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- [00:05]
Travis Hoyt
Oil is up, the market's down. So where do we go from here? Miling full money starts now.
- [00:26]
John Quast
Everybody needs money. That's why they call it money
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Travis Hoyt
are free, but you can give them to the.
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Lou Whiteman
From Fool Global headquarters, this is Motley Fool Money.
- [00:40]
Travis Hoyt
Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by Lou Whiteman and John Quast. And guys, we've got to talk about the elephant in the room. That's what's going on in Iran. It's causing a huge increase in oil prices. It's causing the market to decline. This could impact the economy for years to come. So we're going to try to pull this apart as much as we can, bring a little bit of historical context to what we're seeing in the market, how investors should be thinking about this. But let's start with the near term impact because I think that's probably the easiest loo to get our heads around as we look at, in particular, energy. About 20% of the world's oil flows through the Strait of Hormuz. Hormuz, that's getting a lot of the attention in the market. Qatar's LNG assets have been hit. They say that they could take years, years to actually bring back online. When you look at over the next one to three months, let's say, what are you looking at in energy markets, in the impact of the mark in the market overall, in the economy, where is your head going to sort of try to process this? Yeah.
- [01:42]
Lou Whiteman
Where does your head go? Right. It's a great question. And the hard thing about this is, is that there are two independent timelines. And the second timeline is the one that's really scary. Destruction is immediate. Rebuilding takes time. So the work of one second's explosion can take, if we're lucky, months. So we have both the timeline of the immediate when will this conflict end and the timeline of the looking forward. When are we back to normal? Those are separate things. We can't just say, all right, if the conflict ends next week, we're back to normal next week. In the case of the LNG assets, what did they say? Three to five years before we're back to normal? And that assumes no more destruction, no more, which I don't know if we can assume that the longer we're in the destruction phase, the more that timeline exponentially goes out on the rebuilding phase. I don't think we can look in terms of months here. I think we are already at a point where we are looking as a matter of years before things are back to normal. And that's really depressing. I don't think I had to say that. But that really creates challenges for the global economy.
- [02:56]
Travis Hoyt
John, it seems like there's some band aids that we can put on this. Talked about, you know, releasing some of the oil in the US Oil reserve in the past. You would see a country like Saudi Arabia say, you know what, we'll step up.
- [03:08]
John Quast
We'll.
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Travis Hoyt
We'll provide a little bit more oil. It seems like there's a little less slack there for them to be able to do that. So how do you, how do you think about that supply chain? Because that's, that's where things we learned during COVID Things get really complicated really quickly.
- [03:21]
John Quast
Yes, supply chain does get really complicated very quickly. I heard one person talk about this like this. There could be a supply issue, and that's kind of an easy thing, but we're actually dealing with a supply chain issue, and that's where it gets a whole lot more complicated very quickly. I mean, take opec, for example. It regularly changes the supply of oil on the market. It goes both up and down in how much oil it's producing and shipping out. The. That's a supply issue. But right now we're talking about the LNG facility in Qatar. That's a supply chain issue that takes forever. And like you mentioned, we're talking about some potential ways to mitigate this, but it's pretty difficult. You look at the oil reserves. We've talked about that on a previous show. It really doesn't do a whole lot for prices because of how small that is in relation to daily consumption. The Trump administration right now is talking about waiving the Jones act, or maybe it officially did waive the Jones act for 60 days. This is something that is hoped to mitigate oil prices because it basically loosens restrictions on U.S. ports. But some are already doing some estimations here, and maybe it's going to save less than a penny per gallon on gas at the pump. I mean, it's really not a material development at all. There's not a whole lot we can do here other than what Lou said, rebuild the supply chain. But that's going to take time, and we can't get started yet until this current phase is over.
- [05:00]
Lou Whiteman
Another complicating factor here and another kind of glossary word we have to add, is the crack spread. And the crack spread is basically the difference between the price of oil and the price of what we make with oil. It's very oversimplified.
- [05:13]
Travis Hoyt
Yeah, gasoline is gasoline. Gasoline is typically what you would.
- [05:17]
Lou Whiteman
Oh yeah, yeah. All of that oil has been relatively calm relative to refined products. And that's because there's a disconnect between where the crude is and where the refineries are and what refineries are where technically there is a global surplus of crude. Even with what's going on. If you can't look at the embargoed crude, the ability of outside of Straits of Hormuz to, to produce, but there isn't the capacity to refine. And at the same time a lot of those products are. You know, demand is inelastic because we have to drive work. But more importantly, the military is using a lot of jet fuel and a lot of diesel right now. The bigger issues right now, and this is how it reverberates the economy, we could go beyond that. Fertilizer has all already come up. And fertilizer, we are kind of lucky here because the North American fertilizer season is basically, it had already been booked, it's already through the strait. So we have time there. But that implies that if we, that, that this is going to ripple through for years and not just one growing season because next season's fertilizer is stuck. How about chip manufacturing? Even semiconductors guys? Helium and sulfuric acid, two very, very important parts of the chip making process. 20 to 30% or more production comes through the Gulf. I don't think any of us really have our heads around just kind of the disruptions that have already occurred. And again, I hate to be like, you know, such a doomsday person giving back to this, but all of this is assuming that it just all ends today. How long would it take to rebuild? I haven't checked in the last 10 minutes, but I have seen no sign that it is ending today. And again, for every one day the conflict continues, these issues are going to be extended by days, weeks, months, not just a day.
- [07:12]
Travis Hoyt
Let's bring a little bit of historical context into this and I want to wrap the economy in as well. You guys have touched on a little bit of that and where we could see some impacts. But you know, gasoline is something that people are buying on a day to day basis and like Lou said, it's in inelastic demand. If, if I need to go to work, I need to go to work. Whether gas is $2 a gallon or $4 a gallon. The two historical times that I thought of comparing this moment potentially to is the 1973 oil crisis. Also Iran involved in that one. And then also the war in Iraq started. In 2003, you know, you had 9, 11, 2001. The period after that for, in for the market was essentially a decade of the market going absolutely nowhere. So there was an economic impact and then you potentially had a market impact where investors start to go, man, look, think about all the growth stocks that we have today. Maybe we shouldn't be valuing these as highly if we've got a whole lot of uncertainty. So now, now you see multiples start to come down. Is that something that we should be thinking about, Lou? And I don't, you know, we don't want to be doomerism here, but these are the concepts that we need to think about because if this is another 1973, if this is another 2003, it could mean that that's going to affect our investments over the next decade.
- [08:36]
Lou Whiteman
So I would say the oil experts say that we are already past what definitely the Iraq war was. And I think if you look a lot of the production in the supply impact.
- [08:46]
Travis Hoyt
Is that what you mean?
- [08:46]
Lou Whiteman
Yeah, I mean production capacity was largely spared there. So we didn't have, I mean we had local infrastructure issues. I don't want to be dismissive of it, but you know, this is far worse. I don't remember the 73 oil embargo as well as I remember. Yeah, I'm happy to say I'm not that old. But yeah, look, there is no way that this won't have a profound economic impact. I don't think that can be debated. The debate and the unknown because there really isn't a debate. We don't know. We just don't know how severe the impact is going to be. And yeah, as investors, I think we need to kind of, you know, prepare ourselves for that because, you know, hopefully I'm wrong, hopefully there will just be a bounce back. But if there isn't and we can get into this later, I think there it's going to be, it's time to buckle up.
- [09:39]
Travis Hoyt
Yeah. John, we've already seen the market start to be impacted. The s and P500 as we're recording year to date down about 4%. The NASDAQ composites down about 6%. We're definitely not in any sort of, you know, major correction territory, but Fear and greed index is, is now in full on fear mode. So should we be sort of a little bit more fearful in the way that we're thinking about expectations for the future?
- [10:07]
John Quast
Yeah, it's so interesting right now, the fear and greed meter tracking this inventor investor sentiment sitting at 17. That's its lowest this year and hitting pretty close to the lowest point, highest fear in several years. What's so interesting is that, you know, a market crash and situation like this can generate months and months of bad news. It really can. It can drive sentiment lower. And one of the interesting things is so many investors haven't experienced like a real economic crisis. Yes, there have been pullbacks here and there, but it's a little bit dated now. But in 2021, Charles Schwab did a study and found that 15% of investors started investing during the pandemic. We're five years later now. That means that there's a significant percentage of investors that have started investing within the last six years. They've never experienced a 2000 event, they've never experienced a 2008 event and they're already very fearful with the market only, you know, it's only like 5 or 6% off of its all time high right now. That's pretty good. It can get a lot worse. It can drive that sentiment a lot lower. I hope that people listening to this show don't start panicking because that's one of the worst things that you can do. Your emotions are a very bad instructor and guide for your financial life. Right. It's important to have a level head, but it's also important to realize, yeah, this can get worse before it gets better.
- [11:33]
Travis Hoyt
Yeah. Just to do some quick math on that, the market bottomed in March of 2009. So if you started investing and you were 23 in 2009, you would be 40 now. There is just a huge number of investors. A lot of people that I talk to on a day to day basis were not investing back then, much less have stories like JDS Uniface for those of us who can go back all the way back to the 1990s, yeah, it can get worse. Let's talk about when we come back where we're looking at potential opportunities because I do think that we need to remind people that this does not mean panic, sell everything. But it means that this is why we continue to add to the market buy when you're lower. You want to be greedy when others are fearful. So how should we be thinking about that as investors? We'll get to that in a moment. You're listening to Motley Fulman. Have you been sleeping on your mattress a little too long like I have? My back's getting sore more than it used to and I feel like Homer Simpson with my body shape imprinting on the mattress. But like you, I'm busy with the job and kids. And who wants to go to the mattress store with the family only to deal with a pushy salesperson? That's why I was excited to learn about Leesa and their premium mattresses that you can shop for from the comfort of your own home. We wanted stability and comfort, so we went with the Legend Hybrid. It has over a thousand individually wrapped springs for extra support. But here's the great thing. It virtually eliminates motion transfer just in case one of us has a restless night. No matter how you sleep or your budget, Leesa has a mattress for you. They're made from premium materials right here in the US With a focus on using sustainable materials like recycled steel. Check out which mattress is right for you@leesa.com for 20% off plus get an extra $50 off with the promo Code fool exclusive for our listeners. That's L EE E S a.com promo code fool for 20% off plus another $50 off. Support our show and let them know that we sent you after checkout Leesa.com promo code fool. Welcome back to Motley Fool Money. One of the things that people often talk about when the market starts to decline or we have uncertainty like this, John, is safe havens. We think about these as like maybe the big companies where we know we're going to be buying toilet paper in the future or food in the future. But a lot of these companies are really expensive. We also have things like gold, bitcoin. Are there any real safe havens today?
- [13:58]
John Quast
Well, no. In a worst case scenario with the economy and with the stock market, then really no. But when it comes to what we're talking about here with let's just say oil prices stay high for longer, there's an obvious first order impact, right? And that's on discretionary spending. If you're spending more on gas to get to work, for example, you have less disposable income on toys. So your discretionary spending is an obvious first order impact. There's lesser obvious second order impacts. Lou already touched on potential helium disruption and how that can impact semiconductors potentially. There's also things such as aluminum. Aluminum is a very energy intensive metal. Right. And so maybe even your beverage companies are having a higher input cost with aluminum cans. I mean, there's some interesting things there. But what I like to do in times like this is I have a watch list of high quality companies, okay? Not necessarily safe havens as in they're never going to go down a percentage point, but they're very high quality businesses that I would Turn to when I. When it's hard to see through these cloudy skies. Right. And so I'm thinking about companies such as Waste management for example, Ticker WM or even a Costco. I even put tractor supply in here as well. Tractor supply provides a lot of livestock and pet food and so it really tends to be more resilient. Vistra Energy would be another one. So these are things that regardless of what market conditions are and it can get chaotic. I like to have a watch list of these kinds of companies that I can really say, you know what, in 10 years I really expect them to be bigger and better than they are right now. No matter what happens Right now.
- [15:40]
Lou Whiteman
Yeah, I mean in a real downturn and look, we're not there yet but if it comes in a real downturn there is nowhere to hide, period. I wish there was some secret code. There are some sectors that tend to hold up better than others but in a downturn everything goes down and the pain is almost unavoidable. Most important advice here is don't make long term decisions based on near term pain. Fleeing the markets when things are bad can be really, really harmful to your long term goals. If an individual business is permanently damaged from this and it could happen in some sectors then yes, maybe you need to look at selling. But focus on the long term. No matter how bad things get, I believe the economy will eventually recover. I believe that this 100 year old chart of the markets going up, that long term trend will continue. Ask yourself if the companies you are considering selling will be there on the other side. If they are, try to ride out the storm in terms of specifically where to go. I mean I'll note Travis, I almost made it my radar stock because 6 month treasury there's 10 basis points higher than a week ago. So that's something I guess. But that's cash. I think I'll just be contrarian to John. If you buy the premise that everything goes down and if you believe that the economy will eventually recover and I do believe that there are really great companies out there that can survive. I actually like to look for opportunities in the non consumer staple area. I don't know if it's high flying mag 7 stocks that come back to earth but it's really hard to do and you know, I mean I again I think doing nothing is good enough. But I am much more intrigued in a real, real downturn, you know, God forbid a repeat of 2008, 2009. These are the times that I like to stick my neck out and Try and pick those previous high flyers that I think in better times can do it again. The staples are there. And to me, I would argue that things like energy and staples you keep in your portfolio four times like this and you don't buy them now. But look, I, I in general, I think you look cautiously for optim long for long term opportunities and again, focus on what a business can be after the damage is done and not try not to dwell on what it is.
- [18:12]
Travis Hoyt
Now I'll just add one of the things that I'm looking at is companies that have really phenomenal balance sheets and don't burn cash. I think that's one of the challenges. A lot of companies that you know, get a lot of attention, have a ton of cash on the balance sheet, but then you look and you go h they've really only got the Runway to make it through the next two or three years. So if things are really bad, they're going to have to go raise capital again. But if you have 20%, 30% of your market cap in cash and there are stocks that I have in my portfolio that are in that position and you have a cash generating business, you can start to do things like, well, use it as a safety blanket, but you can also start to use that cash as a weapon to buy back stock and say, you know, what market, you're completely wrong and we're going to be the ones that are aggressive when everybody's in fear mode. John, I just want to quickly ask how you think about cash in this moment. Is that something that you are either moving toward? Do you just have it available if you're, you know, we do have a downturn. You want to be opportunistic.
- [19:08]
John Quast
Yeah, I mean it's so important to stay invested. Right. I mean everyone would love to sell the top and buy the bottom. Research shows that you can't do that. I can't do that. To channel the my inner Mark Twain, I've anticipated many market crashes that have never happened. So it's important to keep stay invested. But I do have a cash position right now. I'm about 20% cash right now. It's arbitrary, imperfect. That's my max. So the other 80% is going to stay in. But that cash position does help me hold tight with my stocks right now before things get chaotic. It helps me be able to realize that in a downturn I'm ready to go, I can take advantage of some opportunities when it knocks.
- [19:47]
Travis Hoyt
Yeah, I think all of these things and the other thing I'm doing is I'm adding to my portfolio every single month. So dollar cost average, whether you're at the highs or the lows, that kind of helps me sleep at night as well, knowing that I'm going to be buying every month. When we come back, we are going to have John and Lou pick their final four. You're listening to Motley Fool Money. All right.
- [20:09]
Lou Whiteman
Changing every day.
- [20:15]
Dan
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- [21:15]
Travis Hoyt
Welcome back to Motley Fool Money. March madness has begun, so we thought we'd take our opportunity to turn that into a little bit of an investing game. I want to, to give Lou and John 12 stocks and I want them to pick a final four and then ultimately the champion of these 12 stocks, we'll kind of go with companies that are well known or bigger in the market. We have the full mag7, so Alphabet, Nvidia, Apple, Tesla, Microsoft, Meta and Amazon. Then we've added Palantir Micron, one of the hottest stocks in the market today. Disney gotta have something consumer. It's a little bit of a recovery play. Chipotle and Rocket Lab. John, I'm going to have you go first out of those 12 stocks. Who is going to make your final four?
- [21:57]
John Quast
Yeah, my final four here was actually kind of easy for me. I'm going to go with Amazon, Meta, Micron and Rocket Lab.
- [22:06]
Travis Hoyt
What are, what, what are you thinking there with a lot of technology and, you know, kind of big companies? Amazon, obviously one of the biggest companies in the world. I think that has one of the lowest priced earnings Multiple in the mag 7. Are you just seeing value in all those areas right now?
- [22:25]
John Quast
Yes. I mean, with Amazon, as you point out, it has pulled back. The valuation looks good. And that cloud business, it just continues to perform so well. I like Amazon for that reason. Meta platforms, as we're going to talk about it in a moment, I think. But you know, as much money as it has wasted at times over the last several years, this company is still just oozing cash. It is being very shareholder friendly and that's with all of the things that it's wasting money on. I think that it's hard for meta platforms to lose, quite honestly. You look at Micron, I think that the current trends in computer memory, I don't think that they're. As it's late in the cycle, I really think that this still has multiple years, at least to it. I think that Micron can make unprecedented money over the next several years.
- [23:14]
Travis Hoyt
Can we just touch on that? And I know you talked about it on yesterday's show, but the numbers are absolutely insane right now. Revenue growth in the most recent quarter was almost 200%. Do I have that right, John?
- [23:26]
John Quast
Yeah. And what's so interesting, and I believe Matt Frankel, our colleague, pointed it out, that gross margin doubled essentially year over year at this scale. Right. It cannot, it physically cannot make enough memory to meet the demands of its customers. And while that persists, it is going to be generating incredible. Prof. It is investing some money to build some more manufacturing capability so that it can increase supply. That's multiple years away. That could really change the profit margin profile of the company in a few, in two years, maybe three years. But in the interim, it's going to be really printing cash, I believe. And Rocket Lab, come on. I love outer space. I really do. I like to invest in companies that I enjoy thinking about, I enjoy researching, and I can't have an entire portfolio comprised of that. But some part of your portfolio where it's like, this is a fun stock for me. Rocket Lab, is that.
- [24:31]
Travis Hoyt
Lou, do you see any different opportunities there in your Final Four?
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Lou Whiteman
Yeah. So, like, this is just like basketball, okay? Because everybody loves to pick Virginia Commonwealth over North Carolina. Everybody loves to pick High Point over Wisconsin. But at the end of the day, by the time you get to the Final Four, it's just going to be Duke and all of the usual people there at the end. And that is.
- [24:52]
Travis Hoyt
Well, we don't have an Nil in the market. I did do my bracket this year and I picked all one seeds because I realized last year that the NIL has kind of ruined it for some of the lower seeds.
- [25:02]
Lou Whiteman
Well, this. Well this has been happening for a while. The blue bloods are the ones that make it so the ultimate blue blood. The Duke in this list, I think is the company that, you know, nobody, nobody really wants to root for, but we all just know they're going to be there at the end. And that's Microsoft. Microsoft is everywhere. You can't not see it. If someone's a Microsoft alum, they probably talk about it too much, just like with Duke. But Microsoft just has so many ways to beat you, whether it's back court, front court, business side, consumer side. Microsoft is just this constant for the last how many years. And I think they're going to be there again. We don't have to like it, but we should probably know they're there. Similarly, Alphabet, I don't even know who Alphabet would be because I guess they're a little younger, but they're just always, you know, like Duke's been around forever.
- [25:55]
John Quast
I don't know, they at least have
- [25:56]
Travis Hoyt
a little bit more exciting businesses.
- [25:58]
Lou Whiteman
Yeah, they have some excited business. They're a little flashier maybe. But look again, winners win. Alphabet is the ultimate winner. I think as we've talked, they are pretty well set up to actually put AI to use, which I think is going to be the hard part for these hyperscalers, getting people to buy it. I like Microsoft and Alphabet there, so I am going to go lean into them as well. I do like Amazon for the reasons John said. They're probably a two seed here and I'm, I'm less certain about that. Maybe if you would have let me set the list. I don't know if I, I probably could have found some. I, I don't even know what it would be off the top of my head. But I'm less certain about Amazon. But I like them relative to what's here.
- [26:38]
Travis Hoyt
Do you think that they have lost some of the magic because they've, let's say, lost a Mike Shashevsky, you know, the founder energy, now that they've gone to Andy Jassy.
- [26:48]
Lou Whiteman
I think that's part of it. And you know, and again, I think it's partially too of, you know, kind of maybe the North Carolina on this list where you're sort of, you know, not going on fumes by any means. But, you know, you're still both a powerhouse and you're less scary than you used to be. That's kind of the way I saw Apple too. You know, Apple I considered for this. That's one we haven't mentioned in this. But look I both believe Apple's going to sell a lot of phones and I don't know what to get excited about with Apple. I sort of feel that way with Amazon too. I, I think the retail business is just going to be what it is. AWS is very strong. I don't know if they have the AI chops or advantages that say an Alphabet does. So it's less interesting to me. But it, I'm just going to be surprised if, if I'm not going to be surprised if they show up there. My last one, this is probably more of a four seed. It's not really a Cinderella, it's not really something we can get excited about, but it's not a blue blood. I went with Rocket Lab too. Just like RO Lab. It's so interesting. Rocket Lab. Maybe there's a Gonzaga. Right, like, because in a way Rocket Lab, it's, how did you possibly get to here? And in a way it's wow, look at what the future can be for them. I don't, I don't know if you said how long we're looking out here, but if we are talking about, you know, for five years versus one year, I, it wouldn't surprise me to see Rocket Lab outperform a huge number of companies on this list.
- [28:12]
Travis Hoyt
The one that you didn't mention that surprised me a little bit is Nvidia. The biggest company in the world, I believe. I believe they still hold that title. The valuation is looking pretty attractive. Price, earnings multiple is 24, still a phenomenal growth company. But John, you went with Micron instead, you know, arguably a little bit a step down on the, on the value chain of actually building these systems and these chips. So why, why Micron instead of a company like Nvidia?
- [28:39]
John Quast
No, it's very inconsistent reasoning because what is good for Micron is good for Nvidia quite honestly. And that is why Micron is doing so well. In fact, it actually pivoted out of the consumer business and it's going all into these, these AI chips. So yes, as this is why Nvidia has been such a great company. It's. Its profit margins are just incredibly high, historically high, once in a lifetime kind of a profit margin situation and it's continuing to be in very high demand and it's a very strong business as Nvidia continues to perform well. It's good for Micron though as well. Right. So it is inconsistent reasoning on my part to name one and not the other.
- [29:24]
Travis Hoyt
Well, it's so hard to look at the valuation of a Company like Micron as well, because given that growth rate, I'm just looking at the forward price to earnings multiple. It's 4.8 right now, which just seems absolutely crazy. All right, I want to get you
- [29:38]
Lou Whiteman
guys real, real quick on Nvidia, because I thought about this for a long time time, and they are the Yukon in this bracket constantly. I mean, Yukon was great in the 80s, took some time off, great. Then came back and takes time off and now they're great again. I do think that, I mean, look, you can't go wrong long term investing in Nvidia. But I don't know if I think based on the growth they've seen the last five years, that again, next five years is going to be the growth story. It was so, again, you could do a lot worse than writing UConn into the brackets, especially this year's bracket, I think. But inevitably there will be that ebb before it flows again. That's UConn and that's Nvidia to me too.
- [30:22]
Travis Hoyt
All right, John, you have to pick one champion out of your final four. Who have you got?
- [30:26]
John Quast
I would have to go with Amazon there. And seriously, I know that sounds, I don't know, maybe a little bit like a letdown because we all know Amazon, we all have seen Amazon and Amazon has been so good in the past, but surely it's not now, right? But no, I think that Amazon still has many good years in front of it. I believe that the cloud business can continue to get bigger.
- [30:49]
Travis Hoyt
Really?
- [30:50]
John Quast
You look at some other business lines such as advertising, still ramping very nicely. This company has the opportunity to generate a lot more profits in coming years. The valuation is historically quite attractive and so I'm taking Amazon here of this list.
- [31:04]
Travis Hoyt
All right, Lou, out of year four, who have you got?
- [31:05]
Lou Whiteman
I want to go with Rocket Lab. I think it could be Rocket Lab, but I'm going to go with the University of Houston, which I think is Alphabet here. Flashy, exciting, great leadership, one of the best leaders in, you know, in, in the whole.
- [31:20]
Travis Hoyt
Is that sentiment completely changed for Sundar Pichai?
- [31:23]
Lou Whiteman
I don't, I mean, I, I can't speak for it. Yeah, I mean, I, I think the markets have grown into him. I think that, you know, his track record speaks for itself. I, I, I like their chances of kind of winning here, I guess. And I, I, I don't know. And I'm also, I do think it's Houston's year, so I'm going to put those together and say Alphabet is the Houston of this tournament.
- [31:47]
Travis Hoyt
I like it. Well, we do have to circle back to Meta. When we come back, get an idea of what's going on with the future of that company. You're listening to Motley Fool Money.
- [31:56]
Lou Whiteman
Now that you're out of my life,
- [31:58]
Travis Hoyt
I'm so much better. You thought that I. I'd be weak without you, but I'm stronger. You thought that I'd be broken?
- [32:04]
Dan
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- [33:15]
John Quast
If you're going to be dumb, you got to be tough.
- [33:18]
Travis Hoyt
Welcome back to MLY Fool Money. Meta's side quest into the metaverse is coming to a somewhat unceremonious end horizon. The metaverse is officially being shut down or neglected even more than it already was. I just got to start with this, guys. John, does Meta platforms now need to change its name from that maybe back to Facebook or something else? But it seems like this name doesn't really identify where the company is right now.
- [33:47]
John Quast
Yeah, I mean, I think it does need to change its name. This is the reason why it changed its name in the first place, was to. I mean, explicitly, right? All in on the metaverse. I mean, look, I've got a great name idea for the company. How about Facebook or Instagram?
- [34:05]
Travis Hoyt
That may even make more sense. Now, Lou, do you agree?
- [34:08]
Lou Whiteman
Zuckerberg's World Emporium. How about that? Is that. Does that work? No. So look, you know what? And again, I'm sure my. My classics teacher from high school will call me up and yell at me if I'm wrong here, but I believe meta is the ancient Greek for beyond, so I think you can use it for anything. If anything, maybe it's more appropriate now because they're going beyond just the metaverse into A.I. i don't know. At this point, I think I would advise against it. You are what you are. Unless you want to go with kind of the Jack Dorsey route and just make it, I don't know, the symbol Prince used to use. Just keep what you're doing and focus on the business.
- [34:53]
Travis Hoyt
It. It is wild, the name changes that happened during the pandemic. It seems like executives just seem to have lost their minds for a few.
- [34:59]
Lou Whiteman
They had too much time on their hands. They couldn't. They couldn't jet off to Burning man and look what happened. Right.
- [35:05]
Travis Hoyt
Exactly. All right, John, so what's. What's real here and what isn't? Because the Reality Labs has been a ton of spending, but it isn't like they're not spending on some of these future products like the AR glasses and AI. So what should we actually know about this?
- [35:19]
John Quast
Yeah, that's a good point, Travis. I mean, Meta's winding down Horizon Worlds, that is the digital online Metaverse world, if you will. But it's not winding down all of Reality Labs. It's not winding down Oculus, it's not winding down the Meta Ray Ban glasses. Right. So there still will be money spent here. But what's so interesting is Meta started breaking out Reality Labs in 2021, and that gave us the financials into 2020. Basically. Cumulatively, since that time, it has spent roughly $80 billion on Reality Labs and generated about 10 billion in revenue during that time. I don't know if we've ever seen anything quite like that. Essentially, it has burned $70 billion on this project. Now, like I said, some of that was Oculus, some of that was. I think most of the revenue generated was Oculus. But it's so interesting to me that spending all of that money, it still couldn't will this concept into existence. Part of me says that that means that the Metaverse will never be ready. Player One will never be. The other part of me says maybe Meta was just too early here. Maybe once we have a better haptic experience that incorporates the five senses even better, maybe that will be something that the user will be improved, and then you won't have to spend $70 billion to get people to use it. They will Be lining up to beg to use the platform because it is good. I don't know which it is I would personally lean towards. We're not getting ready. Player one, but time will tell.
- [37:02]
Travis Hoyt
Yeah, Louis, is this a wise move to get rid of this spending now?
- [37:06]
Lou Whiteman
Yeah. Here's the thing. Being at the Grand Canyon is cooler than looking at a picture of the Grand Canyon. I will concede that the metaverse is probably somewhere in between. I don't think it's worth hundreds of dollars or any revenue of mine versus that picture. And I think, yeah, this is all the money in the world is going into AI. We already know this. This is just them telling us what we already know. We're not focused on this anymore. I think that it's as much of that and as little of that. That's. That's the story. It's just we've moved on it.
- [37:39]
Travis Hoyt
It will be interesting to see how they break things out in the future, because they did talk, I think, even going back a couple of years, about how some of the spending on AI was falling into reality labs. So it was like they were shifting the focus already. But now are they going to be breaking out AI spending in a different way, or is it all just going to be this huge bucket of money? I don't know that we know the full answer to that yet. Maybe by the end of 2020, 26 left to change the disclosures. All right. We like to end the show with the stocks on our radar. John, I'm gonna have you go first. What are you looking at this week?
- [38:15]
John Quast
Yeah, this was a hard one for me this week, but I'm gonna go with Celsius Holdings. That's ticker symbol C, E, L, H. This is the number three energy drink company behind Monster and Red Bull, and it owns its namesake Celsius brand. It also owns Alani New, which is kind of an up and coming energy drink brand. It acquired just. It also recently got the Rockstar brand, if you've heard of that one. So I like revenue growth and I like profit margin improvement. Those are two things that I look for. So revenue in 2025 for Celsius was up 86%. That is huge. A lot of that was acquisition related. However, the company did still take market share with its brands, and so it was still organic growth as well. The mission in 2026 is basically to get its newer brands fully integrated into the business. It's working to get them into Pepsi's distribution network. Pepsi is an investor and a partner here, so that will Help its profit margins improve this year. So we're seeing both of those things that I look for. Revenue growth and profit margin expansion. It's down 35% from 52 week high. It's trading at four times sales. That's cheaper. About 50% cheaper than Monster even though Celsius has way better growth potential. I like Celsius today.
- [39:35]
Travis Hoyt
Dan, are you a Celsius drinker? No. They market this stuff as healthy, but I don't. Listen, I might be being skeptical here, but I don't think any energy drinks are healthy. So yeah, just drink water gang, if you want to be healthy.
- [39:48]
Lou Whiteman
Amen, Dan. Thank you.
- [39:50]
Travis Hoyt
As I take a sip of a wild berry Celsius. So I guess I'll take the other side of that one carbonated tang. I don't know quite what's in these things that have very few calories. I've never understood how you can have a drink with flavor that has zero calories.
- [40:05]
John Quast
But look, don't ask questions.
- [40:06]
Travis Hoyt
Yeah, maybe it's magic. Don't think about it.
- [40:09]
Lou Whiteman
Don't ask questions. Just buy the product. I like that.
- [40:12]
Travis Hoyt
All right, Lou, what's on your radar this week?
- [40:14]
Lou Whiteman
So, Dan, I am looking at Planet Labs and before you ask, no, that's not a B52 song from the 80s. It is a company with a ticker pl. They are satellite imaging specialists. When you look at Google Earth, chances are you're looking at a Planet Labs image. The company posted a solid beat this week and laid out a very, very good growth case. From here, government's about 85% of the business. 20 new awards with an average value of 170 million. So that's a lot of revenue visibility from here. The intriguing part is commercial. It's not just for cool map applications. There's a lot of data that can be extracted for agriculture, for industry. Real time mapping. A lot of things can come out of this stock is not cheap. But Planet Labs, if nothing else, laid out a case why they can justify this valuation and grow from. I'm watching closely.
- [41:03]
Travis Hoyt
Dan, what do you think about Planet Labs? I actually think this company is pretty cool. Their whole deal is taking pictures of the Earth from orbit and I don't know, I think it's really cool. I love seeing pictures of the Earth and I like what they're doing here. It also seems like they're almost propping up SpaceX with the amount of satellites that they're launching through SpaceX. I also like that they have the website, their main website said is just planet.com so fun. I mean, it's a little unspecific if we're going to be honest here. Because, like, we got a lot of those around here, so I don't know. True. All right, Dan, which one is going on your watch list? Let's go. Planet Labs. All right. Congratulations to Lou Don. Better luck next time. Thanks for listening, everybody. To Motleyful Money. We'll see you here next time.