Motley Fool Hidden Gems Investing - GDP, Tesla, FinTech, and "Burrito Season"

Episode Date: January 27, 2023

As much as we love stocks, sometimes the Big Macro really does drive the market.  (0:21) Emily Flippen and Ron Gross discuss: - Stronger-than-expected GDP sending stocks higher - Tesla ending the year on a high note - Chevron's record profits and huge buyback plan - Visa and Mastercard delivering strong profits (again)  - The latest from Intel, Microsoft, Southwest Airlines, and Johnson & Johnson (19:11) Deidre Woollard talks with Corrado Russo, head of global securities at Hazelview Investments, about real estate, REITs, and a part of the market investors might want to avoid.  (30:00) Emily and Ron discuss Chipotle's plan to hire 15,000 workers for "burrito season" and share two stocks on their radar: Mercedes Benz Group and Domino's Pizza.  Looking for stocks trading at a discount?  Go to www.fool.com/report to get your free copy of our "5 Stocks Under $49" report. Stocks discussed: TSLA, INTC, CVX, MSFT, LUV, MA, V, JNJ, REXR, CMG, MBGYY, DPZ Host: Chris Hill Guests: Emily Flippen, Ron Gross, Deidre Woollard, Corrado Russo Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money radio show. I'm Chris Hill. Joining me, Motley Fool Senior Analysts, Emily Flippen and Ron Gross. Good to see you both. How you doing, Chris? Hey, Chris. We've got the latest headlines from Wall Street. We've got the latest on real estate. And as always, we've got a couple of stocks on our radar.

But we begin with the big macro. Despite fears of a recession, U.S. GDP rose nearly 3% in the fourth quarter. That was slightly higher than economists were expecting. And as much as anything, Ron, that GDP number helped push the overall market higher for the week. For sure, Chris. You know, it looks like we've pivoted somewhat. And instead of interest rate hikes dominating the headlines, we're talking more and more now about the potential for a recession,

whether it will happen, and if so, how shallow or deep it will be. And reports like the GDP one provide data points to help economists, strategists, even traders make some educated guesses. And as you said, GDP was slightly better than expected. Importantly, it was quite positive, not negative. So that continues to signal a resilient economy. But as there should be in a rising interest rate environment, there were some signs of weakness that we should pay attention to 2.9% was less than the third quarter's 3.2% pace. So we see a slowing there. Consumer spending, which is 68% of GDP, weakened a bit. Housing has come down sharply. But you do have strength in government spending that help offset that. The labor market remains strong, which is good for

workers, but not necessarily good for bringing down inflation. So you boil that down. Here we are sitting here with the economy, I think, a bit worse than these numbers would indicate because interest rates take a while to make their way completely through the economy. So a recession is by no means off the table. Chances of it being mild, I think, are increasing. Stock market, as you say, has been strong this year as a result, but the Fed is not done yet. Expect more rate increases, but hopefully, I think, likely at a slower pace. Well, I know I just locked down financing for my mortgage on my first house. If that's any indicator, that means rates are straight down from here. In all seriousness, the Fed has done a great job of managing investor

expectations when it comes to interest rates. It's not surprising to see the uncertainty now focusing on, okay, well, what's the health of the economy? Where are GDP numbers at? Because the uncertainty used to be around interest rates. That dominated the headlines. That drove market movements. That uncertainty is largely gone. Now we're moving on to, okay, What uncertainty can we find in other places? For right now, it's the GDP numbers. It's not surprising at all to see this news really driving the sentiment in the market. Let's get to some of the big earnings news of the week. Many people know Elon Musk as the owner of Twitter, but it turns out he's also the CEO of an automotive company called Tesla.

Fourth quarter revenue was a record $24 billion and shares of Tesla up more than 25% this week, Emily. Yeah, let's be clear, the expectations were relatively low for Tesla in the quarter. Not to say that the business was expected to be weak, but with all the antics that are happening around Twitter and Elon Musk, it's fair to say that investors were expecting things to be a little bit less than stellar, especially with the news over the last quarter or so about Tesla employees potentially doing work on Twitter. That caused many investors to be concerned about, okay, what does the resources look like for Tesla today? Should we be worried as Tesla shareholders? But even in the face of

increasing competition and higher expenses. This is a record quarter for Tesla. Automotive revenue grew that 33 percent to over $21 billion. Earnings even beat expectations by six cents, reaching $1.19 per share. There were some concerns around the gross margins for this business because over the last five quarters, we've seen the automotive gross margins tick down and they reached just under 26 percent in this most recent quarter, which is their lowest level over the last five quarters. But it isn't entirely unexpected. A, just like other automotive makers, Tesla is trying to go mass market. So lowering the prices of its vehicles to make it more accessible to consumers, as they did at the end of last year, is probably a smart strategy in Tesla's book.

They need to keep up really high revenue growth rates to justify today's valuation. But it's also just an aspect of the car market. Over the last couple of years, used cars, new cars have been incredibly expensive, in part thanks to supply shortages. So there is a natural contraction in prices. But I think this is a good quarter for Tesla and a strong indicator that they're willing to pivot and change to keep up with the changing times. This is a stock that's been recommended a bunch of times across different monthly full services. My hunch is that shareholders were happy to see Musk back in the job they want to see him in, which is please focus on being the CEO of Tesla. Well, it's actually interesting to think

about how the dynamic of Tesla shareholders and Musk fans has changed over the past year or so. I think there are a fair number of people who are shareholders of Tesla, maybe even fans of Elon Musk that still today think that, hey, the brand of Tesla is maybe worth more without the involvement from Elon Musk just because it could potentially dampen sales when people are afraid to buy a Tesla simply because of its association with a relatively controversial figure. It's interesting. It used to be a net benefit for Tesla, but I think that discussion has become a little bit more to the forefront of shareholders' minds. If Elon Musk were to disappear tomorrow from Tesla, I can't say that my confidence in Tesla shares or the shareholder confidence would necessarily be

shook. Chris Hill Shares of Intel fell nearly 10% on Friday after the chipmaker ended its fiscal year, not with a bang, but a whimper. Fourth quarter profits were much lower than expected with revenue down more than 30% year-over-year, Ron. Ron Gross Not good, Chris, not a strong report. weak report, worse than expected results, disappointing guidance. It's hard to point to something good here. A steep decline in demand for PC processors, largely to blame, but Intel is just not the competitive and the innovative force that it once was. This is not your father's Intel. The company is clearly struggling. As you mentioned, revenue down 32%,

percent. Client computing group down 36 percent. Data center business down 33 percent. Adjusted earnings were 10 cents per share, well below expectations. CEO Pat Gelsinger has his work cut out for him. He's attempting to reinvigorate and reinvent the company. He's accelerating the introduction of new manufacturing technology. He's building factories in the U.S. and Europe, shifting concentration away from Asia. He's trying to turn Intel into more of a contract manufacturer, handling outsourced work for companies. That will be in direct competition with Taiwan Semiconductor, formidable competition, so not a gimme there, what he is trying to do. They're also cutting costs rather dramatically. Intel warned that revenue could fall to the lowest

quarterly level since 2010 in their recent guidance. The CEO, perhaps a little consolation, said, I'd like to remind everyone that we're on a multi-year journey. Well, one would hope so, because this report is really, really weak and tells not the industry bell whether it used to be. I'm really curious to see what AMD, Qualcomm, and others say when they report. Finally, I'll mention they did maintain their dividend, which stands at a pretty healthy 4.9%. Isn't every company on a multi-year journey? Aren't all businesses trying? What kind of comment is that? Not a multi-year turnaround, perhaps. A journey, yes. Just real quick on the stock run.

Shares of Intel are trading basically where they were seven years ago. I realize they're going through a rough stretch here, and Gelsinger and his team are trying to turn this around. Do you look at the stock and think, oh, on a valuation basis, this is starting to get interesting, or are there just too many question marks around what they're trying to do? I've recommended the stock. It's part of our instant income portfolio. I like the 4.9% dividend as long as it's safe. For now, I think it is. Valuation's hard because looking at metrics right now compared to where their earnings are right now are not necessarily indicative of where this company will be a year or two from now. And to project into the future is really,

really difficult. So I'm in kind of this wait and see mode to see how Mr. Gelsinger executes. Well, if it helps, I hear they're on a multi-year journey. On Friday morning, Chevron's fourth quarter results wrapped up a year of record profits. But earlier in the week, Chevron made more headlines by announcing a $75 billion share buyback plan. Emily, where do you want to start? Well, is Chevron on a multi-year journey here? Because it seems to me that their only priority is basically spending all of their capital or repurchasing shares at this point, because $75 billion, admittedly over five years, is certainly driving the narrative for Chevron shareholders. Sure, their record profits were nice over the course of 2022.

I mean, they are the second largest U.S. oil producer, so it's understandable that they had an incredible year over the past 12 months, but nothing like high expectations to be a time to repurchase your shares near all-time highs. It's certainly a conundrum for shareholders. On one hand, share buybacks do pad investors' returns. They're almost like dividends in a sense where they're a way for Chevron to just show support for their shareholders. You might not get a lot in terms of capital gains, but hey, maybe you get some share repurchases, you get some dividends, and that justifies this purchase. But $75 billion represents more than 20% of Chevron's current market cap. This is a massive investment by the business. And this plan has

been called a slap in the face to drivers since the perception is that Chevron continues to benefit off the pain of consumers, the people who are actually consuming and using oil on a day-to-day basis. But it's a pretty silly move, if you ask me, just because I think Chevron sees the writing on the wall. The multi-year plan is not well thought out with this business because support for their stock does depend on oil production. Most forecast shows growth in oil production slowly declining over time. That's likely to compress earnings. If you're looking at Chevron's price-to-earnings ratio of around 10 times right now with their dividends and their share repurchases, I wouldn't jump to the assumption that this is a value stock

or a cheap business by any means because those earnings are likely to compress. But buying back their shares at these levels in this amount of quantity is certainly a head scratcher. Chris Hill. Coming up after the break, we've got the latest on software, healthcare, and the war on cash. Don't touch that dial. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Ron Gross. Microsoft grew revenue in the second quarter, but it was the software giant's slowest sales growth in more than six years. Shares of Microsoft up a bit this week, Ron, but you tell me, how concerning is this? The report itself was okay,

but the stock got hit on the future guidance. Interestingly, the shares have since completely rebounded and actually moved higher along with the strong tech sector and the stock market, at least strong for the week. Only up 2% revenue, very slow six years, as you mentioned. their Cloud business was up 18 percent, their specific Azure business was up 31 percent, which on the absolute basis seems pretty strong, but there's indications that these businesses are slowing and some of the guidance spoke to that. Their Windows operating system fell alongside personal computers being weak, related Windows and Surface tablets business were weak, video gaming was weak. That all fed into the adjusted earnings being down about 6%,

which for a company like Microsoft, you don't really want to see. You certainly don't want to see negative growth. But they still generated operating cash flow of $11 billion for the quarter. It was the guidance that sent the stock down. CFO said the cloud business slowed at the end of the year and would further slow in the coming months. That's what people are mostly focusing on Microsoft eliminating 10,000 jobs in response to this slowdown. Shares are 25 times forward earnings, kind of pricey, but I'm actually okay paying that for a company of this caliber. There's some interesting things going on with AI and Chad GBT as well that investors should keep an eye on. Anyone who attempted to fly on Southwest Airlines over the holidays probably

was not surprised to hear this week that Southwest posted a loss of $220 million in the fourth quarter. Emily, they got some work to do over there. Emily Flippen. Yeah, maybe they need to reach out to Microsoft and chat GDP or GPT to figure out how they can fix the systems because the system errors that happened to Southwest over the last month or so in the course of December were really bad. I don't want to sugarcoat it, investors are already aware, but in December, they had a complete system-wide meltdown as a result of severe weather that caused cancellation for more than 16,000 flights. The way that Southwest is distributed alongside these legacy systems that just weren't able to handle the amount of cancellations that happened led to

just complete chaos at Southwest Airlines. They were eventually able to get their feet back under them, but the end result was a hit of nearly 800 million in pre-tax earnings that caused a loss of 38 cents per share in the most recent quarter, which is significantly higher than the loss of nine cents per share that Wall Street was expecting. Now, revenue was up 22% in the quarter, but let's not forget that they are comparing that to 2021, when the pandemic was still negatively impacting travel. Not a lot of good things to see here, but I will say, here's what you want to see from Southwest in this scenario, accountability. Now, if you're an investor in Southwest or interested, I encourage you to actually listen to the call yourself,

go through, read the transcripts to try to figure out how you feel about how accountable Southwest management was in this scenario. I will say there was outright apologies, which I always like to see. They didn't shy away from the conversation. They didn't sweep it under the rug. The entire call was about the meltdown that happened over the last month. So I appreciate that level of transparency, but I'm still not sure how I feel about their use of blame. For me, it felt a little bit blamey. They're blaming the weather, which everybody suffered. They're actually saying that their processes and technology generally worked as designed, which to me is an even bigger red flag. But then they went even through and kind of described these opaque descriptions about

improvements that they've made. My thought is, this is going to be something that takes a year or longer for Southwest to fix. You do not turn the technology and the ship around overnight. I discount any improvements that they've made over the last couple of weeks, they're Band-Aids in my opinion. What I did like to see was the $1.3 billion that are allocated for funds to upgrade and maintain their IT systems. I want to make sure that money is well allocated. Unfortunately, investors won't have a good sense about whether or not this turnaround has really happened until probably a year from now. For as much as inflation affected consumers last year, you wouldn't necessarily know it from the latest earnings reports from Visa and

MasterCard. Both credit card companies posted earnings that were higher than Wall Street was expecting. Ron, what stood out to you? You know, as is typical, similar reports for both companies, both benefiting from travel rebounding. But MasterCard actually warning that revenue growth will likely slow as travel growth plateaus. But for the quarter, they both had revenue up 12%. Visa did a little bit better on the bottom line with earnings up 21% versus MasterCard up 13%. But both had volume growth, one at 8%, one at 7%, basically the same. Cross-border volume, which tracks spending on cars beyond the country of its issue, so it's a gauge for travel demand, was up 31% for MasterCard, 22% for Visa. This is where MasterCard said that revenue growth is

likely to slow. Pent-up demand for travel will diminish going forward. Visa did not make similar comments. But both companies are strong. I think it's fine to own one or even both of these companies. They both pay a dividend less than 1% yield, but they're both really great companies to have in your portfolio. Shares of Johnson & Johnson treading water this week after fourth quarter profits fell 25% to impart to lower demand for its COVID-19 vaccine. Emily, the profit number got a lot of attention, but the guidance from J&J seemed pretty encouraging. Yeah. I'll tell you what, when you look at the results, if you take out the impact of COVID and foreign translations, it's actually a really strong quarter for Johnson & Johnson.

Their operational revenue grew over 4.5%, which is amazing for a business of this size. Again, adjusted earnings per share look a lot better, growing more than 10% in the quarter. Actually, a really strong quarter for Johnson & Johnson here. I will say a lot of investor focus has been put on their spinoff though. They're in the process of spinning off their consumer health units. It'll be a business named Kenview. Spinoffs actually, interestingly, if you look at the history of them, produce a decent amount of shareholder returns. If you're a shareholder of Johnson & Johnson and you're scared about the spinoff, I wouldn't be overly concerned, at least to start, because history shows that businesses only complete a spinoff when they

think that an independent company will be worth more alone than it is together. Now, what that actually looks like, we don't know yet, but it does seem to see an interesting and potentially lucrative move in Johnson & Johnson's position to reward shareholders. I appreciate you reading my mind, Emily, because I am a Johnson & Johnson shareholder and I am worried about this spinoff. I would only be worried about the timeframe. It's going to take 18 to 24 months for this spinoff to happen, which is a bit long, but I will say they're also going through an unusual process of doing a pre-spinoff IPO, which will raise money for Johnson & Johnson and Kenview. So it's actually a good move for shareholders in this place, at least in my initial opinions,

but ultimately it will shake down to how Johnson & Johnson manages that 80% voting control that they'll retain over Kenview. That could potentially be dominating for how this companies run. All right, Emily, Ron, we'll see you later in the show. Is the bad news for real estate already priced in? That answer's after the break, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Time to get a check on real estate. Corrado Russo is a managing partner and head of global securities at Hazelview Investments. Deidre Woolard caught up with Russo to talk about his firm's new report on global public real estate, why many REITs may be underpriced, and one part of the market that investors

might want to avoid. I really like this report because it talks about REITs, which just happens to be one of my favorite subjects. And it talks a little bit about the impact of dampened expectations when it comes to REIT investing, because last year wasn't a great year. Why could REITs still be an economic bright spot in 2023? Yeah, so if you kind of look at what happened in 2022, obviously with high inflation and interest rates starting to go up, there was an expectation of a potential economic weakness and a potential recession coming on board. And all equities suffered from dampened expectations and earnings starting to come down and REITs weren't immune to that.

But if you look at 2023, we actually think that REITs could outperform relative to those expectations. And if you really think about it, while we've seen market rents significantly go up over the last three years since the beginning of COVID, the underlying companies haven't really captured all of that growth yet.

So even though market rents might tailor off and might flatten and even come down a bit, there's still a very large embedded growth relative to where market is. So two things are really happening. One, you have contractual leases. At the end of the day, people are obligated to cut you a check for rent every single month. So even if the economy rolls over, those amounts are relatively fixed in terms of how much they have to pay on a monthly basis.

So you tend to have a very resilient earning stream when you get into economic weakness or recession. So I think that's the first thing that can sort of outperform relative to what people's expectations are. And then the second thing is, even though rents might be up, let's say, in certain sectors like industrial or multifamily as much as 50, 60, 70 percent, the underlying companies have only captured about half of that. And that's because of these long-term leases that you signed several years ago that takes time to expire and to roll over to the new market rent. So even though rents might be flat, you have leases that have expired from five years ago, seven years ago, 10 years ago that are a much lower rent today. And so they can roll those over at new leases at today's rents that are significantly higher. So not only do I think

you get resilient earnings growth relative to expectations, but I think you can see continued growth in the real estate space or in the REIT space relative to some of the other equity asset classes. Interesting. So, you mentioned leases expiring. Can that also be a negative, though, because especially in sectors like office, as leases expire, will new leases get renewed? Yeah, I think it's a great point. And obviously, when we talk about real estate or REITs, we're lumping everything into one. But when you look under the surface, there's so many different types of real estate. Like you mentioned, you have office, you have industrial, you have hotels, apartment buildings retail shopping centers or strip strip centers all have very different

experience in terms of how they might behave relative to the economy office generally has very long leases so the impact from the downturn is actually relatively slow having said that obviously with the work from home stemming from the the covid quarantines is reducing the demand for overall space in that environment. So I think you could see some weakness or softening as rents, as leases expire. You might see a softening of rents there. But again, keep in mind if these leases were signed five years ago, seven, ten years ago, even if rents have only gone up modestly, they're still higher than where they were five or seven years ago. So I think it's more a function enough. Can you fill the space? Is there enough demand to fill the space than where potential

rents might go? And I'm happy to sort of, you know, dive a bit more into that. But office could be a very interesting sector in terms of how it plays out over the next two to three years. Oh, yeah, absolutely. So when you're looking at REITs as an investor, you're looking, I know, at funds from operations, you're looking probably at occupancy, depending on which sector it's in. what else are you looking for as metrics to watch with REITs? Yeah, well, you want to look at net asset value changes period over period. If you look at historical price performance of REITs, the highest correlation is to what their net asset value has done over time. So, you know, to remind everyone, net asset value obviously is how is the overall value of your properties

changing relative to your debt that you have and other liabilities that you have in your book. So what is the net amount of value that is ascribable to the equity holders. And so what we've seen is over time, those that grow NEV have also outperformed. So I think that's, you know, especially in this environment where there's a potential for cap rate changes, there's a potential for releasing and where market rents might go, paying attention to how net asset value would change over the coming quarters is going to be a significant thing to watch as we try to determine who's going to outperform and not. I wanted to go into a couple of the REITs that you specifically mentioned in the Hazelview report. One of them is Rexford Industrial.

You talked earlier about being location specific. This one is really location specific as an industrial REIT, right? Because it's mostly sort of Southern California, that big like inland empire area where all of the traffic sort of from like the big Long Beach terminal goes kind of through that area before it goes to the rest of the country, right? Yeah, I think that's right. And that is a big reason why we like Rexford. You know, it's the only industrial market in the U.S. where supply is shrinking in Southern California. And that's because land is becoming so scarce in that market. You've seen a lot of the industrial land that's being converted to a higher and more profitable use like residential. As residential shortages in that market continue

to be an issue, they're buying up as much land as you can. And so that means that there's very little land left over for new industrial stock. Yet, we're seeing a significant demand for that infill industrial space, which has gone off the charts. And that's really been driven by the port of LA and Long Beach, as well as broader e-commerce growth. And so that's leading to market rents that are being going, not only have been going up significantly, but we believe that They'll continue to go up at a double-digit place for the foreseeable future. Rexford has an incredible balance sheet. They're the best in the industry.

They have a 20% loan-to-value debt on their balance sheet, so they're relatively immune to potential rises in interest rates. And then acquisitions is really their secret sauce. The company is buying over $1 billion of new assets per year, And that's being driven by a pretty robust, you know, in-house originations team. So, you know, we think when you look at the valuations, the stock still trades at a 20% discount to our forward-looking intrinsic value for the underlying portfolio. So, you've got, you know, you're getting it at a discount.

It has significant growth and it's got great staying power given its balance sheet. As we wrap up here, we've talked about a bunch of different sectors. Is there any sector that worries you if we are headed sort of into a global slowdown and potentially a mild recession here in the U.S.? Yeah. So, again, if you're going into a recession, you don't want to be in cyclical sectors. And I think, you know, the one that sort of highlights its cyclicality is hotels. I would be a bit worried about hotels going into economic downturn for a few reasons. One, traditionally and historically, hotels have not fared as well in a recession, as you know. One of the first things that we cut out is our travel, both on the corporate side and on the personal side.

So I think you could see a potential weakness in occupancy. At the same time, hotels have had a very, very strong fundamental backdrop over the last two years, believe it or not. And that's in stark contrast to 2020 when nobody thought we'd ever get on a plane and step foot into a hotel ever again. And the second we were able to reopen, it was one of the sectors that came roaring back. They've enjoyed extremely high occupancy for quite some time now. They've enjoyed some of the largest margins that they've ever had. And the stocks have done relatively well. And so my fear is that most of that benefit that they've enjoyed over the last couple of years has been driven by leisure travel.

As we've sort of been locked up for a year in 2020 and we saved a lot of capital, the first thing we did is went and enjoyed a very nice vacation and we didn't cheap out in terms of our accommodations. I think once we get out of our system, it's hard to see us continuing to do that year over year. now the saving grace was supposed to be that uh the reopening of business travel was going to pick up the pieces as leisure travel slowed business travel would come roaring back and that might still happen depending on how mild a recession is but i would be worried if you go in the global recession to your point on the technology companies you know um uh cramping down on their budget spending i think you could see a lot of corporations and typically business

travel is one of the first things that get cut back in that environment. So I'd be a little worried about that sector going into 2023. Coming up after the break, Emily Flippen and Ron Gross return. They got a couple of stocks on their radar. So stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here once again with Emily Flippen and Ron Gross. Despite the positive start to the year for the overall market. There are still a lot of great companies whose stocks are trading down at levels

that they haven't been at in a long time. Our investing team has put together a report of five companies that have all fallen below $49 a share, and the report is free. Just go to fool.com slash report, and you'll get immediate access to the report, which I have to say, I love the title. It's creatively entitled, Five Stocks Under $49. Ron, you know me, I love it when things are straightforward. Again, just go to fool.com slash report. You can access it for free immediately. While one of the big narratives recently has been major companies announcing layoffs, at least one business is bucking that trend, Ron. This week, Chipotle announced a plan to hire 15,000 new workers in preparation for what the

restaurant chain referred to as burrito season. We'll get to burrito season in a second. But I got to say, I was a little surprised by this because we've talked a lot about big tech, but it's not just big tech, right? I mean, earlier this week, Hasbro announced with their struggles, they're laying off 15% of their employees. So the fact that Chipotle is stepping up and hiring this many people over the next, let's just call it four or five months, that's surprising and encouraging. Yeah. Chipotle is executing. They're doing well. I want to say the stock's up 15% so far this year, trading at 39 times, by the way, so not cheap. They need to continue to execute and still put up growth and still continue to increase their store count as

well as their same store sales count. But we're used to seeing seasonal hiring at Walmart, Target, companies like that. We're not used to necessarily seeing it in the quick-serve restaurant industry. And certainly, as you say, not around something that I've never heard of called burrito season. So I will just end my thoughts here by saying I demand equal time for pizza. In fact, pizza should have a whole season and burritos can just have a long weekend. Yeah. Emily, I was saying earlier in our production meeting, I feel like burrito season is 12 months out of the year, and to Ron's point, so is pizza season. I'm genuinely interested to hear more from Chipotle on this because they appear to have just thrown this

phrase out there. Maybe they have grander plans and promotions around this in the same way that Amazon years ago came out with Prime Day, but what was your reaction? Yeah, I will say, you know, my theory for burrito season, which they define as March to May, is maybe that's the point where the New Year's resolutioners have given up on their beach bodies and they're saying to themselves, oh, I'll just grab myself a burrito. But no, this is awfully convenient timing, isn't it, Chipotle? Because we do have news of all these layoffs and it's a good PR move to say, hey, look, we're not laying people off. In fact, we're hiring people. And, The reason why we're hiring people, a completely made-up holiday that we've never talked about

before. This whole thing stinks to me. The reason why it stinks to me a little bit, and I'm a big fan of Chipotle, don't get me wrong, both as a consumer and an investor, is the fact that in 2021, they had some of their highest turnover ever for their employees. They had a turnover rate of over 194%. Their corporate staff turnover doubled over the course of 2020 to 2021. They constantly talk in their earnings calls about the costs associated with employee separation. They, similar to Starbucks, are one of those businesses that invest heavily in their employees. So it's pretty expensive for them when they have high levels of turnover. Last quarter alone, they expensed nearly $4 million for employee separation costs. So part of me is like, yeah,

they probably need to be hiring to backfill the positions that they've been suffering over the last year or so due to turnover. And they saw a convenient opportunity to make a PR move out of it. And can we all agree it's Chipotle, not Chipotle? It kind of drives me a little. What did I say? No, you did it perfectly. Oh, good. When people say Chipotle, it kind of drives me a little nuts. Yeah. Can we also agree that the period from March through May already has a title and that title is spring? Again, we're all fans of burritos. I think to your point, Emily, as an investor and a shareholder, fan of Chipotle,

Chipotle. But on a more serious level, Ron, maybe this is under the guise of promotion and maybe it ends up being a little too cute by half, but the best businesses, and I'm thinking Costco as one example, the best businesses, part of their recipe for success is finding a way to hire and retain employees. If this is Chipotle's way of saying, yeah, we haven't done as great a job as we could have on this front, and this is a way to move in a better direction, then hopefully it works out. Yeah. If they want to combine real capital allocation decisions in the sense hiring 15,000 people with something cute like burrito season, that's fine. But the first thing has to come first. Is that a smart use of capital? Do they

need those resources? It can't just be because of this made-up season. It has to be that they're hurting for resources. And if they feel comfortable as a management team, that's the right way to go. We'll give them the benefit of the doubt and we'll keep an eye on it. All right, let's get to the stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Emily, you're up first. What are you looking at this week? Yeah, a stock that popped up on my radar this week is actually Mercedes-Benz. They're traded over the counter in the U.S. with the ticker MBGYY. And the reason it's on my radar is because yesterday they announced that they're the first company to

certify level three self-driving in the United States. This is a big deal because most car companies, including Tesla themselves, are still at what we'd call level two. So certifying for level three means that a state regulator, in this case Nevada, reviewed their technology and gave them permission to have complete liability for self-driving under certain circumstances in their state. So basically, Mercedes-Benz is putting financial liability on themselves if anything goes wrong when their self-driving is in use under certain circumstances. Now, there's a lot of caveats here, but this is a big note, right? Because level two basically says, hey, the liability, even when it's in use, is still on the driver. Now, to be clear,

this is only for their S-class vehicles, the most expensive vehicle that they sell. it's not going to be everywhere overnight the way it would be if Tesla were to implement something like level three self-driving, but it is still a huge milestone for self-driving in general. So yeah, definitely a business that popped up on my radar. Rick, question about Mercedes-Benz? I'm curious about the Mercedes brand. It used to be like a really top-end thing. It feels like an old brand now. So is Mercedes still the Cadillac of cars? I would say that brand has been threatened in part because they were caught cheating on their emissions test. A lot of people were concerned as a result of the corporate governance there. They also are kind of delayed in electric vehicle

adoption. So they have a handful of electric vehicles, but definitely losing ground in terms of attracting new consumers versus the way that Ford or Tesla may be. So the brand is still there, but I would say it's slowly degrading, in my opinion. Ron, we got a minute. What's on your radar? Speaking of pizza season, a company I have a long history with that I'm revisiting is Domino's DPZ. I think we all know what they do. They make mediocre pizza, Chris, but they do it quite well. 19,500 stores in 90 countries, 20% of that market. Return on invested capital of 51%. Long growth runway ahead of them. It's a franchise business. They think they can open many, many more franchise stores. They pay a dividend of 1.3%. Stock has come way down from

it's COVID high, which was probably a little bit too high at that point in time. But I like the company right here. And I think they do a really nice job. Rick, question about Domino's Pizza. You seem to be such a pizza fan. I just have to ask your opinion on pineapple. Absolutely. I'm from New York. We don't eat pineapple pizza, but I see that Emily's a big fan, but you know, you do you. What do you want to add to your watch list, Rick? Well, I haven't had lunch yet. I'm kind of hungry. even if it is mediocre. Ron Gross, Emily Flippen, thanks so much for being here. Thanks, Chris. That's going to do it for this week's Motley Fool Money Radio Show.

The show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.