Motley Fool Hidden Gems Investing - S&P 500: New Highs, Same Valuation Questions

Episode Date: January 24, 2025

At new all-time highs, the market’s valuation concerns aren’t going away anytime soon. But they’re also not keeping big money from being committed to artificial intelligence. (00:44) Jason Moser and Asit Sharma discuss: - The S&P 500s new highs, what to make of the market’s valuation and what some of the big names on The Street have to say about it. - Stargate, the new $500B planned joint venture between OpenAI, Softbank, and some of the biggest names in tech. - Fantastic earnings reports from Netflix, GE Aerospace, and Twilio. (19:03) Tim Beyers talks with Frances Schwiep, a partner at Two Sigma Ventures, about where the biggest early-stage opportunities are right now in the AI ecosystem and what to look for in great founders. AI Summit interview with Frances Schwiep: https://www.fool.com/premium/4056/coverage/2025/01/15/ai-summit-2025-interview-with-frances-schwiep (32:30) Asit and Jason check in on their new year’s resolutions and offer up two stocks on their radar: Nike and Garmin. Stocks discussed: MSFT, NVDA, ORCL, NFLX, GE, TWLO, NKE, GRMN Host: Dylan Lewis Guests: Asit Sharma, Jason Moser, Tim Beyers, Frances Schweip Engineers: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Valuations to the moon, AI to the stars. This week's Motley Fool Money Radio Show 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 Analyst Jason Moser and Asit Sharma. Fools, great to have you both here. Hey, hey. Good to be here.

We're checking in on the market start to 2025 this week. We're also going to be looking at three stocks soaring after earnings and getting a sense of the next wave of early AI investments. But we are going to start out tackling where the market is at. Jason, the S&P 500 hitting fresh all-time highs this week as the market processes the new year and the new administration here in the United States. Yes. And there are certainly some concerns there that the market is maybe a little overvalued or valuations are getting a little frothy. We saw over the week, Jamie Dimon, CEO at J.P. Morgan, he noted that asset prices are, as he said, kind of inflated. He noted they are in the top 10 or 15 percent of historical valuation, which is fair.

Now, you also have to kind of ask yourself, why is that the case? I thought it was interesting to see Stanley Druckenmiller this week. He noted, he said he's been doing this for 49 years, right, managing money and picking stocks. And he said that it feels like we're going from the most anti-business administration to the opposite. So I'm not saying whether that's the case or not, but at least that's the perception out there. And he did also note that they talk to a lot of CEOs, they get a lot of boots on the ground research, and he said that CEOs are somewhere between, and these are the words he used, relieved and giddy. So, yeah, maybe the market is a little bit overvalued there, but it does seem like it's at least for understandable reasons. The Wall Street Journal had a piece out this week talking about the valuations of the market

on a Shiller PE basis that the various administrations have inherited as they've come into office. And Trump's second administration inheriting the highest market valuation that we have seen. Some of that, I think, is a product of so much money flowing into the markets, Asit. And in particular, we're seeing a widening out of the retail investor base in the United States and also globally a lot more money coming into the U.S. Dylan, the last few years have been very good to U.S. investors or those who invest in the U.S. stock markets. Cumulatively, you're looking at 53% points of returns in just the last two years. That success is attracting a lot of capital. You throw in some of the macro picture,

the promise of productivity from AI, an administration that looks like it'll be friendlier to businesses, which will hopefully in turn increase earnings power, which is one way an expensive market can get not as expensive. I think there's a general sense that things could go well here. But on the other hand, I wonder, as you point out, the Shiller PE ratio seems to hand this weird kind of gift to every administration, which is you're probably going to see the markets go down on your watch, right? I wonder what will happen here. We've got two-thirds of the total global capitalization just concentrated in U.S. markets. And the U.S. has about 26%, I say only, of world GDP. So, it almost feels like we're due on a few fronts for a little bit

of reckoning in valuations, especially as they've been pushed higher by big tech companies. So, it's maybe six of one, half a dozen of the other. You know, try to putting everything in context when we talk about valuations and where they stand. I mean, if you look at the S&P right now, the market is valued at somewhere around 30 times trailing earnings and around 23 times full year 2025 estimates. Now, obviously, we just started 2025, but that I think sort of shows you some of the enthusiasm there. And then some listeners may be familiar with that old rule of 20, right? When you sort of, you take the sum of the PE ratio and the inflation rate, ultimately 20 is kind of, kind of the benchmark there, anything above 20, you start looking at

it stretched valuations and anything below 20 looks like a little bit more of an attractive valuation. I mean, clearly right now, given those numbers I just gave you, uh, that, that rule of 20 is, is being broken. Uh, Hey, listen, as investors, we're happy, but it is, it is, again, I think it gives you some context as to kind of why we have these, these conversations on, on, potential overvaluation in the market. Valuations not getting in the way of where some big money is being committed, particularly in the AI space this week. A new $500 billion joint venture, Stargate, announced by OpenAI in news headlines this week, Asit. And this brings together this joint venture, kind of an odd super friends of US tech companies. The hall of justice.

Right. So we've got OpenAI CEO Sam Altman sort of shepherding this project or bring it together. He brings his friend Masayoshi San, the very peculiar, sometimes extremely successful and sometimes not global venture capitalist. We have players like MGX, which is the United Arab Emirates sovereign investment arm. They're going to be investors in here. Then we've got companies that are maybe more familiar to us. Oracle is going to participate. NVIDIA will participate. Microsoft is going to participate on some level. But really, the equity funding is going to come from two sources, OpenAI and SoftBank. Together, they'll, from the details we're getting, own a good portion of this project. We're looking at so many data centers. It could be 20 to 30 data

centers to be built in the U.S. over the next five years out of this $500 billion and a lot of money spent on GPUs. Now, we should say this has attracted a lot of snark from one Elon Musk, who is not great friends with Sam Altman. Satya Nadella from Microsoft said, hey, we're good for $80 billion of CapEx this year. And Mark Zuckerberg got into the act today as we're taping to say, hey, look, we're going to up our spend over at Meta to $60 billion of CapEx this year, whether we're part of this project formally or not. So details are still to be nailed down, but it is interesting. I think it's also indicative of just the race to invest in AI. That part of the fervor and hype hasn't died down in 2025.

A lot of the names that you mentioned there, Microsoft, Nvidia, many of the leaders at those companies, very familiar to folks that have been following the AI space. I think Oracle came up, and that is a name that we have not talked about nearly as much, and probably to our detriment, because over the last one, three, five years, the stock has performed incredibly well. AI has been a part of that story. What do you make of them coming into the mix here? You know, Oracle has very quietly taken its licks. They very famously avoided the cloud and thought it wasn't going to be a great deal and then watched as Amazon Web Services and Microsoft Azure ate their lunch. Credit to Safra Katz, the CEO, and Larry Ellison, the chairman, who

decided to just build a new architecture from scratch, it turns out to be really conducive to running AI cheaply. So all these startups and other companies, enterprise businesses, governments, academic research institutions are finding that if they run their AI on Oracle servers, they actually get a pretty good return for their money. So they've partnered up with a lot of companies and they are plowing money to build more data centers themselves. They're taking their learnings from missing the big cloud explosion and reinventing how they're going to service the cloud from scratch is paying off so nicely for them. And they've flown under the radar, as you point out, pretty hard to do when you're a mega cap company like Oracle, but somehow

they pulled it off. They've certainly caught investors' attention now. It reminds me a little bit of the great Microsoft revival that has happened over the last 10 to 15 years where humongous tech company that I think had a legacy reputation for a lot of investors and then found that next wave. In their case, the productivity cloud software and the cloud segment overall. Maybe there's some more juice here for Oracle going forward. Could be. And I think that we should look at how aggressively they've invested in their infrastructure and how aggressively they intend to invest going forward. It matches some of the scale we're seeing out of Meta and Microsoft and Amazon, the companies we associate with

not holding back when they write checks. So Oracle has joined that club. Let's see what they do in the next few years. All right, coming up after the break, Netflix hits it out of the park with its earnings. Where's the next chapter of its big growth coming from? Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis, here on air with Asit Sharma and Jason Moser. Earnings season is fully underway and Netflix stealing a lot of headlines this week after their report. Jason, the streamer reminding everyone, hey, we are number one. We are king of castle when it comes to streaming yeah stealing headlines for good reason i mean it was a i mean

it was just another really impressive quarter not that i think we should be surprised but i mean adding somewhere in the neighborhood of 19 million additional subscribers uh very very impressive and i thought interestingly enough they noted the call too that it's not like most of those subscribers came from folks looking to to be able to watch the football games over the holiday season or necessarily to, to log into watch a WWE. I mean, to be sure they helped, but, but that wasn't what drove it. And I think that's really what's so impressive with this business. They've just done such a good job over the years, building out a content library that just got something for everyone. And so now over 300 million, uh, seemingly very happy subscribers to me, I thought

the revenue growth, 16% was impressive. I thought to me even more impressive though, to see the operating margin was up 5.3 percentage points from the same quarter a year ago. I mean, this is a company that now is really starting to extract some profitability from the model, and there's no reason why that really shouldn't continue. Shareholders certainly happy to see that the streamer is also planning on increasing prices, maybe something that the subscribers aren't quite as happy about. Asit, we have seen them continue to hike prices and also introduce ad-supported streaming like a lot of other streamers have. What do you think of the interplay between these two business lines

and what's going on with their overall pricing models? Yeah, I think when you have a product that people feel that they just can't do without, you can take pricing and that's what they're doing. Being able to shift some consumers downstream to ad-supported tiers is good for Netflix. And they're taking so much of their CapEx and building a really phenomenal monetization engine. So the ad tech that underlies their revenue is very strong. And they're rolling it out country by country. So it's fine-tuned for Canada, something we heard about this quarter. Now they have their own native tech stack there. They're going to do this country by country just to target local users. So you get this virtuous cycle where you maybe get priced out of the full

tier. You're content to watch the supported tier. And as they show, they have sort of phenomenal uptake of the ad supported tier. We don't know the exact dollar figures from that. And in doing that, they're able to throw some snark at other companies. I love the way only Netflix can subtly take jabs at its competitors. They talked about in their press release being such a pure company, only focused on streaming, not having to deal with the distractions of a linear network like Disney and some other competitors. So yeah, just very focused, core business doing well, that ad business is also meaningful. And I hope to see the breakout of that revenue at some point in the near future. Yeah, I think as it stands right now, we have to

do a little sleuthing to figure out what's going on with that ad business. What I saw, Jason, was ad revenue doubled in 2024 and that the management team expects it to continue to be growing at a pretty fast clip. We're not getting that breakout that we'd love as investors. But in your mind, how are you valuing what's going on there, the growth that you're going to be seeing there when it contributes to the business versus the core membership model that we all know and generally love? Yeah, I'm not sure that we should expect them to get too terribly granular with it. I mean, remember, they are actually going to stop giving us even subscriber forecast numbers. So they'll give us numbers when they hit certain milestones, but we're going to even get a little bit less

information there. But I think going back to just the success from the quarter, I mean, they noted that the advertising strategy continues to take hold. It accounted for over 55% of signups in ad supported countries. And then ads plan memberships grew nearly 30% from a quarter ago. So I think that what they're doing is they went into this with some thought and they understood that advertising supported video on demand is something out there that consumers want. Netflix felt like they could participate. And so they built this out in, I think, a thoughtful way to make sure that they were doing something that they thought the subscribers would love. And so as they continue to raise these prices, sure, I mean, some people are going to balk at

it, but for the most part, we're not, right? And for the people that do balk at it, instead of necessarily quitting Netflix, maybe now they just have an option to downgrade to an ad-supported membership until they decide to re-upgrade again. Also soaring this week, GE Aerospace shares up almost 10% largely on earnings. But Asit, this feels like a little bit of a mix of what the company put out and some excitement around that and the general excitement around the business of space right now in the market. I think you're right, Dylan. I mean, we're always hearing about companies that are on the cutting edge of space innovation, but there's been more focus recently on companies that supply just mission-critical

stuff in the aerospace industry. GE Aerospace is a supplier of high-performance jet engines, and so they're starting to get some love from investors. They can't produce fast enough to meet their demand, which is the situation of a lot of aerospace businesses just now. Total orders this quarter were $15.5 billion. That's up 46% year over year. And what I love about GE Aerospace is it's got this amazing spare parts business, service business. I liken that to sort of the razor and blades model. If the jet engines are the razors, then all these spare parts and shop visits for repairs are the blades. This is a company that benefits from this backlog of airplanes that need to be manufactured. We have to keep some tens of thousands of jet engines

flying in the air all the time. And GE only gets better by that service revenue. So a very interesting quarter on all fronts. And they've got a little defense business on the side that grew pretty well, 22% year over year itself. So for people watching that industry, Asit, would you say that GE Aerospace is maybe one of the more diversified, stable players as folks are looking out and seeing other companies like Rocket Labs, Intuitive Machines, and some of the more, I don't want to say speculative, but more kind of future-oriented businesses? Yes, totally. Because GE is focused on the aero space industry, whereas some of these other companies like Intuitive Machines, which is very interesting technology and is now getting into

the communications business, satellite communications business, they're focused more on the space, space part of the industry. So I like to just make buckets of the two. And when you have solid players like this, you can start to build a basket. If you, you know, follow the industry, there are some great spare parts suppliers like Transdime and Hayco. You can work in a little bit then of the space, space companies as well. So all across the range of this industry, as you point out, Dylan, there's much interest right now, but I like some of these core companies to build sort of a basket around. All right, from the skies back down to ground control, cloud communications company Twilio out with some fresh earnings results on Friday. Jason,

shares up 20%, rounding us out with another heavily followed full stock that seems to be having a pretty good week. Yeah, I think this is a good example of leadership just doing what they say they're going to do. And this is a company we talked a lot about on the show. It was radar stock back in July of last year. I said, to me, it felt like there would be a time where the market's a bit more tolerant of companies like these. And if Kozama's ship Chandler keeps doing what he's doing, I think patients could pay off. The stock was in the $55, $60 range at that point. So I think we kind of see how that has worked out for investors. But they said a lot of really good things on this analyst day presentation, returning back to that double digit growth that we've all

expected, actually reporting their first gap profitable quarter in Q4 and set the expectation that for every year here on out, you should expect that this is a gap profitable company. And they continue to bring that stock-based compensation number down as well. So just operating with a lot of rigor and pursuing a lot of growth opportunities, reigniting that growth, it's certainly understandable the enthusiasm in the stock today. Jason, this was a growth stock. And at one point, I think had to go through the doldrums like so many others did post-2022. Where do you see kind of the expectations, the return profile for a business like this going forward. Yeah, I think things are starting to look a lot more encouraging. Again, maybe it

required a leadership change. A lot of that kind of came from its old startup mentality with Jeff Lawson, the co-founder of the business, and now Kazima Ship Chandler taking over. And he has a bit more of an operational focus. But I think, generally speaking, what they're doing, obviously, it's working and pursuing a very large market opportunity. All right, Jason, Asit, we're going to see you guys a little bit later in the show. Up next, we've got a look at where the next wave of AI upstarts are focused. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. I'm Dylan Lewis. We spend most of our time talking stocks and the public markets here on the show, but the reality is that some of tomorrow's most interesting tech stocks exist today as early-stage venture companies. So to get the skinny on the cutting edge of tech and where new venture funding is going, especially in places like AI, my colleague Tim Byers caught up with Frances Schwepp. She's a partner at Two Sigma Ventures. It's an early-stage venture fund. There, she spends most of her time looking at companies that have a data focus

and leverage AI and machine learning technologies. Tim and Francis talked about where the biggest early stage opportunities are right now in the AI ecosystem and what to look for in great founders. I'm very curious. What kind of view have you developed around AI and ML right now? I assume it's changed and it's probably changing all the time. But when you look at that industry and the view that you have, what do you see? Right now, I think the biggest opportunity is in the underlying tools that are going to be made available to application developers who are looking to build AI applications.

So there's this kind of, and I think we're ending sort of in the next year will be the maybe close to the most exciting tools that are available. And I think we're going to see the start of a real like ROI heavy agentic workflows where you really have AI agents completing specific tasks. And so and maybe I'll just also say, you know, the first part of this wave was obviously a lot of the foundational models. So the anthropics, the coheres, the open AIs of the world, that is at this point, I think, mostly baked out. And it's also very capital intensive and late stage game. So it's not where we focus at the moment. But on the like agentic workflows, I can go into that. I mean, I think I have a view on what makes AI agent tooling very powerful and the areas in which it can really have a lasting impact and maybe are kind of like most right for it to disrupt. So my view is right now we are in the tooling and stack, AI stack build out. Like I said, that involves a lot of things like, you know, AI safety tools, data quality monitoring, automated prompting. And so, you know, things like AutoGPT and Langchain, all of that I put in the tooling set. And now we're just starting to see exciting, true AI applications that are not just being tested in the experimental budgets of the enterprise, but they're actually being used in the day-to-day workflows of those employees and individuals.

Let's talk a little bit about just 2024, obviously the year of the GPU. This has made some investors absolute fortunes. do you think and i think you touched on this briefly is 2025 a bit more of the same or do you have we sometimes like to make reckless predictions here at the fool do you have a reckless prediction about what will be the technology if it's like this is you know 2024 year of the gpu 2025 the francis schwepp reckless prediction is the year of what oh man i don't know I do think agentic workflows is going to be big. I think that's what we'll see in 2025.

Although, you know, NVIDIA made these big announcements recently, I'm sure you saw. I think the most exciting one was the Jensen Ori platforming computer, which is just a significant leap forward in edge AI. And I think maybe the reckless prediction around that is I think we will see the fastest acceleration

in AI-enabled hardware than we've ever seen in the history of venture investing and that is because that computer has made you know being able to compute ai at the edge not only possible um from the like the size of the models that we're talking about these days there's something almost like 300 270 something trillions of operations per second is what that new computer can handle so just like massive ai workloads and then it's incredibly energy efficient it was something i used to work at an wearable computing company as you mentioned was working in product there, man, like being able to get the battery life or, you know,

just like being able to actually run those models on device sucked up a ton of energy. I think this is groundbreaking from that perspective. It's a small form factor. So you can talk about different sizes of hardwares, whether from robotics to drones to, you know, whatever IoT, future IoT hardwares you can dream up to autonomous vehicles. We invested in a company that is autonomous, basically like the autonomous caterpillar. And so, you know, that's a big one. I think, again, stuff like what NVIDIA is releasing around edge AI is going to be huge

for the break open of that market. That's, I don't know if it'll be 2025. I think, to be honest, the 2025 will be the companies building the hardware around this new computing technology. And I think in the next year is when you'll start to see those companies pop up. And then I imagine a lot of 2025

will be focused on agent of workflows. The beginning of AI everywhere in every device. So that's... Yeah, we've been waiting for it, but now we actually have, yeah. It does seem like it's coming. I want to come back to the beginning of your career. You started your career as a data scientist, so you have a very rigorous background, seeing the world in very analytical ways.

Because you're a venture capitalist, there is some art, and you touched on this, that comes into the process. How much of the investing process is art and how much of it is science, do you think? And I'm talking about it specifically from your perspective, but you could take it as general as you want. I'm going to say 80-20 science art. And I think the scientific part of it, I like to say I take a scientific approach to investing, which is you have a thesis.

And then my job is to kind of like disprove the null and go through the steps of diligence to get myself over the line on this being a good risk-adjusted return profile for an investment. You know, we like to say we look, though, for the glimmer of greatness, which is more of the art part of this. I think it has more to do with, like, intuition. And I think it's possible that the 20% is even more important. I think there is a lot that goes into, you know, if you suspend disbelief like there may be no market for the technology today there might not be a single customer using it today and maybe there's a lot of skepticism but on the chance that it becomes great you know and there's like it becomes the it's the power law dynamic and you could say this

about airbnb there was no market for the airbnbs um when they were starting the business and it sounded crazy but on the off chance it worked you know there's a huge glimmer of greatness there that's the creative piece of it is that intuition it's that kind of like trying to peer around the the curb and and suspend disbelief and dream a little bit with a founder and then i think there's also creative ways to get to an investment which might require um you know spending time with the founders like you know we talked about the magic of human connection and what you see that sort of lights someone up there this what sparks your imagination and sparks the imagination of the founder to be dedicating their lives to building this new technology that is something that i think

is requires more human connection and less science yeah quick follow-up on this one and then a final question looking forward can you name a founder doesn't matter the company but a founder that you've either observed or interacted with directly who has that glimmer of greatness can you just who who stands out to you you know somebody that we know who's got it i think will who's the founder of whoop it's one of our investments he is relentless about how he tests and iterates on the product and how how much like focus he drives for the business i think one of the biggest mistakes founders make is they start to lose focus and a lot of people did not believe in him he was like I'm focusing on, I don't know if you've used a whoop before, but it's, um, I'm wearing one.

It tracks your athletic performance, your sleep performance. And he's obsessed with performance. It's like not a, it's not a, uh, a step tracker. It's not a, just say, you know, it's not like a wellness app. It's for true athletes that like, you know, want to track their performance and people trying to push them in a lot of different directions. Like you need to add steps. You need to focus more on like, you know, nutrition and add these other things. And he's like, no, we're going to get as fine-tunedly good at performance as possible. I mean, I think you saw this with the founders of Google. They're like, we're going to focus on the milliseconds of getting you the retrieved answer from the search query. And he's like that when it comes to tweaking the performance

metrics. And so when you wear a whoop and you use the application, you get very highly tuned and precise data about your your body and your you know your performance from your muscle activity to your hitting your vo2 maxes what zone you're in when you're training and pushing it on a treadmill or lifting weights you know where you are in your sleep in terms of rem and restorative sleep things like that that he's he drills in and double clicks into the that product um and then he has built a very loyal and motivated team behind him in Boston. And we actually had the new CTO come and speak at one of our meetings recently. And she is just incredibly inspiring and actually recently led to the release of an AI bot where you can ask questions. I recently asked my whoop,

how many minutes does it take for me to fall asleep? And it said something like 65, which is too long. We spend like 45 of those stressing about the next day or something. but but it's amazing now you have this like ai chat bot about because they have such good data and they focus so much on metrics and so much on the data they were collecting now they're able to layer on this you know ai agent basically that can be your you know your health coach and you can ask questions of this very rich data source that and data asset that they've built up over time so i think i have a lot of respect for him as a leader as a product builder and as someone who knows how to focus and make the right trade-offs.

Relentless focus and right trade-offs. Yeah. Okay, great. Let's end on this. Imagine that I am pitching you a business idea and I'm coming into the meeting and you're gonna give me a piece of advice before I come into the meeting.

What is your piece of advice for me so that I come into the meeting and have a hopefully successful meeting with you and your partners? I think the biggest one is, tell me, tell me why people need your product and why you have to build it. Like you can't buy or hire your way into product market fit. And I think, you know, you just, you have to focus on building a product that users and customers ultimately like really want to use. you just can't skip steps and so I think I've seen folks you know maybe focus prematurely on scaling the company without the killer product first and so I maybe that skews towards my background which is I you know I have more of a product mindset but I think one is telling me

yeah this is really just connecting me and helping me understand why this product needs to be built and then obviously why you are the one building it. What makes you uniquely capable of building this product? And then, of course, we can get into market and your business model and all that. But those are the big ones. Listeners, if you're a Motley Fool premium member, you can catch the full conversation

between Tim and Francis on our website. It was part of our AI Summit for members earlier this month. We'll be sure to drop a link to that for members in the show notes for the podcast version of this week's radio show. If you're not a member and you want to join, head over to fool.com slash sign up to join Stock Advisor. As a Stock Advisor member, you get two new stock picks each month, rankings on the whole scorecard of companies in the service, and access to all

episodes of our premium podcast, Stock Advisor Roundtable. You can learn more at fool.com slash sign up. We've got Asit Sharma and Jason Moser coming back with me in just a second, and they're bringing some stocks and stories on their radar. Stay right here, you're listening to Mountain Full Money. 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. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. The Motley Fool

only picks products that he'd personally recommend to friends like you. I'm Dylan Lewis, back on air with Motley Fool analysts Asit Sharma and Jason Moser. And Fools, we're here taping in the third full week of January. And by this point, experts at Baylor say that most people have failed their New Year's resolutions. Jason, here at The Fool, we're all about keeping score. So I have to ask, how are we checking in on the New Year's resolution so far? Well, I love that. And I will say, so you and I spoke before the new year and I'd kind of a two, a one, two punch on the resolution front personally, just trying to wake up every day with a bit more of a glass, have full view on things, just tackle the day with a smile. So far, so good, Dylan. It's working. I'm not

going to lie. On the back end of that, I said I wanted to add three new companies to my portfolio and we're going to get into radar stocks here in just a minute to be continued. Ooh, all right. Little teaser. Asit, what about you? How's the resolution progress going? It's middling. I mean, I have more than one resolution. So is a 33% rate any good? You're diversified. I noticed in the article that you shared with Jason and I that the folks at Baylor say that 88% of people who set New Year's resolutions fail them within the first two weeks. So I want to meet the other 12% and start hanging with them this year.

You can be part of the 12%. I believe in you. The nice thing about resolutions, you can pick them right back up at any point during the year and keep making progress. And to be serious, that was the point of this article, that you can succeed by failing, picking yourself back up, making that incremental progress, which I think is a great principle to hold. All right. Well, let's help Jason make a little progress on his resolutions. Let's get over to stocks on our radar. As always, our man behind the glass, Rick Engdahl, is going to hit you with a question. Jason, let's hear what you got for adding stocks to your portfolio. Well, yeah, it's 2025, and I indeed have added one of my targeted three. I bought shares the

other week, Dylan, in Nike, ticker NKE. I think everybody knows about this business, right? Tremendous brand equity, obviously the global leader in sports, but recent blunders by former leadership have created some headwinds. They really worked on prioritizing the digital business over the last several years and sort of neglected their wholesale partners. And so new leadership there, I think, is going to focus on sort of balancing those scales a little bit with new CEO Elliot Hill. It's understandable why the stock has been taken to the shed, and it has been taken to the shed. I mean, when you see the headwinds that have created, you see the impact that that's had on the bottom line, sales actually decelerating for a company like this. And then they noted in a

recent call that over the near term, the effect of the actions that they're taking in order to right the ship will result in lower revenue, additional gross margin pressure, and higher demand creation expenses. That doesn't paint a very good picture, Dylan, right? And the stock reflects that today. But I do believe that this is a business that will recover. They were self inflicted wounds that I think they can recover from. A big focus on those wholesale partners going forward. There's a reason why shares are at 22 times earnings today, but I think it'll get back closer to its historical norm in the coming years as new leadership executes a good comeback. All right. Who doesn't love that? Rick, a question about Nike, ticker N-K-E.

I would love that. I'm a longtime Nike shareholder, but not long enough, I'm afraid. So how many years do you say I have to wait to come back for my... Well, my intention, Rick, is to hold this business until I'm long gone. So I think patience will pay off here. That 2.2% dividend yield gives us a lot of incentive to just hang in there and watch them do their thing. All right, I'll hold on. All right, Asit, what's on your radar this week?

So I'm looking at a stock that was up 69% in the last 12 months. Why would I even do that as a radar stock? Well, it's trading at around 28 times forward earnings, not too expensive, and the company is Garmin. Now, this is a business that reinvented itself. Years ago, it was known as a GPS company. It's become more of a consumer-facing company with lots of fitness wearables. It also has an outdoor segment, an aviation segment, a marine segment, an auto original equipment manufacturer segment. So it's very well diversified as a business. And it just has this way of chugging along very quietly. I mean, this is a business that throws off a lot of free cash flow. Operating cash flows increase every year, almost approaching a billion bucks now for what's a relatively small company.

And I just like the way that Garmin has established a brand for itself in the fitness market. I myself have looked over some of their products, including some very snazzy accessories for my bike. Haven't bought them yet, but keeping an eye on them. not only a radar stock, but a watch list item for Asit's personal fitness journey. Rick, a question about Garmin, ticker GRMN. This seems like a company that should have died and didn't. Is that because of good leadership? And is that leadership still in place? Yeah, the leadership is still in place.

And you're absolutely right, not just on the executive level, but the whole management team has been together for a while. And they know the drill, they know how to run this diversified business, and they keep the focus on churning out great new products that we see in stores and online. Rick, you going to a company in your portfolio already, Nike, or something new with Garmin? I got enough Nike. I'm going to go with Garmin. These guys turned it around once. I guess I can trust them. There you go. Jason, Asit, appreciate you guys bringing your stocks. Rick, appreciate you weighing in. That's going to do it for this week's Money Radio Show. The show is mixed by Rick Engdahl. I'm Dylan Lewis. Thanks for listening. We'll see you next time.

Thank you.