Motley Fool Hidden Gems Investing - Huge Jobs Report, Triple-A Earnings

Episode Date: February 3, 2023

Unemployment hit a 53-year low as Apple, Amazon, and Alphabet delivered their latest earnings reports.  (0:21) Ron Gross and Jason Moser discuss: - Another interest rate hike and a surprising jobs report - Apple's first sales drop since 2019 - Guidance overshadowing Amazon's holiday quarter - Starbucks struggling outside the U.S. - The latest from Alphabet, Meta Platforms, Exxon Mobil, and AMD (19:11) Jason and Ron keep earnings-palooza going and discuss: - McDonald's ending the fiscal year on a high note - Match Group's disappointing results and layoff announcement - The latest from Qualcomm, Peloton, and Snap - Two stocks on their radar: Kinsale Capital Group and Samsara 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: AAPL, AMZN, GOOG, SBUX, META, XOM, INTC, AMD, MCD, QCOM, PTON, SNAP, MTCH, KNSL, IOT Host: Chris Hill Guests: Ron Gross, Jason Moser Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. When earnings season heats up, it's a safe bet we're talking about something you own shares of. Motley Fool Money starts now. Everybody needs money. That's why they call it money. Chris Hill. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me at the virtual roundtable, Motley Fool Senior Analysts, Jason Moser and Ron Gross. Good to see you as always, gentlemen. How are you doing, Chris? It's earningspalooza. We've got

so many big earnings stories. We don't have time for a guest this week, but as always, we do have a couple of stocks on our radar. We begin with the big macro. On Wednesday, the Federal Reserve announced an interest rate hike of 0.25%, as many expected. But the big surprise came Friday morning with a jobs report of more than 500,000 added in January, more than double what economists had expected. The unemployment rate fell to 3.4%. Ron, the last time unemployment was this low, Moser wasn't even alive. Ron Grossman. but yet we were. That's why you wanted to know what year I was born. 1969 is the last time unemployment was this low, Ron.

Oh, my goodness. There's a lot to unpack here. First off, the market rallied significantly on the basis point day. It wasn't because the Fed only raised 25 basis points. It was more about the press conference that Chairman Powell held afterwards. It was filled with commentary about how inflation actually was coming down and the labor market remained strong. In fact, Powell actually called the labor market, quote, out of balance. We saw that on Friday morning, as you mentioned, with a strong jobs report and a 3.4% unemployment rate. Wages also continued to increase, which is good for individuals, but that wage inflation is something that the Fed is actually worried about. It's something to keep an eye on. Powell said that the Fed would remain

diligent. They still see more hikes to get down to their 2% target, but that they would adjust that thinking based on new data that comes out. He was saying some things that seemed rather docile and investors started to like what they heard. In fact, I think investors started to believe that a soft landing is actually possible here, especially when Powell used the word disinflation, which got everyone all excited and we saw the market really pop. We'll see if this strong job market causes the Fed to feel they have to keep their foot on the gas, or as some are predicting, will actually rates continue to slow in their increasing, in their growth, and maybe even start to come down, which would, I think, be exciting for the markets.

We'll start the earnings with AAA. Alphabet, Amazon, but up first is Apple. first quarter revenue fell 5%. It was Apple's first year-over-year sales drop since 2019. A surprising bright spot was iPad sales coming in much higher than expected during the holidays. Jason, what stood out to you? Well, a nice little turn of events here from the aftermarket yesterday to the market today. Being received a little bit more positively, I think it's very easy to harp on the narrative that this was the first miss in a long time. I get that. But you consider the nature of the challenges the business is dealing with and you understand this is not unique to Apple, I think the market's reaction starts to make a lot

more sense. Especially in this case, when you think about ultimately, this is really more about sales that I think are being pushed out as opposed to being gone forever. iPhones were the big story, revenue came in at $65.8 billion for the quarter that was down 8% from a year ago. On a constant currency basis, however, it's worth noting that was flat. There are currency impacts that a lot of these businesses are feeling right now. But the performance was really due to supply chain constraints in China and just the greater macroeconomic environment. Look at Mac revenue, that came in at $7.7 billion, down from $10.9 billion a year ago. iPad was a bright spot with revenue of 30%. That is, I think, though, partly due to just an easy comp. They were dealing with

supply chain issues a year ago that crimped that iPad business, so they were able to get past that this year. But I think that also speaks to the challenges that they're dealing with in phones today and why it's reasonable to expect that to pick back up. Wearables, home accessories, $13.5 billion, that was down 8%. Services, up modestly from a year ago, $20.8 billion this year. They now have more than 2 billion active devices. That was double what it was just seven years ago. They have 935 million paid subscriptions. They don't see things getting a heck of a lot better in the immediate near-term, but we will see things improve as the back half of the year approaches. The stock right now valued around

25 times full-year estimates. They've grown earnings around 22% annualized over the last five years. I can think of worse places to have your money. Amazon's revenue in the holiday quarter came in at $149 billion, higher than Wall Street was expecting, but guidance for the first quarter was light and that sent shares of Amazon down a bit on Friday. It was still a good week for the stock though, Ron. Yes, but you really nailed it when you say the report was okay and overall revenue was okay. The guidance was weak and cloud revenue was weak. I think that has some people kind of shaking their heads a little bit. Overall, the report was relatively solid with

sales up about 9%, 12% if we move the impact of foreign exchange rates, which you're going to hear from every global company. It's almost not worth talking about because it ends up coming out in the wash, but the strong dollar is having an impact on a lot of these companies. North America sales are up 13%, international up 8%. Now, the cloud business, AWS, was up up 20%. This is a miss that I think investors will focus on, as they did, by the way, when Microsoft reported. Microsoft went out to rebound and move even higher along with the rest of the tech space. But I think that's certainly what investors will focus on. The core e-commerce business was actually down 2%, but the third-party seller business, which

accounts for 59% of products sold was up 20%. Prime continues to get new members, but I think most are seeing that as a very slow growth business right now, although it is one with really high margins. Operating income was down 21%, lots of charges in there. Net income also impacted by a $2.3 billion charge for the investment in Rivian Automotive. Guidance was somewhat lackluster, expect growth between 4% and 8% in net sales. I think that's mostly what people are focusing on. I remain a shareholder of Amazon, have no desire to trim those holdings, but they've got to get on the expense reduction train. Laying off 18,000 people, for example, is certainly a good start. Similar to Amazon, shares of Alphabet

up this week despite fourth quarter results that were lower than expected. Overall revenue grew just 1% and not surprisingly, Jason Alphabet taking a charge of around $2 billion related to the layoffs that it announced. Yeah, I think the market's reaction to this one is about right, fairly muted in the grand scheme of things. When you look at the degree of the misses here, I know again, you're going to see the focus and the headlines on miss, miss, miss. These misses were very modest and they're dealing with the headwinds the greater ad space, that's no secret either. I'm not terribly worried. This is less about Alphabet, the business, and more about the state of the actual market it serves. That, I think,

is something that just is a bit more short-term in nature. You look at the numbers, revenue, $76 billion. That was basically flat from a year ago. But again, like Ron was saying, you exclude those currency effects, it grew 7%. Just keep that in mind. Earnings per share of $1.05 versus 153 a year ago. Google Cloud, very, very strong performance here. A quarter four revenue of 32%, still running at an operating loss, $480 million for the quarter. YouTube ad revenue of $8 billion was up 8%. You look at the business overall though, I think a lot of these businesses are focused on efficiency and cutting costs. Operating expenses for the company, they were up 10%, operating income down 17%. But the narrative on the call, again, really focusing

on cutting those costs, whittling down that workforce over the year here, and we've seen Google, with many other names in the space, cutting those workforces. That's something I think will continue to be a theme throughout the rest of the year. Probably the big question here as of late is regarding AI, the threat that Chad GPT poses. Pichai was quick to note, they viewed Google as an AI-first company going all the way back six years now, and they continue to invest in that capability. But it does feel like AI is going to be more front and center as it becomes a bigger business opportunity for so many companies out there. Coming up after the break, we've got a decaffeinated Starbucks, a suddenly hot tech stock, and a couple of big buyback plans.

it pays to listen, this is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. The good news for Starbucks shareholders is that first quarter same-store sales in the U.S. rose 10%. The bad news is that same-store sales for the rest of the planet fell 13%. Ron, China is a huge growth opportunity for Starbucks, but when things don't go well in China, it hurts the overall results. Yes. This whole report really is China focused. If you project China getting back to even somewhat normal, these numbers would change significantly, but we have to operate with the data we have. As you say, there were some good things. Total net revenue up 8%, that's pretty good. Comp stores sales up globally 5%. But as

you said, 10% in the U.S. and that's good. That was driven by a 9% increase in average ticket and a 1% increase in comparable transactions. International comps down 13%. China comps down 29%. The country wasn't really even open, for lack of a better word, for a long period of time here, so what are you going to do? You have to operate with the environment you're given. International comps were actually up double digits if you exclude China, so that's just an indication. Operating margins were down, you have higher labor costs, store wages and benefit costs, commodity and still supply chain costs in there. We did have some price increases in North America to help offset that. Adjusted earnings up 4%. The loyalty program is still doing well,

opening new stores, trading at 30 times forward earnings, but that's because earnings are depressed because of China. If we adjust for that, I think it comes down, is a little bit more reasonable, but the company really does have to execute. They do, and I'm already thinking about 12 months from now, what an easy comp they're going to have in terms of same-store sales in China. They better put up the numbers, absolutely. From Starbucks to the social network, Meta Platform's fourth quarter revenue was higher than expected, and the company announced a $40 billion share buyback plan. Shares of Meta Platforms up more than 25% this week, Jason.

Boy, oh boy, is the market picking up what they're putting down, Chris. I mean, it was a respectable quarter to be sure, but as Zuckerberg said on the call, 2023 is the year of efficiency and that is what Wall Street wanted to hear. Business-wise, like I said, it was an acceptable quarter. Revenue down 4%, up 2% excluding those currency impacts. Total expenses grew 22%. Now, that includes some charges related to restructuring that hopefully should be one time in nature. Again, much like Google, the challenges in the greater ad space remain. You look to Snap's report, which we'll talk about in just a little bit. But I don't look at this necessarily as a

bad thing for Meta. In an environment where budgets are tight, businesses are going to spend on what they know works. They know that Facebook and its properties, they know that Google and its properties, they know those work. They're a bit more certain in an uncertain world. So it at least gives these companies an opportunity to tread water while the greater market is witnessing some headwinds. The Reality Labs unit, of course, is going to be a big point of focus here. That's the home to the metaverse ambitions, lost $4.28 billion in the quarter. And back to the repurchase plan, they repurchased a total of almost $28 billion in shares for the full year 2022. They announced a $40 billion increase. Obviously, that's going to be received

very well, particularly as it brings the share count down modestly. But again, back to the theme, the theme of the year is efficiency. They're focused on making investments in AI in the near term. Metaverse is becoming that longer-term vision. I think we heard a lot of focus in the call too about monetizing Reels. For all of the positive response they're getting to Reels from the user perspective, the monetization level still isn't up to par with its other features. They're going to be working on that here in the coming year, right-sizing the business, obviously, headcount, which grew 20 percent. That was not reflective of the 13 percent of the workforce that are cutting. I suspect we probably will see some more cuts as the

year goes on, but the business is around 23 times full-year estimates. This is a company that's grown earnings at 15 percent annualized for the last five years. The market is clearly looking at this business with a bit more of a glass half full perspective today. It makes sense that shares of ExxonMobil are close to an all-time high when you realize fourth quarter profits came in at nearly $13 billion, wrapping up a fiscal year so profitable that only Apple and Microsoft rank higher than ExxonMobil in terms of overall profits for 2022, Ron. Shares up 80% in 2022. Great for shareholders. Yes, the White House, not so much. They've got some things to say there. But in the fourth quarter, Exxon made about $14 billion in

profit, up 60%, excluding one-time events. Those are big numbers. But you know what? That was actually a little bit below analysts' expectations, even those big numbers, and lower than their results in the third quarter. So it's not like the stock really jumped on the news. Their net profit margin is back to around 14% in total for 2022. If you look back to the days, maybe 2012, around that area, they were only about 10%. The company has really made a nice gain, attaching themselves to lucrative projects like in Guyana, the Permian Basin. They increased capacity in Texas by 250 barrels per day. They're really making investments in areas that they think will drive the business forward. Their return on capital reached 25% for the year. That's their

highest annual rate since 2012, but they're spending money. CapEx, $7.5 billion in the fourth quarter. For the full year, almost $23 billion. Share buybacks was something disappointing to investors off the heels of Chevron saying they would potentially buy back up to $75 billion of stock. Exxon holding the line there, I think that was disappointing. You got the stock trading at 10 times earnings, Chevron's 11 times earnings. These are not gangbuster growth companies here, but they are putting up significant, significant profits. If you want energy exposure in this part of the energy market, not a bad company to own. I'm shaking my head at investors disappointed that the buyback plan for ExxonMobil

is only $35 billion. It's all relative. How disappointing. On last week's show, we talked about how chipmaker Intel is struggling, but that was not the case this week with rival chipmaker AMD. Fourth quarter profits and revenue came in higher than expected for AMD. And CEO Lisa Su said she is confident in her company's ability to grow their market share this year, Jason. Yeah, absolutely. I mean, AMD is a different business to an extent now with Xilinx acquisition fully closed and becoming a meaningful contributor to the business. No surprise, PC demand remains soft, but the company's broad portfolio and diversity of revenue streams continues to help the cause. If you look at the numbers, I think

that shows what I'm talking about here. Revenue was up 16% for the quarter, $5.6 billion. There was strong performance in their embedded and their data center segments. Non-GAAP gross margin, 151% operating income, $1.3 billion, and ultimately earnings per share were down 25%. That was ultimately due to lower client operating income thanks to that PC weakness that I mentioned. Not only PC weakness, gaming segments, the gaming segment of the business was a point of weakness, but you flip the other side of the coin there, strength and embedded in data center with tailwinds that we've been seeing in these spaces as the hyperscalers continue invest in their cloud offerings. AMD is a big beneficiary of that. We're looking forward to

2023 and management does expect the headwinds to continue over the first half of the year, but we should start seeing things change here in the back half, so we'll keep an eye on that. They do believe that the PC market will remain challenged. They're calling for it to fall about 10% this year, but CEO Lisa Su sees AI as just one of the company's biggest market opportunities in the coming years. So again, back to that AI theme. Earnings Palooza rolls on after the break, so stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. It's earnings palooza this week. Strong end of the fiscal year for McDonald's. Fourth quarter profits

and revenue were higher than expected, but shares of McDonald's down a bit because CEO Chris Chemchinsky said the company expects inflation pressure to continue this year, Ron. Yeah, that guidance didn't really please some investors, but as you say, stocks only off 6% from the 52-week high. It's been really strong since early October of last year. If we look at some of the data that came in, global same-store sales up almost 13%, thanks to things like adult Happy Meals, higher menu prices really impacting the business. revenue to McDonald's was actually down 1% from a year earlier, up 5% if we account for the effects of currency, once again, talking about currency. McDonald's said that its U.S. prices were up by

an average of 10% last year compared with 2021, but the company interestingly is asking franchisees to not raise prices too quickly. They think that could be a mistake if they go too aggressive on pricing. Operating margins were weaker than expected on higher costs for food, ingredients, fuel, and labor. Interesting that food and ingredients are not the same thing. That makes me a little wary about eating at McDonald's, but you do you. Adjusted operating income of 5%. Stock was weak on management's comments about inflation, as you noted. They still expect a mild recession in the U.S., deeper recession and a longer one in Europe, actually. We'll see if that bears out. They're pushing big into new store openings,

plan to open 1,900 restaurants globally, testing out a to-go-only restaurant in Texas, which provides no public seating and uses a conveyor belt to deliver food. Interesting to keep an eye on that. 2.3% yield, trading at only 25 times. McDonald's looks pretty good to me. Drop an e-mail to podcasts at fool.com. Any of the dozens of listeners in Texas who want to do some boots on the ground research at that new location and email us their experience. One quick thing, Ron, since we touched on this with Starbucks in the previous segment, global same-store sales for McDonald's, 12.5%. That is just so strong in a quarter when it wasn't like everything was perfect. No, it's the value proposition and

And also, as I said, some of the things they're doing to their menus to keep the pricing really attractive, to keep people coming in the door, which can have an impact on margins, but it's great for the top line. Qualcomm's first quarter revenue fell 12%. The software and chipmaker company also guided for an even bigger drop in revenue in the second quarter. And yet, Jason, and shares of Qualcomm still up a bit this week. What's going on? Well, again, the market being so forward-looking, none of this stuff is a secret. We start looking more towards the back half of the year, hoping for a little bit more productivity here from these companies. But much like AMD, this was a respectable quarter, and the results fell well

within the guidance management set a quarter ago. But the near-term headwinds remain for now, and I think the business is coping well. It's very funny when you look at Qualcomm and AMD together over the last year, their returns essentially mimic each other. I think that just speaks more broadly to the challenges that we're seeing in the chip space, but the numbers were pretty good. I mean, the revenue $9.5 billion, that was down 12% from a year ago. Earnings down 27%. I know that doesn't sound good, but again, this was well within guidance that was set. As long as you're meeting that bar. I think that's important. They are seeing a contraction in both the technology segment and the licensing business. But the tech segment was the segment that felt more of the

pressure on the bottom line. This quarter's operating income fell 30%. Part of that is due to, again, going back to Apple, the handset challenges. The handsets were down 18% for the quarter. That really lines up with a lot of the language we've been seeing in the space. The good news is the automotive segment was up 58% and the Internet of Things, IoT division was up 7% with a strong contribution from Edge Networking. They're getting positive response from their Snapdragon 8 Gen 2 mobile platform incorporating more AI into their technology for smartphones. We talk about the diversity of revenue that this company benefits from, but they view IoT, the Internet of Things opportunity, they see that as poised to become

their largest market opportunity here in the coming years. Makes sense to a degree, right? When we're talking about all of these connected devices, hey, more devices is better for a company like Qualcomm. But they're setting the table for continued handset weakness into 2023, so keeping expectations in check there. I think always worth checking for any mention of Apple on the call with a company like this, that's always a soap opera with Qualcomm. But no mention of Apple on the call. As they noted last quarter, the relationship is in a good place for now. They expect to have a vast majority of the share of the 5G modems for iPhones in 2023, and they'll start weaning off that Apple revenue stream by 2025. But it is worth noting too,

they will continue to benefit from royalties for patents involved with the technology, so they won't completely cut off that Apple revenue stream. Peloton's second quarter revenue came in higher than expected. CEO Barry McCarthy called the results a possible turning point for the fitness company. Ron, expectations could hardly have been lower for this business, and yet over the past month, shares of Peloton have doubled. Ron Grossman You know, Chris, there is a business here. It got way ahead of itself during the pandemic, both from a business perspective and certainly

from a stock perspective. But if they can do a reset, bring the company back to being one that is reasonably sized relative to the revenue it generates, then I think it can move forward. Subscription business is a high-margin business. The trick is to retain members, grow the member count. Now, as someone who canceled their subscription within the last two weeks, I remain a little bit skeptical, but I'm probably one of those pandemic subscribers that under normal circumstances would have never subscribed in the first place. You get rid of people like me, you properly size the business, you move forward. For the quarter, a 30 percent decline in sales, a loss for the quarter. If you strip out some one-time charges, they

actually had positive free cash flow of about $8 million. They're doing everything for putting in a new CEO, revamping the executive suite, making revenue come more from subscriptions than equipment, laid off half of their workforce. They're doing the things they need to do to right-size this business. To me, it's too risky to jump in. We're going to have to keep an eye on this quarter by quarter. They brought on Leslie Berlin from Twitter as their Chief Marketing Officer. I think that was a good move. She's a very talented young executive. Real quick, Ron, we're coming up on the one-year anniversary of McCarthy becoming CEO. At the time, there were questions, is

McCarthy coming in just to organize a sale of this business? The stock, for as hot as it's been over the past month, this is a business that's worth about 30% less than it was a year ago. Do you see that as a potential outcome for Peloton in the next couple of years that some larger company comes in and buys them? Yes, and it would have been cheaper to do a year ago, but the business was such in flux, it would have been very risky for a company to come in and do that. If they can get themselves to the right size where they're consistently generating positive cash flow, then it makes it easier for a larger company to come in and properly value it and see what it can bring to the table. Then I do think that remains on

the table, a potential acquisition, yes. Fourth quarter revenue for Snap was a a bit lower than expected, as was average revenue per user. Despite the fact that the social media company is still not offering official guidance, shares of Snap are holding in there this week, Jason. Yeah, they are hanging in there. I continue to try to keep an open mind regarding Snap because of its investments in augmented reality. But it seems clear that things are going to get worse here before they get better. That really is if they get better. They are, of course, dealing with challenges in the greater ad space. That aside, this is still a business really trying to find its way in a very competitive environment. Good news, users are using the platform. Daily

active users were at 375 million at the end of the year. That was up 17% from a year ago. Bad news, revenue for the quarter, $1.3 billion. That was flat from a year ago. They made this investment in Snapchat Plus, that subscription offering that gives users advanced access to features and content. They got two million subs now there. You math that out at $399 per month, you get a run rate of around $100 million a year, which is something, but in the context of this business, it's not enough. Then further, when you look at the financials, stock-based compensation up 50 percent from a year ago. Yeah, when they say they're operating cash flow positive, that may be so, but you account for that stock-based compensation, things start to change a little

bit and it's still 30 percent of total revenue. You got to take this with a big grain. They should be past this by now. We've seen this before. This was an ongoing problem with Twitter. needs to fix this if they want to be taken seriously, I think, by investors as a real long-term opportunity. Back to your point there, no guidance for the quarter. They did note sales are already down. Their forecasts are calling for sales down anywhere from 2% to 10% for the quarter, obviously not very good. An interesting wildcard just to keep in mind for a business like this, if TikTok is actually banned here in the States, that is a net win for Snap. The only problem there is that you got to hope for something like

that and you know what they say, Chris, hope ain't a strategy. No, but I'm glad you mentioned that because we talked before about Google and Facebook, and this is the one thing they have in common with Snap. Both of those businesses would love to see Snap go away altogether, but the one thing that unites them is all all three benefit if TikTok is banned in some significant way in the United States. Most definitely. Match Group's fourth quarter revenue came in lower than expected. The online dating company also lowered guidance for the first quarter and announced it would be laying off 8% of employees. Shares of Match Group got

off to a hot start for the year, Ron, but cooled down a bit after this report. Absolutely. Now down almost 60% from its 52-week high. Still a $14 billion company though. But this was not a great report, really weakness from Tinder being the highlight and again foreign currency. Revenue down 2%, its first-ever quarterly revenue decline. Payers are down by 1%. Revenue per payer, RPP, if you will, declined 1%. The all-important Tinder segment had revenue that was basically flat, which was disappointing, and all the other brands saw a 5% revenue decline. Nothing really to sink your teeth into here, rather lackluster. Adjusted operating income was down 2%. Bernard Kim was named CEO in early 2022. He's tasked with

reaccelerating the company's growth. One example, Tinder will be launching its first global marketing campaign in the current quarter. That's obviously expensive, but they feel it's worth it to try to revive that business, but that's going to take some time. As you said, they're cutting costs at the same time, laying off about 8% of the workforce, that's about 200 people. Operating margins and first quarter revenue guidance were weaker than it hoped for, but they did reaffirm their 2023 revenue guidance of 5% to 10% growth. Trading at 18 times, Bumble's at a weird 60 times, so relative to that, looks okay. But they've got to get Tinder back on track to make this an interesting story for investors. How is it that this business, and Match Group,

let's be clear, it is the dominant company when it comes to online dating. How is it that this dominant player doesn't really have better pricing power? They do have some pricing power. They're not the only game in town, but they certainly are the big kahuna here. Hinge is their bright spot at the moment, which is focused on longer-term relationships. That was up actually 30% for the quarter. They have some areas that appear to be bright spots, but they need to get the whole company, especially Tinder, back on track. Well, certainly if they're planning a big digital ad spend, companies like Snap and Alphabet are going to be happy about that, along with meta-platforms, for sure. We've got a big lineup planned for next week.

A sneak preview of that right after the break, along with a couple of stocks on our radar. 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 with Jason Moser and Ron Gross. You can hear Motley Fool Money every weekend on radio stations across America, and you can listen to new episodes seven days a week on your favorite podcast app, Stitcher, Spotify, iHeart, Apple Podcasts, and more. If you're not already

following the show on one of those apps, you should, because it just takes one click of a button. And starting on Sunday, we're going to have an entire week of shows tied to Super Bowl 57. We're going to be digging into the business of betting on the game, advertising during the game. And it all kicks off this Sunday with our special guest, Dominique Foxworth of ESPN. So do yourself a favor, take 30 seconds, find Motley Fool Money on your favorite podcast app so you don't miss a single episode. Jason, Ron, you're both handy in the kitchen. Have you started planning your meal? I know we're more than a week out, but have you started planning your meal for what you're going to be doing on the big game? I haven't figured it out yet, but I think you

got something special planned. Yeah. All right, man. Yeah. Well, I'm throwing a shoulder on the Traeger. I'm going to cook that bad boy all day. We're going to be having some pulled pork nachos with some homemade queso. Shoulder on the Traeger. I don't know, the shoulder on the Traeger sound appetizing? The shoulder on the Traeger. Just let me and Ron know what time we should be over and we'll be there for the nachos. The invitation is always open. Rick, you too. Let's get to the stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?

I am looking at Kinsale Capital Group, KNSL, a specialty insurance carrier that provides excess and surplus, that's ENS, coverage for a wide variety of unusual risks that go beyond traditional insurance. So they offer insurance for small businesses, construction companies, out-of-the-norm operators like cannabis cultivators and retailers, in the entertainment environment space, motorsports, equestrian shows, firearm competitions. Because these insurance write unique policies, they can achieve usually lower loss ratios and higher margins than the broader industry. For example, Kinsale has a best-in-class combined ratio of 82%, and the industry average is more like around 94%. They have proprietary data-driven

underwriting technology that helps them achieve this. The space is fragmented. You got some big players like Lloyds of London, Berkshire Hathaway, AIG, and longtime full favorite Markel, but they're really only about a third of the market. Kinsale is only 1% of the market. I think because of that fragmentation, they have lots of room to grow. But trading at 34 times earnings versus Markel at 16 times, so I need to dig in there and see why there is a discrepancy in terms of valuation. The sexy world of specialty insurance. Rick, do you have a question about Kinsale Capital Group? Well, I had the good fortune to get a chance to visit Kinsale last summer,

which is a beautiful little town in Southern Ireland. And I noticed that James Fort, which sits up above the town, the wall is very impressive, but there's no active cannons. I'm just wondering about the security. Is this company safe? Yes, I think this company is plenty safe, but thank you for asking. Rick is going to a dark place, man. Jason Moser, what's on your radar? this week? Yeah. A company called Samsara, the ticker is IoT. This is an Internet of Things place, so you could say that the ticker is quite fitting. But Samsara has a business that's built something called the Connected Operations Cloud.

This is a software platform that connects all of the IoT devices that a company may have in their buildings, equipment, cars, and other facilities. It provides services to these companies looking to do more with this data. These services help companies work better, save money, be more efficient, enhance safety, and more. Samsara sells these services to all sorts of companies, big and small. It's a subscription offering and those subscriptions typically last anywhere from three to five years, so the relationships are a little bit longer. I think that bodes well for the business personally. It is a founder-led and controlled company. That, of course, has its puts and takes. Interesting to note as well, Andreessen Horowitz

owns a good slug of the company here. Mark Andreessen actually sits on the board, so take that for what it's worth. Rick, question about Samsara? Jason, you always pick these companies that just start to lose focus, but I do look at the website. I saw that they have a lot to do with technology and trucking and stuff like that. I'm just wondering, what's the matter with CB radios? I miss CB radios. Would you say that this company is the rubber duck of trucking technology? Breaker one-nine. You're making me think of Smokey and the Bandit here, Rick, man. I'm on the cutting edge. This is all about the internet and the capabilities that connectivity offers. Far better connectivity

than CB radios. You got to go run in the muck and pick them up, truck one of them fancy sidebands, get four on the floor. I don't even need to ask. I think we have our answer. Jason Moser, Ron Gross, guys, thanks for being here. Thanks, Chris. That's going to do it for this week's Motley Fool Money radio show. We'll see you next time.