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The Best Investment in 2025 (So Far...) Isn’t What You Think
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- [00:00]
Matt Frankel
Foreign.
- [00:05]
Tyler Crowe
The best investment in 2025 so far and a dive into upcoming IPOs. This is Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, joined by longtime fool contributors Matt Frankel and jonquast. Today we're going to dig into some pre IPO filings because it's going to be a busy week next week. And some companies, they're actually ones that we like. We're going to continue the discussion about Figma from yesterday's show after their post earnings report drop that happened today. But before we get to all that, we're surprisingly close to the fourth quarter. I mean, Matt, you and I, we're sending kids to school. John, I don't know if you're sending your kids to schools yet, but that kind of gets you in a little bit of wow. End of the year is coming up quick here and so we're gonna do a way too early look back at the best investments in 2025 so far because it's been a wild ride for the markets. I mean, The S&P 500 was down almost 14% at one point in April. I think it was Liberation Day tariffs and all that other stuff that really sent the market rocking. But as of this taping, it's up just under 10% year to date and is on pace for a better than average year for the S&P 500. Surprisingly one of the best performing assets this year. And isn't Mag7 or anything like that? It's gold. And frankly, it's not even close. John, you kind of showed us some of the numbers before we got started here. It'll be a hard ask for the S&P 500 to catch up to gold.
- [01:43]
John Quast
Yeah, I mean, as you brought up, Tyler, the S&P 500 up about 10% year to date. That's a good year. Bitcoin, digital gold, so called Digital gold, up 21% year to date, but gold itself up 36%. Who thought that? And on top of that, right, because of gold's appreciation, you have a stock like Newmont, ticker symbol nem. It's more than doubled year to date. And in the S&P 500, only 3 of the constituents have doubled this year. That's Palantir, Seagate and Newmont. That is as odd of a trio as I could possibly think of.
- [02:24]
Tyler Crowe
Yeah, I mean an AI government data intelligence company, a data storage kind of like memory disk company and then gold mining. Yeah, that's a fun trio they've got there. Now, when we talk about we've seen the rise in gold and the rise in Newmont stock. Is this like some wild valuation we're talking about here where everyone's bidded up Newmont Mining stock to the moon because everyone's scared of something?
- [02:51]
John Quast
No, not really. I mean Newmont's profits are pretty good this year. The cost to get the gold out of the ground is way less than what the gold is worth. So it's only trading at about eight times enterprise value to ebitda. That's not that bad for a gold stock. And when you think about it, its production is down a little bit, but it's because it's selling off some non core assets, it's focusing on its mines that it likes the best. And you start thinking about, man, if it's just going to focus on these top tier mines, maybe that gets a little bit more interest from institutional investors. Maybe this valuation goes up a little higher. It's not outrageous here.
- [03:33]
Tyler Crowe
Volatility has always been gold and gold miners best friends probably right up along there with commissions for brokers as volatility's favorite fans. So like Matt, we can point to plenty of things that have caused market volatility. Some of it's just animal spirits. Well, some of them at the same time we'll say were actually more tangible things that may be moving the market in this way. So in your view, what are some of the tangible things that are actually driving this kind of push towards gold?
- [04:04]
Matt Frankel
Yeah, you're absolutely right that volatile markets definitely favor gold and Bitcoin and other things that are seen as like a store of value. I mean you already mentioned the Liberation Day tariffs, but it wasn't just the Liberation Day tariffs. I feel like tariffs are kind of like a reality show this year. I mean one day a country's getting hit with a 50% tariff, the next day it's 20, the next day it's 40. The next day tariffs are illegal. And on and on we go. So it's still in flux. There's a lot of interest rate uncertainty. Will the Fed cut? Won't they? It looks like they will. Now falling interest rates not only can or interest rate uncertainty can not only lead to volatility but but falling interest rates can be favorable for gold as well. It just kind of adds liquidity to the system. And we've seen kind of so. So earnings from a lot of big companies that have. Have been. I mean look how volatile Nvidia was after its earnings. You know, some of the earnings were kind of so so and they're really hard to Predict from the Mag 7. So it's been a lot of different factors, but it's just an. The tariff drama, I think has been the biggest contributor this year, so up 36%.
- [05:05]
Tyler Crowe
I think a lot of people might be getting a little bit of fomo. Like, man, should I invest in gold? So quick question. Do either of you actually invest in gold? Matt, we'll start with you.
- [05:14]
Matt Frankel
Not really. I mean, I have a few gold coins in my safe, but I look at it more as just something I own for because I think it's fun as an investment. But I kind of wish I had had a big old gold bar at the beginning of this year.
- [05:26]
John Quast
Yeah, I haven't invested in gold because I've been programmed to think that gold is something that protects my money, not something that grows my money. And for, for that reason, I have a lot of years of growth ahead of me. So I focus on the growth. And by extension, I haven't focused on gold stocks either, such as Newmont. But maybe I'm missing out.
- [05:45]
Tyler Crowe
All right, let's get prediction time. It's September 2025. Let's fast forward to September 2026. What is performing better, the S&P 500 or the price of gold?
- [05:57]
John Quast
It's really hard for me to bet against American businesses, so I will take the S&P 500 for 1000. Alex.
- [06:05]
Matt Frankel
See, I'd also say the S&P 500, but that's like asking me what tomorrow's pick three lottery numbers are going to be. If rates fall, inflation spikes, it could easily go the other way. We could easily see another 36% move in gold. If that's the case, coming up, we're.
- [06:19]
Tyler Crowe
Going to get into something that hasn't quite performed as well as gold recently and that's Figma and its most recent earnings. But we're going to do that after the break.
- [06:28]
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- [07:00]
Tyler Crowe
Colleagues talked about the uptick in IPO activity and figma's stock decline since its ipo. The company reported earnings after the market closed yesterday and sent some investors. And I'm using air quotes, which obviously makes for a great audio format here, but it sent them to the exits and the Stock's down about 17% as of this taping, although I probably should check it before because it could be changing as we speak. Now I want to timestamp it because of the volatility of this stock. I mean, by the end of the day this thing could end up for. For all we know, considering the volatility of Figma's stock recently. But getting into the earnings specifically, John, was there anything in the earnings report that like shouted run to merit such a sharp price change before the open?
- [07:46]
John Quast
Well, let me say this run implies fear and fear implies a mindset that is not conducive to making good investment choices. So I will say it's not run, but there are some things here that are legitimate concerns and that's what investors are reacting to. I think the story here is decelerating growth for Figma, plain and simple. So when it went public, it was highlighting 46% revenue growth. Now in this second quarter report that it just released, it only had 41% growth, which is still good, but down. And for the third quarter it expects 33% growth. Now this deceleration can also be seen in something called the net dollar retention rate. So this is what customers spent this quarter versus the same quarter a year ago. It was 129% in the most recent quarter. That's good. But it's down from 132% when it went public. So customers are spending more, yes, but that growth in their spending is slowing down. And so when you look at the valuation here, still trading at around 26 times this year's expected revenue. And there are concerns with AI. Is this going to eat into its business? Now you look at that decelerating growth rate and investors are worried.
- [08:59]
Matt Frankel
John really hit the nail on the head there. First, let's be clear, a 41% revenue growth rate is an impressive number. It's not sustainable forever as a business scales. The same can be said for 129% net dollar retention rate. That's rare and it's really hard to keep that number going, which we saw after the last wave of IPOs in 2020, 2021 as businesses scale. But a slowdown is a slowdown, especially from a stock that roughly tripled right after its ipo. Figma was being priced for near perfect Performance. Soon after its IPO, it was trading for more than 50 times sales. So it still kind of is priced for a lot of future growth even after that decline. John already mentioned it trades for about 26 times earnings, and it's barely break even on net income. So there's a lot of future expectations still priced in at this level.
- [09:50]
Tyler Crowe
I just want to mention that was 26 times sales, not 26 times earnings. Just for everyone keeping score at home. I did a little back of the napkin math before we went on the show, and I wanted to share a fun little fact about, like, the volatility of Figma's like, stock. At the IPO. It issued about 36 million shares available to the public, and that's including institutional investors. There are 487 million shares outstanding in both of the share classes, you know, by the founders and all that stuff. So less than 8% of the shares outstanding were offered to investors at the IPO. Right now, there's about 14 million shares changing hands each day, and another 19 million are pledged on option contracts. So it means more than 90% of currently tradable shares are either traded every day or pledged to be traded at a future date. I mean, when you hear like 90% of the stock is traded basically every day, it kind of means like, no wonder this thing has been volatile. It's. It's almost like engineered to be that way. Now, this doesn't happen with every company, not everyone IPOs the way that figma IPOs. So with that in mind, like with the. Sometimes you can have weirdness in IPOs. So, Matt, with the added, like, weirdness of available shares and you have lockup periods for, you know, insider investors around IPOs. Do you personally invest in IPOs?
- [11:14]
Matt Frankel
My short answer is sometimes. And I know that John and I both have a lot. We wish we could forget about the SPAC boom in 2021, but we some bad investments. We made some good ones as well. I did buy SOFI shares before it even announced its merger with the spac. The first IPO I ever bought was Block. Then it was called square for $9 a share. And that worked out pretty well. But in general, I steer clear of IPOs unless I feel really strongly about the business one way or the other.
- [11:43]
John Quast
You know, Tyler, talk is cheap, but whiskey costs money. And there is a lot of talk when companies go public. And I like to see companies that actually deliver on what they talk about. That's called a track record. And that takes a few quarters to establish. And so I like to wait and see if this company is really going to do what it says it does.
- [12:02]
Tyler Crowe
Depends on what kind of whiskey you're drinking, if on how much it costs. But you know, it's funny you guys both say that you're not the biggest fans of IPOs, but you know what? I'm going to make you pick a couple anyways. So we have a big slate of them coming next week and we're going to talk about them after the break.
- [12:20]
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- [13:28]
Tyler Crowe
Next week there's about six companies by public and I don't mean nano caps, likely pump and dump schemes from some questionable parts of the world or some pre SPAC blank check tickers. I mean actual legitimate businesses that are going public. So before the show I asked John and Matt, both of you guys, to look at the companies going public and pick one that was most interesting to you. I want to know what you like about it, what turns you off and what you want to know more about. So Matt, let's start with you.
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Matt Frankel
Yeah, the one on my radar is Gemini. Officially the company's called Gemini Space Station, but don't let the name fool you. This is a crypto exchange. Ticker symbol is going to be gem. This is the crypto exchange that the Winklevoss twins founded with their Facebook settlement money. They started buying bitcoin in huge quantities when it was $10 and never looked back and are now worth about $12 billion. So they've done pretty well out of that $65 million settlement. But what I like about it is that the crypto market's still pretty massive. There's a lot of opportunity there. They have some innovative products, like they have a credit card that earns rewards in crypto. They have better capital allocation than I expected to see. Tyler will appreciate this. Normally when you see a big net loss and a tiny adjusted loss, it means there's a lot of stock based comp. Not the case here. Their stock based comp is about $5 million last year for a company with a roughly $2 billion valuation. I'm fine with that. And the regulatory environment's extremely crypto friendly right now. What I don't like is that it's becoming a crowded space. Gemini, for example, is the number 24 exchange by volume and the business isn't yet profitable. I'd want to know more about their future growth strategies and why do they need to go public. Like I mentioned, the Winklevoss twins are worth $12 billion. Why do they need to raise money on the public markets right now? Why do they feel now's the time? So a few unanswered questions and just.
- [15:21]
Tyler Crowe
For everyone scoring at home, Gemini is going to go public with a NASDAQ ticker. It's going to be G E M I. John, I'm going to leave the last word to you, which means I get to go next. And the one that popped off the page for me was a small coffee chain that's focused on small footprint stores and it got its origins in Oregon and it's kind of weird. I'm not talking about Dutch Bros. It's basically a carbon copy paste. It's BlackRock Coffee Roasters. Very, very similar. Apparently the Pacific Northwest provides us with all of our grunge music and coffee companies. So there's something there. It's going to go public with the ticker brcb. Here's what I like about it. There's it's going public. It has strong same store sales growth about 10% and a plan for I would say robust but not overly aggressive store count growth. Often times companies like this go public and spend go grow very very fast and it tends to not go well in that regard. The founders are involved but instead of being like CEOs like you often see with founder led business actually brought in Mark Davis who was the former VP of operations at Panera Bread and he's currently acting as the CEO. You know, founder led businesses always sound great but sometimes founders just aren't cut out to do it. And bringing in Somebody who scaled up a business like Panera I actually think could be a good idea. So I, I think it's a very interesting take on the way of growing a business rather than being founder led. The thing I don't like, its corporate structure is really messy where it's like economic interest and voting interests are carved up in weird ways between like the pre IPO investors, the founders, the publicly traded shares and things like that. Maybe it's a nothing burger but rarely do things that are like this end up being shareholder friendly. They tend to not be at least for minority shareholders. So I'd like to see some clarity on how that that may change over time. And the thing that I'm definitely going to be watching and it's very nuts and bolts is the, on the, it's on the path to profitability. It's not quite there yet. And can it get there in maintain strong per share or per store returns while in growth mode? Because I would really hate to see like deteriorating same source sales growth from a company that is you know, putting, putting down new stores left and right. So John, what, what did you have on, on deck?
- [17:47]
John Quast
Yeah Tyler, I like that idea. BlackRock Coffee. I'll be looking at that as well. But I'm bringing a different company to the table right now and that is Figure Technologies. It's proposed to trade under the in on the NASDAQ under the symbol figr. So this is a company that wants to reimagine lending by using the blockchain. And when we talk about hidden gems we are looking for bold technical exploration. This is a bold move for sure. Now as far as the business goes, 99% of the originations, the loan originations on its platform right now are HELOCs, home equity lines of credit. That's interesting considering home equity in the USA is near record highs right now and kind of its value proposition is its application to funding time. It's 76% lower compared to the traditional banking process and its origination costs are 90% lower. So maybe this is something that can gain traction. What I like about Figure is that its co founder is Mike Cagney. He is the co founder and former CEO of SoFi. So when you talk about crypto you want to know that there's an adult in the room. I think that Cagney is an adult in the room. And we, we also look for companies that are led by true believers. I believe Cagny is that this is also a profitable business. It's still quite small but it has a 15% net profit margin. That's good. What I don't like is there is material weakness in its accounting. It discovered it as it was filing to go public. And so given crypto's history, that's certainly something that is not desirable. That material weakness. They need to get that under control. But what I'm watching going forward is is this a business that can grow and maintain its margins at the same time? I don't know what the competitive moat is here against other banks, up against other crypto startups. It is regulatory compliant, so maybe that is somewhat of an advantage. But if this is the future of lending, it seems reasonable to me that many companies would come in here and drive those origination costs even lower. So would that hurt figures profits long term?
- [19:54]
Tyler Crowe
I'd like to see There you have it. Crypto, coffee and collateralized loans. Some interesting ideas. We'll see what happens with it. Matt John, thanks for sharing your thoughts and I'm going to hit the disclosure. We'll get out of here. As always, people on the program may have interest in the stock 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 standard 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. Thanks producer Dan Boyd and for Matt, John and I, thanks for listening and we'll chat again.