Motley Fool Hidden Gems Investing - Price Hikes or Push to Ad-Tier?

Episode Date: October 20, 2023

Netflix’s premium tier is now nearly twice as expensive as it was a decade ago – is this pricing power or an effort to move more users to its new ad tier?  (00:14) Jason Moser and Matt Argersinger discuss: - Netflix’s price increases, and why the economics of its new advertising approach might be better than its subscriber business. - How making EVs affordable is eating into Tesla’s industry-leading margins. - The Craig Jelenik era at Costco and how the company is doing succession right.  (19:04) Motley Fool Money’s Deidre Woollard caught up with McKeel Hagerty, CEO of Hagerty about his company’s focus – insuring classic cars, as well as his favorite ride, and the unique ways Hagerty tries to reach new customers.  (32:11) Jason and Matt break down two stocks on their radar: Chipotle and Home Depot. To get our special Stock Advisor offer for podcast listeners, head to: fool.com/mfmdiscount Stocks discussed: NFLX, TSLA, COST, PLD, BX, TSM, HGTY, CMG, HD Host: Dylan Lewis Guests: Jason Moser, Matt Argersinger, McKeel Hagerty, Deidre Woollard Engineers: Rick Engdahl, Chace Przylepa  Learn more about your ad choices. Visit megaphone.fm/adchoices

Prices are going up at Netflix, but the company might not actually want you to pay them. Motley Fool Money starts now. 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 Dylan Lewis. Joining me over the airwaves, Motley Fool Senior Analysts Jason Moser and Matt Argersinger.

Gentlemen, great to have you both here. Hey, Dylan. We're going to do a little rundown on the business of classic cars. We have an update from one of the most important companies in the world. And, of course, we have stocks on our radar. But we are kicking off today with updates on three big-time Fool stocks. We're going to get the party started with Netflix. Jason, shares of the streamer up over 15% after it reported earnings and told the street,

yeah, prices are going up again. Yeah, yeah. I mean, you got to love it when a company can exercise pricing power. And I think that in Netflix's case, they're demonstrating that they can do that to a degree. You know, I think, you know, when you look back at it, I think for some, the introduction of all of these new membership tiers was a thesis breaker in some cases, right? I mean, I do get that. The argument for a long time for Netflix was it's simple, you only have so many choices, you're paying just this small flat fee, and that was great for that time.

But markets involve competition enters the fray, and obviously streaming is a very tough business, right? The bigger that you are, the easier it is to manage those content costs. And so I think that in regard to Netflix, they're looking at this from sort of two different perspectives, right? They can raise prices on their ad-free offering and offer something to those folks that really don't want to deal with ads, right? And that's good. The folks that really want that, they will pay it. And as long as they continue to be thoughtful about those price increases and they don't

go too much at once, I think they've still got plenty of room to go there. Now, the other side of that coin now is they have this ad-supported offering. And the ad-supported offering is something that is really starting to gain some traction, right? The ad tier is a nice way not only to bring in new subscribers. I think it's, what, $6.99 a month. It also offers an option for those looking to maybe whittle down their bill while still having access. So, if you don't like those price increases, right, well, now you have another option. Now you have another choice.

You can, quote-unquote, downgrade to perhaps the ad-supported model. And I say, quote, unquote, downgrade, because honestly, Netflix would be very happy to see you downgrade to that ad-supported model, because it is something that is very profitable for the company, right? They talk about it in The Call, the connected TV market, the linear TV market, as they sort of get into that connected TV, the advertising-supported video-on-demand, it's a $180 billion global opportunity now. And with Netflix, you're looking at a business that has fully 70% of their subscribers.

outside of the United States now. I mean, that has been a massive sea change in the customers that this business serves. So it's a different business than it used to be, but that's not necessarily a bad thing. It really does seem like they're making this all work. Jason, you mentioned the $7 a month for ad-supported. The premium tier of Netflix will now cost $23 a month,

which is almost a double from 2013. And I'm trying to make sense of what the growth lever is for this business because it seems like they've got a couple different things going for them. You mentioned the ad-supported tier. It seems like we have some flexing of pricing power going on, but we haven't even mentioned the password crackdown, the great password crackdown of 2023. And I think we're seeing that show up a little bit in the results too. There's no question. I mean, we saw, I think, 9 million net new subscriber ads for the quarter, significantly higher than really what was expected. And a lot of that was attributable

to this paid sharing that they're rolling out. And that paid sharing offering does make a lot of sense, right? And we're going to see that rolling out. I mean, it's not just Netflix that's doing this. I mean, this is going to become basically just standard operating procedure for streamers as they go forward. And so they find a way to kind of expand that subscriber base, so to speak. And granted, it's going to be a little bit short-lived. They do feel like they're going to see some incremental boost to those paid sharing subscriber ads here in the coming quarters. And that'll eventually die down. But again, it gives them a chance to continue the relationship with the consumer without necessarily losing the consumer. And ultimately,

what it does, and we saw this reflect in the financials, it's meaningfully boosting their margins, their cash flow numbers. They raised the share repurchase authorization here to, I think, $10 billion now. I don't know that I really am so focused on watching Netflix repurchasing shares, given the content costs that come with running a business like this. but clearly expanding the offerings, giving more tiers of membership, that's working out very well for them. It's having a boost of the subscriber numbers. It's obviously playing out well in the financials, and I suspect we'll see that continue. All right, over to another big earnings mover, shares of Tesla down 12% after the company reported Q3 results. Matt, I look at the market

reaction here, and it seems to be a mix of what's in the rear view in the earnings report, but also what's ahead for this company. I think that's right, Dylan. I mean, it's a tough environment right now to be in the business of making electric cars. I mean, it kind of always is a tough business to be in. I mean, and look, despite what many investors think and say, this is still Tesla's core business. I know there's AI, there's the robo-taxi business, autonomous driving, but building and selling electric vehicles is Tesla's core business right now. So, on the good side of things, production was up 18% in the quarter. Delivery numbers were pretty solid, up 27%. I mean, there's still really healthy demand, particularly for the Model 3 and

Model Y vehicles. And it's good for Tesla for being able to continue growing at that kind of pace when other vehicle manufacturers aren't coming in or near that kind of growth. At the same time, though, you've got production expenses, which are higher. The cost of capital is higher. Consumers are more strapped because, you know, probably more so than any time since the pandemic. I mean, it's just, you know, we've been through, you know, kind of ups and downs in the economy. And now there's a lot more uncertainty, especially with interest rates higher. So you look at gross margins for Tesla, they fell to 17.9%. That's down from 25.1% a year ago.

And I think a lot of that has to do with sales price. I mean, the average Tesla sold in the quarter for $44,000. That's down about $10,000 from a year ago. So, Tesla, like a lot of companies, is trying to find the right price mix while at the same time trying to control costs, and that's hard. I'd say the good news for Tesla, it's got $26 billion in cash now, plenty of room to keep experimenting, innovating, investing. And even though shares are down from the report, as we've talked about, Tesla's got this cult of investors that, you know, kind of doesn't really care about bad news, certainly in the

short-term, and that keeps its equity price pretty high. They can always raise equity if they want, and get access to the capital markets. Well, Matty, I think, you know, you keyed in on something there, too, that's really important. I mean, Tesla is still, at the end of the day, it's a car company, right? But, you know, one thing Musk knows how to do. He knows how to sell the sizzle. I think we can all agree there. You read through the call, and we look at Tesla as a car company through today's lens.

But in the call, you know, you see him saying things like, we're going to continue investing significantly in AI. That's the massive game changer. And then he goes on to say, you know, if you have a fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, then it's not clear what the limit is. And so that's where you see like, yeah, it's a car company today. But obviously that cult of investors that we refer to, I mean, they're looking farther and farther down the line here. And they're looking at that language, fully autonomous cars at scale, autonomous humanoid robots that are truly useful. I mean, it is going to be fascinating to see.

I mean, he obviously has a track record of over-promising and under-delivering, at least on a timeline. It's going to be really interesting to see just what this company looks like in 10 years, in 20 years, because they have very bold aspirations, clearly. All right. From a company that is incredibly forward-looking and maybe always changing to one that is perhaps one of the most predictable businesses of all time, we saw a change at Costco being announced this week. CEO Craig Jelinek will be stepping down after the holidays, ending an 11-year run at the head of Costco. Jason, in some ways, a little bit of a surprise, but I think if we take a step back and look at some of the movements that this company has been making, maybe not so much of a shock? No, I guess I was a little surprised just to see that Jelinek was stepping down. I mean,

Costco is not a company that I have undercover, so I'm not following it on a daily basis. I guess it just felt like time, time has just flown by. He was there for, what, 11 years. And now I guess it's time for him to go ahead and step down and pass the torch, so to speak. But, you know, this is one of those companies where when it comes to succession, I think you really are looking for someone to be able to step into that role to just keep that ball rolling, keep doing what has been done all of these years to make this such a successful business. I mean, Costco at the end it's not a very complicated business. You're selling stuff to your members and you're trying to give them the best price possible. I think as long as they continue to do that, chances are good

they'll continue to be successful, particularly when you're hiring from within. I think the value there from a cultural perspective is probably really difficult to put a number on. To your point, Jason, Gelinex Replacement, Ron Vaches, started as a forklift driver with the company over 40 years ago. We look at this internal promotion and someone who has been with company for a long time. Matt, does this feel like succession planning done right? Absolutely. It's what you'd love to see. Both Vatris and Jelinek were COO before they became CEO. They were both with the company. Jelinek, I believe, joined in 1984. He was a warehouse manager and moved his way up. You mentioned Vatris, who was a forklift driver, moved his way

up. This is how you'd love to see it done. But I like the points you guys made about what's unique about Costco's business though, or maybe it's not so unique, but it's just such a steady, consistent business, almost unshakable business model. I'm not saying a CEO coming in can't really change things or could mess things up, but this is the opposite of that famous Warren Buffett quote, which is, when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it's the reputation of the business that remains intact. in this case, with Costco, you have a business with very sound fundamental economics, and that's going to remain intact, really, no matter who is at the helm. But I do love the way

they do the succession at Costco. I can understand why there's been really no reaction to the stock price because this is a business that's just going to keep churning. All right, coming up after the break, we've got updates from major bellwether companies. Stay right here, you're You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis, joined over the airwaves by Jason Moser and Matt Argersinger. With earnings season in full swing, we wanted to zoom in on results from a couple of different companies that help paint a picture of the overall macro environment right now. Matt, let's start with Prologis. This is a lesser-known name, but you like digging into this industrial REIT because you kind of see it as a bellwether

for the economy. I do, Dylan. I mean, it's the world's biggest industrial real estate investment trust, over $200 billion in assets. And those assets are primarily warehouse and logistics facilities. It's kind of the backbone of the modern e-commerce-driven economy that we're evolving toward. For example, Amazon is Prologis' largest tenant. You've also got tenants like 3M, PepsiCo, UPS, Walmart, major kind of global companies that rely on Prologis' facilities to move goods, store goods, and really participate in commerce around the world. And if you look at Prologis' results, they were pretty good. They had solid same-store net operating income growth, occupancy up to 97.5% at the end of the quarter.

That's near a record. Core fronts from operations, kind of a cash flow metric for REITs of 14.6% year-over-year. And Prologis raised guidance, again, for the full year. So all good news there. But then when you look at management's comments, either in the press release or the conference call, you get a bit of a different picture. You've got phrases like negative customer sentiment, increased market vacancy, moderation of demand, lack of clarity. So I think Prologis' management is foreshadowing a little more economic weakness and uncertainty than perhaps I think it's being reflected in the overall market. But it's certainly being reflected in Prologis' stock, which I think looks really attractive right now.

it's trading around a three-year low, 3.1% dividend yield, just 20 times core FFO per share guidance. But that number is actually a lot lower today than it's going to be in the near future. They've got a ton of growth ahead as their leases roll to market over the next several years. So there's a lot to like about Prologis. I would just say in the near term, though, it's telling us a pretty cautionary tale about the economy. Matt, you mentioned that the numbers themselves looked pretty good, but the commentaries were things started to get a little bit more concerning. As you start to see more results come in over earnings season, especially from some companies that are a little bit more in the real estate

game, is that where you're looking for some management commentary to help you understand where things are going? I think so. The reason I like to follow real estate, obviously, is space is used for a lot of different things. In the industrial space, like for Pelagius, that's really where a lot of economic commerce is taking place. I think as more companies report, we're going to get a fuller picture of where things stand. All right. Over to one of the world's most important companies, Taiwan Semiconductor. Jason, you dug into the results from the world's largest chipmaker. What did you see? Yeah, tremendous position in the value chain for this company. I mean, they got a business and the world probably stops turning, right?

So, it's an important one. And from that perspective, it was a good quarter, I think, in that the company exceeded its targets and expectations. I mean, they're dealing, I think, with some difficult near-term issues in market conditions and inventory levels, but it's nothing they can't handle. When you look at the numbers in U.S. dollars, third quarter revenue was $17.3 billion. That was down 14.6% from a year ago, but actually up 10.2% sequentially. They're seeing a little bit of improvement there in the gross margin number. Operating expenses accounted for 12.6% of revenue, that was up 50 basis points. But again, you look get this business, I mean, their balance sheet, just a fortress, $48 billion in cash and short-term

investments. And they continue to build out facilities in order to be able to meet the demand in what they do. Now, again, back to sort of these difficult near-term issues and market conditions. And they did talk about that in the call. They tightened their capital expenditures. Previously, they were within a range of $32 to $36 billion. They brought that down to $32 billion, given just general market conditions right now. And they talked about, in regard to this overall macroeconomic state of things, right, they see slow demand recovery in China. They see, you know, just a weaker overall macroeconomic conditions.

And right now, their customers are very cautious in inventory control. So, in the near term, customers are going to kind of continue to get through that inventory, right, going through the fourth quarter. But they are seeing some early signs of demand stabilization in PC and smartphones, which is not a surprise that there was weakness there. We've been talking about that weakness for many quarters now with a lot of these chipmakers. But I think that what we're looking for is this company to be able to get through that inventory, watch their customers get through that inventory towards the end of the year and start 2024 in a little bit of a healthier level. And it does look like they see revenue growing, guiding for revenue growth of about 11% sequentially here for this coming quarter. So, some near-term issues, yes, but generally speaking, the big picture still remains very optimistic.

Jason, for folks that are more casual observers of the chip market, they may be a little surprised to hear moderate demand or even slow demand, just given what a boon AI has been for some of the chip makers. Do you feel like, basically, if we're talking about chips that are in AI applications, we are off to the races? And if we're talking about chips that are more in conventional consumer electronics, that's where we're seeing a lot of this more kind of stagnant demand. Certainly, AI is the phrase du jour, right? I mean, it's no surprise to see those replacement cycles in PCs and smartphones extend. Just the technology is getting better and better. And so I suspect we'll continue to see that that is the case. All right.

Finally, over to one of the big money movers, the world's largest alternative asset manager, Blackstone, reported. And Matt, it seems like maybe money isn't quite as easy to come by as it used to be. It is not, Dylan. And the investors have taken that pretty hard on Blackstone stock this week. I mean, yeah, Blackstone is in the business of raising capital, investing capital, and earning management and performance fees on that invested capital. And raising capital has become a bit of a struggle. So they raised $25 billion in the quarter, and that's still a really gargantuan number,

but it's much lower than forecast and down from the second quarter when it was $30 billion. They also raised just less than $1 billion for corporate buyouts this quarter. That's a fraction of what Blackstone normally raises. So, President Jonathan Gray, he gave an interview to the Financial Times this week. You know, he mentioned that, look, institutional investors kind of holding back new commitments to private equity until the new year. He pointed to higher rates as being kind of a key factor as well. I mean, 10-year treasury, it's at a 16-year high. So, the risk-free rate where they are, it just makes potential returns in the private equity space look less compelling. And then if you look at the results for Blackstone, distributable earnings,

which is kind of their big metric, that was down 12% year over year. If that continues, you're going to see Blackstone's dividend fall because that's closely tied to distributable earnings. So this is kind of a wait and see until 2024 story. I can understand why the stock's beating down right now. Institutional investors, retail investors, turns out not that different. When yields start looking attractive, people start paying attention to debt and other places to put their money. Matt, appreciate the commentary there. Jason, appreciate your thoughts on earnings. We're going to see you guys a little bit later in the show, but up next, we've got a breakdown on a name you need to know if you're into muscle cars. Stay right here. You're listening

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Sign up for exclusive access today, rippling.ai slash fool. Welcome back to Motley Fool Money. I'm Dylan Lewis. Here on the show, we like to find companies that operate in unique spaces and shine a light on them. For every interest, there's probably an industry. If you're into classic cars, short of having doubles or triples, your best way of protecting your collectible ride is probably having specialty insurance. Motley Fool Money's Deidre Woollard caught up with McKeel Haggerty, CEO of Haggerty Insurance, about his company's focus, insuring classic cars, as well as his favorite ride and the unique ways Haggerty tries to reach new customers. Let's talk a bit about Hagerty because you went public in 2021,

but the history of the business is so much older. So tell us a little bit about where it was and where it is now. Well, thanks. We are in our 39th year as a business, celebrate our 40th anniversary next year. And it started in an even smaller niche than insuring classic cars. We actually started as a family company in the basement of the house I grew up in, insuring wooden boats, if you can imagine, just classic boats. But many of the ideas that were there are really the same. And that is insurance is a well-known product or service that people buy out there. But when you sell into a community of people, a community of like minds, the risk dynamics are pretty different. So that was certainly true in the early days with wooden

boats. And it's a big part of what makes our classic car, collector car insurance business so different. Well, it's interesting because you've, so you went from boats and you've got the insurance business. It's, you know, we see this as a pretty, pretty niche business, but you're growing this larger brand, which I think is really fascinating and sort of catering to the classic car enthusiast going deep into events. So why are events so important? Tell us a little bit about the world of classic cars? Well, the car world is large and not just the new car buying world with OEMs trying to sell us new cars every year, but the vintage car world, it's almost a century old. Believe it or not, in the very, very early decades of the last century, people even then

were interested in the earliest of cars and they kept them running and they would bring them out for special events and they would show them. And it created this community of car lovers that it would move forward each decade and each generation, the interest in different types of cars evolves. But it's always been this community piece. And so when you fast forward all the way to today, large population, and I'm just using US numbers of a few hundred million people, there are tens of millions of people that consider themselves in some fashion a car enthusiast. And those tens of millions of people, not everybody owns a vehicle that's special to them, but many, many do. And, you know, these are not just the big celebrity car owners. These are

not just multi-millionaires. These are just kind of everyday folks that have a special car that they keep in the garage and it has a special place in their world. And events are part of it. Media is part of it. They consume car magazines and obviously a lot of online content today. They watch television shows on streaming and cable television. All of those things are kind of a hallmark of a big community. And, uh, that's the world we serve. And it's, it, again, insurance is not the maybe sexiest product out there, uh, that people ever think about it. Nobody wants to buy car insurance, but if you love your car, like truly love it, um, then you think very carefully about decisions like how do you take care of it? How do you protect it? Where am I going to park

it when I'm out on a Sunday drive and stop for lunch somewhere? Those are the things that car people think about. And that's our world. That's the community we play into. So if you own a classic car, why do you need a special niche insurance versus just like insuring it through one of the big insurance companies? Well, many of these cars are insured through the big insurance companies. And we partnered with many of those companies to work with them. But that's the second part of the story. The big difference is this. We've all heard the old saw that you go out to a car dealership, you buy your brand new car, you drive it off the dealer lot and a mile down the road, you get into an accident. Now, hopefully you're okay, but the car is destroyed. And one

of the most frustrating things that people find out is that even that mile down from the showroom floor, that car is already depreciated in value. And the insurance company will pay you a depreciated amount for that total loss. That's true. So cars, you buy them, they depreciate in value, they go down to maybe not nothing, but next to nothing. And then many of them go away. They just fade into the ether of old cars and junkyards, that kind of thing. But some of them hit bottom and then they start going back up again in value. And that's the collecting feature. And it can take years. It can take even decades before a car is collected. But that's when we start seeing clubs form, buying those cars, or somebody wrote an article, wouldn't that be a cool old car

to have. And those cars start appreciating in value. And insurance, normal car insurance, doesn't take into account that appreciation of value. And that's what we do. We come in, we help people or our insurance partners value these cars, make sure that they're well protected for their appreciated value. And then we offer great coverage. But then it's the claim part that's most difficult because claims fixing an old car, not the total loss, but think a fender bender or something that happens out on the road, those cars need special care. You have to go to special restoration shops, repair shops. And the big insurance companies, again, many of them who are our partners, they're just not set up to deal with that. They put on new plastic parts for a

brand new car. They're very standard ways of fixing things. They put in kind of third-party windshields when a windshield is broken. But for our car owners, the windshield on a 1965 Mustang is a special windshield and it needs to be handled very, very differently. And so that's where we step in and yeah, it's a, you know, we're a growing business. We've been growing a lot for, well, really since the beginning, but that's where we step in both for the consumer, but also the big insurance companies and kind of solve that problem for them. And it kind of makes everybody happy too, because we get to, we get to play with people's toys. Well, speaking of that, the reason I became interested in your company is I have an uncle who collects cars, collects classic cars.

He's got around 70 of them in a warehouse in Florida. It's a whole lifestyle for him now. He goes to the car auctions a lot and doesn't buy every time, doesn't sell every time, but it really is this lifestyle. So you talked a little bit about the events and I know they attract a wide variety of people, but the auctions especially, why are auctions so important to integrity? Well, it's, first of all, they're, they're super fun. I've been attending auctions for, for 30 years and, you know, it's fun just watching any car sell at an auction. They're, they're kind of sometimes rowdy environments and there's this kind of gladiatorial feet quality to a car auction when it pulls in and maybe it's loud and, you know, the bidding starts and the

auctioneers start calling out numbers. And when a really, really valuable car sells, you just, I mean, I still, I get shivers thinking about, you know, sometimes millions of dollars being bid on a car and it rolls out and it goes to somebody, some new collection. But there are many, many different types of auction companies that do high-end, low-end, sports cars, different kinds of things. And we had been sponsors of many of these auctions through the years. And they're great. They're fun. They're awesome. But we also knew that they were a great way to attract new customers for us in the insurance and our membership business. And we also knew that maybe there was a better way to think about serving some of these customers. So we actually,

after going public, acquired an auction company and have been kind of layering them into our other event strategy and saying, look, we're not trying to control the auction world. There's always going to be many choices, but we want to be a really high quality choice where service is really good. Cars are described really well. Both buyers and sellers get all the information they need to make good choices. And then you let the excitement happen. So auctions are super fun and they're a big part of our world now alongside insurance. You've also got a membership model and that grew about 20% in the last quarter. It seems like an interesting entry point for getting involved and getting engaged with Hagerty. So how does that work? Well, if you think like from the lens of

insurance and think of some of the big, well-known larger insurance companies, you know, when I was growing up, AAA was figured very prominently in people's minds. They're an insurance company that also did roadside assistance. They had a membership component there. You think USAA, one of the just titans of our insurance space, great company, served originally U.S. military officers and their families. They've since expanded that to families of enlisted soldiers, which made for a much larger total addressable market. But there was always a membership component under that. And I always really looked at those businesses and said, wow, they sell insurance. Insurance is a good business, but they engage with people in between just

sending them a bill for their policy. And they engage with them, you know, offering different things, different services, maybe engaging them in a community aspect. And that was really what we dreamed about doing. So we have a program called the Hagerty Drivers Club, and it is available to anybody. It's a $70 a year membership. You get roadside assistance and a magazine and discounts and access to a number of our events. But the model really here is, you know, insurance is great, but insurance isn't the most fun thing to talk about. And having cars to talk about is a lot of fun. And so if you were to look at our magazine, for example, I think we're the second highest circulation car magazine in the world of any kind, audited circulation.

And there isn't, there's no talk of insurance in there. I mean, this is about the love of the car, this is about events, this is about cool cars to drive, or celebrities that own certain cars, you name it, we cover it in there. And that's the brand building part as well that you mentioned, that, you know, I'd always admired, you know, some of the best companies, insurance or otherwise, they just really thoughtfully built their brands around engaging with people in things that they care about. And, you know, having these media components around with associated with membership has really been, it's been very successful for us. Last question for you. What would you like potential investors in your company to know

about Hagerty? Well, what I'd say is that it may sound niche, but it's a much larger group than many people think. And it's probably been the biggest surprise of investors when they've looked at the company. So when we talk about a total addressable market of 44 million vehicles now, this is not some media number that we're making up. This is actual data we have of registered vehicles. So it's large, large audience, very persistent economically, you know, across the board, all the way from buying cars all the way down through insuring them. And, you know, very resilient in downturns, like we may be, if we're calling this a downturn today, an inflationary environment. And so it's just good, steady business. And it's actually fun. So it's fun to

look at. It is fun. Thank you for your time. But one quick last question. What's your favorite collectible car or what what car do you wish you could own maybe well i'm you know my i kind of grew up in the midwest so you know we were definitely kind of we were a ford family but for whatever reason my very first car that i dug out of a snowbank when i was 13 years old was a 1967 porsche 911s and before anybody thinks like oh you had a porsche when he was 13 like i paid 500 for it and that was my lawn mowing money and i still have that car and in fact it's a beautiful sunny day, and I drove it today. If you're into classic rides, Hagerty's site has blog posts for free for the aficionados.

And if you're into stock ideas, we're offering our Motley Fool money listeners a discount on our flagship service, Stock Advisor. With Stock Advisor, you get two stock recommendations per month, access to our analysts on our members-only live stream, Motley Fool Live, and Stock Advisor's full scorecard of stocks generating market-beating returns. To learn more, head to fool.com slash MFM discount. That's fool.com slash MFM discount. If you listen to the podcast version of our radio show, we'll drop a link in the show description. Coming up after the break, Matt Argersinger and Jason Moser return with a couple of stocks on their radar. Stay right here, you're listening to Motley Fool Money.

your summer travels deserve an upgrade with select Chevrolet Buick GMC and Cadillac vehicles connected by OnStar you can stream game and more on the go whether you're headed to a music festival or a cottage getaway you can access hundreds of apps on google play right from your center display explore OnStar tech today at OnStar.ca and discover how to take your summer to the next level OnStar better never stops as always people on the program may have interests in the stocks they talk about and the motley fool may have formal recommendations for or against so don't buy or sell anything based solely on what you hear i'm dylan lewis joined again by jason moser and matt argersinger we've been

talking a lot this year about consumers cutting back. And there's one spot that just doesn't seem to be happening. Boats. Matt, in prepping for this week's show, you shared what might be my favorite headline I have seen this year. It comes from Axios, quote, Americans sound miserable, but they are buying lots of boats. What do you make of this? Yes, I mean, it's fascinating. I guess post pandemic, there was, you know, kind of this surge in buying for boats. And when we say boats. We're not talking about yachts. These are fishing boats, you know, small sailboats, jet skis. And I mean, the numbers are massive. I mean, there are more people buying boats today than ever before in the country. And the demand just doesn't seem to go away. And there were something like

800,000 first time boat buyers that entered the market in 2020 and 2021. I've never owned a boat. I know it's not the cheapest and easiest thing to have, but it's fun. I can understand why in a post-pandemic world, the boat is a thing to have. Jason, is the boat on the holiday shopping list for you and the Moser family? Listen here, man. Okay. I grew up with boats and I love them, but this headline, Americans sound miserable, but are buying lots of boats. Two things can be true here, right? You can be buying boats and you can be miserable. And I think going back to that first time buyers number that Maddie pulled out there, that probably has something to do with it. Because once you buy a boat and you realize everything that comes with it, then you start asking yourself,

was this really worth it? Boats are super. They're fun. They are also a big responsibility and they are a big money suck. There's just no question about it. So I'll be interested to see how this ultimately plays out, particularly given the first time purchasers. But I was looking to see how this might translate into something investable, right? I mean, Brunswick Corporation, which this plays right into their market. Boy, I tell you, the stock price isn't really reflecting this, right? The three-year chart is up maybe 15%. The one-year chart is up only 7%. Year-to-date, it's just flat. So I don't know. I mean, maybe we'll see this flow through, or maybe those first-time buyers have had a quick case of buyer's remorse. Matt, you've been talking quite a bit

about how this high interest rate environment has been, in a way, an upper-class and upper-middle class stimulus. Do you feel like that might be playing into what we're seeing here? It could be. I mean, I believe in that a lot, by the way. I just think the high interest rates that people are getting on their savings, especially in the upper tiers, has been somewhat of an economic stimulus. I just think this has more to do with people being at home, a lot more, especially office workers, and it's just a great new hobby, recreation. But I have to believe, Jason, that some healthy portion of this 800,000

first-time boat buyers are probably going to be handing in the keys this year or next, and maybe that's why Brunswick stock's not doing so well. There's that old adage, there's two great days when you buy a boat, the day you buy it and the day you sell it. So, we'll see what day two looks like for some of those folks. Let's get over to stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Jason, you're up first.

What are you looking at this week? Yeah, just keeping an eye on Chipotle Mexican Grill, ticker CMG. They have earnings coming out next week on Thursday. You know, there's a recent announcement they just came out with. They're going to be raising prices again. Talk about Netflix raising prices. Chipotle is another company that has demonstrated. they do have a modicum of pricing power. Now, we're not entirely clear on how much and where

at this point, but this isn't the first time, right? I mean, they've raised prices several times here over the last several years. So, you do start wondering if they aren't flying a little too close to the sun, right? You can't raise those things forever, particularly in this environment. But I think furthermore, in just looking at the earnings release, we need to keep an eye on traffic and transactions to get a better idea of how the stores are going in the digital orders as well. They continue to do great things with the app and the rewards program. They've grown that rewards program now to 35 million members. That's up from 29 million a year ago. They've got this new initiative called Free Potlay, which, hey, listen, I'm all on board with Free Chipotle,

but this was something they launched earlier this year where it's essentially just 10 free food drops that they throw to their rewards members throughout the year, queso, blanco, guac, whatever it may be. But I guess my real question is, could these price increases cause some near-term friction in the coming quarters? I guess time will tell. All right, Rick, a question about Chipotle. How important is it to Chipotle that everybody who goes there has a single order that they always get? Nobody ever changes up. Nobody ever thinks about it. It's got to be fast and keep their menu limited. Well, I think that's something they've really exploited, certainly through their app, once you get your favorite order there, they make it very easy to

order and pick up. So it's something they've definitely benefited from. All right, Matt, what is on your radar this week? I'm going with the Home Depot, ticker HD. No introduction needed for this one. You've got 2,000 stores in the U.S. and U.S. territories, 300 plus stores in Canada, Mexico, fourth largest U.S. retailer by sales, fifth largest online retailer. I'm thinking most investors don't know that. But look, this has been a tough year for Home Depot. They've had to deal with an inventory overhang, comp salesmen down, customer transactions are down, big ticket items like lumber and appliances have really struggled. That's one side of the story. The other side is inventory is now under control, sales trends have started to improve. They're going to lap those

record results from a year ago, so comps will start to look better. And they just put in a new $15 billion buyback program. Over the last 10 years, Home Depot has bought back almost 30% of its shares. That's pretty impressive. So I look at the stock today, beaten down under 20 times forward earnings, 3% dividend yield. I feel like sales and earnings will be bouncing back in the new year. Looks like a bargain to me. Rick, a question about Home Depot. How much of their bottom line is attributable to the giant skeleton? Well, this month, it's huge, Rick. It's huge. Rick, which one is going on your watch list this week? Hey, it's October. I got to go with the giant skeleton. Got to, absolutely.

Go get you a burrito. Actually, I'll get the burrito on the way to the Home Depot. There you go. Maybe both are on my radar. Rick, appreciate you weighing in on our radar stocks. Jason, Matt, appreciate you bringing them. That's going to do it for this week's Motley Fool Money Radio Show. The show is mixed by Rick Engel.

I'm Dylan Lewis. Thanks for listening. We'll see you next time.