Motley Fool Hidden Gems Investing - Money Advice from Moms

Episode Date: May 11, 2023

Spending, investing, dealing with debt...moms have seen it all. (00:21) Tim Beyers discusses: - Disney shares falling after a lackluster 2nd-quarter report - The fate of Hulu - Why The Trade Desk is an attractive business (with a richly-valued share price) (11:17) Mother's Day is on Sunday! To celebrate, Lysha Fuentes, Jim Mueller, Anand Chokkavelu, and Jim Gillies share money lessons they got from their moms. Got a question about personal finance? Email [e-mail] and your question might get used in next week's mailbag segment! Companies discussed: DIS, CMCSA, TTD Host: Chris Hill Guests: Tim Beyers, Lysha Fuentes, Jim Mueller, Anand Chokkavelu, Jim Gillies Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. Chris Hill. We've got a motherload of money advice. Motley Fool Money starts now. I'm Chris Hill. Joining me today, our man in Colorado, Motley Fool Senior Analyst, Tim Byers. Good to see you. Good to see you, too. Fully caffeinated, ready to go. Likewise, would that shares of Disney were fully caffeinated. Instead, they are down 8% this morning because, stop me if you've heard this before, the theme park part of the business was strong in the latest quarter, but the streaming business, and maybe the streaming business gets an outsized amount of attention, but it is what it is. It's getting

closer to profitability, but they lost four million subscribers. I think that along with a few other things probably is what has people spooked. In terms of the results themselves, what stood out to you? Well, let's remember, you're right that they're not losing as much and we're inching closer to profitability in terms of Disney+. However, direct consumer operating losses for the quarter, we're at $659 million, that is down or better from $887 million in losses last year during this time. But like you said, they are losing subscribers. That is not a good look, that is not a good part of the business. Overall, the domestic contribution from Disney Plus for this quarter was down 1%. That's in terms of

paid subscribers, so not great overall. Down 4 million, also not great. But guess what? Sportsball is still sportsball, Chris. Up 2% was ESPN Plus here. What I like is that Disney is recognizing that Disney+, as its own asset, needs help. There does seem to be more of an emphasis on the Disney bundle, because the Disney bundle, I think, works. Disney+, not so much, at least not yet. That does stand out to me, this idea that we're going to see maybe more Hulu originals that find their way into Disney+. I think we're seeing the weakness of a business, and I'm speaking specifically about Disney+, here, Chris, that relies on historical content. I said this on the morning show, so I'll repeat it here, but only for the purposes of illustration.

Disney Plus, in a way, is like Turner Classic Movies. It's amazing. I love Turner Classic Movies, but it's where you go for the hits. I go to Disney Plus for Star Wars. I go for Marvel. I go for known entities. And I'm not really surprised by what I get at Disney Plus. And what we're finding here, Chris, is that after a while, well, I'm not surprised anymore. So, I'm tired and I cycle out and I go on to something else. Can you tell me where Hulu is going to be in a year? Because increasingly, it seems like Hulu is this football being passed back and forth, at least in the business media, between Comcast and Disney. As soon as I hear one of the companies talk about the virtues of it and why they like it. In the next breath, it's like, yeah,

but we're probably going to sell. Who wants Hulu? Not from a you and me and the dozens of listeners consumer standpoint. As a business, where is Hulu going to end up? I'll tell you where I hope it ends up. I hope it ends up with Disney because I do think that Disney needs more fresh programming injected into its direct-to-consumer efforts here. This is one of the things that makes Netflix an interesting and more resilient business than what we're seeing from Disney Plus, is that there is always something fresh. Now, does that mean that Netflix has no stinkers? No, of course not. They put out stuff that's terrible, but they put out a lot of stuff. And so, when something is not hitting in the U.S., it might be hitting in Brazil, it might

be hitting in South Korea, it might be hitting in Japan. There's a resilience to that because there is always a constant stream of new, and Disney needs that. They need some fresh injection into what they offer with Disney+, so that they can justify the higher overall subscription price they want to charge for their business. I really hope that Hulu ends up with Disney, Chris, because I think that Disney needs it more. Last thing on the stock, I get the short-term questions, particularly when you layer in the uncertainty of the writer's strike and how long that will go and what the ripple effects will be for the business. You layer in the uncertainty of Bob Iger is the CEO at the

moment, but who's going to be next? But long-term, do you look at the stock trading downward as today and think, no, this seems like a pretty nice entry point for people who are willing to be patient? I want to say yes. The reason I'm going to say a strong maybe is because you could have said that so many times over the past several years and really got nothing for your efforts. What I really want to see before I say a strong yes here, Chris, is an operational plan for the direct-to-consumer business that scales it to consistent operating profit. We are nowhere close to that yet, Chris. As a Disney shareholder, I have no designs on selling my shares, but I am not in the mood of buying more at the moment.

first quarter revenue for the Trade Desk was 21% higher than a year ago. I don't want to say that this was all sunshine and rainbows in terms of the results from the Trade Desk, but free cash flow is up, margins are up. The business is, for the most part, doing what you would want to see if you were a shareholder. That is absolutely right. Let's just park on those cash flows for a second here, because that's pretty important. Year-over-year for the quarter, $187.5 million in cash from operations versus $146.2 million year-over-year. The contribution from stock-based compensation in that time was down. This is not juiced by artificial sweetener here per se. This was just a better operating report. Good improvements on working capital, for example, accounts payable,

outflow last year of about $246 million versus an outflow of about $200 million this past year. Just a better operating quarter. They're generating free cash flow. Not enough to cover the stock repurchases during the quarter, Chris, but covering a fair amount of it. This is a business that is getting better. I want to park briefly on the stock repurchase, which I think is a good sign for the trade desk. So the overall, 5 million shares repurchased, about $293 million for that. So you're looking at about $59 a share. Stock trading higher than that right now. They do issue a lot of stock-based compensation. So this is not perfect. But if you're going to buy back shares and you're buying them back at lower prices than your stock is

trading, yeah, that's pretty good. That's not bad. So they are doing better here, Chris. The stock is down a little bit today, but even with that, year-to-date, shares of the Trade Desk are up 40%. How richly valued is this stock right now, in your opinion? I do think it trades for a premium. I think the reason you're seeing it down today has as much to do with the change in Chief Financial Officer. Grayson, the CFO, is stepping aside for a long-term employee who's stepping up into the role. She's got 20 years of experience. I could see why the stock is trading down a little bit on a down day here. It does trade for a bit of a premium, but I like the sensibility that Jeff Green is bringing to the business.

I'm going to see if I can quote something here on what he said about AI. Everybody's talking about AI, but the way that the Trade Desk talked about it, I think, is a bit more important. The way that he talked about it is that the Trade Desk has a huge amount of very specific data that it can use to train its systems to get better at serving clients. For those who don't know, the Trade Desk is a demand-side platform. When you want advertising, when you want to buy advertising, it does behoove you to get really good bids and really good insight into how the advertising market is evolving. This is a really good use case, Chris, for AI.

If you get better insights from a really large data set and better predictions about what that data will tell you, that's an outstanding case for AI versus ChatGPT, which is like, we got a blob of everything in here, and what do you want to ask? Maybe we'll have an answer, or we might mansplain something to you, and you'll want to punch us in the face, which is more like what you get from ChatGPT. There is actually a real use case for AI in the trade desk, and I think you're starting to see just the very beginnings of what they can do with that data. Tim Beyers, always great talking to you. Thanks for being here. Thanks, Chris.

Just in case you forgot, Mother's Day is on Sunday. To celebrate, we rounded up a few of my colleagues to share a few money lessons they got from their moms. Happy almost Mother's Day. In celebration, we asked four fools one question. What did your mom teach you about money? Up first is Lisha Fuentes, who works on Motley Fool Events. My mom taught me the value of making extra payments towards any loans I may have, so whether that's mortgage payments or car payments, this will ultimately help me make fewer payments in the long term and lessen those interest payments. Next up is Motley Fool senior analyst Jim Mueller.

My mom taught me the value of saving and paying up for quality to buy something that is going to last a while rather than buying an inferior version over and over and over again. okay and and the example may not be exactly that way but that's what i took from it when i was growing up we uh we ate very well and part of it was because every year she would buy half a cow it sounds funny and when i say that she's stuck in a in a chest freezer i'm not talking about legs sticking out of the freezer or anything this is she bought it straight from the butcher so she got a lower price and it was a higher quality because it was freshly butchered cow and so we had steaks and ground beef and roasts and ribs and all the stuff you get from a cow.

And she wouldn't have to buy it from the grocery store and pay a higher price all throughout the year. And so she ended up saving money. But the upfront cost of the half a cow was quite a lot of money. And so she had to budget and save up for that. And then she'd make it up on the back end after, but not having to buy steaks and ground beef throughout the year from the grocery store. So that's what she did.

And I know it can be hard for people, especially when they're living closer to a paycheck-to-paycheck level. But if you can, for instance, shoes. Rather than buying sneakers that are going to last a year and wear out, save up and pay two or three or four times as much, but get a pair of shoes that'll last six or seven or eight years. and you end up saving money over the long run that way. So that's what she taught me. Next is Anand Chakravallu, the Motley Fool Livestreams Programming Director.

My mom ran the finances in our house and she's an immigrant who came with zero knowledge about finances. But she taught me kind of three things, I think, that I took away from all of the discussions and watching her over the years. One is to keep asking questions until you understand. A lot of us are just saying, well, I spent some time and you don't quite understand.

You don't want to show your ignorance and you hear some jargon, but she will just keep as I've heard her on the customer service lines, the poor customer service representatives when she doesn't understand the nuances of something, she will just keep hammering away. And that's something I try to get better and better at the older I get. The second thing is buy and halt. I look at some of the stocks that she bought in the 80s and 90s, probably the 90s, and she still owns them. And they're like blue chip type of stocks that have just, you know, it's amazing to

see compounding over the years. And you really see it when you buy and hold. And the third thing is temperament over anything else. And she's very calm. And I told you, she keeps asking questions until she understands, but she buys and holds. She's not going to make rash decisions. and if they are, they're on the margin and very small. She's not risking everything on one silly bet that she thought of this morning. And finally, we've got Motley Fool

senior analyst Jim Gillies. Inadvertently, I'm going to say inadvertently, my parents, lovely people, salt of the earth, give you the shirt up their back if you needed it. But my mother is the seventh child of a de facto single mother who lived through the Great Depression. My mother really learned the value of stretching a dollar and then stretching it and then stretching it a little bit more. Growing up, my father was primary breadwinner. My mother stayed home with us kids for a lot of the time. I would argue my mother was underemployed for a lot of her career. She was a teacher. We never wanted for anything. What you learn from your parents and particularly mom about money,

we were always fed, we had a roof over our head, we knew we were loved, like all of the wonderful stuff. However, my mother is responsible for me working for The Motley Fool today, which is kind of a strange thing, because, you know, it's kind of a sliding doors, people don't even know that reference anymore, but, you know, sliding doors, you know, you turn left instead of turning right and your life unfolds in a way perhaps you didn't envision in, I believe, it was 1996. My parents had recently paid off their house at that time, and they were in their 50s. And so, the possibility of retirement and golden years is kind of staring them down the face. And my mother expressed an interest in learning this investing

thing. Now, my background is, I have a couple of engineering degrees. I was a perfectly happy. So, I thought, engineer, working in process redesign for environmental purposes, decent little career. I was still fairly young, decent little career starting out. So, I knew nothing about investing. Investing was never, ever a topic in my house growing up. And so, here's mom talking about, well, I'd like to start investing. At the time, I live on the west side of Toronto, and at the time, they lived on the east side of Toronto. So, I was going back for for a weekend, a Mother's Day weekend specifically in 1996 to say hi to mom and dad and maybe meet with some friends, take mom out for Mother's Day brunch and all that wonderful stuff.

The gift I bought her, I went into a bookstore and I bought two books on investing. I don't remember what the one book was, it was probably some Canadian compendium of mutual funds or something. But the other one was a book with a couple of guys with silly hats on the front page, almost jester caps, if you will, fool's caps, if you will. And I looked at the back, I'd never heard of The Motley Fool, I had no idea who Tom and David Gardner were, but it looked fun, it looked fun. And I thumbed through it, I said, this might be interesting and it's not boring financial stuff that might cause mom to look at it and go, whatever. So, we went out for brunch on Sunday morning, and that was mom's gift, and I didn't really think anything of it until about

a year later, when again, I was visiting mom and dad for a weekend, and I think I had a bout of insomnia and I really couldn't fall asleep, and this is Saturday night at midnight, I'm like, I want to go find a book that I can just read, and it'll dull me into stupor. I saw The Motley Fool Investing Guide sitting on the shelf, looked like it had never been read, So, I said, okay, what the heck. So, I grabbed it, started reading. I think I was up until about 3 in the morning reading this. It just inherently made sense to me, the concept that you as an individual can invest, and you can invest for yourself. And it covered things like some rudimentary valuation metrics. It talked a little bit about business and business

strategy, about the value of rising dividends. I think Coca-Cola featured fairly prominently in the book as an example. I was hooked. Mom, if you're listening, I stole the book from you that I gave you a year earlier. I stole the book that day and I took it back to where I was living on the other side of Toronto at the time. I read the whole thing. Reading that book sparked me. There was a lot of references to Peter Lynch in there. Of course, the next logical books to get were Peter Lynch's one up on Wall Street and beating the street, devoured those, really got into looking at some of the other famous investors they talked about, some guy named Buffett featured prominently as well. It sparked a love of investing that I didn't

know was there and didn't know I had. Because again, as I mentioned, investing was not a topic that was ever discussed in my house growing up. One thing led to another. Ultimately, I left my engineering career after about nine years. I quit without a plan. I quit without a plan to go back. I did an MBA in finance, invested my money since the late 90s personally, since about 97 personally, and I've now been with The Fool. It's going to be 18 years in July, because I was very active in the old Motley Fool investing forums, and that's where I got to know Tom and David, and one thing led to another. It comes back to me buying some random book for Mother's Day for my mother, and then a year later, just deciding to read it for myself.

It's one of those things where, if I don't buy that book, do I ever move into investing? Do I ever discover this latent passion for a topic that I literally knew nothing about until 1997. So, mom, if you're listening, thank you. Quick note before we go, next Monday, Robert Brokamp and Alison Southwick are recording a mailbag segment. So, if you've got questions about all things personal finance, drop a note to podcasts at fool.com. 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.