Motley Fool Hidden Gems Investing - Apple's Next iPhone and Robotics Future

Episode Date: February 18, 2025

Apple is widely expected to launch a new version of its budget-friendly iPhone SE tomorrow. But does the tech giant have another mega-hit in store? (00:21) Jason Moser and Ricky Mulvey discuss: - Apple's and Meta’s robotics ambitions. - Earnings from payments company Adyen. - What Berkshire Hathaway is buying and selling Then, (17:05) Alison Southwick and Robert Brokamp answer listener questions about saving for kids, how inflation affects financial ratios, and starting a 401(k) plan at your workplace. Companies discussed: APPL, META, ADYEY (OTC), BRK.A, BRK.B, BAC, POOL, STZ Host: Ricky Mulvey Guests: Jason Moser, Robert Brokamp, Alison Southwick Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with the delicious Pret Organic Coffee? Starting with just one dollar, all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. Buffett's throwing a barbecue. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Jason Moser. Jason, how was your long weekend, man?

Ricky, you had me at barbecue, man. Yeah, the weekend was great. It was Valentine's Day Friday, which was really nice. Happy Valentine's Day, everybody. Ricky, I hope you had a great one, too. Dan, you as well. Yeah, it's nice. We're kind of trekking through the winter here in Northern Virginia. Yeah, we're getting those nine-degree days out here in Colorado. Having a podcast to keep me busy ain't so bad. Let's get into this Apple stuff because tomorrow Apple is set to announce a new device. They haven't said what it is yet, but a lot of observers, including Bloomberg's Mark Gurman, believe it to be a lower cost iPhone, the iPhone SE, which according to Gurman's reporting, quote, will have the

company's first in-house cellular modem chip, the A18 processor and Apple intelligence. The home button will be replaced by Face ID in a USB-C connector supplants the lightning port. Jason, anytime Apple is launching an iPhone, they need it to go well. So, what does Apple need from this launch tomorrow? I love all of the tech that you mentioned right there at the front, because the meme that's out there, I don't know if you've seen it, I'm sure most people have, it's the coffee mug, where the actual mug costs $500, but then the handle for the coffee mug costs an additional $1,000 or something like that. People are having a lot of fun with this one. We don't really know, but to me, what they need, honestly, they need something more than just a cheaper phone.

They've been there and done that. Now, if this is the announcement that it is just a cheaper phone, I think it's going to be received with a collective sigh. That's not to say I'm bearish on Apple. I think Apple is an amazing company. I think what they've done has just been incredible. The technology they continue to produce is amazing. But, this cheaper phone would rhyme with a lot of these other device launches, things like different-sized phones, different-sized iPads, a price point for everyone. It's just probably not as innovative as folks in the investing community might be looking for. But I guess we're going to have to wait and see. Well, and that's why Apple is trying to figure out what's next as they look further out. You

already know about the headset battle that they have with Meta. But Gurman's reporting that now the quieter competition is in robotics. So here's the two strategies as these companies go mono-e-mono head-to-head. Meta's near-term goal is to build basically the underlying software for robotics hardware makers. They want to be like the Android of your humanoid robots. Apple's trying a different tact because, Jason, they like to keep everything in-house. One of the ways they're going to do this for an at-home robotics thing is, I'm going to use my arm here, a tabletop device that's basically a robotic limb attached to an iPad. What are your thoughts on these strategies? With the Apple one, I don't see how this tabletop device is solving a problem that really anyone has,

unless you're running around while you're on Zoom. I think that makes sense. I think it definitely is in line with what Meta has been trying to do. You look at their AI strategy, for example, and what they've been doing with their Lama models and whatnot. They're trying to be the underlying software for people to create, whereas Apple operates in a little bit more of a walled garden, so to speak. A lot of this, the bigger opportunity here, a lot of this just reminds me of what Elon Musk said on Tesla's recent call here. He was talking about, he thinks there's a path for Tesla

to become worth more than the next top five companies combined. Now, he qualified that with saying, this is a very difficult path. It's not a done deal, but he could see it. But the key to that path was through autonomous vehicles and autonomous humanoid robots. And so, it doesn't surprise me to see Meta and Apple wanting to pivot in that same direction. Now, in regard to that Apple device, that robot iPad thing, I think you're right. I look at that and I think, this is really neat technology. It's amazing. Most of this technology, to me, it's all magic.

It's just phenomenal. But it doesn't seem like it really solves a problem. It's like much of what they do these days. It's just amazing technology, but it doesn't really solve a problem. It gives us a different way to do things, but that's not always necessarily so convenient. I think that's where Apple and others have been spinning their wheels for a bit. Now, on the flip side, I do think there are potential massive industrial applications here. So, I think about all of the work I've done over the past five, six years in regard to immersive technology, for example. I think with immersive technology, a lot of the focus was on, how is this going to impact the consumer, us as the mass consumer? And we're not quite

there yet. The headset battles are still going on. We're still trying to figure out exactly how we're supposed to use these things on a day-to-day basis. The answer is not clear at all. But there are a lot of industrial implications that are already playing out right now. I think it's fair for investors to say, look, there is a consumer side to this, but there's also an industrial side to this. It reminds me of the Fire Phone that Amazon put out a while back. It seemed like a dud from the get-go, but you know they're going to learn some lessons from it. Maybe with Apple and this robot iPad device, maybe it's not something that really keys in on the mass consumer. But maybe they take some lessons from this,

and it gives them some industrial opportunities that can make a difference down the road. I think that's going to be the most clear with Meta, at least right now. They're looking into immersive tech, and a lot of investors have wondered, why are you spending so much on reality labs and studying how human hands move? They're spending billions of dollars on reality labs for this immersive tech for humans. But if you're studying it that closely, and then you can apply it to robotics for the software, maybe eventually even the hardware of building humanoid robots, this might be the kind of thing where 10 years from now, Jason, we're looking at a case study of how a mistake became a billion-dollar opportunity or whatever for Meta. I think that's

a great point. I mean, there's no accident that all of these great companies are studying all of these phenomenal technologies. It's no accident that they're studying this stuff. You have to take that into consideration as well. There's something that will come from all of this. Granted, it might take a little time, but my suspicion is there will be some world-changing stuff that eventually comes. What's it going to take for you to get a humanoid robot in the Moser household? What's your bar for that? I don't even have a bar. I've thought about this before. I love technology. I was one of the first to get an Alexa. I was just excited to see that technology. Going back to that, what problem does

it really solve? I just don't have any interest in some creepy robots skulking around my house at all hours, Ricky. I have a hard enough time trusting our cat isn't going to off me in the middle of the night while I'm sleeping. Now, with that said, that's just me. I don't consider myself a proxy for what most people want. In fact, often, I think I'm probably the opposite. it. But these are big-ticket items, and I think that's something to keep in mind as well. You love cooking. Let's say there's something you don't love in the kitchen. Maybe it's peeling garlic. It gets stuck everywhere as you're trying to chop it and mince it. You can outsource that now or soon to your humanoid robot showing up to your house.

I mean, it's compelling. It's compelling. Let's get into audience. We're coming off this wave of a big earnings week. Do you look at the more on cash, you think about payments companies. I wanted to look at a company that I own for selfish reasons, and that's Audient, which is a behind-the-scenes payment processor for big companies. Think Intuit and Adobe. They're using Audient's technology to do their payment solutions. They report every half-year as a European company. What they found is that revenue and processed volume grew by more than 20%. Audient's investors sure were happy with these results, a lot happier than PayPal's investors were with PayPal's results. But as you dug into the earnings

this morning, J-Mo, what'd you find? It seems to be on the right track in what is clearly a very competitive space. I like what Adyen does in focusing on trying to bring this singular solution to the payments industry. I like the fact that they focus on these big ticket customers because there's a lot of money that can be made there. Of course, you sacrifice a little bit there on pricing, but we'll have to see how that plays out. That's been a big question in regard to this company over the recent past years, just in regard to margins and intake rates. But I think the numbers, as you said, for the second half of 2024, very encouraging. Net revenue up 22% from a year ago. Process volume up 22%. And they noted that

was actually 28%, excluding a single large volume customer. But we're going to go with 22%, Ricky. I thought it was really great to see EBITDA close to 570 million euros, up 35% from a year ago. And I thought this was, to me, what stood out, because this has been a big question over the last several quarters, just in regard to that EBITDA margin. EBITDA margin came in there at 53%. That was compared to 48% from a year ago. Now, that was due to basically two things. We saw some strong top-line growth with a scalable business, coupled with less hiring than they've seen in previous periods. They're becoming a little bit more efficient, and they're making a little bit more with

the money that they're making, which I think is encouraging. There's one metric I want to get into, because not all companies report this. I thought it was interesting to brag about this, Jason. but the shareholder letter is promoting that Audion has a net promoter score of 66. Essentially, net promoter score is how likely are you to recommend this business to a friend. If you think of companies like Amazon Prime, high net promoter score, or even Chewy, when they've reported that, has been a pretty high net promoter score. Jason, 66 seems low. Is that low? 66 seems low.

I know. Everybody asks, is that good? Is that bad? It requires you to dig in there and understand a little bit about what the Net Promoter Score actually is. To clarify, this Net Promoter Score, the NPS, you're calculating this based on the answer to one key question, and it's using a zero to 10 scale. How likely is it that you would recommend this particular brand to a friend or a colleague. You can score it in one of three groups. Promoters are considered scoring 9 to 10. Passives score 7 to 8. Detractors score 0 to 6. Then, ultimately, the calculation is subtracting the percentage of detractors from the percentage of promoters. That ultimately yields the net promoter score. Now, that can range from a low, an absolute low

of minus 100 to a perfect score of 100, which is really unheard of. I thought it was interesting to look this up. The creators of the net promoter score, it's Bain & Company. They suggest this framework where they say, a score above zero is good, a score above 20 is favorable, a score above 50 is excellent, and then a score above 80 world-class. We can see where Adyen is concerned. It seems like, based on the numbers, they're not doing too bad. We're going to negative 100. You think it'd be 0-100, but you start working in those negative numbers, it can get a little tricky. 66, it's actually good. Let's move on to our final story, which is

another one from last week that we're picking up in this post-President's Day segment. That's Berkshire. They released their buys and sells in the latest 13F statement. They closely watched SEC filing to see what Warren Buffett and his lieutenants, Ted Wexler and Todd Combs, are up to. And Jason, this is what they're up to over the past quarter. They seem to be trimming, not seem to be, they are trimming their big bank's holdings. Bank of America, Capital One, Citigroup. And meanwhile, looks like Buffett's throwing an outdoor barbecue.

He's getting Domino's pizza. He's getting some beer with Constellation Brands. And what's a barbecue without a pool? He's grabbing some Pool Corp, which does a lot of maintenance and services for pools. Let's start with the banks, though. What's going on with these banks' numbers? Seems like Buffett's getting a little pessimistic on that. That could be the case. I mean, he's done very well with these holdings for the most part. And I think that's something to keep in mind. This could be a testament that maybe they feel like the economy in the near term might be a little bit more challenging. The interest rate environment

It may be a little bit higher than perhaps they were thinking previously before. But it's worth noting, he's held Bank of America for some time and has done very well with it. So, trying to take some of those gains and be a little bit more productive with them makes a lot of sense. I wouldn't read too much into it, but it is something to think about, for sure. I want to look into these tea leaves. He wants to throw a party. He's doing pizza, beer, and pools. What's going on here? I love that. Pizza and beer, right? It's a great combo. I absolutely see the love for

adding to Domino's. It's really a tremendous operator in its space. We know, obviously, pizza. What Domino's does so well, they execute so well, not only on the delivery side, but on the pickup side as well. Being an international business, and I think, Generally speaking, when you have that brand identity and you have the control over that company that they do, you can maintain some quality in regard to the end product. And that matters a lot. In regard to Constellation, I think that really, to me, that strikes me as a big value play, given how the company has performed over the last year or so.

But when you look at the results, it's been very encouraging. They've been able to capitalize on Bud Light's misfortunes. Modelo, Especial, has been performing very well. They noted they grew depletions there with that franchise over 3% last quarter. It's upheld its position as the top share gainer in the U.S. Both companies pay very nice dividends, which I think is encouraging. Then, Pool Corp, another interesting one. It seems like a very Buffett-style investment. Hey, everybody loves pools, right? It's big business. They're the leader in the space. The stock has had a very tough year. While it's worth noting, this is not one that lights

the world on fire. A lot of the challenges we've seen have been in discretionary spend here recently. We'll just have to see how that plays out. But yeah, interesting picks. And for the stock investors looking at that, maybe looking to follow in Buffett's lead a little bit, are there any overall retail lessons for investors like you and me who are looking at what Berkshire is doing? For me, the perpetual lesson here is that it's always fascinating to see what smart and proven investors are doing. But that doesn't mean you should necessarily be doing it, too. There is a very big difference between what I'm personally trying to accomplish versus what they are. And of course, we're all trying to make money at the end of the day, but we're in very

different boats and we have very different goals. And so I think that's always just something to keep in mind is their actions, while interesting, doesn't necessarily mean we need to mimic them because we need to take into consideration our ultimate goal as individual investors as well. Jason Moser, your action is always interesting to me. Thanks for being here. Appreciate your time and your insight. Thank you. Pret Organic Coffee, starting at just $1 all day, every day, now until December 31st. You gotta try breakfast at A&W at participating A&W locations in Ontario. All right, up next, Alison Southwick and Robert Brokamp take on your questions

about saving for kids and starting a 401k at your workplace. Our first question comes from Vinny. Hi, Allison and bro. Thank you for your always excellent advice and perspective on preparing for retirement. Oh, thanks Vinny. Bro's going to go take a victory lap. All right. He's back. All right. Vinny writes, my wife and I welcomed our first child and future fool into our family over the weekend. Wow. Congrats Vinny. That's awesome. and we want to start investing on his behalf as soon as we can. We want to use the money for education and to set him up for the longterm. You've covered at length, the five to nine and brokerage accounts options, but we have issues with all of them. We want to control our investments.

We don't trust that if the five to nine funds converting to Roth IRA will stick. We don't want to give over control of a custodial account at 18 and would prefer if we could make the account tax advantage somehow. All that to say, we don't love our options. Can you please compare and contrast the plans and maybe jump into any plans accounts that I'm missing here? Thanks. Well, Vinny, first of all, congrats on the newborn child and the new adventure. It's going to be a lot of fun. Secondly, you say you want to use the money for education and to set your setup for the long-term. Those are somewhat different goals depending on how you define setting the kid up for the long-term, but maybe we'll talk a little bit about that. And thirdly, frankly, none of

these options are going to satisfy all your criteria. Let's just do a really quick lightning round of your options and their pros and cons, and you can decide which has the pros that most outweigh the cons for your situation. For saving for college, by far the most popular option is the 529 plan. The pros, money grows tax-free if used for qualified education accounts. Very high contribution limits. It varies by state, but we're talking hundreds of thousands of dollars. Possibly a deduction on the state income tax return. If it's opened and owned by the parent or grandparent. It's considered their asset, not the kid's. That's beneficial when it comes to applying for financial aid. Any unused money can be transferred to any

other eligible relatives or to a Roth IRA if certain conditions are met. Now, you say you don't think that's going to last. I've not heard that it's going to be eliminated. But sure, it could possibly happen. You definitely do have to meet the criteria. The account has to be open for 15 years. You can't move over money that's contributed over the last five years. There are definitely a lot of rules around that. Now, there are really only two main cons to the 529, and that is, you can only invest in mutual funds. If you love stocks, you can't do that. And the investments can only be changed twice a year. If you're a long-term investor, it's no big deal, but you don't have a lot

of flexibility. But if you don't like that, or if you're looking for other options, another option is the Coverdell education savings account. The pro of the Coverdell is that you can invest in stocks and, like the 529, the withdrawals are tax-free if used for qualified education expenses. The downside is very low annual contribution limit, just $2,000, although there's still time to make a contribution for 2024. You have until April 15th. You can't contribute if you earn above a certain amount of money. That starts to phase out at $95,000 for singles, $190,000 if you're married. Though you can get around that by gifting the money to somebody else and then they make the contribution. With the Coverdell, the money must be used

by age 30. It can be transferred to another relative, not to a Roth IRA. Let's talk about some other options that you touched on as well. You could open a brokerage account owned by the kid. This is an UTMA or an UGMA. The main advantage is there's some tax advantages. There's a certain level of interest in capital gains and investment income that is tax-free to kids or taxed at a low rate. The downside, as you touched on, is the kid does get control at the age of majority. It depends on your state, but eventually they do get it, and you have to hope that they're responsible with it. And it is considered an asset of the kid, which will have a more harmful effect on financial aid eligibility when they go to college.

Now, you could instead have a brokerage account that's owned by the parents. That way, you maintain control, and then you just gift the investments to your son when you think he's ready, and you could do it all at once or just gradually over time. And it's your asset, asset of the parent, so it does not have as much of an effect on financial aid eligibility. The downside is, you owe all the taxes on the investment income, capital gains, or whatever else is going on in that account for as long as you own it. The last thing I will highlight is the Roth IRA. This is the thing, if you really want

to set your son up for being financially secure in the long run, do a Roth IRA. It grows tax-free if left alone until age 59.5. You can take some money, tax and penalty-free, out beforehand for qualified higher education expenses. You can always take out the contributions tax penalty-free for any reason, and then the withdrawals for higher education expenses will be free of the 10% early distribution penalty. The downside is, the kid has to have earned income. Unless your newborn is already working, they're probably not earning money. There are people who try to get creative with this. Maybe they have a business, they take a picture of their kid, they put it on their business website, and then they pay their

kid a modeling fee. There's all kinds of funny ways that people try to get around it. But they do have to have earned income. Like the regular brokerage account, it is their money so they could control at the age of majority. All this to say, there's no perfect solution, but it's also not an either-or decision. You could choose two or three or more of these options. Regardless of which you choose, your son is very lucky that you and your spouse are already thinking about his financial future. Just know that everything that I discussed here is just the basics. To learn more about all these options, especially when it comes to paying for college, visit savingforcollege.com. Our next question comes from Brett.

My question is about valuations, the price-to-earnings ratio, or PE to be specific. I read an article some years back about investors being price-anchored to PE when they first started investing. If you look back 100 years or so, you'll see spikes above 20 were rare until the 90s. From then on, PE ratios continue to climb steadily. My question is, can PE ratios be affected by inflation? Like every other good whose price climbs, why wouldn't valuations be more expensive over time. Does that correlation stick? Well, Brett, I would say that the E in the PE, the earnings, are definitely affected by inflation. Earnings are profits. Profits are what you charge for revenue minus the

cost of doing whatever you do to make a business. If inflation is higher, the inputs into your business are higher, which could reduce earnings. On the other hand, if a company can increase the prices above the rate of inflation, then earnings will benefit. But inflation doesn't really explain why people are willing to pay more for earnings over the past few decades, which is the P and the P-E ratio. But there are a few theories for why over the last 20 or 30 years P-Es have risen. One is that it's because interest rates have been really low, which could be good for stocks because loans are cheaper to the business, and there's not as much competition from cash and bonds. Interest rates have gone up over the past year or so, but they're still

very low compared to what they were in the 80s and 70s. Another possible reason suggested by Wharton professor Jeremy Siegel, is that investing is now easier and cheaper. You can invest with the click of a button, and you don't have to work with a stockbroker. Siegel says that commissions and bid-ask spreads used to reduce the returns somewhat earned by 1% to 2% a year, whereas now transaction costs are virtually nothing, plus tax rates are lower now. Stocks deserve a higher premium, according to Siegel. Finally, there's just more demand for stocks, largely thanks to the popularization of 401ks and IRAs over the past 40 years. According to the Federal Reserve, less than 10% of households owned stocks in the early 1980s, compared to more than 50% today.

Plenty of possible reasons for why PEs have mostly been higher in the 2000s, but it's not likely due to inflation. Kat writes, does a stock's price go down proportionately to cover a dividend payment, or is it just a reaction from the investing community? Well, Kat, I think the answer is both. The price does go down proportionally, but it's due to a reasonable price adjustment that is basically demanded by the investment community. When a company pays a dividend, it's essentially distributing one of its assets, in this case, cash. After the company distributes an asset worth millions of dollars, and in some cases, hundreds of millions of dollars, the price of the stock should adjust because the company

is no longer worth as much. Here's generally when you'll see it happen. When a company declares a dividend, they will also declare a record date, which is when you have to be a shareholder of record to get the dividend. In most cases, the record date will also be the ex-dividend date, though sometimes the ex-dividend date is the day before. You have to own the stock before the ex-dividend date to get the dividend. That ex-dividend date is generally when you'll see most of the adjustment to the stock price because anyone who buys it on that date or later won't get the dividend. If the dividend is small, it may be hard to tell whether any of the price movements are due to payout or just regular market noise. But if it's a higher yielding stock you're looking

at or a higher-yielding fund, such as a bond fund, you'll see a much more noticeable price adjustment on that ex-dividend date. Our next question comes from Jonathan. Hi, Allison and Bro. I've been a longtime listener back when you had your own show. I even sent you a postcard at one point. Oh, Jonathan, I still have that postcard somewhere. I'm sure it is somewhere. Yeah, we have hundreds and hundreds of them from listeners. Thank you. All right. Jonathan writes, my mom passed away in 2023, and we, my sister and I sold her house in Arlington, Virginia in 2024. We hired a CPA to handle the taxes for the trust and the estate. And they told us that as the beneficiaries, we should expect to

receive a K-1 form from both the estate and trust. What exactly is the K-1 form and how will that affect my personal income taxes? There are a couple of versions of the K-1. A couple of those versions are for businesses. So that's not what we're talking about here. We're talking about the K-1 that is specifically for estates and trusts. You can pull the form up on the internet and you'll see basically, especially with the trust, you'll have a share of any of the income that is distributed by the trust. The K-1 will say how much of it is yours and how it should be categorized. If you look at the K-1 form, you'll see different lines for interest income, ordinary dividends, qualified dividends, short-term gains, long-term gains. Then you

You basically take that information and put it on your income tax return when you file your taxes. Generally speaking, there aren't that many taxes related to the estate, because one of the jobs of an executor is to pay the estate's taxes before the money is distributed. But since your CPA said you might get something, keep an eye out for it. I would just say, since you have a CPA, you might want to get help from that CPA to know where to enter the information on your tax return. And if you use any sort of tax prep software, you probably could do an online search for how they handle information you receive from a K1. Next question comes from Mason.

My workplace, a nonprofit, does not offer a 401k. How have you seen workers effectively advocate for one? Who should I tell the director to go to in order to start one? Well, like I said, I would say the first thing to do is talk to the director about why they don't offer one. You want to understand what the limitation is. It might be just that they're not particularly savvy about investments or retirement or anything like that, or benefits. A lot of small companies, a lot of small nonprofits are very good people who started their companies or nonprofits for good reasons, but they're actually not that aware of how to do all this. So just find out why they don't. And then explain why you want one, why it's good for

the organization. It's a retention tool. It keeps employees, attracts employees. And it's good for the director, too, if the director works for the nonprofit. And then knowing that criteria maybe helped doing some of the research. Nonprofits are generally associated with 403Bs. But a few changes over the past couple of years have made it easier for nonprofits to have a 401K, so you don't have to limit yourself to the 403B. If it comes down to cost and administrative overhead, perhaps the easiest choice might be what's called a non-ERISA 403B. ERISA is E-R-I-S-A. It's referencing a law that was passed in 1974 that basically regulates retirement plans. By making it a non-ERISA 403B, that'll be easier and cheaper to operate,

but it has some drawbacks, such as there's not as much protections for the workers and the employer can't offer a match. But it might be better than offering nothing. If you've got a question for the show, email us at podcastsatfool.com. That is podcasts with an S at fool.com. As always, people on the program may have interests in the stocks they talk about. and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that we personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.