Motley Fool Hidden Gems Investing - 0.25% Increase? No Problem!

Episode Date: March 18, 2022

For the first time since 2018 the Federal Reserve raised interest rates. Not only did everyone survive, but investors actually seemed to embrace the first of what will probably be several rate hikes this year. (0:45) Ron Gross and Jason Moser discuss the impact on the stock market, as well as: - GameStop's 4th-quarter loss - FedEx weathering challenges to get through its latest quarter - Williams-Sonoma closing out the fiscal year with record results - Amazon and Netflix making moves to strengthen their video streaming businesses - The latest from Starbucks, Accenture, and Walmart (19:00) Andy Cross talks with Fred Reichheld, author of "Winning On Purpose", about the Net Promoter Score and how it can help long-term investors beat the market. (33:00) Ron and Jason answer a question about Berkshire-Hathaway and share two stocks on their radar: Taiwan Semiconductor and Chewy. Got a stock you want us to discuss? Post a review on Apple and include your stock pitch! Stocks discussed: GME, FDX, SBUX, DPZ, WSM, ACN, AMZN, NFLX, WMT, DFS, FRC, WRBY, INTU, BRK, CHWY, TSM Host: Chris Hill Guests: Jason Moser, Ron Gross, Andy Cross, Fred Reichheld Engineer: Steve Broido Learn more about your ad choices. Visit megaphone.fm/adchoices

Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad? I get it. I'm Siaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll.

So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. coming up we've got a key metric most investors ignore two tech giants approaching the same challenge with different strategies and a lot more load up on stocks and bring your friends motley fool money starts now Everybody needs money. That's why they call it money. The best things in life are free.

But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Hill, and I'm joined by Motley Fool senior analysts Jason Moser and Ron Gross. Good to see you as always, gentlemen. Hey, how are you doing, Chris? We've got the latest headlines from Wall Street. We will dip into the full mailbag. And as always, we've got a couple of stocks on our radar. But we begin with the big macro. On Wednesday, for the first time since 2018, the Federal Reserve raised interest rates. And while it

was just a quarter percent, the Fed indicated rate increases will happen six more times this year. And Ron, when you look at what happened with stocks in general the days after the announcement, investors seem okay with all this? Well, Chris, this should have been a surprise to literally no one. So I think we're seeing a bit of a relief rally. We've been waiting for so long for rates to increase, and now it's finally upon us. That tends to calm people down, interestingly enough, although everyone probably would like rates to be at zero forever. That's not going to happen, Chris. The Fed signaled they expect to lift the rate to 1.9% by the end of this year. That's slightly higher than the level from before the pandemic when they cut rates to near

zero. Now, interestingly, easy for me to say, the median projections of Fed officials show the rate rising to around 2.75%, not 1.9%, which was the average by the end of 2023. So that would be the highest since 2008. So don't be surprised if you see those short-term rates go above 2%. I think 1.9% is probably on the lighter end. The committee also expects to begin reducing their holdings of treasury securities and other debt securities in May. Chairman Powell signaled a concern that higher inflation might persist due to a really hot job market. I think Friday's unemployment report reinforces those sentiments. So, so far, the market is holding steady, actually up. We've got obviously escalating tensions in Ukraine and Russia. It's a mess. We have higher energy and

commodity prices, although we've seen oil come down over the last several days, which the market has liked as well. We've got a lot going on, Chris. Let's move on to some of the companies making headlines this week. GameStop reported a loss in its fourth quarter. CEO Matt Furlong cited a number of issues hitting the video game retailer over the holidays. Jason, shares at GameStop are now 50% lower from where they were a year ago. Yeah, and that makes sense. The bumpy ride that the stock has taken over the past couple of years has been obviously an attention-getter and a point of conversation for many of us. This is recognized as a meme stock and that's a sword that can cut both ways. But it is

important to remember. As critical as we could be of GameStop, there is an actual business here, and while it's a challenged one, I do feel like CEO Matt Furlong seems very much up for the challenge. That said, cutting a loss in this quarter is a bit of a downer. This is the most important quarter ultimately for this business. In fiscal 2020 and 2019, 42% and 34% of their revenue respectively came from the fourth quarter, so that holiday quarter matters to them, and they are still trying to turn things around. It is important to note how the revenue shift continues to evolve for this business. It's becoming a bit more dependent on hardware, it's now fully more than half of overall sales. But it is also interesting to note this

collectibles business, which I don't think many of us would have really thought a whole heck of of a lot about back in 2018, it was 8.5% of the business. Well, that collectibles business now is 13.7% of total revenue. And as they make this move into this metaverse age, right, and dabble in NFTs and talk about blockchain and crypto, I mean, there are going to be some opportunities to really perhaps diversify that revenue stream a little bit for GameStop, which ultimately would be a good thing. So, I mean, listen, I'm not saying this is a business that you got to buy today, But it is a fascinating one to cover from an analyst's perspective. And sometimes turnarounds do turn around. So keep an eye on it. Third quarter revenue for FedEx was higher than

Wall Street was expecting, but shares of the Bellwether stock fell a bit on Friday after profits were impacted by worker shortages. Ron, when you think about the rise and fall of Omicron over the course of FedEx's quarter, this seems logical. Yeah, for sure. It was actually a pretty good report. I would call it solid in most areas in light of everything going on. I was just a bit shy, I think, of expectations. But as we said, when we talked about macro, there are so many things going on here that companies are doing their best to navigate. I think FedEx did a pretty good job. If we look at some of the metrics, you had revenue up almost 10%, higher shipping rates made up for fewer ship

packages. Holiday season brought record operating income in December, but Omicron led to decreased customer demand in January and February. So we started off strong, we got weaker. Results benefited from fuel surcharges that rose at a faster pace than fuel costs. FedEx said it's going to continue to raise its fuel surcharge across all shipping services starting April 4th. that shouldn't be a surprise where we're seeing fuel costs rise across the board, impacting everyone. Results also benefited from lower variable comp expense, less severe winter weather. If we take a quick look at the three main segments, FedEx Express operating results increased. FedEx Ground operating results declined, primarily due to higher transportation

and labor costs. And FedEx Freight, which is their smallest division, operating income nearly tripled there. Revenue per shipment increased 19 percent. Overall operating margins widened by 130 basis points and adjusted earnings per share were up 32 percent. So you can't argue with the increase in earnings of 32 percent. I think that all things being equal, that's pretty good. Struggling to attract workers in recent months, labor costs are skyrocketing. They're also under pressure from contractors who are saying that their projections were not good enough. They ended up taking on renting trucks and adding staff that they actually didn't need to do. That doesn't make contractors very happy when they have to do things like that.

So they have some things to work out, but overall, a solid report. This week, Starbucks announced that CEO Kevin Johnson is stepping down on April 4th. Former CEO Howard Schultz is returning as interim CEO, making it the third time in company history that Schultz has occupied the corner office. The board says they will begin a search for permanent replacement and expect to have the next CEO in place this fall. Jason, shares of Starbucks rose on this news, and I hope that optimism is warranted because I kind of feel like there's more to this story than we actually know right now. It feels like there probably is what that is. It's really anyone's guess. But one concern I have, honestly, I mean, we talk a lot about

cord cutting these days, right? Everybody wanted to cut the cord. Starbucks needs to cut the Schultz. They really need to depart. They need to get out of it. They can't keep falling back on him, right? I mean, he's been a wonderful leader for this business. I'm not being critical of him. They really need to get their ducks in a row here. There was an interview with board member Melody Hobson. She said flatly, this was not a surprise to the board that Kevin Johnson mentioned something a year ago about this. So I'm going to take her at her word for that. did Kevin Johnson light the world on fire during his time at Starbucks? No, but he managed the business through a very tough stretch here, particularly over the last couple of years.

So maybe that five years feels more like 10 for him and he's ready to kind of go off and do something else. There's some questions in regard to the union narrative here. Maybe that's ruffled some feathers, some concerns there on the in-store experience, feeling like maybe the operations have have suffered a little bit. I don't know, man. I mean, they're going to have to really make sure they nail this next CEO down and make the right decision. It feels like Roz Brewer is the obvious candidate, but a lot remains to be seen. If the board knew a year ago, Ron, why did they let Roz Brewer leave the executive ranks and go become the CEO at Walgreens? I think there's some wordsmith going on here. I'm not sure how significant Johnson's

notice to them was a year ago. He might have in passing said at some point, I'm going to look to retire. I think this is more about the unions. A group of investors representing more than $1 billion in Starbucks stock sent a letter saying, we believe that Starbucks reputation may be jeopardized due to reporting of aggressive union busting tactics. They go on to say a lot of other things that are critical of Kevin Johnson, who I'm on record as being a fan of, by the way. I hope that was not misplaced. So I think this is more about the union, about the National Labor Relations Board filing a complaint, a lot of things that said it's time for him to go. Let's bring Schultz back for a bit, and then we'll regroup.

Jason, I agree with you. All of these questions that we have disappear if they really nail the hiring of the next CEO. Let's end on this note. How attractive do you think this job is? All things being equal, is being the CEO of Starbucks a more attractive job than, say, being the CEO of Domino's, which is another global restaurant chain that's about to undergo a CEO change? Yeah, I think so. I mean, I love coffee and I love pizza, but I do feel like you can eat too much pizza and it's going to have probably some more detrimental effects on your health as opposed to coffee. So from that perspective alone, I mean, listen, you go back to Peter Lynch's sentiment there. You go for a business that any idiot can run

because sooner or later you're going to have an idiot probably running it. I mean, I don't feel like it's the biggest challenge really to run a coffee business. Coffee kind of sells itself. But I mean, this is a business that's going to have to evolve over time. It's going to have to address this in-store experience. And I mean, we talked about this earlier in the week too, this idea of getting completely waste-free, right? Eliminating disposable cups by 2025. I think that's probably impractical, but to hear how they may address that in the coming years would be interesting. Coming up after the break, changes coming to two of the biggest video streaming companies. Which one holds more

potential for investors. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. Williams-Sonoma's fourth quarter report closed out a record year for the home goods retailer. The company also announced a dividend increase. Shares of Williams-Sonoma up nearly 15% this week, wrong. Big earnings beat, Chris. Increased dividend, as you said, announced a new share buyback. Very solid here. Revenue up 9%. Q4 comps up almost 11%. If you look at their three main divisions, you had West Elm up 18%. Pottery Barn up 16%. William Sonoma bringing up the back at 4.5%, but still relatively solid. About 70% of sales now comes from e-commerce. And that's

important because years ago, this is what they needed to do to get back in the game. And yes, they did it. And they should be applauded for that. The gross margins expand 290 basis points. Operating margins expand 310 basis points. Earnings per share up 37%. That's pretty solid. So far, they've successfully navigated supply chain disruptions, material and labor shortage, capacity limitations. Those issues are still on the table. There's certainly risks, pricing pressures still remain as well. Guidance is strong, mid to high single-digit annual net revenue growth, increasing revenues to $10 billion by fiscal 2024, which is 2024, it's at $8.2 million now. 2% yield now. You can buy this stock, Chris, for only 10 times forward earnings and you

get a 2% yield. That's not too shabby. Accenture's strong second quarter results came with an increase in guidance for the full fiscal year. Jason, if you're a shareholder of this consulting firm, you have to be pleased with the way Julie Sweet has performed in the two-and-a-half years she's been CEO. Oh, just a tremendous job, and it looks like that's poised to continue. I mean, this is a big business with a lot of resources, and they do a very good job also investing in the future through vehicles like Accenture Ventures. They've got the Accenture Extended reality services. So it's a bit of a two-for-one there, and that you get that stability of that large business also with sort of those little investments that they continued to make to give

you some growth opportunities as well. And so it benefits from consulting services as well as outsourcing, each representing about half of overall sales. Revenue for the quarter, $15 billion. That was up 24% in U.S. dollars. Earnings per share of $2.54 grew 25%. And that's excluding gains from an investment that they recognized last year. Operating income also up 25%. They saw particular strength in their product segment as well as communications, media, and technology. Revenue in those two segments was up 30% and 29% respectively. As you mentioned, raised guidance, which of course the market loves to see. They did mention the Russia-Ukraine situation in the call. It's a bit of a wild card in the near term, but I wouldn't let that take

away from the longer-term view that this is a very well-diversified business, both geographically and by industry. Big week for streaming video services. Amazon closed its $8.5 billion purchase of MGM Studios, a film library which includes the Rocky franchise, and Netflix has begun quietly testing a new feature to crack down on password sharing. Ron, I know you're a fan of the Rocky franchise, but which one do you think has more potential to benefit shareholders? Netflix, if they get it right, that'll accrue right to the bottom line, boom. I think they'll get a lot of revenue that they probably deserve, that people have been taking advantage of. The Amazon deal is much bigger though. It has the potential to really transform that

side of their business. I think the most important part of that story is actually that it got through the Justice Department, got through antitrust scrutiny. A lot of the big companies, like Amazon, Microsoft, Alphabet, all under a bit of heat from the Justice Department to not take part in any anti-competitive acquisitions. This went through, it'll give them 4,000 films, 17,000 TV shows. I think that's a pretty good number for what they paid. Yeah, Jason, we talk all the time about content costs being an ongoing concern for the streaming services. I mean, this is a big check to write, but you get all this content if you're Amazon in one fell swoop. Yeah, that's the name of the game, of course. And that really, I don't think

is poised to change. I mean, I think it's great to see Netflix testing with this because ultimately that's the goal of the business like that, is you need to spread those content costs around as much as you can. And I think that in Amazon's case, this shows the benefit of that streaming, of that media side being just one aspect, one part of the business, right? you don't see nearly the same granularity in those content costs and what it takes to run a streaming business because they've got so many other pieces of the business to talk about as well. So you can certainly see that more so with Netflix. And so I would suspect that, like Ron said, if Netflix can nail this down right, it should really benefit that business

immediately. Also, if they get this right, doesn't every other streaming service do the exact same Aren't they all sitting on the sidelines saying, you go first, Netflix? I would imagine so. We'll have to wait and see there. But I mean, listen, these guys are pretty bright. Save the Quickster debacle. I mean, Reed Hastings has done a very, very good job through the years with this business. So I suspect that they'll go into this with some very deliberate thought. It's not just restaurants that are offering limited menu items. This week, Walmart began selling a limited collection of ice cream flavors at more than 3,500 locations nationwide. The new flavors include wild blueberry shortcake, bourbon cherries jubilee,

Kraft mac and cheese, and pizza. Ron, I'm not eager to try the pizza. I guess I'm just surprised that they just stopped at pizza. All these other flavors are very specific. Why not go the full nine yards and really take a swing with a topping type pizza pepperoni pizza ice cream no no no no now listen i get that ice cream is made from milk i get that but the mac and cheese ice cream that has buttery sweet cheese and the pizza ice cream that has cream cheese and mozzarella i it doesn't sound appealing to me at all even though they're all made from milk it just doesn't do it for me. Some of the other ones, I think, are intriguing, though. I was going to say, Jason, a couple of these other flavors,

it might get me into a Walmart this weekend just to see if I can find them. Yeah, it's difficult for me to wrap my head around savory ice cream, right? I mean, I think we've been conditioned to really expect it as a sweet treat. With that in mind, I mean, hey, listen, if I'm throwing some flavor ideas out there, you know I'm a big fan of Dizzy Pig barbecue rubs. And that pineapple head that I always talk about, hey, let's see a pineapple ice cream. I could see that working out very well. You get a little sweet, a little heat. I'm down for something like that, Chris. All right, guys, we'll see you later in the show. Up next, a closer look at a key metric for investors that public companies are not

required to disclose. Stay right here. This is Motley Fool Money. welcome back to motley fool money i'm chris hill one of the most important pieces of information about a public company is something it's not required to report it's the nps the net promoter score. Invented by Frank Reicheld, the net promoter score simply measures how likely a customer is to recommend a business to a friend. In his book, Winning on Purpose, Reicheld shares how finding this piece of information can help long-term investors beat the market. It's something he outlined in a recent conversation with our chief investment officer, Andy Cross. Maybe just highlight a few examples and some learnings. As you looked at some of these

businesses with really positive NPS scores. A little bit of just lessons or examples from the book that a viewer and a listener can take away. Yeah, I mean, you know from the book in chapter five, my strategy of investing in NPS leaders consistently over the last decade has more than tripled the stock market. And I use the Vanguard total index as my hurdle. So we've tripled that, achieved a kind of return that no, as far as I know, no fund or ETF tracked by Morningstar has matched my FREDZ, the FRED stock index. And so you got to ask, why is that? Why isn't this insight reflected in market prices more quickly. And I think it's because investors have an accountant's mindset, not intentionally, but all of the numbers that we look at are the ones that

accountants have said are important to track progress. So costs and revenues and the things that accountants audit and force people to report accurately, thank goodness, don't capture this idea of, are the customers feeling the love? Are they coming back for more and bringing their friends? So, you know, generally accepted accounting does not make you even report the number of customers you have, let alone how many of them are growing their businesses or defecting and referrals. That's just nowhere. And so this whole concept of what drives success is being missed and undervalued. So some examples, a great example is Discover Card. Discover was a credit card company that I knew out of the corner of my eye, but I'd always seen

American Express had been the top of our list of highest NPS. And then one of my friends at the data business at Bain said, no, Fred, Discover has actually surpassed American Express. And I went back and studied it and you'll see it's covered extensively in the book but these guys live the golden rule they don't even sell they not only were the first one to get rid of annual fees they got rid of surprise late fees there uh there's no breakage on the points that just every customer friendly thing including they will not sell your receivables to a collection agency even if they charge off your as a bad debt because the ceo said to me fred would you do that to a loved one is that golden rule behavior? And so this love thy neighbor as thyself, the golden rule is at the

core of the philosophy. And the guys that actually live that philosophy, like Discover, are doing things that their customers love. And then I asked their employees, how does it feel to be able to treat customers the way you treat a loved one? And it obviously is very inspiring because that's what living a life of meaning and purpose, service to others, and earning standing ovations in the form of 10s on an NPS survey. That's pretty cool. And their total shareholder return has been the best in their industry. So I could tell you a dozen of those stories, but it's the same logic. Investors, at least, don't see that the only way to win in a long-term sense, sure, you can win in a quarterly better and speculative, but if you're a buy and hold kind of person, I think the only

way to win is to invest in companies who are the NPS leaders and are loving their customers and treating them the way they treat loved ones. Another not a well-known example is First Republic Bank. I'd never heard of them. They came to me and wanted me to give a keynote. And I said, I'm flattered, but why? They said, well, we think we have the highest NPS in the industry. We've been following your ideas for years and years. I got to know them and they are special. And in In fact, I switched my banking relationship there because they're so good. And I've just loved it. Really excellent customer focus.

No late fees. No gotcha. None of the stuff that normal banks do to you. And the problem was they're sort of a niche. They're a member of the S&P 500, so they're big. They went from $8 million in seed capital to worth something like $30 or $35 billion today, generating their own cash. and um but it's hard to measure nps for them in a bane rigor because you can't get a panel of relatively high net worth households to to talk to you and so they you know they have a high score

but it's very hard to prove that it's the best and i said well you know i saw that you you and you report to your investors this number i call it earned growth ratio of all your growth how much of it came from your existing book of business and people referred. And they show this to investors. And in their case, 88% of their deposit growth came from their existing book, Coming Back for More and Bringing Their Friends, 90% of their deposit growth. And now we measure earned growth as carefully as we do in Net Promoter Score. And when you see a 90% earned growth rate invest that that's which i did and i've been a very happy camper that that stock has been just as good as all my nps leaders fred what about the the concept so so you're right i was

just um before we hopped on the call i was knee deep in spreadsheets getting my analysis and i can say i admit there's no cell for nps score in my spreadsheets and there should be but there's No sell. But what is in a lot of our numbers are things like retention levels and that kind of thing. So as you mentioned, most companies when you talk about, especially SaaS, software companies now report net revenue retention rates and you mentioned referral rates. So is that a proxy for NPS or is that a dangerous thinking on my part? Well, one watch out is net revenue retention rates is not yet an audited gap statistic. So people are still defining it in a way that makes sense. So watch out for comparability. I do think that net revenue retention measured

consistently is an outstanding metric. And it's an even better metric if you add on that referral flow because referred customers is really the best way to grow. There tends to be higher quality customers. There's no acquisition, very low acquisition. But people say, oh, that's hard to measure. We're going to ignore that and treat it as extra credit. No, it's time to measure that. It's at the core of this whole idea. So when I say earned growth rate, it's really just taking net revenue retention, which is something already thought about and measured somewhat by businesses and upgrading it with referral flows, which we did with Warby Parker. You know, Warby, you know, tough last few months, but I happened,

Warby was one of the companies that opened their books to us to do some work with earned growth. And we found what percentage of their new customers said that the reason they were trying out Warby was primarily because of a recommendation from a friend. and it was almost 90%. So, wow. And we don't know as much about earned growth as we do about NPS because it's a newer metric,

but this is in the superstar category. And Warby Parker being the, sorry, the eyeglass retailer. Yeah, Warby started as a pure digital player to start, but then they've opened, I think they've opened 160 stores or something. It's a big part of their strategy going forward. Every company,

runs into bumps in the road that surprise accountants, surprise themselves, the thing that lets them recover and prosper and get back to the top of the charts is this core of happy customers who trust that you're going to treat them right. And employees who are part of a culture that is committed to treating customers with loving care. And so I'm willing to take a risk on a company that's hitting the bumps. It's maybe a great bargain. Only time will tell. But yeah, Warby is one of those companies

I think very highly of. Fred, a few more questions here before we wrap up. Is the trend in NPS important? Is that more important than the number? I think the most important thing is your score versus your key competitors measured correctly. And if your competitors are closing the gap versus you, watch out.

If you're stretching your lead, invest. Intuit, another early, early adopter of Net Promoter. This is a software company now worth $130 billion. TurboTax. An old friend of mine, TurboTax, QuickBooks. Now they own MailChimp. Yeah, yeah. Um, but Scott Cook, the founder started at Bain & Company about the same time I did.

And when he left to start this business, he had this philosophy of, we don't deserve any profit from until our customer's happy. That's so different than the caveat emptor, buyer beware, maximize shareholder value mentality of the typical business school graduate. But that's what does it. And the reason he adopted NPS is because it helps him put that philosophy in place. He reports NPS measured carefully every year at Investor Day versus his competitors measured the same way. So that, when you ask about trends, that's the kind of data I would want to see.

So that's the trend. Second of all, as you mentioned, you've used this historically as a great way to invest. So two questions around the investors and takeaways for people who are watching and listening today. One is, how can they best embrace MPS and use it as part of perhaps their own investment strategy? But also tied to that, Fred, do they balance? Well, this company has a high MPS score, but as you mentioned, the stock may be rocky or they have some other things that maybe the growth may be slowing. So how do you balance out MPS with other metrics? So a little bit of guidance around how we might be able to use the great research you found.

Yeah. Well, I grew up – I love your business. I've been interested in investing since I was in college. And I came to the conclusion that, boy, the index funds, the stock market really does a pretty good job of incorporating public financials into pricing models. And if it's not a perfect market, it's just so close, it's hard to win. It's pretty efficient. It's very efficient. And so I, you know, there were guys like Peter Lynch and Ron Buffett, but man, they were needles in a haystack.

And then I said, wait a minute, if you have new information that the market doesn't understand how important it is or even how to gather it, you really could beat the market. And I think with NPS, it's data that no one else has. And what's one place you can get it on a number of companies is look inside my book, Winning on Purpose. You'll find what I've been investing on. But then how do you go forward and know those numbers? Part of it is going to be the investor days by companies like Intuit. If you see a company that has got a third party, trusted third party, measuring NPS for multiple competitors and shares that with you, that's deep insight. And the market does not understand it yet. It is not priced into shares. The reason I say that is I would not have tripled the stock market over 10 years by looking at only one non-financial metric, as I have. That promoter, that's the only non-financial metric, and I've used it.

Market's going to take a long time before it understands, because I think it is a different mentality. When you're an accountant, you're solving for profits. When you are a love customers is the purpose of my business. You know, enrich the lives of customers is what animates both my economics and inspires my employees. That's a whole different mindset. And this lets you, yeah, listen to what the leaders say. Do they say customers are the primary purpose here?

Of course, we have to, you know, we treat all stakeholders reasonably, but customers come first. If they say that, if they act it, and then if you see NPS evidence or earned growth evidence that they're special, go for it. And by the way, you'll not only make more money, you'll make the world a better place. To hear the full conversation with Fred Reichelt, Motley Fool members can find it online at live.fool.com. Up next, Ron Gross and Jason Moser return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. 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. Welcome back to Motley Fool Money. Chris Hill here once again with Jason Moser and Ron Gross. We've got a question from Richard Mockett who writes, should we expect Berkshire Hathaway to start paying a dividend? Warren Buffett has previously said they generate better shareholder returns through buybacks or by reinvesting retained earnings, but with such a large cash pile and no recent acquisitions, maybe now is the time Berkshire should start paying out a decent dividend, particularly when Mr. Buffett so often highlights this as a key component of a well-run company. Great question,

Richard. Thank you for that. Ron, should Buffett start walking the walk on the dividend? I think Richard makes some very good points. However, I don't expect to see a dividend anytime soon. He's clearly laid out that he has three priorities for using cash that are ahead of any dividend. Reinvesting in the businesses, he wants to improve efficiency, expand their reach, create new products, improve existing products. The second thing is he wants to make new acquisitions. He's got that elephant gun at the ready that he talks about. Hasn't made anything too significant anytime recently, but they're looking. And then buying back stock when they feel it's selling at a good price. $51 billion in stock buybacks over the last two years. 9%

of outstanding shares. Still has cash of $147 billion, to Richard's point. Stock is at an all-time high. Let Buffett be Buffett. He knows what he's doing. Richard, thanks again for the question. We want to hear from more of you out there. Post a review of the show on Apple and pitch us a stock you want us to talk about. Hit us with a question, pitch us a topic for the show, and if we like it, we will use your idea on Motley Fool Money. Just post a review on Apple and give us your pitch. Let's get to the stocks on our radar. Our man behind the glass, Steve Broido, is going to hit you with a question. Jason Moser, you're up first. What are you looking at this week? Yeah, well, you find a lot of these boxes on my front porch, Chris. I'm talking

Chewy this week. Ticker is CHWY. Earnings for Chewy will come out on March 29th, a little bit out of that earnings palooza cycle. So I'll be looking forward to seeing what they have to say there. They ended the last quarter with 20.4 million customers. That was growth of 15% over a year ago. But more importantly, and I'm one of these, is auto ship customer sales as a percentage of net sales increased 140 basis points to 70.6% of overall revenue. That's a new high. Average order value continues to grow. This is really a good one, I think, to think about from an inflationary perspective. Pets, I think we almost just spend blindly on them, at least I know that's how it works in our household. I think a lot of listeners feel the same way.

They've got this neat dynamic too with the health investments that they're making now, partnership with Trupanion. This is the stock Santa gave my daughters for Christmas this year. It's one that tugs at my heartstrings a little bit. Steve, question about Chewy? Sure. Can Chewy do what it's been doing and leave it at that and be a successful business, or does it need to grow and expand into all these other spaces as well? Yeah, that's a good question. I think they could just leave it where it is and be successful, But I think that as we see this evolution of this digital economy, they see the opportunities out there, not only to help consumers, but to help veterinary practices and overall the

opportunity in the animal health space. I definitely think those are wise investments to make, but yeah, good point you make there, Steve. Ron Gross, what are you looking at? A stock I recently included in our new instant income portfolio in total income is Taiwan Semiconductor TSM. They're a pure place semiconductor foundry or manufacturer. It doesn't design and manufacture chips under its own brand. It partners with NVIDIA, Apple,

folks like that, to produce their chips for them. According to industry experts, more than 90% of the world's most sophisticated chips are made by TSM. Rollout of 5G, autonomous transportation, virtual augmented reality, artificial intelligence, the need for chips is growing, growing, growing. Taiwan Semi is perfectly positioned to take advantage of the future steve question about taiwan semiconductor so why is it taking everyone so long to get us these chips these are small chips these are can fit on your finger on the tip of your finger what is the deal why is this taking it it's not shipping cargo ships what's going on someone please help me supply disruption steve that's all that's all i could say supply disruptions

i got a stamp and an envelope come on we'll get through it sit tight what do you want to add to your watch list, Steve? Well, I own both of them. I love both of them. And I think I would be adding more to Taiwan Semiconductor right now. All right. Ron Gross, Jason Moser, guys, thanks for being here. Thank you. That's going to do it for this week's Motley Fool Money Radio Show. The show is mixed by Steve Broido. I'm Chris Hill. Thanks for listening. We'll see you next time.