Motley Fool Hidden Gems Investing - Intel's Smart Hire, Importance of Earnings Guidance, and 5 Tips for Increasing Your Wealth

Episode Date: January 11, 2022

Intel hires away Micron Technology's CFO as it preps to raise capital this year. Rivian Automotive's COO retires. Tim Beyers analyzes those stories, the latest on Juniper Networks, and shares why Netflix's management team is the best at offering guidance on their business results. Later in the show Alison Southwick and Robert Brokamp share five things you can do in five minutes to be richer in five years (or less). Plus, Bro proposes a new holiday for late February! Stocks: INTC, MU, RIVN, JNPR, CSCO, ANET, NFLX Host: Chris Hill Guests: Tim Beyers, Alison Southwick, Robert Brokamp Producer: Ricky Mulvey Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. Chris Hill. Today on Motley Fool Money, a new holiday proposal for late February and a few tips on how to have more money in the next five years. That's coming up right now. I'm Chris Hill, joined by Motley Fool Senior Analyst Tim Beyers. Thanks for being here. Tim Beyers. having me, man. We've also got a networking business that appears to be on the rise, but we're going to start with some movement in the C-suite. Intel has a new chief financial officer starting next Monday. David Zinsner, I hope I'm pronouncing that correctly, is leading his role

as CFO at Micron Technology to run the books at Intel. We were going back and forth a little bit earlier today, you see this as a move to what Intel has in store for Mobileye. Do I have that right? Yeah, I do. This is somebody who has merger and acquisition experience. If you don't know anything about Micron technology, Micron is primarily known as, I would call them more of a lower-level chipmaker, more commodity-type chips, memory chips. Micron has done a lot of asset buys and sales. This guy, in June of 2021, executed a sale of the 300, I'm going to guess this is Nanometer Semiconductor Factory, it may be. Yeah, I think so. But it's a semiconductor factory in Lehigh, Utah for $900 million, sold it to Texas Instruments.

also been helping during his three years on the job execute things like mergers and acquisitions. He's not somebody that is unfamiliar with the idea of putting excess capital to work or selling assets in order to raise capital. I think that's important. I think Intel is in a business right now as part of its transition, where it is going to put, I think the reports are, Chris, $20 billion to work here and standing up two semiconductor manufacturing fabrication facilities in Arizona over the next several years. They're going to raise capital for that. They generate plenty of cash flow, but Mobileye is a business that they acquired several years ago, right around $15 billion to $16 billion. Let's say it's worth $18 billion to $20 billion today. They're going

to sell a minority of their ownership in Mobileye. They're still going to retain control of it. If they sold 30% to 40%, they're going to raise $5 billion to $6 billion, maybe up to $7 billion in excess. This guy, he knows how to do that. I think you're going to see a lot more of Intel using capital in creative, fundamental ways to build out assets, to build out new opportunities, and to sell things that are extraneous. This is going to be a meaty job for an experienced CFO with a lot of interest in and experience with selling and cultivating assets. I like the move. I like that you're being conservative about the potential for Mobileye. We'll get to other people being conservative in their guidance

in a few minutes here. But when the story first broke late 2021 that this is what Intel has in store for Mobileye to spin it out as a public company, there were some people saying that could could be a $50 billion business. Now, granted, the Nasdaq has come down since then, but there were some people looking at Rivian Automotive and saying, well, if Rivian is worth X, then we think Mobileye is worth maybe half of X. What does that mean for Intel if it actually gets that valuation right out of the gate? There's no way that's happening. You talk about a banana in the tailpipe. That's a banana in the tailpipe right there. There's no way that's happening. But it doesn't need to happen. What's so silly about those estimates, Chris, is it's entirely

unnecessary. I am being conservative. Let's say that Intel over the last six or so years has been, I was talking with our mutual friend Jim Gillies about this and we were gaming this out. Jim and I, even though we're different sides of the coin as investors, we're both very conservative in our thinking around investing. We're both like, let's play this conservatively and say that the valuation for Mobileye, which interestingly, you said it's a spin-off. It's actually not. All they're doing is they're going to sell shares to the public. An Intel investor is not going to get Mobileye shares unless they go out to the public markets and buy them. all they're going to do is sell some of their stake, sell some of their holdings, raise that

capital, put it on the balance sheet, and presumably that defrays some of the costs of their investments elsewhere. But let's say you're right. Let's say Jim and I are being way too conservative and a more realistic valuation is that Mobileye improved operations by 40% percent over the last six years. A better valuation would be like they added $6-7 billion of value, which takes you up to about $24 billion. Then in that case, if you sell 30 percent, let's say you sell 40 percent of the business, you're going to raise $9 billion. You've almost raised half of what you're going to spend on these new foundries. You don't have to be aggressive to see how meaningful this is to Intel. I didn't necessarily want to talk about Rivian Automotive again today,

but I feel like they keep forcing my hand when they're constantly in the headlines. And today, it's the fact, and this sticks with the theme of the C-suite, Chief Operating Officer Rod Copes has left the company. He's been there a year, Tim. And look, if I'm doing the math correctly, he's somewhere in his late 50s. This is being termed a retirement. Copes was at Harley Davidson for nearly 20 years. So let's take everyone at their word that this is retirement. And it has been planned for months, as the company says. This just seems like one more not great narrative for Rivian Automotive. Well, and I agree with that, and I agree with it in multiple ways. It also comes combined with news that Rivian said, so they did confirm their overall production for

2021. So here are the numbers, 1,015 vehicles by the end of 2021, 920 vehicles were delivered by that date. I don't think any of us, I mean, unless you really were professor positive here, you did not think that it was going to be much bigger than that anyway, if you were paying attention to Rivian. So I'm a little bit mystified by the reaction to this. It was initially very negative. Where I think this is a not great part of the narrative, to use your words here, Chris, is Rivian is going to need to raise new capital. They are not in a state yet where they can just say, hey, we've got this, we're self-funded. No, they're not. They need to go back out to the markets and they're going to need to convince investors to fund them for several more years,

particularly since they want to stand up other factories. Losing your CFO, even if, and I admit, this is not the typical, he's going to spend more time with his family, which is the, we couldn't wait to kick him out the door fast enough of corporate press releases. It's not that, and yet, Chris, I think you're right. What does this say to investors when Rivian is going to have to go back to the well at some point, maybe even in 2022. Chris Hill So COPE's Chief Operating Officer, not the CFO, but still. Tim Beyers Yeah, thank you. Chris Hill

Again, even if we're going to take everyone at their word, this has been planned, and they've got his replacement planned as well. Among other things, Tim, this is a reminder to me of how much story matters. Tim Beyers Yeah. Chris Hill Balance sheets matter, but the story that a company tells its stakeholders, customers, investors, partners, and yes, Wall Street analysts, it matters, particularly if you want to go out and raise some money. Right now, Rivian Automotive really needs a better story. Yeah, there's no doubt. You and I are both fans of sports ball in different ways,

And you know, on a team, and I think this is also true in corporate, on a team, the degree to which the team believes in what the coach is selling does have an impact on what happens on the field. It absolutely has an impact. And I think the same is true when Elon Musk goes to the markets and is selling an idea and the market buys that idea, then the degree to which Tesla is able to sell equity at a premium is impacted. That has a real tangible impact and Rivian is in the same boat. Because let's remember something about Rivian, this is really important, I can't stress this enough. Rivian is not doing a Tesla. Rivian is moving faster than Tesla. Please get your head around that. Rivian is trying to do in the space of a shorter period of time what

Tesla took like six or seven years to do. They want to scale to 100,000 vehicles at a much shorter timeframe than Tesla did. Wrap your mind around that and then buy your story there, Chris, which is they have to tell a story that is so powerful that they just keep the floodgates of equity sales open. Shares of Juniper Networks up 5% this morning after the stock got the attention of analysts at Bank of America. You and I are old enough to remember when Juniper networks was a legitimate threat to Cisco systems in the core routers market. But for years, Juniper has just been treading water as a business and a stock. I guess the analysts at B of A think that they're sandbagging on their guidance, but given their track record, maybe that's a good

idea. Right. Yes, exactly. Right. Not only their track record, but in this market, to be what's so I want to give, I feel like this is trolling Bank of America a little bit, but I'll do it anyway because it's funny. It's Bank of America. They can take it. They can take it. And it's a little bit funny. It's like the double upgrade. Because that's what they gave them. It was like, it's not just an upgrade, it's a double upgrade. We went from like not even thinking about these guys to, oh yeah, now you got to buy them. And I think the reason for it is exactly what you said, Chris, that they are sandbagging and the guidance is too light, but could you blame them? I mean, doesn't this speak well, at least

in the short-term, of Juniper and they're saying like, look, we haven't been great, we know we haven't been great. We think we've got something going, but we're going to be careful about how we proceed from here. Isn't that a good thing? Frankly, if they weren't doing that in the environment they're in, because look, they are still in a bare-knuckles market between Cisco and Arista Networks. Arista does have a lot of power and a lot of momentum. if they weren't doing that, I'd be more worried. I want to get you out of here on this. As we are getting ready to kick off earnings season, and we've talked on this show before about capital allocation and how important it is. Let's put aside Juniper Networks. For any business,

capital allocation is such an important skill. And it's one of those things that only reveals itself with time. Only years into a management team running a business, do you have a true sense of how good they are at allocating capital? I would argue guidance is the same thing in this sense. Guidance isn't necessarily as important a skill as capital allocation, but how a management team does in their quarterly guidance in what they're saying, and look, there are some out there, Warren Buffett among them, who just say, I'm not giving guidance. That's up to you people. Here's our earnings report. Go with God. But most companies are giving some type of guidance. Is this one of those earnings seasons where you feel like if anyone is being aggressive with

guidance, pay attention to it? Because to your point, it seems like one of those quarters, you look at the overall market environment where there's even less of an incentive for a company to be aggressive with their guidance. Oh, a hundred percent. Here's the way I think about guidance. It's not whether or not they beat the guidance of the street. It's are they disciplined if they're going to issue guidance? Are you disciplined with how you issue guidance? And are you always beating your own guidance? What guidance can tell you if a company is going to commit to quarterly guidance and they routinely nail or they beat their own guidance and they're not trying to routinely sandbag, they're just relatively in the ballpark of accurate, then what

that tells you, and this is an important signal, this is a management team that knows its business. That is important. You want a management team that knows its business, knows something about forecasting, and is able to be relatively accurate. The best example I can give you on this, Chris, is Netflix. Netflix does get it wrong from time to time, but they forecast without building in any sandbagging, they say, here's the number that we think it's going to be. They're usually right. When they're wrong, they tell you why they're wrong, which tells you that Netflix management understands the business really well. You aren't going to be able to give them a forecast or a projection that's better than theirs. That means something. Tim Beyers, great

talking to you. Thanks so much for being here. Same here. Thanks, Chris. How can I increase my net worth? How much time is it going to take? You've got questions, we've got the dynamic duo from Motley Fool Answers, Robert Brokamp and Alison Southwick. This is the time of year for making resolutions. Maybe 2022 will be the year you get better with money, lose weight, or get more sleep. Now, the secret to actually keeping a resolution is that your goals need to be SMART, which is an acronym for Specific, Measurable, Achievable, Relatable, and Time-bound, such as having bite-sized deadlines to meet. So today we have for you five actions that you can take in five minutes or less so that you can check better with money

off your list of new year's resolutions, specific, measurable, achievable, and hopefully relatable and time-bound. I feel like we're already crushing it in 2022, bro. Let's do this. Let's do it. All right. First thing you can do is save more. Wait, what? In five minutes? Well, yes. So a higher savings rate obviously is a guaranteed formula for higher future wealth. When you look at surveys about financial regrets, a lack of savings is always at the top of the list. People wish they had started earlier and saved more. Then on top of that, according to the Center for Retirement Research at Boston College, only half of Americans are saving enough to maintain their lifestyle in retirement, and you definitely want to be in that half.

Do your future self a favor and begin 2022 by increasing your savings rate. If you already have an account, it's super easy to increase the amount you save. You just go to the website, set up an automatic transfer from your bank account, or just increase the amount if you've already set it up. By investment account, I mean the whole cornucopia of choices. There's 401 s, IRAs, 529 and Coverdell College savings accounts. Health savings accounts are just plain old savings accounts. Many of these accounts have contribution limits that change each year. I won't cover each of them, but I will point out that the limit for 401 s is higher in 2022. It's 20,500 plus another 6,500 if you'll be 50 or older by the end of the year. How much should you save? Of course,

it depends on your individual situation. But for retirement, you should aim to save at least 15% of household income. A study by Fidelity of 401K millionaires found that they actually saved closer to 20%. And increasing your savings rate really could be done in five minutes. In fact, because the 401K limit is higher this year, I increased my contribution amount to my 401K, and I timed how long it would take for me to log into my account and take care of business, and it took a mere 49 seconds. Wait, but that was because you still remembered your password, right? Because if I forget my password, that's adding on another 15 minutes.

All right. The second thing you can do is identify three ways you overspend money and reduce or eliminate them entirely. That's right. Because after all, if you're going to save more, that often means you have to spend less. So you think about where that extra savings is going to come from. Chances are, you already know what they are, right? I think most people have a sense of where they could cut back. But you can also look at your year-end credit card and bank statements, which often characterize your spending from the past year. You're going to start receiving those statements in the mail soon. It'll only take you a few minutes to peruse them, or you can just log into your account online and look for a year

in spending summary. Also, some retailers have a way to see your past orders, including amazon.com, which allows you to run an order report for specific dates. Or you can check out your budget tools if you use them, you know, services like Mint, Personal Capital, Tiller, YNAB, which stands for You Need a Budget. Of course, if you don't use a budgeting tool, giving one a try is a great New Year's resolution. Another tool is the Truebill app, which helps identify forgotten subscriptions. So, one category I'll be focusing on in 2022 is food. My wife and I are going to try to eat out less, but also cut back on waste. Americans waste almost a third of their food. So, given that the typical household devotes 13% of their budget to food, that's around 4% of annual spending going

in the trash or down the disposal. All right, number three, get a raise. Oh, wait, okay, no, this is going to take way more than five minutes. Yeah, yes, but beginning the process won't take long. And for some people, that's just sending an email to your manager, whereas you can talk about your compensation if you have that type of relationship, and that's the right step to take. But obviously, earning more is a surefire way to grow your net worth, especially if you save a portion of that higher income, which, of course, is what you should do. And it also boosts the amount you eventually receive from Social Security, since the benefit

is based on your 35 highest earning years. And now is the time to try to increase your income. In the words of a recent Wall Street Journal article, quote, for those truly motivated to land a new role, ascend to the next level, boost their salary, or all three, conditions have rarely been better. Job listings are plentiful, wages are rising, and unemployment is low. So one first step is to check resources to see how your compensation lines up. So sites like Glassdoor, PayScale, Salary.com. Also, the U.S. Bureau of Labor Statistics provides wage data by area and occupation at BLS.gov. Nowadays, workers are using inflation as a reason to ask

for a raise, saying to their bosses, like, hey, my salary should at least keep up with the cost of living. But while that's a good start, most compensation experts say that you should focus the discussion on your skills and what unique value you bring to the job. So, give that some thought. And finally, the workers who are seeing the biggest pay bumps are often those who are willing to switch employers. So, you might see what other positions are out there. Even if you don't switch, you might be able to use it in your negotiations with your current employer. All right. No. 4, find a better credit card. These days, Americans use cards to do the majority of their spending. Most cards offer some type of awards, whether it's cash back,

travel points, or even deposits in your investment accounts. If you're not using the best card for your situation, you really are leaving money on the table. Fortunately, it's easy to see which cards and rewards are available thanks to sites that review these. Sites like Credit Karma, Third Wallet, and The Ascent, which is owned by The Motley Fool. If you go to The Ascent right now, there's an article, best credit cards of January 2022, and then different categories. Best cash back cards, best balance transfer cards, best travel rewards cards, best cards for students. It's really easy to look for a card that might be better for your situation. Also, you might think about where you spend most of your money and then find the cards that offer the most rebates at that

store. All right. And the fifth and final thing that you can do in five minutes to have more money in five years is put a weekly money hour on your calendar. Wait a second. This was supposed to be five minutes. Well, putting something on your calendar, it only takes a minute or so. Yes. Now, when you do that hourly meeting, it'll take longer than five minutes, of course, but the first step does not take long. And the principle here is this, managing the household finances takes time, but often gets pushed toward the bottom of the to-do list. I know this because I'm a congenital procrastinator. It used to cause real problems for me. Around 15 years ago, I became obsessed with productivity and read hundreds of articles and books. One of my favorite

books was Take Back Your Life by Sally McGee. According to her company's research, there's a 75% greater chance that something will get done if it's scheduled on a calendar. I found this to be true for myself. I also found that many successful people have a money appointment on their calendars, an hour each week devoted to tackling the dollar-related to-dos. Some people do it during the week while businesses are open in case you need to get a hold of someone at the bank, insurance company, brokerage, or whatever. Others do it on the weekend when they're not distracted by work, so you choose a time that's right for you. You use it to pay bills, update your budget, check your portfolio, submit reimbursements, monitor your credit score,

estimate whether your retirement is on track, and cross off all the other important items. Generally, it actually doesn't take the whole hour, but you'll feel much better and likely be much richer over the years by regularly getting your financial things done. All right. Well, we have one more resolution for listeners to consider because maybe you're not the kind of person who makes New Year's resolutions like getting fitter or drinking more water. Before we go, here's our final suggestion for a New Year's resolution to make you happier in 2022. Bro, what is it? Resolve to invent a new holiday. Actually, before it was featured on Seinfeld, Festivus was actually a holiday invented by a showwriter's dad

back in the 60s. It included such things like clock in a bag. Yeah, he never told them what it was about. He said, it's none of your business, but there it was. Another example, I had a friend growing up who celebrated Tutu Day, and it was taught to her by a neighbor lady. It was every February 2nd, and if I'm remembering correctly, you celebrate Tutu Day by having a tea party and wearing a tutu, but maybe tutus and clocks and bags aren't your thing. So make your own day to look forward to. Maybe you buy eggplant Parmesan from every Italian restaurant in town and declare a winner. You'd call it eggplant Parmageddon day. I don't know, but plan to do something based on something you love and make a day of it and celebrate. So to inspire our listeners, bro,

what holiday would you invent? Well, I love Christmas and frankly could celebrate it year round. Also, I think it's a good idea to go through your stuff and get rid of things you no longer need. You could donate it or sell it, or try this holiday idea, re-gift-smiths. I propose it happens in late February when many people have the winter blues, football season is sadly over. You can make it a potluck, and if it's at my house, there will be Christmas music. Everyone basically brings a gift they received over the holidays that they didn't really need or want, or really, it could just be anything that's in good shape you just don't need anymore. Then there's the gift exchange. could be random, or you do that thing where people could steal gifts. Depending on where

you live, it's called White Element. Pirate Santa, Dirty Santa, something I had not heard before. But that's my idea for a new holiday. Am I invited? Oh, absolutely. All right. I'm getting invited by all of our listeners, too. Okay. So, I guess we're all going to a party at Bro's House. That's all for today, but coming up tomorrow, we'll dig into an IPO from last year that's been overlooked by Wall Street, but could have serious upside potential. 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.

I'm Chris Hill. Thanks for listening. We'll see you tomorrow.