Motley Fool Hidden Gems Investing - Big Tech's AI Spending Spree

Episode Date: November 1, 2024

Amazon, Alphabet, and Microsoft are doing their part to drive $200B in AI-related capital expenditures for 2024. They’ll get some of that back in generative AI cloud workloads, but they’ve got a ways to go.  (00:42) Bill Mann and Matt Argersinger discuss: - How AI demand is refueling cloud growth at Amazon and Alphabet, but why there’s still some reason to be concerned about the sustainability of that spend. - Apple continuing to run counter to the rest of big tech with their AI strategy and cap ex approach.   - Reddit’s first-ever quarterly profit, Atlassian getting its mojo back, and why the red-hot weight loss market didn’t turn into great quarterly results for Eli Lilly. (19:02) Ahead of the 2024 election, David Gardner offers up his advice for how to keep calm with your portfolio and mindset while the news cycle turns next week.  (34:37) Bill and Matt break down two stocks on their radar for very different reasons: eBay and Super Micro Computer. Stocks discussed: AMZN, GOOG, GOOGL, AAPL, RDDT, TEAM, LLY, EBAY, SMCI. Host: Dylan Lewis Guests: Bill Mann, Matt Argersinger, David Gardner Engineers: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Big tech keeps up its big spending. 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 Dylan Lewis. Joining me over the airwaves, Motley Fool Senior Analyst Bill Mann and Matt Argersinger. Fools, great to have you both here. Hey, Dylan. We've got some big earnings movers and earnings from big tech, your pre-election investing pep talk, and of course, stocks on our radar. Fellas, a big-time earnings week. A little spoiled for choice here with Amazon, Google, Microsoft, Apple, Meta all reporting.

We are going to try to get to as many of those names as we can. Why don't we start with Amazon? One of the biggest movers of the group, shares up about 7% after earnings. And Matt, just shy of a new all-time high. I was wondering about that. I saw it was just over $200 a share, and I was wondering if that was a new all-time high. So almost there. So results were great.

It's tempting to go right to Amazon Web Services when we talk about Amazon these days. But I think the real reason, Dylan, that shares are higher is really about the stores business. It's really about the core business. If you look, sales were up 9% in North America, 12% internationally, higher than expectations. And remember, Amazon sold off a bit last quarter after that kind of core retail business underreformed. At the time, I remember Andy Jassy said, you know, online shoppers were tending to trade down to lower priced items. And for Amazon, of course, that means lower margin items. that appears to have either reversed or waned in the most recent quarter.

Jassy mentioned on the conference call that customers are still being cautious about their spending, but the volume of buying is remaining fairly resilient. So I think the market liked to hear that. They like to hear that the core business is still strong, still growing. And I also want to point out Amazon's advertising business, which I think we used to call it kind of a nascent part of amazon amazon's business well not anymore because amazon amazon generated 14.3 billion in advertising revenue that's right around nine percent of total revenue and it was up 19 year over year it has naced it has that's right bill uh so seeing nice gains and kind of sponsored ads on the storefront uh and of course as we know with prime video as well but last and

certainly not least, let's talk about Amazon Web Services. Sales up 19% to $27.5 billion. Lots and lots going on there, including, of course, a lot of AI initiatives. AI was mentioned no less than 39 times on Amazon's conference call. And of course, we know it's the biggest contributor to Amazon's operating profits, which, by the way, were up 55% in the third quarter to $17.4 billion, which is a new record for the company. Dylan. I think if you like capital expenditure conversation. Listeners, you are probably going to enjoy this big tech rundown. I can't resist. I have to zoom in on the cloud here. Bill, Amazon spent over $20 billion on property and equipment during the quarter, up 80% from a year before. Andy Jassy saying the

company also has zero plans to slow that down anytime soon. Yeah. Across the, I guess what people call the Magnificent Seven, they're set to spend more than $200 billion chasing AI this year alone in capital expenditures. I don't know about you, but that is an unprecedentedly massive amount of money to be spent in a short period of time for a business that, I mean, it has to be said, we don't know what AI is going to be yet. They are just making sure that they're there for whatever happens. Amazon has literally built a $2 trillion business on spending money up front, losing money, and then watching it pile up down the road. Matt, any concerns for you with the CapEx spend here? I do have some concerns only because

when Amazon is spending on transportation fleets, on warehouses, on building out its existing cloud infrastructure business, I think we can draw clear lines to revenue growth and profits. This spending, and I think Bill kind of hinted at that, this spending is much more uncertain. So if Amazon itself is going to spend $75 billion in 2024, and by the way, CFO Brian Olszewski said, it's not slowing down. So expect maybe a similar number in 2025. These initiatives better pay off. A somewhat similar story playing out at Google Parent Alphabet. Company dropped $13 billion in CapEx this quarter, up 60%. They're not expecting that to slow down anytime soon, either bill. I'm old enough to remember six months ago when Google was the company that had

the greatest risk that AI was going to take its business. That's right. Generative AI coming for search. Coming for search. So what's ended up happening is that generative AI is in fact bolstering search. And Google, the amount of money that they've spent, and they got a lot of criticism and they were thought to be in catch-up mode. But you can see from their cloud results, which were $11.4 billion in revenues, which is a 35% rise from a year ago, whatever it is that they've done with their investing, they've done very efficiently. And I know we just talked about $200 billion being dropped this year. And I love to think of the, I hope these are being done by check because the smoking checkbooks in these CFO's offices, the amount of

money that's going out the door. But Google is far from, at this point, a hunted in this space. Their revenues went up 16% to $74 billion, and that's a big jump from a year ago. Bill, Matt gave us the tour of some of the non-cloud elements of Amazon. When you look over at Alphabet, anything in particular that's interesting to you with YouTube or any of the other businesses that we tend to follow. YouTube is still just a monster. But the business that I think is interesting right now that's done really well, and I would say, and this may be a theme for me, this show, much better than I thought they would. Waymo, I saw as now being valued, if it were a standalone company, as being a $45 billion company, and it is a bit subsidiary for Alphabet

at this point. Matt, I want to go back to one of the things you were talking about with being able to tie that spend back to activity on the AI side. Because one thing that has had me a little excited looking at some of these cloud segments coming in this quarter is some of the re-acceleration that generative AI has been pushing for growth rates with AWS, with Google Cloud. There's something manifesting there for these businesses. It's just not quite as much as the money that's going out the door. Right. Well, my question is, are all these new customers expanding their spending because they feel like they need to justify that? And the idea that, hey, it's more productive, there's more features and more tools. I need to make sure my enterprise, whether it's

small or midsize, is using these tools and features. Is it going to pay off though? I think that's a big question mark. I think at this point, a lot of them are super worried about being what happened with Facebook when mobile came along and Facebook did not move. And suddenly, they ceded that ground and had to catch up. We saw it with the metaverse, which has not turned out to really pay off, although the investments weren't as big. In AI, none of these companies are intending to be left behind, even if they don't know what it's going to be. So even though some of that money is coming back to big tech, ultimately, we want to see that money flowing back to big tech's customers to feel comfortable with the sustainability of that spend.

Yeah, I think that's right. I mean, but again, there's just a little bit of build it and they will come. And by a little bit, I'm saying $200 billion this year. But yeah, I feel like they have to. It is an imperative that they not be left behind. Apple is a little bit more focused on the here and now than maybe some of the other players in big tech. They sell phones. People buy new ones every few years. And Matt, AI might help them sell a few more phones this holiday quarter. Yeah, a few more, Dylan.

That's a good question mark as well. My reaction to Apple's results were somewhere between ho-hum and may, which I think are technical terms in investing. Total revenue is up 6%. If you look at the iPhone business, sales were up 5% from a year ago, but flat in China, which continues just to be a really a bane for Apple and a lot of big technology companies as well. But of course, this quarter was unusual because we didn't get the iPhone 16 until late September. So we won't really see what the demand and uptake for that is going to be until we get results for this quarter. We also don't know how Apple intelligence, which is Apple's consumer

facing AI tools. What kind of demand driver that's going to be? Are people really going to upgrade to the iPhone 16 because of Apple intelligence? We've seen the commercials. It all sounds exciting. That's a big question mark. We'll get a much better sense in the next quarter. So this quarter was kind of a pass through one. On the services side, I'd say one bright new revenue there was up 12%. We continue to see double digit growth on the services side for Apple. That's really strong. And of course, Apple just generates and also has a mountain of cash that they use for buybacks. They did about $25 billion in the quarter. Is that money well spent at around 30 times earnings? I'm not so sure. We'll see. We were just talking about companies

perhaps being left behind here. I want to get your take quick on this one, Bill. Luca Maestri, CFO of Apple, said on their not-so-big CapEx spending, we have a bit of a hybrid model in the way we run our data centers. In some cases, we use our own. In some cases, we use third-party. Apple has been on the outside looking in as so many other companies have been dumping money into their build outs. Are you worried at all about them being left behind? No, because they are living off of the capital expenditures of other companies. I mean, I think you'd have to say that the best company in this space is NVIDIA because that's where the money is flowing to. But Apple's in a pretty good spot. They can allow a winner to be identified

and then push their operating system that direction. All right, coming up after the break, we've got the big movers from this week's mega earning slate, including one company that's more than doubled since coming public earlier this year. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money.

I'm Dylan Lewis here on air with Bill Mann and Matt Argersinger. the earnings party continues gentlemen we've got some reads on the blockbuster weight loss drugs and the hottest ipo of 2024 bill that's where we're going to start a stellar earnings report for reddit pick a metric and the social media and community company beat it and the market absolutely loved it up 40 on a price to awesomeness ratio reddit has stuck the landing and i i really have to come back i'm not sure if i said it publicly but i definitely said it privately I was so, so, so wrong about Reddit. I really thought this was going to be Twitter Junior, a company that was going to struggle to figure out how to take a massive community that it has

and convert that into business insights. But they've really, really done it. They're firing on all cylinders. The shares were up 40% Wednesday after the results. And they've earned, they had sales of 348 million, way above the estimate of 312 million, profitable on a gap basis. They have arrived, is the best thing that I could say about Reddit as a business. It's been there as a cultural phenomenon for a long time, but they've made that transition. A lot of different things to love here. You mentioned the profitability. First time they have ever been profitable in 20 years. I think the market is probably pretty excited about that. The user metrics for the business, also incredibly impressive. Daily actives up over 45%. Their average revenue per user ahead of expectations as well. And what was interesting to me, Bill, was I interviewed CEO Steve Huffman a little while back, and he had talked about how the company was particularly excited about the AI application of using AI to translate their corpus, all of their discussion boards, all of their post history, from English to other languages as part of their market expansion.

strategy. They seem to have done that fairly successfully and are going to be investing even more in that zone. Yeah, they really have followed in the footprints of Facebook in terms of taking those insights from their customers and using that business, the business information that they've gotten to really help. I mean, ultimately, keep in mind the core customer for Reddit is the businesses who are buying those insights and the businesses find them valuable. And so long may it continue for Reddit. Also feeling the love from the market this week, Atlassian, software company behind the collaboration tools like Jira, Confluence, and Loom, up 15%, Matt, on earnings that were ahead of expectations. Right. Big quarter. We're so used to talking about the

Mag7, the tech behemoths in the world, and we've already talked about several of them on this show, but there are a whole slew of software companies who are really critical to helping businesses run, be productive. They live in the mid-size, mid-tier part of the market. That's where I think Atlassian lives. I don't follow it very closely. I do own shares though, because David Gardner recommended it a bunch of times back in the day, but really impressive results. If you look at their ongoing businesses, cloud service revenue up 31%, data center revenue business up 38%. Atlassian Intelligence, which unlike Apple Intelligence has been around for quite a while, they're seeing a 10x usage increase there since the beginning of the year. So I think customers are really

embracing the new tools that Atlassian can just leverage across. It's already a big user base, all these tools that people have come to use. And they raised the revenue guidance for the full year. The stock is still, believe it or not, even after this latest surge, 50% below its 2021 peak. This was a stock that was over $450 a share in late 2021. they're on track to do about $5 billion in revenue this year. So still trading at roughly 11 times revenue if you look at the market cap. Very expensive to me, but obviously the market loves the results. The recent rally bringing them fairly close to where they started the year, as you noted, Matt, the last couple of years have not been

great for Atlassian shareholders. Not a surprise in the software landscape. There have been a lot of companies that we've kind of had to reprice the growth expectations for. On the enterprise side, we've also seen budget shrink a little bit. And so people have been a little bit more careful with their spend. Thinking just kind of broadly about how you're looking at software companies right now, you feel like we've kind of hit a little bit more of a stasis point in the industry? I do, Dylan. I think companies have done a lot to cut their operating costs in places they can. But I think when it comes to productivity tools like software, it's harder to let those go. You kind of want to increase your spend there generally. It's easier to cut costs in other

parts of the business. So I do feel like we're probably at a bit of an inflection point for the market. We talked about this a long time in 2019 and 2020. It seemed like there were a bunch of apps that were masquerading as companies. I think that we've gotten to the other side of that. And what you have now are legitimate companies like Atlassian, and they are starting to really put their foot down in terms of defining their businesses. All right. Shares of drug maker Eli Lilly down 10 percent this week. The company posted revenue and earnings below expectations. The real focus, though, Bill, Lilly's Terzepatide treatments, Zepbound, which is a weight loss drug, and Moonjaro, it's diabetes drug. Some disappointing results there, which is surprising because this has been a space that has been red hot and has had tons of headlines about it. Yeah. So I'm sure you all are excited for next week's Obesity Week, which is a conference that's being held in San Antonio, Texas. We're going to hear from a bunch of companies, including Eli Lilly. We have to preface anything that we say about the results for this quarter that Eli Lilly has been one of the massive success stories on the planet over the last couple of years, thanks to powerful growth in its GLP-1 drug portfolio. I mean, they've redefined what you would describe as a blockbuster drug.

Manjaro generated $3 billion in revenues in the quarter. Zep bound $1.2 billion. But shares are down sharply from, you know, as revenues came in a little light for this quarter. And their earnings for the next year, they're anticipated a little light as well. But I don't know where the competition is coming from or where it might be that GLP-1 drugs are at any risk. I want you to help me unpack something that came up in the conference call because I think we are all looking for what exactly happened here when something is so attractive, there's so much consumer interest, and the results aren't living up to it. CEO David Rick said, at a macro level, is there a demand problem here? No.

Is there a supply problem? No. So what are we looking at here, Bill? What's left? I think these are the two ends of things. Is this a matter of supply chain, inventory, and just the way that quarter to quarter some of the things will hit? No. Well, yes, I think that that's probably it.

There is a little bit of an open question that we do not know yet what these drugs will do, what side effects will come as people take these drugs chronically, which they have to do. So, yeah, I think he was – I don't think he was being cute at all. He was just saying, ah, things are developing differently than we had anticipated. Bill Mann, Matt Argersinger, fellas, we'll see you guys a little bit later in the show. Up next, we've got the rational optimist pep talk for navigating investing and the election. Stay right here. You're listening to Motley Fool Money. When you're a mid-sized business, you need every competitive advantage you can get.

Like an AI solution that works for you, not against you. SAP Grow is built with AI embedded at its core, working across every system. And it's ready to go from day one, so you can hit the ground running. Bring it with SAP Grow. AI Cloud ERP for any size business. Welcome back to Motley Fool Money. I'm Dylan Lewis. This is our final radio show before the 2024 election, and we wanted to give investors a pep talk to keep calm with their portfolios and mindset ahead of the news cycle's turns next week. And really, who better than David Gardner?

He's one of the co-founders of The Motley Fool and our chief rule breaker. He's also one of the biggest optimists I know, and it feels like a really good time to have an optimist on the show. We talk through the persistent march of private enterprise, the joys of 80s answering machines, and how to set yourself up to process what could be a stressful few days or weeks. David, thanks for joining me. Thank you. I'm a rational optimist, Dylan. I hope you are too. I think we all should be. It's actually the way to succeed, not just in investing, but in business and in life. I have a bunch of questions for you, but I think my first one is, I want to unpack

rational optimist there. Yeah, so a rational optimist is somebody who recognizes that if you study history, as Matt Ridley, who wrote the wonderful book The Rational Optimist, has done, you discover something amazing. Virtually every generation through recorded history, a lot of people thought it was all about to end. We're all going down things. My kids will be worse off than I am. And then when you look backward, you start realizing they were always wrong. And I think anybody who feels that way today is actually going to be proven wrong by history. I do think things tend to get better. With Kevin Kelly, the founder of Wired Magazine, I believe

that we're living in a world that is not a utopia or a dystopia. Kevin says it's a protopia. He defines that as things are actually getting infinitesimally better every day. Not every single day, but generally in a way you can't measure. But then when you look backward, you realize, wow, look at the progress we've, look at the technologies and experiences I take for granted for free today. So that's the protopia I think we're living in. Kevin Kelly has another great line, Dylan, here it is. If you read the headlines, you conclude things have never been worse. If you read history, you conclude things have never been better. It reminds me a little bit of the outlook that our colleague Morgan Housel had, I think a couple of years ago, saying

I'm going to endeavor to read more books and read less articles, read more history, read fewer forecasts, because it is a better mind space to be in and probably a little bit more of an instructive space to be in. Morgan is a pretty smart guy. And Dylan, you are too. I think that's a it's a helpful message for people to be hearing. I'm going to ask for some more advice. That was a that was a nugget of advice. But I'm gonna ask for some more advice here. We're a few days from the election. This will be the third one that I've really been closely following the markets and investing. You've got a few on me, David. You've been doing this for a while and a very sober voice for a lot of investors for a very long time.

When it comes to investing and the market, do you want people to have in mind as they're processing information over the next couple of weeks? Well, a couple of things, Dylan. I think, first of all, I want to remind, this is less of a market. We're going to have a market point in a second, a stock market point, but this is more about our society and our culture. Speaking to the U.S. Americans among our listener base. We also have many international listeners on Motley Fool Money. But I want to remind us of something that I would say is hidden in plain sight. So in April 2024, six months ago, Pew Research Center study concluded the following. 32% of us are in one of the parties. I won't say which. 33% are in the other. 35% of Americans

are independents. So there's rarely, if ever, any media acknowledgement of this fact. People are brought on from the left or the right, this color state or that color state. Yet the largest group of Americans, and let's just call ourselves the center or moderates, are basically colorless, if you want to use blue-red language, which I never do. We're told what the so-called left think and the right think, but we're not told what the center thinks. No one comes on and says, okay, now we're going to talk to a moderate. There's not really a moderate news channel or feed or source. So moderates in America literally outnumber anybody else, but have no real platform. Now, I affiliate this way. I'm not going to say how you affiliate, Dylan. It's not necessary for

us all to do that. But more of you hearing me today also self-identify as moderate than are in either party. And we have no voice. And I just want to point that out. If I were going to volunteer a color for the moderates, I think the stations would probably go with gray. It almost is synonymous with undecided, but it doesn't feel worthy of the majority, David. Yeah. Gray is not a word, to me, a color word with a very positive context. But really, when you think about what is the true strength of our country, I don't think it's the lunatic fringes. I think it's the center. And it is hidden in plain sight. And you might think that I'm sounding a pessimistic view. Actually, I'm just trying to sound an eye-opening view. But it's a very positive view because

the next day after the election, whoever wins, it's actually business that will be delivering no matter who wins. And one of the things I think we like, you too, I know, we at The Fool like is conscious capitalism. We love to celebrate companies that do well by doing good. I've tried to fill my portfolio and our members' portfolios with them. And these companies and business itself is not just selling to half of America or not the other half or trying to divide us. Businesses yoke us together. Most of us work in business. The private sector in the United States dominates much bigger than the public sector, although you could be excused for not recognizing that in the last few weeks. I've had a lot of friends go, I'm going to be turning cartwheels

when this whole thing is over next week, and I might do it along with them. But here's my prediction. The day after the election, whoever wins, Starbucks will be serving coffee to all Americans, not just half the country. Amazon will deliver you your packages. Patagonia will continue to model and embody sustainability and respect for the environment. Intuitive Surgical, which just tripped over the 100-bagger mark for Rule Breaker members a few weeks ago, will help thousands of people walk away from minimally invasive surgeries that once took expensive days of hospital recovery. Apple will be helping people who are less tech savvy be part of the tech revolution. And one of my favorite companies, another 100-bagger for us

in Rule Breakers, MercadoLibre, will continue to provide a free and accessible marketplace for a portion of our world, Latin America, that often would otherwise be more deeply sunk in authoritarian-driven poverty. So these businesses, Dylan, and really hundreds of thousands of others, To me, that's the true story of our country. And the private sector, as I already mentioned, dwarfs the public sector, always has. And our stock market, by the way, is at all-time highs. And that's worth pointing out because I think a lot of people would think that couldn't possibly be the case. To your point, David, looking at the way the market may process the election, business continuing on as usual, there was a sharp adjustment in 2016 because the election didn't go the way that the market had necessarily priced it. That sharp adjustment wound up being totally retraced in about a week's time.

The S&P 500 wound up closing 2016 at basically a new all-time high. The market has gone to set multiple all-time highs in many years since. So that march has continued on. And that's really important to point out. And by the way, this will happen again. Now, it won't happen the same way every time, but the market will go back and make new highs. It might continue forward from where it is. It might dip back. But in time, it comes back. And I think the important point, Dylan, again, I'm speaking more to the center here, rarely addressed in the media. Thanks for an opportunity. But I was looking back at a great

Arthur Brooks, quote, Arthur Brooks, somebody I had on my podcast last year and a very bright writer. He writes the happiness column for The Atlantic. But he said this in his book, Love Your Enemies, which is all about how you shouldn't treat people who disagree with you with contempt, about how destructive that is, not for them, but for you treating them that way. But Arthur Brooks said, and I quote, anyone who can't tell the difference between an ordinary Bernie Sanders supporter and a Stalinist revolutionary, or between Donald Trump's average voter and a Nazi, is either willfully ignorant or needs to get out of the house more. Today, our public discourse is shockingly hyperbolic in ascribing historically murderous

ideologies to the tens of millions of ordinary Americans with whom we strongly disagree. Just because you disagree with something doesn't mean it's hate speech or the person saying it is a deviant, end quote. Great quote. Such an important point. Can't make it enough, especially right now. David, you are known for your mailbag episodes. And so I would be remiss if I didn't take an opportunity having you on the show to put a listener question in front of you. This one, technically not in the mailbag, technically on our answering machine. But listener Alberto gave us a call. Here is his question. Dylan, are you saying that we're still using an answering machine? It's technically powered by Zoom. So it's a very 21st century answering

machine. I was picturing the one I grew up with. I would love it if we had an analog cassette that we really needed to be switching every single time we got a new caller. It's so charming to imagine. If you will allow me, I'm still going to imagine that that's how this happened. All right. Here's Alberto. Hi, my name is Alberto. We're calling from Long Beach. and I just wanted to ask about how wealth is generated by concentration and wealth is preserved with diversification. I know that you guys are long-term pretty much buying hold and let the runners run, but at what point do you start making a switch from selling those concentrated positions

and you can start diversifying so you can start preserving that wealth that you've generated. Thank you. David, I think you might be one of the most qualified people in the world to answer this question. You have an entire concept dedicated to this that you talk about often on the RBI podcast. Thank you. Yeah. And first of all, Alberto, thanks for dialing in. Second, it's a great problem to have, isn't it? When stocks do so well for you because you were smart, You were actually an investor, capital I. You bought to hold. You didn't buy to sell right away. You didn't trade, the opposite of investing. You're an investor. That stock starts to outgrow its original slot in your portfolio because it's doing so well. It can start to cause

you to lose some sleep at night at its worst. That's why I decided to borrow a phrase from the sleep industry, the mattress industry. I think some of us will recognize maybe where I'm headed here, the sleep number. Sleep number, which by the way, was a really bad stock pick for me for Rule Breakers. But with that said, it's a wonderful concept we can repurpose for thinking about our portfolio. So in fact, I would say Rule Breaker portfolio principle number four of my six is establish your sleep number. And what I mean by that, Alberto, is it's a different number for each of this, by the way, but what is the number that you would allow your largest position to grow to and not lose sleep at night? What is that number? Let me give two quick examples. A lot

of people actually have the number one. Their sleep number is one because they're in funds. They're in a diversified fund where the largest holding in that fund might just be 1%. Now, S&P 500 funds these days, some of the total market funds, because of the size of some of the great, big tech dogs that we've held for years and years, the Motley Fool, that have started to control the market, in some cases, Apple-ish, can be 5% of a fund, even a diversified fund. Many people across America have a sleep number of one to five. I think a lot of Fool members have a sleep number closer to 10. My own sleep number is about 35. That means I'll allow a single stock to become a third of my portfolio. There's no right number and there's no right

answer, but the principle, Alberto, is establish your sleep number. Decide ahead of time if you can, or as you watch, watch and learn, and come up with that number. If I have a stock that's 35% of my portfolio. It just keeps going. All of a sudden, I know, oh my gosh, earnings. It just blow out earnings. It's now 46% of my portfolio. That will trigger me to start selling off a portion to get it back to the level where I can sleep the next night. I'm not here to say what your number should be, dear fellow fools. I'm here to say it's a thing. It's a really good guide for many people. They haven't necessarily thought of that before, but once you start framing it up that way. It helps you manage your portfolio to success. It's an awesome framework for thinking

about this. I have my own number. It's about 15% to 20%, depending on the company and the volatility that that company might experience. I'm going to take that sleep number concept, David, and play with it and maybe propose that people apply it somewhere else for the next few weeks and think about the influence and the concentration of the voices in their life and how they are spending their time and how helpful it actually is. We, I think during periods where things are a little stressful, where there is a fast moving news cycle, tend to over allocate to watching the news, to scrolling social media, don't spend as much time talking to people we love or simply getting outside. And so I think people maybe can go into the next couple of weeks with

an intention on how much news they're going to watch, on how many articles they're going to read. And then once they've done that, say, you know what? I'm going to go do something else. Hashtag truth, my friend. That was very well said. I learned it from someone that's pretty smart, it turns out. Listeners, you can catch David every week on Rule Breaker Investing. New episodes out every Wednesday.

His mailbag is rbi at fool.com. And our voicemail is 703-254-1445. One of my favorite things to do is get listeners' voices on the show. So give us a call at 703-254-1445. I promise we will change the cassette. Let us know what's on your mind and the questions you have for the team. Coming up next, Matt Argersinger and Bill Mann return with a couple stocks on their radar. Stay right here.

You're listening to Motley Fool Money. Be happy. Be happy now. 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 anything based solely on what you hear. I'm Dylan Lewis, joined again by Bill Mann and Matt Argersinger. And we're going to jump right into stocks on our radar this week. Our man behind the glass, Rick Engdahl, is going to hit you with a question.

Matt, you're up first. What are you looking at this week? Gold with eBay, Dylan, ticker E-B-A-Y. So eBay's results this week, not really impressive, and they're never going to be on a quarter-to-quarter basis. Revenue was up just 3%, gross merchandise volume up about 2%. I do like some of the recent moves management's made to invest in product authentication, bring in golden auctions. But this is really what's happening underneath the surface at eBay. You have a business that generates an enormous amount of cash. We talked about this. $755 million in operating cash flow alone in the third quarter. The business requires very little capital to run, so a lot of that cash

goes right back to shareholders. In the third quarter, $750 million in share purchases, $131 million in dividends. In the last 12 months, eBay has repurchased 7% of its outstanding shares. In the last five years, it's repurchased 40% of its outstanding shares. As long as the business remains stable, they can keep allocating capital like that. I think investors will do just fine. Rick, a question about eBay, ticker E-B-A-Y. It's probably just me being dumb, but I love shopping online, Amazon, Etsy, Reverb, with all these places, eBay still feels shady to me. Why is that? Well, I don't think it's shady, but it does attract a certain buyer and seller, I think, who's dealing mainly with collectibles.

That's a big thing for them. So I'm guessing you're not a collectibles kind of guy, Rick. I guess not. Rick doesn't like the thrill of the auction. He just wants to know it's going to show up at his door and I can respect that. He wants certainty. I get it. I believe Rick is just called collector shady. I feel offended. Bill, what's on your watch list this week? Well, I've kind of forgotten that the watch list was supposed to be something that we were supposed to try to win the affections of Rick, but my company, uh, as, uh, is super micro computing incorporated SMCI, uh, that had their auditor Ernst and young, uh, leave them last week, telling them that they could not rely what SMCI was telling them to do an audit. This is the

second time in a few years that SMCI has had auditing issues. Their shares were halted for several months by NASDAQ for accounting issues. So this is bad. This is actually really bad. I joked earlier that SMCI, Supermicro, could drop the super and just be microcomputers and ticker mci the greatest thing about this and this comes from our friend of the show ken taylor they're actually super micro announced that they're going to announce their business update next week for the fiscal quarter of 2025. they're doing it 5 p.m on tuesday november 5th this is like this is election day this is like the friday surprise but done in a very very impressive way maybe when when they're thinking nobody's going to pay attention.

Rick, Bill's giving you a ton of fodder there. Where do you want to go with that one? Super duper, itsy bitsy, teeny weeny. What is this? Forget the questions. I guess I'm stuck with eBay here. That's right. I win by default.

I win by default. I love it. But you know what? This is a good reminder. The radar stocks have been not always on our radar for a good reason. Sometimes it is a story that is worth paying attention to. And Bill, you caught the loss here today,

But I think there's an educational victory here. And that's a win for all of us. Matt, Bill, appreciate you guys being here and bringing your radar stocks. Rick, as always, appreciate you weighing in and mixing the show. That's going to do it for this week's Motley Fool Money Radio Show. I'm Dylan Lewis. Thank you for listening. We'll catch you next time.