Motley Fool Hidden Gems Investing - Bitcoin Breaks $2 Trillion

Episode Date: December 5, 2024

The crypto bulls were right. Bitcoin's market cap is now about the size of Alphabet. (00:14) Jason Moser and Ricky Mulvey discuss: - The murder of Unitedhealthcare’s CEO. - What’s contributed to Bitcoin’s rise to $100,000 per token. - Chewy’s trouble finding new customers. Then, (17:23) Motley Fool Senior Analyst Sanmeet Deo joins Ricky to check in on a mall retailer that’s showing signs of a turnaround. Companies/Tickers discussed: UHC, BTC, PLD, KNSL, MKL, CHWY, SPG, ONON, GAP Host: Ricky Mulvey Guests: Jason Moser, Sanmeet Deo Producer: Mary Long Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range. Infused with functional benefits. Choose the coffee you love with added B vitamins. Like Coffee Plus B12 to help support immune function. And Coffee Plus B6 to keep your day moving. Or go with the flow and choose Ginseng Delight. Our new double espresso with ginseng extract.

Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. The CEO of UnitedHealthcare was murdered outside of an investor meeting. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Jason Moser. Jason, we are starting today with a darker and wilder story than we normally do. Brian Thompson, the CEO of UnitedHealthcare was shot and killed in Midtown Manhattan yesterday morning. We don't know much the killer as of this recording has not been caught by the police. We do know that it was very

targeted. And the New York Times reports that authorities are running ballistics tests on the bullet casings, which appear to have the words delay and deny on them, possibly in reference to UnitedHealthcare denying insurance claims. This story has been a lot to take in. What's been going through your mind as you've digested it over the past day, day and a half? Yeah. I mean, I think like most people, it's awful, right? I mean, we think about this and that's the one word that I keep coming back to. This is just horrible. First and foremost, we feel for the victim and his family. I mean, it's hard to even conceive. It does seem like it has to do with a disgruntled individual who was unhappy with some sort of result or some sort of call that was made by the business. that said, I mean, there's just no excuse for, for, for something like this. And I really do hope, uh, uh, we ultimately, we ultimately see justice prevail here. I've been having to pull myself off the X platform because my mind continues to go to the dark place with it.

I want to just talk to normal people about this story and not just engage with, with comments. I'm going to make one observation though. Yeah. And you know, we, we, we talk about businesses, we focus on the businesses. So I'm going to talk about the stock. And it's okay if we don't have smart commentary for it. I'm going to observe it. Maybe we'll just move on. Stock market investors like certainty. And yet, the stock of UnitedHealthcare, it's down a little bit, but it is barely budged on this news on something that is a lot of uncertainty, Jason. Well, yeah, I mean, there is some uncertainty. I mean, as bad as this news is, I mean, I'm not terribly surprised that the stock hasn't done much in the sense that he was one part of a greater

team, right? That's not to belittle what happened here. But I mean, it's a very big company. United Healthcare is obviously a very large company. And there are a lot of people within that business that are helping it run. That said, to me, I mean, I do feel like the one thing that I keep thinking about, you have to wonder what's going on through the minds of leadership throughout the rest of this company, right? And even beyond that, just with companies everywhere, because this becomes something that is a little bit more commonplace where we see behavior like this from people because companies are doing things that maybe they didn't agree with or they were not happy with. I mean, that becomes a big problem. So I do really, I mean, I think a lot about how

the rest of leadership with UnitedHealthcare at this point is viewing the situation in exactly how they're handling it because it seems very reasonable that most would probably be constantly looking over their shoulders at this point. I would. Yeah. Yeah. There's a lot we don't know here. And right now it's a little bit of a business story. It's really a human story. It is. I agree. And as details emerge, if this becomes a business story, we're going to talk about it more on Motley Fool money. But this is I mean, it's something that, you know, there's so much we don't know that we can't have a fact based conversation and provide a lot of smart commentary for it. So I mean, Jason, unless you got more, that's kind of all I got on it for

now. Well, no, I think you're right. There's just so much we don't know. But but we really you said it. This is a human story. I mean, we want to acknowledge that. And until we learn more, we can't really, really put the pieces together here. But but at the end of the day, this really is just it it's a human story and that's it's something we all should feel all right let's move on to uh another story bitcoin it's back in the news jason and i know i know you're not a crypto guy but i i wanted to this is big enough that i think it's worth talking about on the show and it's something where i'm gonna eat a little humble pie i remember back in so back in 2018 i was working on a i was working on a radio show for a financial planning firm in cincinnati and i saw this article

in CNBC. And there are these analysts giving $100,000 price predictions for Bitcoin. And I was like, this is clickbait. This is so stupid. How could you possibly think this? You know what? They were right. I was wrong. There is a tremendous demand for digital gold. So far, Michael Saylor of MicroStrategy has been right. I've been a little bit wrong about this. And how surprised were you to see Bitcoin hitting $100,000 for a coin? Well, if you're looking for someone to saddle up a side of there right there and eat some Humble Pie with you, I will gladly do it. Because clearly, you're right, I've never been the biggest crypto guy in the world.

I mean, to me, I've said many times in early days, it just felt like an easy way to get burned. Clearly, I was wrong in the case of Bitcoin, at least. And I also, I got to stress, I am okay with that. I never participated and I likely never will because it's just, it's a greater leap of faith than I ever cared to take. I just still don't fully understand why it exists, I guess, for lack of a better phrase. But with that said, congratulations to those who have done well with it. I mean, that's investing, right? We leave great ideas on the table all the time for whatever reason. Either you don't get it, you don't want to take that sort of level of risk, or you just straight up disagree with the thesis, whatever it may be. I mean, it's kind of like that Warren Buffett, you know, it's a no-call-strikes game, right?

You don't have to swing at every pitch. And so I think that's important for investors to remember. I mean, we miss things all the time. Got a lot of money, you only have so much money to spread around to so many ideas. And in this case, it seems like to this point, at least Bitcoin has worked out very well for a lot of folks. And this is also a time where I'm reminding myself, where I feel my lizard brain going, where it's like, oh, everybody's in on crypto. Is this something I should get excited about? And while it hasn't really been a big part of my investing style, what I'm reminded of is, no, the time to get excited about it is when everyone's down and out on it.

When you see the certified financial planners dunking on crypto, when the CEOs of crypto are trying to convince everybody to get back in, that would have been the time to get excited about it. Now that everyone's at the party, you might be buying high and selling low. I don't know. Let's talk about the rise, though. Politics are a definite part of this story. And the incoming Trump administration has discussed adding crypto to the nation's reserve

fund. If you've listened to Marc Andreessen, he was recently on the Joe Rogan Experience. He's talked about the optimism from a lot of crypto entrepreneurs that doing business in this space is going to be easier because a lot of them over the past few years have been debanked. And you've also seen over the past few years, more adoption in terms of ETFs. People can buy Bitcoin through an exchange traded fund. When you're looking at this recent rise, this tremendous spike, anything else to explain it or anything else you're noticing? Well, I think there are a the ease or it's becoming easier to transact, or at least to deal with buying and selling Bitcoin,

that has absolutely gotten better through the years. We're seeing more platforms facilitating that process. And so I think that alone probably brings more people into the fold. And I think that's one thing that really does add to the value of Bitcoin and crypto at large. It's just you have more people that are willing to participate. And so that's likely a very good thing. Now, I do agree that the political angle here, I mean, you get the former commissioner of the SEC, Paul Atkins. I mean, he's going to he's going to be the chair of the SEC with this incoming administration. And I think that's generally seen as pro crypto, pro Bitcoin and whatnot. And so if we see some more certainty, some more regulation, at least understanding more sort of the rules within this particular game, so to speak, then it becomes a little bit more understandable for investors.

And I think we've talked about through the years, it's just the big debate through the years with Bitcoin and crypto in general is just what purpose does it ultimately serve, right? Is it a store of value? Is it a medium of exchange? It certainly seems more the former than the latter today. And then I think you can also, we can point to Jay Powell's recent comments there as well. And he just recently was saying that, you know, Bitcoin, it's not a challenge for traditional currencies like the U.S. dollar. So he's kind of pushing back on, listen, this isn't really a medium of exchange, but that it is a competitor to gold, right? It's kind of like digital gold. So it does seem like it's served better, at least as a store of value to this point. It's obviously more volatile.

But with that said, I mean, the price is the price. And so for folks who have put their money in Bitcoin through the years, they've clearly seen a very acceptable return to that investment. Yeah, take a coin market cap with a grain of salt. Bitcoin is now worth $2 trillion. You mentioned the payments platform and you mentioned the store of value. So I think it's pretty agreed upon that Bitcoin is pretty bad as a payments platform. It doesn't really compare to the Visa network where the Bitcoin blocks take minutes to transact. You don't want to sit at the counter for 10 minutes to see if your payment goes through.

And it's believers like that its supply is limited, is that store of value as a hedge against inflation. I'm going to try to bring this over more into your world, Jason, into the stock investing universe. I want to see if there's any, not commonalities, but let's take some of these concepts. Store of value, maybe a controlled share count. Companies that are offering a really disciplined, controlled share count and something where you expect its goods and services to provide value for decades. Are there any companies that

you think about when you think of that store of value, share count discipline, long-lasting service or goods? Yeah. I think there are a number of ways to look at it. I think the broadest way you could look at it, if you're looking to hedge against inflation, you can never really go wrong which is investing in the broader S&P, right? I mean, the S&P, it's very tech-heavy in nature. I think, generally speaking, businesses that gain from inflation, that do well in inflation, are businesses that don't require a ton of capital. And so you see the S&P, obviously, is very highly concentrated

with technology, business, communications companies, and I think that accounts for close to a third of the index today as it stands. But that makes sense to me if you're looking to kind of take sort of a lower risk way to kind of hedge, so to speak. I think another way you can look, and this is an interesting one. I know Maddy Argersinger would love this. You can look to REITs, Real Estate Investment Trust. I think real estate generally does a pretty good job of keeping up with inflation. And so we look at Prologis.

That's one that we like a lot here at The Motley Fool. It's been recommended in a number of our services. and what I own personally, a company that's very focused on investing in warehouse side of real estate, as well as the burgeoning data center side. And you get that really hefty dividend every quarter as well, which is nice. And then I think, look to companies you feel like have some pricing power or that are maybe less exposed to discretionary spending. So think about things people need. They're kind of not optional. One that stands out to me, there is insurance. Insurance is always an interesting one to me. You don't really have the option there. I mean,

you got to pay for that insurance, whether it's your car insurance, whether it's your business insurance, whatever it may be. So companies like Markel, I think, and Kinsale Capital in the specialty space. And then the one that stands out there, we probably see the commercials all the time, progressive insurance, right? You got to pay that car insurance, Ricky. Yes, I understand that I have to pay that car insurance. I'm not exactly happy to do that. And it's worth noting all three of those companies have outperformed the market over the last three years

in what I think we all would consider to be a very high inflationary time. Well, I'm happy to be an owner of Prologis. I'm happy to be an owner of Kinsale. Let's move on to a company that reported I'm a little less happy to be an owner of, and that's Chewy, the pet retailer reported yesterday. It's boosting its earnings.

Its sales are up a little bit, but here's what I can't get over. This business, Jason, is not adding any new customers. And I think that was forgivable when a bunch of people adopted pets over the pandemic, then interest waned. But now, I mean, we're about five years from 2020. How are you not adding more customers? I mean, I own shares, and my thesis was that Chewy customers love the business.

There's so much customer love for Chewy, and more folks would be coming in after that pandemic hangover. So you're the patient long-term investor. I'm trying to be a patient long-term investor. Should I be patient here? Well, I feel like you probably should be. I don't personally own shares of Chewy. My daughters do own shares of Chewy.

And with a household here of three dogs and a cat, Chewy gets a lot of our money every month, every two weeks, really. But you're right. I think on the one hand, it is a concern that customer growth has stalled. Now, let's be fair and admit that they pulled a lot of customer growth forward

over the last few years. So that accelerated a little bit abnormally. So hopefully what we will see here and what management is guiding towards, at least, is that they should see modest customer growth year over year by the end of this year, which that's at least encouraging. But you're right. If you can't find ways to expand your customer base, then you're going to have to find ways to get those customers that you do have to spend more. So you look at those sales per active customer. Now, in regard to the business itself

and profitability, they are investing in the business. They're continuing to build out distribution, for example, that takes time and it costs a lot of money. And they're also expanding into new countries, right? That international expansion, building out the Canada presence there. So I think, you know, bottom line for me, this is a still, it's still a very young business and it's one that I think is going to require a lot of time and a lot of capital to fully build out the distribution network. But I do, I like at the core, the market that they serve, right? they do one thing and they do it really well. And, and I think look at something that stands out to me in quarter after quarter, we look at those auto ship numbers. Um, and I, we use that

auto ship here and it's, it's terrific auto ship customer sales were up 8.7% year over year, uh, to $2.3 billion. That's 80% of, of net sales. So they are, it's a good business. They're doing well, but it's a young business and they're, they're still investing in, in trying to become a mature and more established business. Yeah. I'll tell you the story that I'm reminding myself of is, is I look at this and that's when Netflix lost subscribers a couple of years ago and a lot of folks were willing to hit the panic button. But you know, when you have smart leadership teams, when you have a product that customers love, sometimes they can figure it out. You mentioned that they do one thing really well. Chewy's also trying something new.

they've launched vet care clinics. It's got six clinics open. And CEO Sumit Singh is hoping this will unlock a $25 billion total addressable market. You're seeing big tech companies get into the healthcare space before. It's been a little tricky. What do you think of that move? Well, I think it's a sensible move, right? I mean, it's kind of going back to that they do one thing, one thing very well. And I'm kind of using pets. That's the one thing they do really well. So we probably shop at Chewy mostly for pet food and maybe pet medicines. I think getting into the vet side of the business makes sense, at least to attempt. That said, it's also a very competitive space. They have a lot of strong competition out there. You look at a company

like Mars. Mars owns Banfield. They acquired VCA a while back. And so it is a difficult space, no question. But the flip side of that, they talked about this in the call, net sales per active customer actually grew 4.2% from a year ago. And they credited the healthcare and specialty businesses as driving this increase. So I think it makes sense for them to give this a shot, because if they pull it off, it absolutely could take this business to the next level. Jason Mezzer, appreciate you being here. Thank you for your time and your insight. Thank you. up next we're gonna look back on black friday and cyber monday with motley fool senior analyst

sandmeat deo he joined me for a look at two retailers one with its foot firmly on the gas and one turnaround story showing some green shoots holiday shopping season is well underway and send me a couple of days ago i checked in on Black Friday results in Cyber Monday with Bill Mann. Basically, the headline is that Shopify is proving to be a winner where their sales are up about a quarter from last year. And also that shift from in-person store experience to online buying is continuing. Now, when I did that segment, I found a new wrinkle. And that was because of something that you sent me, is we looked at the overall in-store shopper traffic from a company called Sensormatic Solutions. And they found

that that was down foot traffic down about eight percent compared to 2023 and then in in from the top rope comes simon property group which operates a lot of class a mall space you can think of the the nice shiny floors going on at a simon property group mall i've been to a few of them they say that over this past holiday weekend traffic at their malls is up seven percent year over year when you're looking at these results what comes to your mind is a stock analyst well what do we believe ironically we're just talking about this offline you know it's like with macro level data it can be so conflicting confusing sometimes you always have to take a little with a little bit of grain of salt for every bit of data that you find like the ones

that you found you can find something contradictory so i saw a survey by the national retail federation that showed around 126 million shopped in person over the thanksgiving weekend which was up 5 million from 2023, but online shoppers fell 10 million year over year. So I would have expected online traffic to be a lot stronger than foot traffic. But in terms of the data you presented in the Sensormatic Solutions data, that is overall retail traffic across various types of stores and locations, while Simon is focused on their properties, their malls, their outlet stores, and whatnot. So some of that discrepancy could indicate that mall traffic is actually performing better than some of these other types of stores and locations. And specifically, Simon's properties

might be performing even better than other malls. So CEO David Simon said, popular brands throughout our portfolio reported double digit sales increases over the weekend compared to last year. So I think malls are doing well, specifically Simon. We're starting to hone in on some of these brands because I know you follow especially some of these athleisure brands. People are going to this class a mall space they want to go where it's nice and where it's popping what brands are doing well in that class a type mall space like your simon property group places so you still have like the luxury brands like you know louis vuitton gucci tiffany they're all expanding their presence in like top tier malls um simon doesn't really break down their brands that are performing

well but you know they on their shop simon digital platform which is relatively new you know companies like adidas american eagle colhan steve madden todds they're doing quite well you know a big story too of late in terms of retail has been abercrombie and fitch you know they they reported comp sales increase of 16 in the third quarter of this year you know with growth like broadly across all geographic regions and multiple categories a lot of strength in hollister which is in their teen market and i've actually anecdotally heard a lot of like my my daughter and and her friend's interest in hollister yeah people love abercrombie people love abercrombie and fitch and i'm hoping that we can have a story a little bit later that might emulate abercrombie

and fitch although you always want to be careful saying x is the next thing that's already done really well one company i want to talk to you about and this is one that's not really at malls as much but it's a high demand black friday uh item at least in my household and that's on holdings This is a premium brand that does really nice walking and running shoes. And over Black Friday, it discounted some of its popular shoes by 30% to 40%. And this is not an ad. We got two pairs. We got two pairs of On shoes in my house because we were like, they don't do it that often.

The very popular On Cloud 5s are still full price at $140. They have like a slightly different version that I ended up buying for $100. So we'll see how different they really are. And I had to get them in a slightly off color because a lot of the sizes and colors that I wanted were sold out. But when you look at this, a super premium brand like Odd that's made a name for itself in terms of selling things at full price, what are you watching when you're seeing them discount some of their products over the holidays? Yeah. So I'm okay with some of their discounting because it's a more targeted member exclusive approach. They're doing it to clear out

some old inventory. They're offering discounts to members only. So you have to sign up and become part of their member program to actually get the discounts. They're boosting some sales during seasonally slow times. And they want to try to expand their customer base a little bit to some of the more price sensitive customers out there. But it's not a wholesale discounting strategy per se. Okay. And so I've gotten two pairs of on shoes. I was actually... When we first did a segment about on i started looking into it more and then i got i got some shoes and i had to go like a half hour away to a dick's sporting goods to get the color and type that i wanted and when i talked to the guy who's working the the cash register at dicks he was saying you know i'm

seeing a ton of these shoes flying off the shelves right now more than pretty much any other brand and they're doing this at full price the thing that's really driven on's growth though is direct to consumer sales how is on sort of mastered this channel when a lot of other apparel companies kind of need their own you know to partner with other shoe sellers like your foot lockers and your dick sporting goods a little bit more to drive that growth yeah you know so on you know i've been seeing ons everywhere i haven't shopped for them myself i've actually been curious to to potentially buy some for myself or my family as well but you've been curious about this for like eight months i know i haven't pulled i have so many shoes so i'm like maybe it'll hold off but um

i'll do it one day so um you know they they've kind of distinguished themselves as a premier footwear brand you know innovation is really the core every every time i've seen on shoes like online or on people's feet they're pretty they're pretty nice looking you know some people don't love the the great or whatever it's called on the sole ridges the rocks get stuck into if you go anywhere that has any type type of pebble yeah not not the not the best for those i i'm sure but um you know they've done a good job of strategically placing themselves and like with premium wholesale partners like nordstrom's and um you know aligning that align with their premium brand image you know they're careful who they work with ensuring their brand authenticity and like

you know sophistication and while they've shifted to these direct consumer they haven't completely abandoned wholesale and wholesale is still outpacing direct consumer you know nike on the other hand has undergone significant changes wholesale strategy hasn't really balanced well between wholesale and dtc you know leaving some of their wholesale partners in the dust and kind of going too full in on on dtc so you know on will have to be careful not to lean in too heavily and negatively affect their dynamics with their wholesale partners but they're doing a good job right now balancing yeah because that's that's what nike's now walking back from is really sort of going away from their companies like footlocker that we're selling their shoes and then footlocker

then adjusts getting more brands in the door and then nike has to say hey remember the good times we'd love to come back and get some of those premium shelf placements ever since we've talked about on on the show which has been about six eight months i look at the stock i'm like this is a really expensive stock and then it's kept being a really expensive stock and even more expensive stock. When you put your stock analyst hat back on, not the person who just owns too many shoes and is not going to buy some bonds. Where are you at with the company? I mean, I'm still bullish on the company. I personally own it myself. I think it's going to continue to innovate, increase their brand awareness through different partnerships,

different sports activities that come up, expand its apparel line, which it's still very early in. and they're they're impressing me with their ability to take share from from companies like nike and adidas you know you can you can when you listen to an on earnings call and when you listen nike you can you know while the numbers may not we may not know the exact numbers you can tell that they're they're biting off a little bit from from those bigger bigger guys so you know they have a play to win attitude and i love it i want to go to another retailer we'll go back to the mall for a real mall retailer that might have a comeback brewing you mentioned abercrombie and fitch earlier and you know i don't want to say this is the next abercrombie and fitch but i want

to see if they have a legitimate turnaround brewing and that's over at the gap when we talk about the gap we're also talking about old navy banana republic and athleta and when you look at their a few things have happened number one is that they got a new ceo in richard dixon this was last year last august he comes in from mattel where he had sort of reinvented barbie for mattel and give it sort of a brand upgrade. Obviously, the movie had later come from that. I don't know exactly what his involvement is with that. But he was at Mattel.

He was working on Barbie for a good number of years. He goes into the Gap, and now he's been there for more than a year. When you look at these brands, Gap, Old Navy, Banana Republic, Athleta, and you look at the comp sales since he's been there, none of them are shooting the lights out. But three out of the four have gotten better

since he's been there. and you know a lot of that reinvigoration i think can be is due to that new ceo richard dixon so what is he doing since he's come in to try and transform uh gap in their brands you know when i might be aging myself here but when i think of mall retailer i thought i was i always think the gap as the mall retailer that was a big draw going to the mall when i when i was younger um you know he's doing a few things you know one is a big part of his strategy is reducing the product assortment, you know, it had gotten cluttered, it had gotten complex, there's just too much, you know, in this day and age, we just have too much sometimes. So he wants to make a more focused

kind of compelling selection of merchandise, which will improve the customer experience, and also in extreme line, you know, the operations and the costs. Another thing he's doing is revamping the marketing strategy, you know, making it more relevant to today's consumers, you know embracing digital marketing e-commerce kind of engage that younger demographic who we've seen with abercrombie and fitch are the ones buying a lot of these clothes and are very excited they still go to the mall you know um and and buy one of the other things he's doing too is like just getting back the identity of each of those brands that you listed you know gap has its own unique identity banana republic old navy getting back to the core roots of what those brands were

and each having a reason for people to want to go to those actual brands. Yeah. And when we talk about retail, this is an incredibly difficult business. Small retail is really, really tough. Gap is also, it's been historically a cyclical stock. When you look at this turnaround story that's maybe starting to brew, do you think it's deserving, this company, of a spot on retail investors' radars? I think it actually is. Writing a retail turnaround story can be difficult.

consumer perceptions of a brand can change quickly, especially in this day of social media. Luckily, the gap is not trading at a price that's almost at a bankruptcy valuation. And it's trading at about 12 to 13 times forward earnings. Not terribly low, but not premium price or even richly valued. But I think it's worth keeping an eye on because I'm seeing more as I look at more like social media trends, TikTok comments and chatters of customers, you know, being surprised and delighted by Gap and people even telling you, hey, you should check out the Gap. It's gotten a lot better. Don't fall asleep on the Gap. You know, if this kind of continues and there's more social media chatter, people are going and it results in sales and kind of like that cool

factor, it could be something that grows. You know, I'd like to see it be more consistently sustainable and profitable with that and can expand internationally which abercrombie has done can extend like establish kind of a significant digital presence and you know are there threats like fast fashion that they are still fighting off so um still a lot there but it's definitely worth keeping on the radar yeah and i think my big question is i've put this stock onto my watch list i don't own it currently at the time of this recording is what can dixon do about old navy because that is a massive channel for the gap. And I think that's one that's going to be pretty tough to turn. Same with Dale. Appreciate you being here. Thank you for your time and your

insight. Thank you, Ricky. 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.