playing out. So times like this are when it makes the most sense to apply that principle of holding through market volatility. Ask anybody who's panicked and sold in the early days of the COVID pandemic because they were afraid of, quote, things getting worse. They were right. Things did get worse. But even after the recent market pullback, the S and P has more than doubled from its all time high before the COVID pandemic. So those who panicked and sold missed out. So this is where those principles make the most sense.

C (7:16)

Yeah, I mean maintaining that long term investment horizon during what we are seeing right now as well as other periods of extreme volatility. It's not naive, but I think it's important to underscore. It's also as retail investors, it is a Statistical advantage. And I think that's something that's really important to bear in mind. You know, we're seeing what's happening with a lot of energy stocks right now. This is event driven volatility, right? It hits the markets fast. The businesses with the strongest moats, the healthiest balance sheets eventually will adapt. Now if you're looking at the market as a whole and you're seeing this volatility, volatility impact the stocks you own, I think it's important to remember at this time, you know, when you panic, sell a winner because of a temporary spike in crude, for example, that's having negative downward pressure on different industries, you aren't just dodging a dip, you are incurring the investment risk of missing that eventual recovery. And I think it's important for us to remember that great companies are built to survive cycles in the market, various cycles in the market are inevitable. And the long term compounding power of those businesses can usually far outweigh even a one year headwind in input costs. That puts pressure on businesses. And I think, you know, obviously there's been some concerns of a market downturn or crash. I don't think we're there yet. But I will also note as a long term retail investor, this can be our best friend. You know, when we see stocks in a sell off and bear in mind when there's these external triggers like oil prices going up, the market rarely discriminates. It tends to punish struggling stocks and compounding machines equally. And this can really, I think create a very rare window to harvest value in really robust businesses at depressed valuations. I think sticking to our investment principles as long term investors can prevent us from making emotional decisions at the bottom of a cycle. And that is also where the most retail wealth is lost. Those emotional decisions that are made at the bottom of the cycle. So you know, as long as your underlying business the is intact, holding through the noise is key.

B (9:15)

Yeah. The late great Charlie Munger used to say, the first rule of compounding is to never interrupt it unnecessarily. Seems like a good thing to remember here. After the break, they're shaking up the S&P 500 again. You're listening to Motley Fool Money.

D (9:30)

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B (10:27)

Motley Fool Money with the Hidden Gems team. So the S&P 500 when we talk about the market, we're really normally talking about an index. Sometimes it's the nasdaq, sometimes the Dow Jones, but most of the time for me it's the S&P 500. This is a collection per se of about 500 of the largest profitable US companies. The list is always changing after the market close. On Friday, the selection committee announced four changes to the lineup and so Match Group, Molina Healthcare, Lam Weston and Paycom are all out and Vertiv, Lumentum, Coherent and echostar are now in. Rachel, when looking at this list, are there any here that you're sorry to see leave the S&P 500 or are there any newcomers here that you really like?

C (11:17)

Yeah, I think it's worth noting. So the four companies leaving the index, these have all really underperformed the market over the last year. They've been really consistently trading in the red even as the broader market has rallied. I think Match Group probably stuck out to be. I mean this was once a growth darling, right? But they've really struggled. Tinder, which is of course their flagship app, their monthly users have declined for multiple quarters. So Match Groups moving to the S and P small cap 600 and I think that's an example of a once growth oriented favorite that is dealing with a turnaround that's taking much longer than investors had hoped. But you know, switching over to the newcomers list, this was really interesting. I think the selection committee made a very clean sweep for AI and connectivity infrastructure with these additions, all of which I think are up by triple digits over the last year. So these have been all very high flyers in the market. You look at Vertiv holdings for example, right? This is a company with a near monopoly on liquid cooling and high density power systems for data centers. They have really, really strong organic growth rates. They recently upgraded their investment grade credit rating. You've got Lamentum and Coherent. They're leaders in photonics, which is a market that's really surging due to the 1.6 T transceiver rollout. Basically it's this major industry transition which is essential for GPUs to talk to each other within AI clusters. And then EchoStar was also interesting. This is a key player in satellite infrastructure and space and they've really gotten a lot of attention from investors recently due to some different SpaceX related deals. So some intriguing plays that have been added to the index.

B (12:53)

And that's normally how it works, right? Normally it's businesses that are maybe declining, the stock is going down now it's no longer representative of one of those large US companies and vice versa. Companies that are really, the business is booming, the stock is going up now it is more representative of that large cap company. And I'm glad that you brought up that for some of these, such as Vertiv and Coherent, for example, this is really playing in, on this semiconductor trend. Business is hot for, for all of those companies. And it's kind of playing into these larger trends that we've been looking at in AI in data centers. And some people are afraid, of course, that we're reaching kind of a bubble territory because of how the funding works out. And two of the main companies that are the source of fears for some investors would be Oracle and OpenAI. And on Friday, Bloomberg reported that talks between these two companies for a data center in Abilene, Texas had broken down. The thought was that OpenAI can't get the funding and Oracle's running into this cash crunch. And now it turns out Oracle reporting yesterday that those reports about the Abilene site were false and, and incorrect. I mean, Matt, what are your thoughts here on the AI spending?

A (14:11)

I mean there's too much to keep up with, honestly. But in my mind, the AI spending trend, it reminds me of what Warren Buffet said a few years ago. I think it was Berkshire's 50th anniversary, how he said the 20% annual gains that they return are not sustainable for the next 50 years because at some point the numbers just get too big. And in this case you literally can't have companies spending a trillion dollars on AI infrastructure, which I think just between the MAG7 that's close to what they're spending and they keep doubling their spending year after year. That can't go on indefinitely. And a lot of it seems like to me circular spending is what I call it. For example, OpenAI buys a lot of Nvidia's chips. Nvidia invests in OpenAI's next funding round, essentially giving them their money back. OpenAI places new orders for Nvidia chips and the cycle just goes on. I don't necessarily think AI spending is in a bubble. It just can't keep growing at this rate indefinitely. I do foresee a lot of long tail demand, not just for GPUs and data centers, but for other type of chips. For example, CPUs are likely to play a much bigger role in the next wave of AI and energy infrastructure to power all these things. I see that as a big long tailed driver of demand. So I don't think we're in a bubble, but I don't think the growth rate that everyone expects between now and 2030 is necessarily going to happen.

B (15:28)

After the break, we'll chat about a stock that jumped 40% today. You're listening to Motley Fool Money.

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B (16:37)

promo code fool welcome back to Motley Fool Money with the Hidden Gems team. For our final topic today, Hims and hers stock is having itself a day. As of this taping, it's up about 40%. This isn't a company I follow closely, so Rachel, why on earth is Hemstock up so much today?

C (16:56)

Well, for anyone who follows this business, it's been kind of a rocky road for the stock over the last year. But Hims and Hirst just struck a massive, kind of unexpected partnership with their former legal rival, Novo Nordisk. The deal is a significant game changer because it basically ends what had been turning into this very high stakes legal feud over weight loss drugs. Investors might remember that when there was a shortage of semaglutide, the FDA allowed compounders like Hims and hers to be able to manufacture duplicates as long as that shortage was ongoing. That shortage ended over a year ago, and then they were sort of operating in this gray area where they were able to sell individualized doses. But this sparked legal action from Novo Nordisk. Well, now moving forward, HIMSS is going to sell Novo's Blockbuster, Wegovy and Ozempic directly through their platform. And so this has them selling FDA approved brand name treatments rather than these, these copycat versions. And this comes after, a few weeks ago, you know, we had a situation where Novo was suing Hims for patent infringement. Now they're partners. So this removes a massive legal cloud that had been overhanging the company. It's worth noting that GLP1 treatments are still a pretty small part of the business for HIMSS and hers. The revenue is growing at a really incredible clip and they reported their first full year of positive net income and in 2025. So there are, I think, a lot of good news for the company today.

B (18:21)

So ever since the Gamestop drama a few years ago, it seems like investors are paying a lot of attention to short interest and short squeezes more than ever. I did check this morning. 39% of the float for him stock is sold short, according to Y charts. And Matt, I guess my question here for you is why are investors so pessimistic about this business Here, about Hims. But two, is this news with Novo Nordisk potentially something that causes short sellers to rethink their assumptions?

A (18:54)

I realize that what I'm about to say is an oversimplification and Rachel can correct me if I'm wrong, but at least until today's news, for the past year or so, a big part of him's business model was literally copying the products of a very deep pocketed company that had the power to fight back. I'm not that surprised at the high short interest. If I were to start a business that made my own iPhones and called them iPhones, I would expect Apple to sue me. So that's why investors have been a little pessimistic. As she said, they were operating in a gray area, and I don't like investing in companies that operate in gray areas of any kind. So today's price action could absolutely be at least partially due to short sellers closing their positions. But on the other hand, I would say it's a move that changes the business model for the better.

B (19:39)

Well, and that change of the business model is something that we like to pay attention to. So thanks for pointing that out. I wish we had more time to talk about it, but we are out of time for today. Rachel, Matt, thank you so much for sharing your thoughts on these topics. 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 Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored by content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer, Dan Boyd and the rest of the Motley fool team for Rachel, Matt and myself. Thank you so much for listening today and we'll chat again soon.