Barron's Streetwise - No Robots Allowed

Episode Date: September 11, 2026

In this safe space for the AI-weary, Jack discusses eight companies that are growing nicely outside of tech. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Are you so into artificial intelligence that you wish you could hear people talking about it for 16 hours a day? If you are, this is probably not the episode for you. This is for the person who just maybe wants a break, just a little reprieve from all the AI talk to hear about some growth stocks out there, some companies that can do well without a ton of AI. Maybe you're looking for stocks because you feel like your portfolio has wandered just a bit too far into the middle. Matrix. I'm going to give you some ideas. Eight of them, in fact. This is the Barron Streetwise podcast. I'm Jack Howe. Let's get into it. Listening in is our audio producer Emily Sumlin. Hi, Emily. Hi, Jack. We've got some stocks to talk about. I wrote a story for Barron's. This is apart from the column, which by the time people are hearing this, I surely will have written.

I was asked to produce a roundup of non-AI stocks, and it's not because of any particular investment thesis. It's not because of a prediction that AI is a bubble and it's going to go bust. It's not to say that these are the stocks that you should own instead of the S&P 500. It's just that folks are hearing a lot, right, about AI every week. You got the people arguing about whether it's a fourth industrial revolution or about whether it's a super bubble. I heard people say it's going to set off a hyper-productivity super cycle, which sounds like a good thing, or a crash, doesn't sound that way. I've heard that it's going to conquer disease and poverty, but I've heard that it might lower the barrier for mass destruction. Sounds like a negative point.

It is all a little bit exhausting. And so what I did in Bairns was I created a safe space for people who just wanted to read a story without hearing about neuromorphic computing or cybernetic convergence. There were no paradigm shifts. There were some cruise ships moving. No singularity or event horizons. There is a pretty big video. game launched to talk about. I couldn't really come up with a list of stocks that were 100% AI-free. There's no such thing anymore. Like there's a broker that's making at least some money because investors are out there flipping things like direction, daily AI and big data bull two-time shares and other related nonsense. There's a pair of drug makers. Pretty much any drug maker today,

any big drug maker is using machine learning to look for new treatments to test. The corrugated box company, they've got a spiel about AI-driven efficiency. The gym chain, they'll point you toward an AI coach if that's something you're really into. But I asked AI, and AI told me that my list of stocks has only 7.7% exposure to AI as an investment theme, so that's got to count for something. To find these stocks, we screened across different sizes, sectors, styles. I guess if you wanted to make a non-AI stock list, you might start with value stocks. Barkley's capital just, upgraded value and downgraded growth because of higher interest rates, sticky inflation and tighter AI funding. It sounds sensible but I've always had a hard time

telling the difference between a cheap growth stock and a growthy cheap stock. And so by the way do growth and value funds judging by the holdings overlap. So we just look for companies with solid prospects for doubling their earnings per share over the next five years. To do that you have to have a yearly growth rate in the mid teens or higher. We wanted companies that with reasonable valuations so the shares can move with the earnings, and we look for financial strength to persevere, even if the economy doesn't roar.

And we came up with eight names. Again, these names are not a coherent portfolio. They're just a list of individual candidates for consideration. And me going through this exercise of an AI reprieve, I can't stress enough, is not an act of doom saying on my part, unless we end up with doom and then I just remember, I've been saying it all along. But I'm optimistic as long as that doesn't happen.

Do I have all my bases covered, Emily? You got one foot on first. Right. And I got the other foot on third. I don't know that doesn't sound possible. And it's not comfortable at all for the pitcher, believe me. But I've managed to do it. If you stretch before, you'll be okay.

So you've seen the list. Do you want to go through these? Are we going to do all eight? Or we're going to do a sampling? You want to do it like a rapid fire? How many do you think we can get to? You've heard of a tight five. Jack, I think you can do a tight eight.

I'll let you, we'll go in any order you want. You tell me a company. Well, first you got to tell folks the thing you told me about one of the companies on the list, which is Royal Caribbean. You have a royal connection, a royal anecdote. Let's hear it. I do. Yeah, we have to start where it hits closest to home for me because my grandparents

were some of the first people on the Royal Caribbean's cruise around the world. They were on the first ever venture for it, and they did all stops. I think they were gone for nine months straight. I could swear we had the former CEO of Royal Caribbean on this podcast and one of the things he talked about was a new thing that they have coming out which is like, you know, a full-blown like you travel for the better part of a year or something like that, you go all around the world. Is that the thing we're talking about?

It was the very same, I believe. He told us about it on this podcast and then your grandparents were the, went on the first cruise of that kind. They were the guinea pigs. They made it back in one piece. Did they, what did they have to say? They liked it? Yes, consider they live already what I would call a Jimmy Buffett-esque lifestyle.

They've been on island time for as long as I've known them. Flip flip flops. Yes. Second coffee at 2 p.m. sort of vibe. So this was right up their alley. And they saw so much. I was so jealous. I wish I could have gone.

Well, start with the flip flops and then, you know, keep working toward the rest. I think if I did flip flops at work, Jack, I wouldn't have this job anymore. You would not hear from me again. I could probably get you a special allowance if you really want it. So Royal Caribbean, here's the thing I find remarkable about the stock. If you're a 10-year investor in that company, you've made 352%. You've beaten the S&P 500 by 34 points. Okay, pretty good.

You've beaten the market by a little. But think about that. That period includes the COVID-19 pandemic. And that shut Royal down completely worldwide for 15 months. and when it opened again, it took a year to bring the full fleet back into action. So think about that. And the company has overseas incorporation and a global workforce, so it didn't qualify for U.S. government aid. It had to issue high interest bonds, and it had to sell shares to the public to get by. And the result of all that,

after looking back over 10 years, is an outperformance of the stock market. I find that incredible. There are some worries now about new ships in the Caribbean. Will that create oversupply? There's, of course, war in the Middle East. That's driven up marine fuel costs. Will it dampen European wanderlust? And the company is opening what's called Perfect Day Mexico. It has a strategy of a bunch of the cruise operators do of owning private islands.

It's a highly lucrative business where you can control all of the guests spending during these visits to the private islands. So it's opening up a new one of these in. Mexico and there's a bunch of red tape. It was supposed to open late last year. It might get pushed into 2008. It's unclear. The shares have dipped 4% this year, but the earnings consensus is basically unchanged from where it started the year, implying 14% growth. It's kind of how it goes for this company. It always looks like there's some concerns about the cruising business, but it seems to in recent years anyhow, just keep plugging right along. And so Royal Caribbean makes the list as a company it has a good shot to double last year's earnings by 2030.

And Emily's grandparents played at least some part in that. Now, who should we go to next, Emily? What about Biomeran? Biomeran, this is a drug company. Sometimes you have a drug company that's like an all-or-nothing bet on a single treatment, and sometimes you have a big mature drug company that has a lot of cash flow, but it's got sleepy growth. And this is kind of in the middle.

This company is best known for one treatment for, I really don't want to mispronounce this, but acondroplasia, I'm going to say, it's the most common cause of dwarfism. And it's got this shot called Voxogo. And if you give this to children with this condition, when they're young and their growth plates are still open, it can, it doesn't make it go away. It doesn't stop this growth pattern from happening. But it can improve proportionality and reduce skeletal complications.

And it can increase adult height from, I just say, as the, example from just over four feet to maybe just under five, which is, which is meaningful if you're a person or a family facing this condition. That juggle top a billion dollars in sales this year. It could ultimately hit two billion dollars. There's a competitor out there with a weekly shot for this condition, a new medicine. That compares with a daily one for Biomeran. There was a lawsuit. The lawsuit was settled. And the upshot is that Biomeran is going to be receiving royalties on that new drug from a competitor. Meanwhile, it just did a big buyout of another company that gives it two new treatments for genetic disorders. Both of those could ultimately

do more than the billion dollars in sales. So this is a company that over the years ahead, first of all, it looks like there's going to be a big increase in earnings, but also it's going to go from being maybe a one blockbuster drug maker to a diversified rare disease specialist. Sometimes those can attract more love on Wall Street. Let's keep in the drug theme. How about Eli Lilly? Right. We've said a lot.

We've, you know, we've had the CEO of Lily on this podcast. We've said a lot about it. Obviously, the obesity medicines. And I just did, I want to say a cover story. I can't remember how long ago on this. Yes, just a couple weeks ago, the everything drug. Just the idea that these, this class of drugs, GLP1, they're being approved for more and more conditioned.

and studied for more. And it's just starting to look like so many of the ailments that are, that are the most expensive things in health care are all tied to maybe, you know, the same or similar underlying conditions. You can fix a lot of them or help a lot of them with this class of drugs. And Eli Lilly is out there making that case. They just pointed to a study that they funded, but it's a study that shows that for Americans 55 and older who are overweight, basically if you put them on Zepbound for a year, their health care costs at the end of that year are more than $600 a month less

than someone who wasn't taking Zepound. And that's significant because Medicare, by law, is prohibited from covering drugs that are just for weight loss, but because these drugs are doing so much more, there's a bridge plan that's created some funding for seniors on Medicare to get these drugs cheaply. It's temporary in order to, to make it permanent, Congress has to step in. But Lilly's point was, hey, under that bridge

plan, Zepbound is costing $195 a month for these patients, but their health care costs are more than $600 a month lower. So, you know, again, consider the funding. It's a littlely funded study, but I think it's a pretty powerful argument. I think you see that both in rising insurance coverage and patient uptake. And there are, of course, new and better GLP1 medicines on the horizon. Lily is a company that could go from less than $10 billion in free cash flow to more than $50 billion in yearly free cash flow by the end of the decade. Emily, you had an observation about Eli Lilly's advertising. Yes, if they could politely just cool it a little bit on their advertising around Love Island or any other, like, woman heavy show on Hulu and other streamings, Eli Lilly, I know all the side effects now. Don't you worry.

I have heard it all. Come on, Lily. Emily's trying to watch Love Island. She wants to get to the island and the love, whatever else happens on that show. I'm a scholar. I'm an intellectual, Eli Lilly. Get your ads off of my educational programming. Fair enough.

Who's next on the list? Oh, we've got a children's favorite, five below. Five below. You're familiar with five below, right? All I have seen is toddlers disappear in there to presumably go. haywire. I have not really been in there myself. This is basically, they sell impulse purchases to the parents of pleading children. And the way it works is, you know, you got your kid there and, oh, can I, I'm going to go

on a five blower. I want to go on a five block. Well, you know if you go along with it, at least the damage is contained, because a lot of the stuff in there is under five bucks. If they want to go to a store next to that, you could be looking at 35 bucks, whatever. So I think that's the business model. And this is a case of a company with blowout results. but also some pessimism around the company. You see that sometimes because investors are thinking, these results can't continue. These are abnormally good and it's going to go away.

And it comes down to something called squishy dumplings. If I put that phrase out there, you know what I'm talking about? I can only picture exactly what you're saying to me, which is a squishy dumpling. Like a plushy? It's not, I don't think it's a plushy. I think a squishy is more like, it's like a stress ball. right and these come and there was and they come in a set and they come you about they were in a little um what do you call it like a dim something like a steamer container a bamboo steamer container but maybe it's made a

plastic and you get this set of squishy dumplings and all i can tell you is this became a viral sensation everybody wanted them they were sold out everywhere and um so five below is the kind of company that reacts rapidly to something like that and they're all over the squish and so they've got plop pets, they've got chubby buddies, they've got all kinds of toys like this. And demand has been incredible and everybody says, this is a fad, it's going to pass and then growth is going to collapse. All I can tell you is that in early September, it reported quarterly results. It had same store sales growth of over 14%, which is incredible. And management said that squishy dumplings were only a low single digit contributor. There has been a halo effect. The squish visitors are buying other things and

they're making repeat visits. So I guess you can call that a fad. I call it kind of the business model of a company that's in the business of capitalizing on social trends. This company calls itself. It says it aspires to be, quote, America's greatest little toy store. And I think if that's what you want to be, you got to get on the squish quickly. And I think five below has done that. And it seems to be that other things are selling well and there's a positive halo effect in the customer base is growing. I think investors are coming around to that view. The squishy dumplings, they've got, I think they have facial features, but I'm pretty sure they don't have legs. But I say, I say that five below as a company has legs. The consensus estimate calls for a slowdown to

8% earnings per share growth next year because comparisons are difficult with this year, but they see that rebounding to 14% the following year. And recently, estimates have been rising, all good signs. The times they are a change in Jack. In my time, the toy de jour was a Webkins. And now it's squishy dumplings. What's a web... You don't remember Webkins? What a shame. These are all unfamiliar names. I had a hand-me-down G.I. Joe doll that I got from... Well, action figure, I should say, that I got from my brother. Not much else. A single? By the way. Single action figure. By the way, everyone was like poorer in the 70s and 80s. Like, everyone had fewer toys and less of everything, I think.

I don't know. Maybe it's just, that's the way it appears to be. I mean, I'm sure, too, the children were less spoiled, you know, school uphill both ways. I guess we were outside tearing, tearing holes in the knees of our husky, tough skin, jeans from Sears. Well, not everyone wore a size husky, but some of us did. And some of us had patches on the knees and some of us wore holes in those patches. But hey, hey, your toys were dirt and a can-do attitude. My best friend was dirt.

We should take a quick break. We have four more stocks to get to. Go ahead and hydrate. Maybe grab a chubby buddy. You know the fidget toy from five below. You understand what I'm saying. We'll be right back after this quick break. Welcome back.

We got to do like a like a zip through of the last one, two, three, four. We got to go fast because I'm taking too much time. So I'm going to go real fast. This one is new to me. All I am picturing is a smurf. You're picturing smirfs. Everyone pictures smurfs. But the company is called Smurfit West Rock and they have nothing to do with Smurfs.

There was a guy named Jefferson Smurfit. He was not at all a Smurf. He was an English industrialist. And in 1938, he bought a Dublin boxmaker, but we can't get into history. There's no time. The company, there's been a lot of dealmaking in the box business consolidation. So in recent decades, this company has had a lot of names, Smurfit Stone, Smurfeit Kappa. The latest is Smurfit Westrock.

And that's because it bought a company called Westrock, which was itself a combination of two other companies called Rock 10 and Mead West Vaco. But the upshot here is that Smurfit has a long reputation as an efficient operator in boxes, in corrugated boxes, in what the Philistines out there who have no love for proper paper terminology would call cardboard boxes, even though everybody knows corrugated paper and cardboard are two very different things. But it's an efficient operator in corrugated packages. and the company it bought Westrock is not. So there is a lot of room here to take out costs from this deal.

This is not normally the kind of company that would be in any danger of doubling its earnings within five years. But there's a legitimate path there now because there's so much money to be saved after this deal. How about Charles Schwab? Charles Schwab, everybody knows, is a one-stop brokerage and banking shop. It used to trade at price earnings ratios well into the 20s, and now it was recently 14 times earnings, and the decline has a lot to do with interest rate hikes from the Federal Reserve. Basically, you go to Schwab because you can do everything in one place. There's low fees.

You can trade a lot of exchange traded funds for free. You can get reimbursed for cash machine fees, which a lot of the banking customers like. And Schwab makes money in a bunch of different ways, but two main ones. One is that some of its clients will shift funds to specialty products or advisory services and those have higher fees. But also, a lot of customers will just leave funds parked in a checking account earning next to no interest by default. And Schwab can take this cheap funding and it can put it to work just buying other investments and earn a spread. Now, when interest rates rise, things change. You might not care that you're leaving money earning next to no interest instead of actively live.

on and buying into a money market fund that's going to pay you 1%. But if that money market fund pays you 4%, now you start to care more. And that's what has happened here. The industry term for that is cash sorting. And everyone should pretty much do it. You should always be looking for a better rate on your money. But if you're a company like Schwab, what it does is the money that's sitting there earning next to no interest, that's overnight funding.

And what Schwab is buying is longer term investment. So that can create a timing mismatch. It can create a cash crunch if people start. moving money out of those accounts and into other stuff. And that did happen and it led to a big earnings decline in 2003 and very little growth the following year. And to get out of that funding front, Schwab had to turn to higher cost sources of funds and that was bad for profit margins. However, cash sorting doesn't tend to last forever. It has already plateaued. Schwab is gradually retiring its high cost funding and client money continues to pour in. So last quarter Schwab had 22%

revenue growth and a 43% jump in earnings per share. This to me looks like a company that can get back to higher earnings and as shares are trading cheaper than they usually do. Hopping your rocket jack because we're blasting off. Yes. To where? Is it Planet Fitness? It's Planet Fitness. I just went for the first time to a Planet Fitness. I can't remember what town I was in, but I like paid for a day. And there was, they have a thing on the wall. It says no lung or has, It says lunk alarm. And it says like no slamming weights and no loud grunting. They wanted to be a place that's not intimidating.

But there was a guy literally slamming weights and grunting like his life was on the line. And every time he would finish a set, he would stand up and he would hold his arms out like he was carrying invisible luggage. And he would strut around the gym and try to make eye contact with people. And it was an awkward situation. I looked away from him. But I was also fascinated. So I looked up into the.

mirror to get another look at him. And when I did, he was looking at me in the mirror. If you do this, it's like the boy who cried wolf. When you hurt yourself for real and you yell out, no one's going to know. No one will help you. People are going to say, oh, he must be going for a max set over there. And meanwhile, you've got a, you know, you've got a compound fracture. Okay.

This is a stock that has lost half of its value this year. First of all, gyms have to do strong signups. January that's when everyone signs up and sign up disappointed this year and the company had plans they have this some premium membership called black card and they were going to raise the price of that from 2499 to 2999 they had to put that on hold they'd bring down their financial guidance investors don't like it at all this is what the industry calls an HVLP or high value low price gym it famously for decades held its base membership price to $10 a month then a couple of

years ago, it raised it to 15. Low prices drive high signups. The base members get access to one location. The black card members can go to anyone and they get free guest visits and tanning and other stuff. So the question is, is this a broken growth company or a buying opportunity? It's always difficult to say. I think it might be the latter.

I don't think that it has necessarily hit a wall on pricing. It might have just been clumsy. When it tried to raise prices for black card members, it didn't really. really point to anything that it was offering in addition to sort of add more value. And let's say it could have thrown in red light therapy or cold plunges. I'm not sure why that's something a person would pay for, but I guess it's popular. I'll just point out there's still a lot to like about this business. The gym level economics are strong.

They don't have to pay for swimming pools or childcare or big instructor led classes. So costs don't get bloated. Margins are high. And they continue to do good black card conversions of their members. free cash flow is quite strong. Memberships last quarter were stable. Jeffries wrote, quote,

this does not read like a business with fundamentals rolling over. It reads like one holding its shape while management retools the growth engine. The shares are 14 times earnings there. They're down for more than 30 times at the start of the year. Maybe that's a case of a company where you want to wait and see another couple of data points. But I think that's really interesting

if you can get what was formerly a solid growth stock at less than half the price. And to wrap things up, we're actually going to circle back to a company you've covered on here before. This is Take Two Interactive? Did I talk about it recently? I should probably remember a thing like that. Well, then I won't go into great detail here. I'm sure I mentioned that the new Grand Theft Auto is coming out in November, and they

haven't had a release. This is number six coming out. Number five came out 13 years ago. And it was like the biggest. video game ever. The significant thing about it is there wasn't like this boom and then this bust in between releases because they they added on online, the online version of that game. And it's just basically continued to make money year after year after year. Now they have a new one coming out. So people will pay for the title and get the new story, but there will also be an online version coming

and Wall Street expects it to have better opportunities for monetization, including on mobile games. So doubling earnings for this company is a slam dunk. It could happen in a year or two. But this is more about the ability of this company to keep those high earnings rolling even years after this release. We'll see. And that takes care of eight stocks in a mere, what was that? Three and a half hours. It only felt that way.

I want to thank. Oh, we have no one to thank, right? It's just us. I want to thank our listeners for listening. I want to thank you, Emily. You've been wonderful. you're a Webkins kid and I'm into dirt and somehow we make it work. Folks can subscribe to the podcast on Apple Podcasts and Spotify and YouTube.

You can leave a review. You can leave a comment. You can tell us about the weirdest thing you've seen at Planet Fitness. Or you can tell us about that great non-AI growthy stock that is so attractive that us not mentioning it here was downright malpractice. If you have a question about investing, you'd like played an answer. Go ahead and send it in. It could be in a future episode. You just tape it on the voice memo app on your phone, email it to jack.how.

That's h-o-u-g-h at barons.com. Thanks and see you next week.