Motley Fool Hidden Gems Investing - Microsoft's Hike, GM's Strike

Episode Date: September 20, 2019

Microsoft hikes its dividend and buys back stock. Apple launches its subscription gaming service. Airbnb announces plans for an IPO. And FedEx delivers disappointment. Analysts Aaron Bush, Emily Flippen, and Ron Gross discuss these stories and the latest from Datadog, General Mills, WeWork, and YUM! Brands. Plus, we dip into the Fool Mailbag to discuss AI’s future. And Motley Fool auto analyst John Rosevear weighs in on GM’s strike, Ford’s future, and Amazon’s electrifying buy. Get the money you need to run your small business. Go to Kabbage.com to get started. Credit lines subject to review and change. Individual requests for capital are separate installment loans issued by Celtic Bank, Member FDIC.  Thanks Netsuite. Get the FREE guide, “7 Key Strategies to Grow your Profits," at www.NetSuite.com/Fool.   Learn more about your ad choices. Visit megaphone.fm/adchoices

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Individual requests for capital are separate installment loans issued by Celtic Bank, member FDIC. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week, senior analysts Aaron Bush, Emily Flippen, and Ron Gross. Good to see you, as always. We've got the latest earnings from Wall Street. We will dig into the automotive industry. And as always, we'll give you an inside look at the stocks on our radar. But we begin with a bellwether stock having a bad week. Fourth quarter profits for FedEx came in lower than expected. They cut guidance for the new fiscal

year. And Emily, we've seen FedEx have bad quarters before. This feels different for a few reasons, not the least of which is the fact that Fred Smith, the CEO, in the past basically hasn't really acknowledged, he sort of downplayed Amazon as a competitor in the shipping space. That was not the case this time. Exactly. And so, Amazon actually pulled out of their agreements with FedEx, both for their air transport and ground transport earlier this year. And FedEx definitely downplayed how important that was to their business. They said, Amazon only makes up about 1% of our revenue, we're not going to see much of a change. And then, when they reported this week,

it was very much a different tone, saying, oh, the escalating trade war plus Amazon really hampered us. And they hampered them to the tune of a 20% decrease in their earnings estimate for this year, which was already a year-over-year decline. So, definitely a challenge for FedEx. So, here's my question. In today's day and age, is FedEx still a bellwether? Because the world has moved on and FedEx is still FedEx. So, maybe we should stop looking to them as a sign of what's to come from the overall economy. I think your question points to part of what FedEx is dealing with and why this one feels a little different, because it is the increased competition from Amazon. It's

the fact that their acquisition of TNT Express in Europe didn't really translate to the bottom line like the way they were hoping it would. And let's face it, they're in a tough business. Global shipping is a really tough business to be in. So, I mean, there are companies that sort of name-check the trade war as being a reason why they're not doing so well. I feel like it's warranted in FedEx's case. Well, actually, if you look at what FedEx kind of painted in a positive light during the call, it was the fact that they're saying, hey, we're operating in a growing space. They're saying that 90% of total market volume growth is going to come from e-commerce through 2026. And that 59% of that market is going to be

a market that's addressable to them, so that they could ship. But that's a decrease from 65% today. So, really, all investors took away from that was, oh, you're in potentially a growing industry, which would indicate maybe they're still a bellwether stock, but they're losing their market share to Amazon. Yeah, one of my pet peeves I'm learning as an investor is that when management says something isn't a problem, and then a quarter or two later, it's a problem. That's so bothersome. We saw that last year with Nvidia, when they were like, our inventory concerns aren't a problem with crypto, and suddenly it's a massive problem. We saw that with Abiomed, saying our FDA letter that we're working through

isn't a problem, and suddenly next quarter, oh, we also have to do all these restructurings. It reminds me of that, and when this happens, it just makes me question everything else management has to say. Yeah, I wrestle with, did they lose credibility, in my mind, the management team, because they were kind of fibbing, or did they just get it wrong? And either way, it's not that impressive. Last thing for you, Emily, on the stock, there are people out there who look at the long-term performance of FedEx, how well the company has done over time, and say, you know what, if the stock is down 13%, 15% this week, that's a buying opportunity for me.

Yeah, I don't look back, I look forward. And what I see is, FedEx is going to have to meet Amazon's investments into logistics and infrastructure, modernizing their fleet. That's going to be extremely capital-intensive. It's probably going to force them to raise prices on their core consumers, which now have a lot of third-party options. So, yeah, I don't look back and look, oh, FedEx is so important for the last 10, 20 years. I look forward and I think, oh, FedEx probably is not going to be as important for the next 10 or 20 years. Shares of Microsoft hit a new all-time high this week after the board of directors approved a stock buyback plan to the tune

of $40 billion, Ron. Also, they increased their quarterly dividend 11%. So impressed with what this company has done over the last four or five years. Incredibly strong balance sheet. They produce gobs of cash flow. They have $134 billion in cash. Cash from operations in the last fiscal year was $52 billion. They've got more cash than they know what to do with. Between 2017 and 2019, the fiscal years, the company repurchased $35 billion worth of stock. Here we go with another $40 billion authorization, which they're not going to execute quickly. They'll be smart about it. Certainly, the last two years, it was a great use of capital. Stock's up 88% over the last two years. Over the last five

years, it's up over 200%. Crushing the market. Love the dividend. I think they could actually do more. It's only really about a 1.5% yield. Nothing's stopping them, I think, from increasing that to maybe 2% or higher. But the company really continues to execute, especially with their cloud business. Love it. Yeah. When I look at this, we talked about this a bit yesterday on MarketFoolery. It is impressive because it's big numbers, but put into context, when you have $130-something billion on your balance sheet, when you produce $40 billion in free cash flow and growing every year, it's not a drop in the bucket. It's a nice little scoop in the bucket. But it isn't as meaningful as $40 billion would

sound in pretty much any other context. That's still less than 4% of total shares outstanding. So, it's not like it's some big, bold, strategic move on behalf of management. But, every bit helps. Ron, when you look at shares of Microsoft, do you think it's an expensive stock, or do you feel like it's reasonably priced? 26X forward earnings right here. It's not cheap, but they're really executing. No. 2 cloud company right now in the world behind Amazon. I think it's fine to own it. This week, Apple launched Arcade, a new video game subscription service with access to 100 games. It's $5 a month, and that's for an entire family. Aaron, are you at all

surprised at the low price? This is a company that made its bones charging premium prices for premium products. A little bit. I'm not surprised by most things relating to the service, but definitely the price was lower than what I and I think pretty much everybody else expected. But when you think a bit about it, it makes a bit of sense because what they can make up in price, they can more than make up on volume. And they're going to be doing with Apple Arcade is, out of the five tabs on the App Store, they're going to make one of them Apple Arcade. So, all the 600-700 million Apple users that are out there, this will be one of the five tabs that all of them see. So, they have a

huge distribution advantage. It's estimated that they've invested about $500 million into the initial slate of games, which is a pretty significant sum of money. But what makes it different from something like Apple Music, is with music, you have to pay for every single song that is played. With games, it's just that fixed cost upfront. So, the more people that they can get into it, the margin is just incremental upside. And so, even though it's a lower price, I feel good about their ability to scale over their costs. It kind of reminds me of Disney+, actually, where people were really excited about the Disney Plus offering, and they came in with this much lower price, because I think

Both companies realized that you have to change habits when you come out with these new products. So, gamers for a long time are not used to consuming games on a subscription-style basis. And so, you come with a low price, it causes a low hurdle for people to jump just to try it. And once they're in, people enjoy the service, hopefully, and get stuck using it. So, it's not too much of a surprise to me to see the low price point. Yeah, I think consumers have almost forgotten, especially as we see things like cable become unbundling. Bundling is actually a pretty great thing for consumers, because it gives you more at lower prices. What is not to like? And I think we're starting to see some of these companies

come back and start to re-bundle again in new ways. And that ultimately is good for everybody. Last thing on Apple. Aaron, when you look at where this is going to go, this is going to get recognized in the services division for Apple, how big do you think Arcade can get? I think it could wind up the most profitable service that Apple has, because games are such an important piece of the App Store, and the economics of games and being able to scale over their costs is significantly better than what we see in some of the other services like music. So, I do think this will move the needle. It might take some time to scale up, and they'll definitely invest more in other games, but I do think it will be impactful.

Shares of General Mills up slightly for the week, despite a less-than-fabulous first quarter report. Ron, General Mills has 15 categories it sells in, breakfast, cereal, snacks, baking products. It looks like the pet division is the shining star, and the other 14 are lagging. Well, you nailed it. Definitely a mixed quarter. Disappointing top line, but they did eke out some earnings growth, which was nice to see. Sales fell 2%. Really, strength only in pets, thanks to the Blue Buffalo acquisition. weakness pretty much everywhere else. International was especially weak. North America was flat, but that's actually good, because it's an improvement over where it's been recently.

What allowed them to eke out a profit was, they had some good pricing and sales mix that impacted margins to the positive. So, margins widened, operating income up 10%, adjusted earnings up 13%. So, that's pretty good and allowed them to reaffirm their outlook. But, you know, things remain kind of weak. You've got to grow those top-line numbers because you're not going to be able to continually expand margins, widen margins on price and mix for long. You need to sell stuff. And when investors think about General Mills, they probably don't think about pet food, but that makes up about 10% of their total revenue. it's almost as big as their entire Europe and Australia business, and bigger than their Asia

and Oceania business entirely. So, it's important to remember here that this really is kind of like a pet food story and a proof that the Blue Buffalo acquisition is really the only thing keeping General Mills alive. I also think investors appreciate the fact that they reaffirmed guidance for organic growth of 1% to 2% for the year. So, that's also helped, but undoubtedly buoyed by Blue Buffalo. And it's interesting, because acquisitions often don't work out and they often are a waste of money. This perhaps, the story isn't over yet, but perhaps is actually a pretty good use of capital. So, how are shares of General Mills up 40% year-to-date? Was it just oversold?

It was oversold because the business was incredibly weak, as were many of these companies, whether it be Kellogg's or Kraft Mondelez. And then, the Blue Buffalo acquisition kind of reinvigorated the company, reinvigorated the revenue, and that led to growth on the profit line. And of course, the stock reacts when profits go up. But in context, the stock is still flat over the past five years. So, context is key. Context is key. Coming up, we've got the hot IPO of the week, as well as what could be the hot IPO of 2020. Stay right here. You're listening to Motley Fool Money.

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It's something a lot of companies struggle with when they're starting out, so get the money you need to run your small business today. Go to cabbage.com to get started. That's K-A-B-B-A-G-E.com. Credit lines subject to review and change. Individual requests for capital are separate installment loans issued by Celtic Bank, member FDIC. All right, let's talk IPOs. Welcome back to Motley Fool Money. Chris Hill here in studio with Aaron Bush, Emily Flippen, and Ron Gross. A lot of IPO news this week. Aaron, let's start with the one that actually happened. Datadog went public on Thursday. This is a data analytics company. Shares up nearly 40% on its first day. Are you interested?

I am interested. I don't know if I'm interested in the price right now, but I'm very interested in the business. For some context, Datadog, they provide monitoring and analytics services for developers and IT teams. What they do isn't necessarily new. Other companies like New Relic and Splunk and others have worked in similar spaces, but what they've been able to do differently is continue to add new features, go into new areas, and then bundle things together in a way that makes it extra convenient for teams and developers to use. A lot of that progress has also shown in the numbers. If you look at the past year, revenue has grown 82%. 40% of customers use at least two of their products, so it shows that their value proposition is

working. Their dollar-based net retention rate, which shows how existing customers are spending more money, over the past year, it's clocked in at 146%, which is about the best I've seen since maybe Twilio a couple of years ago or so. Already operating cash flow positive. So, there's evidence that what they're doing technologically is helping people, developers and IT teams are racing towards them very quickly. And yeah, I think there's evidence that this can be a big company. It already is a big company because of how it's being priced at something like 40X sales. So, they still have a lot to prove, but it is an impressive business. Already an $11 billion company. And before they went public, Cisco Systems

made them a $7 billion offer to buy them. Think they're happy they turned that down? A little bit. This week, Airbnb said it plans to go public in 2020. Emily, obviously, there's no S-1 filing yet. We don't know the numbers. But even without knowing the numbers, how interested are you in Airbnb? Well, I feel like I've been teased with Airbnb for a while now. What happened to 2019? It seemed like that was going to happen for an IPO for Airbnb, but it did not. So, yes, the CEO and co-founder Brian Chesky is now teasing a possible 2020 IPO. And while we are still waiting for those documents to get a sense about the pricing and the business. Their

most recent valuation was in September 2017 at $31 billion. So, I think it's safe to say that this, if it does IPO in 2020, is going to be a big IPO. And that's kind of saying something because the company, as of the most recent numbers we have, which I believe was end of 2018, only was doing about $1 billion in revenue, which is great. But when you look at a 2017 valuation of $31 billion, it does testify to the value of maybe just the name brand that's being perceived in the market right now. It will be interesting to see, because to add a little more context, you look at Hyatt Hotels, that's an $8 billion company. Marriott, $42 billion. It's not inconceivable

that depending on any number of outside factors, Airbnb goes public and it is automatically a bigger corporation than Marriott. And I don't think that's ridiculous. I think it's like going back to Uber and looking at Uber and the size of the cab market. When in reality, a lot of these businesses are expanding their market by making hotels, for instance, or staying at someone's house more accessible. People are doing it more frequently because it's more accessible, because it's cheaper, versus staying at a Hilton or staying at a Marriott. So, I think it's not completely unfounded, although it might not be the best return for shareholders. Yeah, I don't know where exactly

it'll go public, but it definitely is a bigger idea. On the same side of, they have their own rooms and places where you can stay, but they also are increasingly acting like an OTA. They bought hotels tonight, I think. So, not only are they competing with the Marriotts of the world, but they're increasingly competing with the Expedia's and Bookings of the world, in almost like a hybrid, unique form that we're seeing at scale for the first time. WeWork officially postponed its plans to go public. Ron, given all the skepticism that we saw from Wall Street, along with the Wall Street Journal's, let's just call it, less-than-flattering profile of CEO Adam Neumann. What is the path forward for WeWork?

Well, first, I'm happy to say that some rationality has returned to the IPO market. It's good when you see something be pulled that should be pulled. Valuation concerns, governance concerns, business model concerns, leadership concerns. There was so much writing on the wall here that certainly the $47 billion initial valuation was going to be ridiculous, but perhaps they needed to rethink some things, such as corporate governance, which they have done. To pass forward, they really needed to raise $3 billion for a $6 billion line of credit to kick in. SoftBank may be there to backstop them, it remains to be seen. SoftBank was willing to buy $750 million worth of stock in the IPO to help soak up some of that excess

supply because it wasn't going very well. So, maybe there's a way forward for them to raise capital in the private markets. But right now, they're really saying postponement is until mid-October at the earliest. It doesn't mean it's on hold forever. You think Adam Neumann stays as CEO? Because this is reminding me of Travis Kalanick at Uber, and the path forward for Uber included Kalanick stepping aside. He's an eccentric dude, for sure. I think they probably need to bring in someone who is more of a professional manager, and then kick him upstairs and allow him to be the co-founder. After years of being the worst-performing franchise in the Yum! brand's

empire, Pizza Hut is finally showing some momentum in terms of growing sales in the second year of its partnership with the NFL. And Pizza Hut is looking to capitalize on that momentum with its latest innovation, the Stuffed Cheez-It Pizza. It is a limited-time menu item. The Stuffed Cheez-It Pizza includes four large squares of a crust infused with the sharp cheddar flavor of Cheez-Its, a popular snack made by the Kellogg Corporation. I'm all-in on this innovation. I thought Cheez-Its couldn't get any worse. But you know what, give it to Pizza Hut, leave it to Pizza Hut to somehow bring back the Cheez-It.

I'm taking the other side of the Cheez-It trade there. Cheez-Its are just fine, but cheddar flavor has no place on a pizza. Ron, would you hate a stock before you looked at it and analyzed it? Are you saying I need to taste test this thing? I'm saying you can't hate on this type of pizza without trying it. I consider myself a pizza aficionado, and I can tell without tasting it. I am pretty confident this is going to move the needle for average ticket price in the next couple of quarters for Pizza Hut.

Well, I'd be lying if I said I didn't want to try it, even though my for cheese, it's pretty palpable. Alright. We'll see you later in the show. A big week in the automotive industry. We'll get the latest from The Motley Fool's auto industry analyst, John Rosevear. That's next, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. John Rosevear covers the auto industry for The Motley Fool. Earlier this week, producer Mac Greer caught up with John to talk about investing in self-driving cars, the future of Ford Motor, electric vehicles, and more. But Mac began the conversation by asking John about General Motors and the United Auto Workers.

The two sides have been meeting to hammer out a new contract as 46,000 union workers continue their nationwide strike. Now, for those who haven't really been following this GM story as it unfolds, what's the issue and what does it mean for investors? Well, let's step back a minute so we understand the context. The UAW redoes its contracts with the three Detroit automakers, GM, Ford, and Fiat Chrysler, every four years. So this is an every-four-year kind of thing. And when they do it, they pick one of the three automakers to really negotiate aggressively with to try and get an agreement they can live with. And then they use that as what they call the pattern and try to impose similar terms with the others. And it usually works out.

This year they selected General Motors, and they found that they were really butting heads with GM. The workers have a few issues. first of all, GM announced a big restructuring late last year. 6,000 hourly jobs cut, similar number of white-collar jobs cut, several plants closed, and so on. In particular, a big factory in Lordstown, Ohio, which made the compact Chevrolet Cruze sedan, which has been discontinued, was set to be shut down. That has kind of become a rallying point for the UAW. They want GM to give that factory a new product to build. They see, from their perspective, GM is building vehicles in Mexico, more and more of them, and they say, hey, wait a

minute, you've got to bring some of that to the United States and back to us. Another issue, GM has been using temporary workers as a portion of their hourly workforce to try and increase flexibility. I mean, they're worried about the economy and so forth. Right now, about 7% of GM's U.S. factory jobs are filled by temporary workers, and these folks make about $15 an hour, which is significantly below the UAW scale. UAW wants to reduce that percentage and give the contractors a path to becoming full-time employees, getting the UAW scale, and so on. GM would actually like to use more contractors, and that's another big bone of contention there. There are some issues around health care. UAW workers pay only about 4% of their health care

costs. GM had wanted to boost that to 15 percent, but backed off that demand. We should note that the national average for family health care coverage, the average U.S. worker contributes about 29 percent. So they would both be generous plans, but the UIW strongly wants to stick with the status quo. There's some other stuff in there, too, but those are the big points. We understand, at least as of yesterday, that the sides are still far apart on this issue. And this is going to be expensive for both sides. GM is probably losing something like $45 million, $50 million a day because of lost production with all its U.S. factories shut down.

If this goes on into next week, we're going to start to see network effects, too. Suppliers will be furloughing. GM's factories in Canada and Mexico that depend on parts from the United States will be shutting down and so forth. That will get more expensive. Meanwhile, the folks on Strike are getting StrikePay from the UAW, which is $250 a week, and they're getting their health care benefits covered via COBRA. UAW is picking up that tab, but it's a hardship for them, too.

So there's incentives on both sides to cut a deal here, but it doesn't sound like they're close yet. When we pull back and look at the business of GM, what do you think is the biggest threat and what do you think is the biggest opportunity? I think there are two sides of the same coin. We know that the auto industry is moving towards electrified propulsion, more and more computerized assistance, artificial intelligence assistance with driving up to full self-driving, we think, eventually. These are seismic transitions for the industry. GM is deep into a plan to transition to that. They have 20-something electric vehicles on the drawing boards.

They have a subsidiary called Cruise out in San Francisco that has made really good progress with self-driving. But they are restructuring the company to sort of optimize, maximize their profits from their old businesses, selling cars, trucks, and SUVs, particularly trucks and SUVs, which generate good profits, to sort of fund this transition. The biggest threat to them, I would say, is that they don't make it. that they get into this new world and, and others have beaten them out and stolen their market share or alternatively, uh, that, you know, they, they commit heavily to electric cars and nobody shows up to buy them. Everybody still wants the gasoline cars. Uh, that's also the biggest opportunity. They're being very aggressive here. If in fact the world goes the way they think they

it will towards more electric vehicles, towards more connected cars, towards more self-driving cars. They are right now in a good spot to be out in front when that happens. And John, let's talk self-driving cars. If I'm interested in this space, I'm looking at some potential investments, where should I be looking? That's an excellent question. And unfortunately, there isn't an easy answer. There are companies obviously working on self-driving cars. Some of them are well-positioned. We should clarify that there are no self-driving cars out in the world yet. this is technology that is under development. And when you hear cars described as self-driving,

what you're really seeing is sort of advanced driver assist systems like Tesla's Autopilot and GM's Super Cruise. Self-driving cars are a technology that we expect to emerge soon. And there are a lot of companies working on it. The problem is, from an investment perspective, is there are no pure plays. Waymo is a company that is out in front in terms of its technology. it is a wholly owned subsidiary of Google's parent, Alphabet. You can invest in Alphabet, but the portion of Alphabet's revenue and profit that's likely to come from self-driving cars over the next decade is relatively small in the grand scheme of Alphabet. Likewise, General Motors, Cruise is also doing very well. They're probably a step behind Waymo, but a step ahead of most

others. GM has a majority stake, a controlling stake in Cruise. You could invest in GM for Cruise, that'll have a somewhat bigger participation. And you might actually get shares of Cruise if GM chooses to spin it off. But again, right now and in the next five years or so, the portion of GM's top and bottom lines that are going to come from Cruise is fairly small. And then there are other companies which are not yet public, or we should say not public because they may choose a different path. They may be acquired by a larger firm rather than going public. A number of startups, including companies like Zoox, as well as companies tangential to the self-driving space, Velodyne, which makes the LiDAR sensors that most self-driving cars under development depend upon.

I think to an investor who is interested in this space, what I would say to you is learn about it, because there will be pure play opportunities. I'm convinced of this. They will start to emerge maybe within the next year or so. I know Velodyne is talking about an IPO. So, I would say educate oneself. And, John, let's talk electric vehicles. News out this week that Amazon is placing a new order of 100,000 electric delivery vans from Rivian, which is a rival to Tesla. What do you make of that? I think it's interesting.

I mean, Amazon is an investor in Rivian. We should say so is Ford Motor Company. In fact, Ford's manufacturing chief, Joe Henrich, sits on Rivian's board, which is some assurance that those vehicles will actually be able to get manufactured because Ford is helping them with that. I think it's really interesting. You know, that deal just came out earlier today as we're recording. It's not unexpected. There are things we don't know. Is this vehicle being designed jointly with Ford?

Is this a pure Rivian design? Is this a sort of a utilitarian commercial van? Is it something else, some sort of customized thing? Is there some element of self-driving or advanced driver assist that is contemplated for this? There's a lot we don't know. And to back it off a minute, it is 100,000 vehicles, but that's over four years. So it's 25,000 a year, which is not a ton of volume, but it is significant because people will see these in their neighborhoods, presumably. Um, and, and, you know, they may be branded as Rivian or uniquely recognizable in some way.

So it's significant in that sense. It's a plum for Rivian. Um, it doesn't shake the world, but, but it's a noteworthy deal. And when we look at the industry as a whole, when we look at the auto industry as a whole, what's something you think we might be missing as investors? Oh, good question. Well, I always want to remind investors, this is a cyclical business. It takes a lot of capital. You know, margins are relatively thin, even in good times, et cetera, et cetera, et cetera. But the scale of this transition that we've been talking about, from gasoline-powered, human-driven vehicles to electric, at least partially if not fully self-driving vehicles, is just massive. It's not just the automakers. They can't just set up one

day and start building these things. There's a whole supply chain that has to come into existence right down to, you know, one of the reasons that we don't have millions of electric cars on the road right now is that, you know, two, three years ago, there was not enough lithium coming out of the ground to make the batteries to power all these cars. All of these things are being scaled and ramped up and thought about and invested in right now. I think somebody who's like, you know, when is Ford going to roll out an electric F-150 needs to understand that there are four or five years worth of events that have to happen, some of which have already happened. We are down that road on a huge scale for Ford to bang out an electric F-150 every 53 seconds like it does with the

gasoline F-150s. For the volumes to happen, there is just so much that has to change and be developed. And it is happening. But I think sometimes people say, well, Tesla can put out lots of electric cars. How come GM can't? Well, first of all, GM operates on a much bigger scale than Tesla. Second of all, Tesla has been working on its own little supply chain for years. The bigger supply chain needed to support GM, Volkswagen, Ford, Toyota, et cetera, et cetera. That's coming into being. And we're several years down the road of it coming into being, and it's going to take several more years before it comes into being. And just the size of this transition, I think investors have to keep that in mind, the amount of money that's being spent by

most, if not all of the automakers and just, you know, this huge, almost global effort to bring this into being. And, and the parallel to that, there are going to be winners and losers out of this. There are going to be some automakers that don't make the transition. Uh, there will be some automakers we think of as medium sized who might become very big. We don't know how that's going to play out yet. And John, as we wrap up here, how about one story you're watching going forward? so ford is is doing this uh what they call the redesign of their business uh this is this is jim hackett's term ceo jim hackett he was at steelcase for many years he has kind of a professorial um teacher uh affect to him um and and he has brought to ford this idea that they need to

redesign their business uh both to thrive and in the existing world and to be ready for this upcoming world that we've been talking about. A lot has started to unfold of this. For a long time, it was unclear exactly what they were going to do. There are a lot of elements and a lot of moving parts to this that are coming into play. If Ford pulls this off, they will be a significantly more profitable company four or five years from now, and they will be well-positioned to play in this new world as well. That's the story I'm watching. What is Ford going to do in Europe? How is Ford going to resuscitate its Chinese business, which has really gone off a cliff, which is part of what's being redesigned here? How will buyers react to Ford dealers that don't

have any sedans, which will be the case in a couple of years? How will buyers react to the new products Ford is bringing out to fill in some of the spaces that are being opened by its decision to discontinue lower profit models? All of this. This is a really fascinating story. I know that a lot of folks in America have an attachment to Ford, which makes it all the more compelling. They are doing this really interesting sort of self-restructuring that was not dictated by urgent financial need, but was dictated by what they saw as a need to prepare for the future. And just the way it's unfolding is very interesting. John Rosevear covers the auto industry for The Motley Fool. John, thanks for joining us. Mac, thanks for having me.

Coming up, we'll dip into the Fool mailbag, and we've got a few stocks on our radar. So, Stay right here. You're listening to Motley Fool Money. All right, before we get to the stocks on our radar, If you don't know your numbers, you don't know your business. And the problem that growing businesses have that keeps them from knowing their numbers is the patchwork quilt of business systems. You know what I'm talking about.

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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 in studio once again with Aaron Bush, Emily Flippen, and Ron Gross. Our email address is radio at fool.com. Question from Matt Riley, who asks, do you think the hype around artificial intelligence is similar to the hype that surrounded 3D printing? Seems like right now there are a ton of ideas for how AI can be applied, but in the end, they will be difficult to execute or scale. Thanks for all the great work. Love listening to your show. We love that you listen, Matt. So, thank you. Great question, Ron. What

you think? Well, Matt, because I care about you and the listeners, I reached out to our resident AI expert, Seth Jason, about this question. And he sees the two industries as being very different. He thinks AI is already doing much of what's been promised, especially with machine vision, natural language comprehension, and machine and deep learning. It's already making a major impact for many companies. It's only going to become more useful as the software and hardware become better. He sees that as a big contrast to 3D. Really, in his opinion, the two things have not much in common. I'll take the other side of that trade. I mean, look, with 3D printing, there's something physical. I can see it there. AI is so popular

right now because nobody knows what it is, and everybody can claim that they do it. So, for instance, last month, doing some research on Intuit, AI was mentioned over 20 times and Intuit's most recent earnings call. They're talking about improving AI for improving the tax software. Look, AI is everything. I'm AI, you're AI. We're all AI, and we all love to say it. So, is that helpful, Matt? I'll take the middle road. AI is different because it's a foundational software-based technology that lots of different companies and lots of different industries can build on. You won't hear an Intuit talking about 3D printing, for example, but you'll hear

Lots of companies talk about artificial intelligence. But it is smart to be aware of hype, because all technologies, all trends go through the hype cycle. And AI is definitely higher up the curve than 3D printing is. But really, 3D printing, their problem was less the hype cycle with consumers and investors. And the problem there was, the hype cycle got to the executives and they just lit money on fire on terrible deals, all of them. Two against one, we win. I think I'm in the middle. 0.5 to 1.

0.5, tied. Tell us, Aaron. It's a push. Let's get to the stocks on our radar. Our man Steve Broido is under the weather, but fortunately, Austin Morgan, the Iron Man, is behind the glass. He'll hit you with a question. Ron Gross, you're up first. What are you looking at this week? I'm going back to Tractor Supply. TSCO, operator of 1,800 retail farm and ranch stores in the U.S. Total income recommendation in April. Stock has been weak this month, creating an opportunity for investors to get in. They are the largest operator of rural lifestyle

stores in the U.S. 2016 acquisition of PestSense gives them another avenue of growth. I think margins are going to continue to go up. They've raised their dividend for the last eight years consecutively, with that dividend standing at 1.3%. O' Austin, question about tractor supply? Ron, have you ever driven a tractor? Actually, growing up, we had quite a big backyard, and I had a deer tractor, and my dad taught me how to mow the lawn, and I loved it. Was it a deer lawnmower or an actual tractor? It was an actual tractor.

Wow. All right. Emily Flippen, what are you looking at this week? Well, how about we try to drive something a little better than a tractor? How about a car? So, today I'm going to be talking about Yuxin, which is the largest e-commerce car dealer in China. I talked about this company before. They report earnings next week. It'll be really interesting to see what they report, especially given all the noise around China right now and the slowing economy and maybe some of the tariffs that are coming in place, especially on vehicles. So, it'll be exciting. But Yuxin has a really innovative business model. They're kind of taking the place of the CarMax in China, right? Transporting vehicles.

But it's definitely not without risk. So, it'll be an interesting one to watch. And the ticker symbol? UXIN. Austin, question about Yuxin? How popular is the American muscle car in China? More popular than I think you would assume, but not as popular as, say, in other countries. Aaron Bush, what are you looking at this week? Well, let's fly back across the ocean to another part of the world and look at Mercado

Libre, which is the dominant e-commerce company in Latin America, that's increasingly becoming a leading fintech company in the region, too. If you look at the business, pretty much all of the metrics are swiftly moving in the right direction. The number of customers, number of items shipped, total payment volume. And of course, being in Latin America does make them more prone to geopolitical risk. But those tough conditions actually keep a lot of the competition away. It makes you wonder, if MercadoLibre is doing this well when times are poor, it makes you wonder just how good they can perform when times are good. Stock is down a bit, but frankly, I have a hard time seeing how this doesn't become a much

bigger company in the long-term. And the ticker? M-E-L-I. Austin? Are they stuck in Latin America, or can they expand? Right now, they are stuck in Latin America, but that is OK. There still are a billion people there, and pretty much right now, with limited competition, it's all theirs to take. Three stocks, Austin. You got one you want to add to your watch list?

I'll go with MercadoLibre. Alright. Alright. Thanks, everybody. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Austin Morgan and our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.